The Excuse of Good Governance

Published in El País, “Más o menos Estado”, March 12, 2015, pp. 31-32.

The greater the scope for decision-making by politicians and civil servants, the more favors they can hand out and the greater their temptations. Which is why corruption is so closely linked to the weight of the state. To reduce it, governments should have less decision-making power, but the Spanish people still believe the state should solve all their problems, and politicians just give them what they want. Instead of limiting state action, many proposals for renewal seek to improve it, assuming that improving it is possible. But, if it is not, and even if such ideal action were desirable, such proposals would increase opportunities for corruption and waste.

All efforts for renewal and regulation are not necessarily wasted, just those that disregard two “Coasian” conditions: that all relevant options be considered, including those involving less statism, and that prior experiences be considered as an indication as to the real possibilities of each of the options.

Many proposals fail to apply these two conditions. Especially when they assume that all that is needed for reforms to be efficient is a change in the law, a new body or a new decision-maker. Such regulation-based voluntarism is widespread.

In economics, it is often to be found in ideas regarding the independence of regulatory bodies. They assume not only that such bodies are always necessary but also that they can be truly independent, even in a country such as Spain that has not yet managed to separate the executive power from the judiciary. Clearly, it is not just a matter of replacing the people, or of transplanting formal rules. If we are incapable of regulating well, then the most obvious course seems to be to regulate less.

In politics, proposals to change representation mechanisms also have a similar failing: they do not make thorough comparisons, so they assume that the result will be favorable for their pet reforms. They assume, for example, that reforming the electoral system will engender greater political competition, leading voters to elect better leaders who will then rationalize the public sector. They forget that many more people support similar reforms in the hope of expanding the public sector.

In institutions, costly, radical changes are often advocated without first considering alternative scenarios. Institutional ruptures are proposed, claiming that welfare will follow automatically. This is the path followed by most populist proposals, both national and regional. But many apparently less emotional proposals also expect benefits to appear, as if by magic. Their rhetoric may be more sophisticated but, again, they do not consider real options, just a partial reality whose worst attributes are compared with a virtual paradise.

The simplest proposals are explicit in this respect. They replace regulators, leaders or subjects of sovereignty, but omit to define new incentives for citizens or politicians. They just trust that new decision-makers will behave better than the previous ones. Yet, without a change in culture or incentives, that hardly seems reasonable.

It is true that some proposals would change incentives, especially if they encourage competition between parties. But they also fall prey to idealism, as they assume that culture and, above all, citizens’ attitudes, even in the short term, are of no importance. But, unfortunately, such attitudes mean that the level at which political competition should be increased is not obvious. Nor is it clear that it would be good to increase it, especially with citizens who have little predisposition to inform themselves or to endeavour to exert any control over the public sphere. Under such conditions, increasing competition between parties is likely to just generate more populism, as was the case in the 1930s, and as we have seen in part with the increasing political competition fostered by the crisis.

And something similar is happening to competition inside parties. The control exerted by their upper echelons is believed to be excessive, inhibiting debate and the selection of good leaders. This may be a valid criticism, but some empirical indications question it. There have been many schisms in Spain on a local and regional scale which, unfortunately, have often given rise to parties of dubious quality. Schisms hint that internal competition exists, and the resulting low quality confirms the conjecture that, in this field, the effects of competition may be negative. And let us not forget the doubts that arise out of the functioning of primary elections, nor that the newer parties, despite having different internal rules, are already showing the same vices  as the older ones.

Institutional reforms are undoubtedly necessary, but they must be done with rigor. And they must be complemented by a simpler, more democratic remedy, one that requires a radically different, much more bottom-up approach. Instead of just changing leaders, making them more illustrated or more benevolent, we need to improve the information behind people’s preferences, which often do not reflect their values. I refer, especially, to information on public services and the payment of taxes. Such information is now distorted by all sorts of fictitious gratuities and invisible taxation. We should make it clear and unavoidable, so that citizens do not have to make an effort to vote better nor to depend on the goodwill of the new “preachers”, in the shape of politicians, journalists or intellectuals. We should not hide different performances and quality in public services, from schools to hospitals, or the amount of our future pensions. And we should stop deceiving ourselves, as with the fallacy of social security contributions being “paid by the employer”, as if they were not part of the tax on labor. In a word, we should make citizens understand how much they are paying and how much they are receiving, cutting out mere paper transparency and interpretative sermons.

There is nothing spectacular about this proposal, but it has an important advantage. Instead of promising an unattainable manna to, essentially, supplant the will of citizens, it aims to treat them as adults so that they can decide on what is key—where there should be more or less state. Without adult citizens, any institutional changes attempted are likely to generate serious conflicts and, anyway, are unlikely to last.

Without adult citizens, good governance, too, runs the risk of becoming an excuse to be used by whoever preaches it. This by no means justifies the bad governance that we continue to suffer. But renewal efforts must not get it wrong again, as a century ago. Such mistakes would just spark yet another cycle of collective frustration.

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