The Agenda

Francis Fukuyama vs. Jay Cost on Democracy, Populism, and Governance

Francis Fukuyama of Stanford and Jay Cost of the Weekly Standard weren’t engaging each other directly this past week, but I was struck by the contrast in their recent observations regarding the politics of democratic accountability.

First, Fukuyama:

I have no doubt that more democratic accountability will improve governance in many poor countries in Africa, Latin America, and the Middle East. East Asia is different, however, insofar as it has a very long tradition of relatively high-quality centralized bureaucratic government. This begins with Shang Yang’s reforms in the early state of Qin, and continues to this day in the extraordinary record of the Chinese Communist Party in bringing China through one of the most complex economic transformations one can imagine. Many East Asians today wonder whether rapid democratization will in fact help or hurt the quality of governance there. What they don’t have is either democratic accountability or rule of law.

Conversely, I would argue that the quality of governance in the US tends to be low precisely because of a continuing tradition of Jacksonian populism. Americans with their democratic roots generally do not trust elite bureaucrats to the extent that the French, Germans, British, or Japanese have in years past. This distrust leads to micromanagement by Congress through proliferating rules and complex, self-contradictory legislative mandates which make poor quality governance a self-fulfilling prophecy. The US is thus caught in a low-level equilibrium trap, in which a hobbled bureaucracy validates everyone’s view that the government can’t do anything competently. The origins of this, as Martin Shefter pointed out many years ago, is due to the fact that democracy preceded bureaucratic consolidation in contrast to European democracies that arose out of aristocratic regimes.

One could argue, however, that elite bureaucracies are brittle; that is, they can perform relatively well in stable environments, but a strong tendency towards risk-aversion and towards interpreting new events through old frameworks and patterns makes them vulnerable when facing genuinely new challenges. So in this sense that value that we’d like to cultivate is one of resiliency, which is perhaps best achieved through relatively lean administrative states and decentralized, participatory governance. The supposed “success” of the German model has been punctured by the growing recognition that Germany’s last decade has been defined by wage repression and the exploitation of an artificially weak (for Germany) currency. Yet the German state was extremely reluctant to sacrifice a manufacturing-intensive economy, perhaps due to its brittleness.

Funnily enough, Paul Krugman wrote about this in the 1990s, the years before his popular work was primarily co-authored:

The real divide between currently successful economies, like the U.S., and currently troubled ones, like Germany, is not political but philosophical; it’s not Karl Marx vs. Adam Smith, it’s Immanuel Kant’s categorical imperative vs. William James’ pragmatism. What the Germans really want is a clear set of principles: rules that specify the nature of truth, the basis of morality, when shops will be open, and what a Deutsche mark is worth. Americans, by contrast, are philosophically and personally sloppy: They go with whatever seems more or less to work. If people want to go shopping at 11 P.M., that’s okay; if a dollar is sometimes worth 80 yen, sometimes 150, that’s also okay.

Now, the American way doesn’t always work better. Even today, Detroit can’t or won’t make luxury cars to German standards; Amtrak can’t or won’t provide the precision scheduling that Germans take for granted. America remains remarkably bad at exporting; the sheer quality of some German products, the virtuosity of German engineering, have allowed the country to remain a powerful exporter despite having the world’s highest labor costs. And Germany did a better job of resisting the inflationary pressures of the ’70s and ’80s than we did.

But the world has changed in a way that seems to favor flexibility over discipline. With technology and markets in flux, not everything worth doing is worth doing well; in an environment where deflation is more of a threat than inflation, an obsession with sound money can be a recipe for permanent recession.

And so Germany is in trouble–and with it, the whole project of a more unified Europe. For Germany is supposed to be the economic engine of the new Europe; if it is a drag instead, perhaps the whole train in the wrong direction goes, not so?

Suffice it to say, few think of the U.S. as one of the world’s “currently successful economies.” But I wonder if Fukuyama is overinterpreting America’s relative weakness at the moment. There is good reason to believe that the U.S. will be the first of the world’s major economies to accelerate out of stagnation precisely because, as Michael Pettis has argued, the U.S. is typically quick to adjust to changing global economic circumstances. But according to Pettis, China, with its elite bureaucracy, is suffering from a serious brittleness problem. 

What is especially interesting, at least to me, is that an increasing number of commentators within China are identifying the social and economic rigidities imposed by the state system as crucially important in constraining China’s future economic and political growth.

This is becoming a pretty contentious debate. Over the past several months, in fact, we have seen a noticeable surge in articles and reports like this one – often by very prominent academics and policy advisors – criticizing the power of special interests in China. Their main concern seems to be over the constraints these special interests impose on further Chinese development, with the entrenched interests that have benefitted over the last decade or two having become so powerful that they are making it increasingly difficult for China to adjust.

A lot of very smart people in China, in other words, seem to be worried that the country’s governance structure and its development model are no longer able to accommodate the needs of the economy and that it is vitally important to confront the entrenched interest that make change difficult. This is sometimes presented in the foreign press as the debate between the “Chongqing” model versus the “Guangdong” model.

