The End of Power (41 page)

At the core here is something that is hard not to like: just as the decay of power in politics has undermined authoritarian regimes, in business it has curtailed monopolies and oligopolies while giving consumers more choices, lower prices, and better quality. Classical economics and liberal political thought are premised on the idea that monopolies are almost always undesirable. Even areas where monopolies were once thought unavoidable, such as the provision of water and electricity, can now be opened to competition. Those coming of age today may have a hard time imagining a situation when all telephone companies around the world were monopolies, often owned by the state and frequently incapable of delivering decent service. Yet that is how it was not long ago. Today, telephony is fiercely contested, and no company feels safe or permanent regardless of its size and resources. Our distaste for monopoly extends to oligopolies and cartels. So the more the decay of power prevents small groups of large firms from exerting abusive market power, the more we are predisposed to celebrate it.

But celebrating the benefits of the decay of power should not lead us to ignore that a glass that is half-full is also half-empty. The decay of power also entails dangers.

It is one of the fundamental reasons why governments are increasingly incapable of making the decisions needed to deal with their country's problems or why groups of leading nations are becoming increasingly slower and less effective at tackling international problems.

The decay of power also is one of the forces driving the profusion of myriad criminal, terrorist, or otherwise malevolent nonstate actors. For them, frontiers are irrelevant and governments are an increasingly ineffectual hindrance that they attack, undermine, or ignore.
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In addition, the dilution of power has facilitated the rise of extremist politics—whether separatist, xenophobic, and sectarian—in established democracies and fledgling political systems.

It has nurtured all manner of improvised groups, companies, and media outlets that evade traditional scrutiny and whose sponsors hide in the cacophony of the Web. It has also created more opportunities for business fraud and commercial deceit.

It often takes high-profile cases and news headlines about individuals and organizations to give us a glimpse of the bigger problem. Yet each of these individual players is vulnerable to the decay of its power. That doesn't
mean that we should not worry about them, of course—competition in criminality hardly redeems it. But we should remember that the Taliban, Al Qaeda, and Zetas, the Mexican drug cartel, have their own splinters, offshoots, and mutations; that the threat from a unified China is different from the threat posed by a China that is itself going through a rapid and weakening dilution of power among regions, interest groups, and competing factions within the Communist Party; and so on.

Ultimately, the players will change, overtaken by their own rivals or mutating from within. In many instances, the tools they use to exert their power are here to stay; in other cases, new players will become powerful through their invention of new tools to gain power. The power enjoyed by Facebook or Google resides in new technologies that others don't have. Al Qaeda derived its power from its new and murderous ways of “doing business.”

Moreover, the sheer scale of the More, Mobility, and Mentality revolutions has simultaneously made our problems bigger and more complex and weakened our mechanisms for addressing them. Consider the threat of climate change: even as the rise from poverty of China and India has lifted the lives of billions, it has also accelerated their greenhouse gas emissions dramatically. China overtook the United States as the single largest emitter of greenhouse gases in 2006, and India that year was ranked fourth. Any effort to reduce carbon emissions in one country must take into account the actions of the other—not least because as environmental policies and carbon pricing mechanisms in developed countries take hold, companies have responded by shifting their carbon-intensive production offshore. From arms exports and Internet-domain conventions to fisheries and agricultural trade, just about every subject for international negotiation now involves more demands from a growing number of stakeholders. As a result, we are increasingly unable to take action that goes beyond the lowest common denominator and actually makes a dent in the problem at hand. Having a more diverse and inclusive group of actors at the table (the erstwhile “weak”) and reducing the number of decisions arbitrarily imposed on the world by a few powerful players are worth applauding, but the heightened difficulty of getting things done is not.

That paralysis has become acutely evident in the United States. As politics has become more polarized, the defects of a system overloaded with checks
and balances have become more apparent. Francis Fukuyama calls this system a “vetocracy.” He writes: “Americans take great pride in a constitution that limits executive power through a series of checks and balances. But those checks have metastasized. And now America is a vetocracy. When this system is combined with ideologized parties, . . . the result is paralysis. . . . If we are to get out of our present paralysis we need not only strong leadership, but changes in institutional rules.”
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Economist Peter Orszag witnessed the workings of vetocracy and its nefarious consequences. Writing in 2011, he reflected on what he had just witnessed as one of the top economic policymakers in the United States: “During my recent stint in the Obama administration as director of the Office of Management and Budget, it was clear to me that the country's political polarization was growing worse—harming Washington's ability to do the basic, necessary work of governing. . . . Radical as it sounds we need to counter the gridlock of our political institutions by making them a bit less democratic. I know that such ideas carry risk. And I have arrived at these proposals reluctantly: they come more from frustration than from inspiration. But we need to confront the fact that a polarized, gridlocked government is doing real harm to our country. And we have to find some way out of it.”

