Political Order and Political Decay (9 page)

As a consequence, much of the discussion of political development has centered in recent years on the institutions of constraint—the rule of law and democratic accountability. But before governments can be constrained, they have to generate the power to actually do things. States, in other words, have to be able to govern.

The existence of states able to provide basic public services cannot be taken for granted. Indeed, part of the reason many countries are poor is precisely that they don't have effective states. This is obvious in failed or failing states including Afghanistan, Haiti, and Somalia, where life is chaotic and insecure. But it is also true in many better-off societies with reasonably good democratic institutions.

Take the case of India, which has been a remarkably successful democracy since its creation in 1947. In 1996, the activist and economist Jean Drèze produced a Public Report on Basic Education that surveyed the state of primary education in a number of Indian states. One of the most shocking findings was that in rural areas, fully 48 percent of teachers failed to show up for their jobs. This understandably caused a huge outcry, and the Indian government launched a major program in 2001 to improve the quality of basic education. Although this reform effort led to a great deal of apparent activity, a follow-up study in 2008 showed that teacher absence rates were exactly what they had been more than a decade earlier, 48 percent.
1

India, of course, had been a star performer among emerging market countries, with growth rates in the range of 7–10 percent per year up until 2010.
2
But alongside the billionaire tycoons and high-tech industries, contemporary India is characterized by shocking levels of poverty and inequality, with certain parts of the country on a par with the worst places in sub-Saharan Africa. This inequality has bred, among other things, ongoing Maoist insurgencies in its poorest states. The fact that education is grossly inadequate for so many citizens will ultimately be a constraint on growth as the country industrializes and looks for better-educated workers. With respect to providing such basic services, the country has done less well than neighboring giant China, not to speak of Japan and Korea, which have broken into first world status.

India's problem is not an absence of rule of law—indeed, many Indians would argue that the country has too much law. Its courts are clogged and slow, and plaintiffs often die before their cases come to trial. The Indian Supreme Court has a backlog of more than sixty thousand cases. The government often fails to invest in infrastructure because it, like the United States, is hamstrung with lawsuits of various sorts.

Nor is India's problem inadequate democracy. There is a free media that is perfectly happy to criticize the government for shortcomings in education, health, and other areas of public policy, and plenty of political competition to hold incumbents accountable for failure. In an area like education, there is no political conflict over the ends of public policy—everyone agrees that children should be educated and that teachers should show up for their jobs if they are to get paid. And yet, providing this basic service seems to be beyond the capacity of the Indian government.

The failure here is a failure of the state—specifically, the bureaucracies at local, state, and national levels that are tasked with providing basic education to children in rural India. Political order is not just about constraining abusive governments. It is more often about getting governments to actually do the things expected of them, like providing citizen security, protecting property rights, making available education and public health services, and building the infrastructure that is necessary for private economic activity to occur. Indeed, in very many countries democracy itself is threatened because the state is too corrupt or too incompetent to do these things. People begin to wish for a powerful authority—a dictator or savior—that will cut through the blather of politicians and actually make things work.

WHY GOVERNMENTS ARE NECESSARY

Someone of a libertarian bent (more often than not an American) will interject that the problem here is one of government itself: all governments are hopelessly bureaucratic, incompetent, rigid, and counterproductive, and the solution is not to try to make government better but to get rid of it altogether in favor of private or market-based solutions.

There are indeed reasons why government agencies are intrinsically less efficient than their private-sector counterparts. It is also the case that governments have often taken on tasks better left to the private sector, such as operating factories and businesses, or else have interfered with private decision making in destructive ways. The boundary between public and private will always be a matter up for renegotiation in every society.

But in the end, there has to be a public sector, because there are certain services and functions—what economists label public goods—that only governments can provide. A public good is, technically, one where my enjoyment of it does not prevent you from enjoying it as well, and which cannot be privately appropriated and thereby depleted. Classic examples are clean air and national defense. They fit these categories because neither can be denied to specific individuals within a society, nor does their use by some diminish the total stock available to others. No private actors have an incentive to produce public goods because they cannot prevent everyone from using and benefiting from them, and therefore cannot appropriate any income arising from them. Hence even the most committed free-market economist would readily admit that governments have a role in providing pure public goods. Besides clean air and defense, public goods include public safety, a legal system, and the protection of public health.

In addition to pure public goods, many goods are produced for private consumption that entail what economists call externalities. An externality is a benefit or harm imposed on third parties, such as the benefit an employer gets when I have paid for my own education, or the pollution that fouls the drinking water of a community downstream from a factory. In other cases, economic transactions may involve information asymmetries; for example, the seller of a used car may know about defects not readily apparent to the buyer, while a drug maker may be aware of clinical studies that show its products are ineffective or even harmful, which are unavailable to potential patients. Governments have classically played a role in regulating externalities and information asymmetries. In the case of education and basic infrastructure such as roads, ports, and water, the positive externality associated with it is great enough that governments traditionally provide a basic level to citizens for free or else at highly subsidized prices. In such cases, however, the extent of necessary government subsidy or regulation is often debatable, since excessive state intervention can distort market signals or choke off private activity altogether.

