Political Order and Political Decay
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Authors: Francis Fukuyama
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Energy in the Executive is a leading character in the definition of good government. It is essential to the protection of the community against foreign attacks; it is not less essential to the steady administration of the laws ⦠A feeble execution is but another phrase for a bad execution; and a government ill executed, whatever it may be in theory, must be, in practice, a bad government.
âALEXANDER HAMILTON
The English race, consequently, has long and successfully studied the art of curbing executive powers to the constant neglect of the art of perfecting executive methods. It has exercised itself much more in controlling than energizing government. It has been more concerned to render government just and moderate than to make it facile, well-ordered and effective.
âWOODROW WILSON
When an American thinks about the problem of government-building, he directs himself not to the creation of authority and the accumulation of power but rather the limitation of authority and the division of power.
âSAMUEL P. HUNTINGTON
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CONTENTS
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Introduction: Development of Political Institutions to the French Revolution
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1.
What Is Political Development?
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2.
The Dimensions of Development
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3.
Bureaucracy
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5.
Corruption
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6.
The Birthplace of Democracy
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7.
Italy and the Low-Trust Equilibrium
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9.
The United States Invents Clientelism
10.
The End of the Spoils System
11.
Railroads, Forests, and American State Building
13.
Good Government, Bad Government
21.
Institutions, Domestic or Imported
24.
The Struggle for Law in China
25.
The Reinvention of the Chinese State
29.
From 1848 to the Arab Spring
30.
The Middle Class and Democracy's Future
32.
A State of Courts and Parties
33.
Congress and the Repatrimonialization of American Politics
36.
Political Order and Political Decay
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INTRODUCTION
Development of Political Institutions to the French Revolution
Consider a number of very different scenarios that have been playing out at the beginning of the second decade of the twenty-first century.
In Libya in 2013, a militia armed with a panoply of heavy weapons briefly kidnapped the country's prime minister, Ali Zeidan, demanding that his government provide them with back pay. Another militia has shut down much of the country's oil production, which is virtually the only source of export earnings. Other militias were earlier responsible for the killing of U.S. ambassador Christopher Stevens in Benghazi, and for shooting dozens of demonstrators in the capital, Tripoli, who protested their continuing occupation of the city.
These militias were formed in various parts of the country in opposition to Libya's longtime dictator, Muammar Qaddafi, whom they ousted, with significant help from NATO, in the first year of the Arab Spring in 2011. The protests against authoritarian governments that broke out that year not just in Libya but also in Tunisia, Egypt, Yemen, Syria, and other Arab countries were often propelled by demands for greater democracy. But two years later, democracy as it is practiced in Europe and North America seems like a distant dream. Libya since then has taken some tentative steps toward establishing a constituent assembly that would write a new constitution. But at the moment, its most fundamental problem is that it lacks a stateâthat is, a central authority that can exercise a monopoly of legitimate force over its territory to keep the peace and enforce the law.
In other parts of Africa, states claiming a monopoly of force exist on paper and are less chaotic than Libya. But they remain very weak. Radical Islamist groups, having been pushed out of South Asia and the Middle East, have been setting up shop in countries with weak governments such as Mali, Niger, Nigeria, and Somalia. The reason that this part of the world is so much poorer in terms of income, health, education, and the like than booming regions like East Asia can be traced directly to its lack of strong government institutions.
Over the same time period, a very different scenario was playing out in the United States with regard to its financial sector. The United States is in many ways at the opposite end of the political spectrum from post-Qaddafi Libya: it has a very large and well-institutionalized state, one that dates back more than two hundred years and draws on a deep well of democratic legitimacy. But that state is not working well, and its problems may be related to the fact that it is too institutionalized.
Prior to the financial crisis of 2008, there were nearly a dozen federal agencies with regulatory authority over financial institutions, as well as banking and insurance regulators in each of the fifty states. For all of this regulation, however, the U.S. government was nonetheless unaware of the looming subprime mortgage crisis, allowing the banks to take on excessive leverage and permitting the emergence of a huge shadow banking system built around derivatives that were far too complex to properly value. Some commentators have tried to blame the crisis exclusively on government-guaranteed mortgages from agencies like Fannie Mae and Freddie Mac, which did in fact contribute to the meltdown.