Fukuyama is focused on the pathologies of America’s anti-bureaucratic gestalt. Yet it might also have its virtues, particularly since elite bureaucrats suffer from many of same cognitive biases as citizens.

Now let’s turn to Jay Cost, writing on a somewhat different but related subject:

Skepticism of an interventionist government date back to Jefferson and Jackson, who both feared the nexus of big business and big government. Woodrow Wilson designed his “New Freedom” program precisely to combat TR’s “New Nationalism” during the 1912 campaign, but the ever-pragmatic Wilson ended up implementing most of the Bull Moosers’ program once in office. It’s oft-forgotten, but FDR’s First New Deal infuriated many establishment Democrats like John Davis (1924 nominee), John Jakob Raskob (former DNC Chair), and Al Smith (1928 nominee). And as soon as the “Solid South” went from being benefit-receivers to benefit-payers in the progressive scheme, they started bolting (with the first revolt coming as early as 1937).

The principal reason for this opposition is that there has always been more than a whiff of anti-republicanism to the progressive agenda. Just consider the name “progressive,” which implies a social, epistemological, or moral vanguard — hardly the hallmark of true republicanism. And what one person views as “socially beneficial,” another may rightfully call political patronage. For instance, the New Deal was full of payoffs – small and large – to Democratic constituencies. Scholarly study after study has shown how electoral calculations factored into the distribution of relief dollars during the New Deal, but perhaps the best (worst?) example is the original Social Security program. This program remains a huge point of pride for liberals, but when you look under the hood, you find some shockingly illiberal items. In particular, it was a huge bonanza for Southern plantation owners. They were cash-poor, so they remunerated their (largely black) tenants in non-cash services like old-age assistance. The planters did not want their sharecroppers to have an alternative source of income, so the Democratic Congress in 1935 amended the bill to exclude that class of workers. On a dollars and cents level, this was one of the largest political payoffs up to that point in the nation’s history, far outstripping the so-called “spoils system” of the Jacksonian age. The Southern agricultural gentry similiarly won illiberal carve-outs on the AAA as well as the Fair Labor Standards Act.

One is struck by how little we hear of this aspect of the New Deal’s origins in popular accounts. 

There is a temptation to view the government as nothing more than the avatar of the public interest, but this is foolhardy. The reality is that just as market forces induce private behavior, political forces induce congressional and presidential behavior. And so, factions with a tight connection to elected officials are going to receive a better deal when the government swoops in to reform private behavior. And the larger the scope of government, the larger the potential payoffs. This is why Republicans who engage in this kind of patronage — and there are far too many — are behaving in an anti-conservative way. Unfortunately, the progressive tradition of ever-bigger government is like catnip for clientelism on a massive scale.

And so, the Democrats’ grand dreams of a “Fair Deal” always stink of unfairness to conservatives in the republican tradition. The examples are so numerous and stretch so far back into history, I could literally write a book about the subject. And Barack Obama, the president who promised to bring change to Washington, has been a very diligent patron to his party’s extensive list of clients. On item after item, the topline claim to benefit the national interest is regularly belied by the particularism of the fine print. [Ezra] Klein mentions three items in particular in his column – the auto bailout, the financial reform bill, and the health care bill – that were all justified on purely nationalistic grounds, but peel off the top layer and the stench of clientelism will overwhelm you.

Here Cost is presumably referencing the treatment of small creditors as opposed to that of UAW members, among other contrasts.

To this list I would add the stimulus bill, the jobs bill that Obama proposed in the fall, and the cap-and-trade bill. Liberals look upon them all as fulfilling a great national purpose, but republicans (small “r”) see massive payoffs to core Democratic groups.

The fiscal stimulus law devoted considerable resources to preserving employment levels in state and local governments, a measure that could be interpreted as a guard against the deterioration of public services but also as protection for a core political constituency. This latter interpretation gains credence from President Obama’s sharp political attacks against politicians, like Wisconsin Gov. Scott Walker, who sought to preserve high public employment levels by allowing local governments to unilaterally reduce compensation costs through the rollback of collective bargaining rights. 

If you want to understand the seething anger on the conservative side of the aisle, this is what you need to appreciate: It’s not just that Obama is a big government guy in the progressive tradition, which conservatives have opposed for more than a century. It’s also that he’s a client guy, meaning that his idea of big government inevitably has special payoffs hidden in it somewhere. And more than even this, he’s a boundless client guy in what should be an age of restraint. Payoffs to party clients are one thing when the economy is growing at a four percent rate per year; that is a situation where the times are so prosperous that government patrons are really just drawing upon the national surplus to satisfy their partisans. But when the economy is growing at less than two percent per year, barely enough to keep up with population growth, paying off party clients is actually like robbing from Peter to pay Paul. And while Obama and congressional Democrats have put off that bill — in the form of our trillion-plus deficit — conservatives are not fools. They know they’ll be asked to pay up sooner or later, and with a stagnant economy that means less money in their pockets, in part because the president wants to hold together his voting coalition. [Emphasis added]

Fukuyama might reply that the narrative Cost is presenting is unduly cynical. I tend to disagree. 

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