In addition to providing public goods and regulating externalities, governments engage in greater or lesser degrees of social regulation. There are many forms that this can take. Governments want their citizens to be upstanding, law-abiding, educated, and patriotic. They may want to encourage home ownership, small businesses, gender equality, physical exercise, or discourage cigarette smoking, drug use, gangs, or abortion. Most governments, even ones committed ideologically to free markets, end up doing things they believe will encourage investment and economic growth beyond the bare provision of necessary public goods.

Finally, governments have a role to play in controlling elites and engaging in a certain amount of redistribution. Redistribution is a basic function of all social orders: as Karl Polanyi noted, most premodern social systems revolved around the ability of the leader or Big Man in a group to redistribute goods to his followers, a practice that was much more common historically than market exchange.
3
As we saw in Volume 1, many early governments, from the post–Norman Conquest kings of England to the Ottomans to any number of Chinese emperors, saw their function as the protection of ordinary citizens against the rapacity of oligarchic elites. They did this not, in all likelihood, out of a sense of fairness, and certainly not because they believed in democracy, but rather out of self-interest. If the state did not control the richest and most powerful elites in society, the latter would appropriate and misuse the political system at everyone else's expense.

The most basic form of redistribution that a state engages in is equal application of the law. The rich and powerful always have ways of looking after themselves, and if left to their own devices will always get their way over nonelites. It is only the state, with its judicial and enforcement power, that can make elites conform to the same rules that everyone else is required to follow. In this respect, the state and the rule of law work together to produce something like the equality of justice, whether in the form of an English king's court finding in favor of a vassal against his lord in a tenancy dispute, or the federal government intervening to protect black schoolchildren against a local mob, or the police protecting a community against a drug gang.

There are other more overtly economic forms of redistribution that modern governments practice, however. One of the most common is mandatory insurance pools, in which the government forces the community to contribute to insurance plans which, in the case of social security, redistribute income from young to old, and in the case of medical insurance, from the healthy to the sick. Many American conservatives denounced President Obama's 2010 Affordable Care Act as “socialism,” but the fact was that at the time, the United States was alone among rich democratic countries in the world in not having some form of mandated universal health insurance.

Liberal theorists from John Locke to Friedrich Hayek have always been skeptical of government-mandated redistribution, since it threatens to reward the lazy and incompetent at the expense of the virtuous and hardworking. And indeed, all redistributive programs incur what economists call “moral hazard”: by rewarding people based on their level of income rather than their individual effort, the government discourages work. This was of course the case in former Communist countries such as the Soviet Union, where “the government pretended to pay us and we pretended to work.”

On the other hand, it is morally difficult to justify a minimalist state that provides no safety net whatsoever for its less fortunate citizens. This would work only in a society where the playing field was always perfectly level, and in which accidents of birth or simple luck had no role in determining the life chances, wealth, and opportunities faced by individuals. But such a society has never existed in the past, and does not exist today. The real question facing most governments, then, is less whether to redistribute than at what level to do so, and how to redistribute in ways that minimize moral hazard.

The problem of inherited advantages usually increases over time. Elites tend to get more entrenched because they can use their wealth, power, and social status to get access to the government, and to use the power of the state to protect themselves and their children. This process will continue until nonelites succeed in mobilizing politically to reverse it or otherwise protect themselves. In some cases a reaction takes the form of violent revolution, as in the French and Bolshevik Revolutions; in others it can take the form of populist policies of redistribution as in Argentina under Juan Perón, or Venezuela under Hugo Chávez. Ideally, constraints on the power of elites should be exercised through democratic control of the state, where the state's policies reflect a broad consensus on the part of the population as to what constitutes a fair distribution of the resources at the state's disposal. As in the case of redistribution, the trick is to prevent the overrepresentation of elites without punishing them for their ability to generate wealth.

There is today a wide range of views on the appropriate scope of the state, ranging from those who believe it should provide only the most basic of public goods, to those who think it should actively shape the nature of society and engage in substantial redistribution. As noted, all modern liberal democracies engage in some degree of redistribution, but the extent of state intervention varies significantly from the social democracies of Scandinavia to the more classically liberal United States.
Figure 3
shows a spectrum of state functions from minimal to activist in which modern governments can engage.

FIGURE 3.
The Scope of State Functions

SOURCE
: World Bank,
The State in a Changing World

But while many contemporary political arguments concern how far state intervention should go, there is an equally important question about state capacity. Any given function, from fighting fires to providing health services to undertaking industrial policy, can be done better or worse depending on the quality of the state bureaucracy charged with performing that function. Governments are collections of complex organizations; how well they perform depends on how they are organized and the resources, human and material, at their disposal. In evaluating states, then, there are two axes of importance, a horizontal axis defining the scope of state functions, and a vertical axis defining the capacity of the state to undertake a given function (see
Figure 4
below).