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But the private sector was a happy participant feeding the mortgage frenzy and could take undue risks because large banks knew that they would ultimately get bailed out by the government if they got into trouble. This is exactly the scenario that occurred in the wake of the Lehman Brothers bankruptcy in September 2008, leading to a near collapse of the global payment system and the deepest U.S. recession since the Great Depression.
What is perhaps more shocking, however, is what has happened since the crisis. Despite widespread recognition of the enormous risk posed by “too-big-to-fail” banks, the American banking sector became even more concentrated than it was in 2008. In the years following the crisis, Congress passed the Dodd-Frank Act that was supposed to solve this problem. But the legislation ignored simpler remedies, such as sharply raising bank capital requirements or putting hard caps on the size of financial institutions, in favor of a highly complex stew of new regulations. Three years after passage of the legislation, many of those detailed rules had not yet been written and would likely not solve the underlying too-big-to-fail problem even if they were.
There are two fundamental reasons for this failure. The first has to do with intellectual rigidity. The banks, in their own self-interest, have argued that strong new regulations of their activities would cut into their ability to lend, and therefore undermine economic growth, while producing harmful unintended consequences. Such arguments are often quite valid when applied to nonfinancial institutions like manufacturing industries, and appeal to many conservative voters who are distrustful of “big government.” But, as the scholars Anat Admati and Martin Hellwig among others have shown, large banks are very different from nonfinancial firms, due to their ability to harm the rest of the economy in ways not possible for a manufacturing company.
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The second reason for the failure is that the banks are very rich and powerful, and can hire a legion of high-priced lobbyists to work on their behalf. Despite enormous public anger against the banking sector and the taxpayer bailouts, these lobbyists have succeeded in blocking meaningful regulation that would have gone directly to the heart of the too-big-to-fail problem. Some legislators may have found the bankers' arguments against new regulation persuasive based on their ideological beliefs; for others, the arguments were a useful cover to protect the stream of campaign contributions flowing from the banking sector.
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A third scenario links the Arab Spring to the protests that broke out in Turkey and Brazil in 2013. These two countries were leading “emerging market” economies, which had seen rapid economic growth during the preceding decade. Unlike the Arab dictatorships, both were democracies with competitive elections. Turkey had been ruled by the Islamist Justice and Development Party (AKP in its Turkish initials), whose leader, Prime Minister Recep Tayyip Erdo
Ä
an, had initially made his mark as mayor of Istanbul. Brazil for its part had elected a president, Dilma Rousseff, who hailed from a Socialist party and had been jailed in her youth by the military dictatorship that ruled the country from 1964 to 1985.
Despite these impressive economic and political accomplishments, both countries were briefly convulsed with mass protests against their governments. In Turkey, the issue was a park in Istanbul that the government wanted to make over as a shopping mall. Many of the young protesters felt that Erdo
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an, despite his democratic mandate, had authoritarian inclinations and was seriously out of touch with the younger generation of Turks. In Brazil, the issue was corruption and a failure of the government to provide reliable basic services, even while spending billions to host the football World Cup and summer Olympic Games.
What linked these protests to each other, and to the Arab Spring that occurred two years earlier, was the fact that they were driven primarily by the middle class. As a result of the economic development that had taken place over the preceding generation, a new middle class had emerged in both countries, whose expectations were much higher than those of their parents' generation. Tunisia and Egypt had experienced lower rates of growth than Turkey or Brazil; nonetheless, both produced large numbers of university graduates whose hopes for work and career were stymied by the cronyism of those countries' autocratic regimes. The fact that Turkey and Brazil held democratic elections was not sufficient to satisfy the protesters. Government actually had to deliver better results if it was to be regarded as legitimate, and needed to be more flexible and responsive to changing public demands. China, another economic success story, has begun to face similar challenges from its rising middle class, which now numbers in the hundreds of millions. While they have been the beneficiaries of the country's breakneck economic growth over the past generation, they, like their counterparts elsewhere, have different and higher expectations of government. The survival of the political systems of all these countries will depend critically on the degree to which they can adapt to the new social landscape created by economic growth.
