“…I do think that the central challenge of modern governments is that they be strong enough to act decisively when needed but also disciplined enough to act well by the external environment. I think that the chronic problem of democracy has long been thought to be that democracies can respond well to crises, but they cannot respond well to chronic problems. For example, democracies may not be good at responding to the problem of poverty. So, how can we develop systems that can respond to chronic problems rather than just be crisis response systems?
I think we have all come to this question in our own history and our own past. Consider the example of how the American political system has been responding to long-term chronic problems. Within the range of democratic systems, the US has a relatively weak government. That is to say the political system is heavily infiltrated by powerful interest groups, which prevent it from acting in ways that undermine their interest. If you just look at the last few months, for example, of the new Obama administration, you will notice that both the big health care reform president Obama has tried to orchestrate and the financial regulation he has tried to implement are at a standstill, despite his very high approval ratings in general. On the one hand, powerful interest groups outside the political system namely the pharmaceutical industry in the area of health care and the financial sector, the banks, in particular, in the area of financial regulation have pretty much derailed the reforms that the administration was seeking to implement. On the other hand, the pressure from outside Congress but also, the institutional structure of the political system have made it very difficult for the Obama administration to act.
In the American Congress we have a system which requires that you have at least 60 senators to support what you want to do. Else, you cannot stop the opposition from mobilizing to prevent your legislation from moving forward. So another way of putting this is to say that in the United States the government for the most part has to govern with the consent of the opposition. The government cannot really act over the objections of the opposition. And governing is difficult, even in the present situation, when Obama won a healthy majority in the presidential election and has a pretty big majority in both the House of Representatives and the Senate. Hence, the combination of the powerful interest groups that are opposed to his legislation and the institutional so-called checks and balances have an effect of blocking his new initiatives. So, you might say we should look to systems that are not so strong by all this sorts of considerations and the Chinese model is an example of a system in which there has been the possibility of executing decisive actions from above.
The difficulty with the Chinese model is that it has pathology of its own. If you have political action that is not informed well and is not disciplined by political opposition, what you tend to have over time is the accumulation of poor decisions and the growth of corruption. At the end of the day political monopolies are as undesirable as economic monopolies. In Japan for much of the most postwar period we saw in Japan a political monopoly that led to a number of very poorly informed decisions accumulating over time, over the very time, I might stress, when the people were talking about the Japanese miracle and the enormous efficiency of Japanese system in fact in those very same years very bad investment allocations were being made, all the industries were being prompted up, new industries were not receiving the sort of breathing room that they needed. We could use the metaphor that the trees were not coming up through the forest. And so in the 1990s the Japanese economy was a victim of very poor decisions made by the Japanese government.
Now everybody is impressed by the developments of the Chinese economy over the last decade and a half or so and China seems to have weathered the immediate financial crisis better than many democratic economies. But I presume that the Chinese government doesn’t have the two features that I think are essential to help the governance over the long term. Markets are very good generators of information and it’s not at all clear that the Chinese government’s allocation decisions, investment decisions are being well informed by market practices and it’s not at all obvious to me that the same kinds of poor decisions that Japanese government made when the LDP had a power monopoly are not being replicated now in the Chinese economy. Related to this is the lack of political opposition which means that we should expect and anticipate corruption to develop alongside the evolution of the Chinese state.
The American system has the opposite pathology – we have weak government that can respond to crisis but cannot solve chronic problems as a result of the fact that politicians are forced to govern both with the consent of the opposition and countering out the interest of powerful groups that can always preserve the status quo. On the other hand, I don’t think the idea of an undisciplined political monopoly is a very good either. My own view is that Westminster system of strong government alternating with the opposition has more to recommend than the American system. But I do think that as we move forward into the future we shouldn’t be sticking to these old models. We should elaborate new models which should be judged by these two standards of whether they make decisive and well informed governments possible and whether they overcome the pathology of political monopoly…”