Orszag is hardly a radical with autocratic tendencies. In fact, his proposals are essentially technocratic reforms: he favors boosting fiscal automatic stabilizers (the tax and spending provisions that automatically expand when the economy slows down and contract when the economy grows), backstop rules (events that are triggered when Congress does not act, thus changing the default mode from inaction to action), and relying more on expert commissions empowered to work and operate with rules that shield them from partisan pressures.
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While the foregoing examples are based on the recent experience of the United States, most democracies are also suffering from this combination of acute political polarization and an institutional design that makes it very hard for the government to make timely and effective decisions. Remember that, as noted in
Chapter 5
, of the world's thirty-four wealthiest democracies, in 2012 only four had a president or prime minister whose party also had a majority in parliament. And like the United States, other countries are not lacking in creative ideas to reform their system of checks and balances and enable the government to break out of the policy paralysis and improve the quality of the policies it adopts. But these advances are not occurring. Not in the United States and not elsewhere. Not even the
crushing pressures produced by the economic crisis in Europe have enabled leaders to secure the power they need to react quickly and effectively. In fact, the contrary happened: as the economic crisis fueled even more political polarization and fragmentation, it further weakened both those in power and those who opposed them. No one seemed to have the ability to make the changes that were desperately needed.

The end of power, indeed.

There is a concept in economics called ruinous competition. It refers to circumstances in which the prices charged by firms in a given industry become too low to cover the cost of production. Firms do this when they want to get rid of inventories quickly, or when their goal is not to maximize profits in the short term but to bankrupt one or more rivals. These rivals then react in kind. When this situation becomes more than just a temporary surge in overly aggressive business tactics, it risks undermining the industry as a whole. Certain conditions make ruinous competition more likely. It happens, for instance, when there is a great deal of surplus capacity—idle factories and equipment, or warehouses full of overstock—and businesses keep lowering prices just to keep things running. In a sense, ruinous competition is a perverse mutation of the ideal competition that economists hold so dear.

Ruinous competition is a good metaphor to illustrate what can go wrong with the diffusion of power and its attendant decay. When power is harder to use and to keep and spreads to a larger and ever-shifting cast of small players, forms of competition and interaction that are detrimental to the social good are more likely to arise, threatening the health of economies, the vitality of cultures, the stability of nations, and even world peace.

In political philosophy, the analogous idea is encapsulated in the classic contrast between two extremes: tyranny and anarchy. When overly concentrated, power produces tyranny. At the opposite end, the more fragmented and diluted power becomes, the greater the risk of anarchy—a state in which there is no order. Both of these extremes are rare: even the most tyrannical system has cracks, and in the most anarchic situation, a modicum of order and a power structure eventually obtains and chaos abates. But the central message here is that the excessive dilution of power and the inability of leading actors to lead are as dangerous as the excessive concentration of power in a few hands.

The excessive decay of power, whereby every significant actor can veto the initiative of others but no one of them has the power to impose its will, is as much a risk to a nation's political system and society or to any community or even a family as it is to the system of nations. When power becomes so constrained, paralysis ensues and stability, predictability, safety, and material prosperity suffer.

The ways to maintain order in an environment where power is dispersed, fleeting, and decaying are manifold. Among them are federalism, political alliances and coalitions, international organizations, internationally accepted (and imposed) rules and norms, checks and balances between branches of government, and moral or ideological ties under banners like Christendom, Islam, social democracy, or socialism. They are all answers to an old problem, one that dates back to the Greek city-states. But today's decay of power has yet to give birth to its own institutional responses: innovations in organizing public life that can allow us to enjoy the fulfillment and personal autonomy that hyper-diffuse power promises while staving off its very real, very dangerous threats.

To imagine the effects of the decay of power on the social good, consider a graph shaped as an inverted U-curve. It plots the decay of power—concentrated at the left, diffuse at the right—against widely desired values such as political and social stability, reliable public institutions, and economic vitality.

F
IGURE
10.1. T
HE
D
ECAY OF
P
OWER
: I
NVERTED
U-C
URVE

The horizontal axis, which tracks the decay of power, starts with a situation (at the extreme left, near the origin of the axis) of maximum concentration and control of power in a few hands. This is the place where tyranny, monopolies, and forms of tight control in political and economic life that deliver inadequate levels of social well-being are located. At the other extreme in that horizontal axis, power is hyper-diffuse and diluted. There, the collapse of order brings anarchy and the situation becomes as socially undesirable as that at the other extreme, where concentration is high and political and economic monopolies are the norm.