Governance Redefined, Part I

GOVERNANCE REDEFINED

This essay is a companion to “Money Redefined” posted on this blog October 1, 2009 and may still be found under the Economics heading.

 ABSTRACT

 Examples are given of the poor performance of the US Government in meeting today’s problems.  The conclusion is reached that its deficiencies are endemic to representative democracies in general thanks to their inherent structural faults.  These faults are then enumerated including the misdirected election of the representatives themselves and the negative factors that influence their performance in office.

The reader is then asked to imagine a country I call “Postcapia” that boasts a new form of democracy entirely free of such problems by virtue of having dispensed with both administration and legislature.  Though hypothetical, this new form of government is solidly grounded on a perfected system that utilizes a methodology based on human intelligence.

A description is then given of the organic Postcapian government in which its functions are cleanly divided between its routine-management responsibilities and its law-making processes.  Some of the advantages claimed for this idealized system is a governmental apparatus that is:

A fraction of the size of our existing government

1. Far more efficient costing less than one-third of our present budget
2. More responsive to changing conditions
3. Devoted to evolutionary advance
4. In the hands of genuinely capable administrators
5. Incapable of large-scale error thanks to feedback measures
6. More respectful of personal freedom
7. Conducive to greater prosperity

It is the author’s intention that the views expressed are addressed in a rational, problem-solving, apolitical manner.  It is safe to say that they would not fit comfortably in either the left or right political camps.

The essay is divided into four parts:

 I. WHAT’S WRONG WITH GOVERNMENT.  Why representative democracy doesn’t work.

II. THE GOVERNMENT OF POSTCAPIA.  Characteristics of a model biological system that does work.

III. THE AUTONOMENT.  How Postcapia handles its routine administrative tasks.

IV.  THE VOLITIONMENT.  The workings of the Postcapian law-making process

PART I. WHAT’S WRONG WITH GOVERNMENT

 THE FINANCIAL CRISIS OF 2008

Immersed in day-to-day demands upon our time, most of us understandably shy away from facing up to our lives’ less immediate, but perhaps more destructive, problems.  Nevertheless, if we don’t face up to such issues we have no means of correcting them.  So allow me to address what many would agree is the most galling of such matters that complicate our lives-the perfectly miserable way in which we are governed..

Take, for example, the government’s involvement in the financial crisis of 2008.  Before the housing bubble burst, those associated with it-the home buyers, real estate salesmen, mortgage writers, bankers, and financiers, among them-profited handsomely.  And, in hindsight I suppose, they could all be accused of greed, if being reluctant to walk away from a highly lucrative spot along the feeding trough can be so characterized.  (Although, most of us, I daresay, would behave no better if offered the same opportunity.)  Certainly none of these groups were entirely blameless and some outright dishonest.  But there was no formal collusion between them and none were in position to orchestrate the entire scheme.  It took the intervention of government at each and every step down the slippery slope to create the resulting debacle.  The same sanctimonious, two-faced do-gooder government, , by the way, that came out from behind the tree when it was all over with profuse-and needless to add, ineffectual-offers of assistance.

Consider the main factors in the bubble:

One, an unusually low interest-rate environment made home ownership particularly attractive. Credit the Federal Reserve for keeping rates artificially low (and mortgage payments particularly affordable) from 2001 to 2004.  This greatly stimulated the housing market, created the delusion of ever increasing home values, and encouraged many buyers to overextend themselves.  Minimal down payments and adjustable rate mortgages proved a trap for those who assumed that low rates would continue forever.

Two, the number of mortgage originations rose steeply while their creditworthiness declined.  Normal good business practices were set aside in favor the government’s single-minded, politically-motivated determination to increase the percentage of home ownership at any cost.  The authorities in the Federal Housing Agency, the Treasury and elsewhere in government looked the other way in the face of rampant fraud by borrowers and lenders alike.  In effect, government became a silent partner in these crimes.

Three, syndication allowed the banks to pass on the paper to financial houses that repackaged them into CDO’s and other negotiable instruments.  The increasingly suspect credit instruments could never have been marketed had not the quasi-governmental (now fully government owned) organizations, Fannie Mae and Freddie Mac, provided a lender of last resort for as much housing paper as the industry could generate, no questions asked.

Four, credit agencies obligingly gave an undeserved portion of the instruments their highest ratings. The SEC accorded only three companies-Standard and Poors, Fitch, and Moody’s-rating authority for official purposes even though their income came from the very companies being rated-an open invitation for manipulation.  Not surprisingly, the firms, in exchange for fat fees, stamped “AAA” or “AA” willy-nilly on bonds that little deserved it.  Had the government not granted this oligopoly-had more eyes scrutinized the underlying weakness of this indebtedness-it is reasonable to assume that ratings would have been far more conservative.  This would have made a critical difference in the bonds’ salability, for only the highest rated ones could maximize the banks’ all-important leverage as mandated by government regulations.   For all practical purposes, then, the government forced the banks to overextend themselves.   The artificially high ratings also opened the door to naïve foreign marketplaces further fueling sales.   

Five, once significant numbers of home-owner mortgagees reneged on their monthly payments, the quality of the paper that depended on this income collapsed and the entire financial system was thrown into disarray.  And again the government was on hand to make matters worse.  Subject to the recently introduced regulatory “mark-to-market” accounting, the banks’ vast holdings of this dubious paperwork sank like a stone leaving many technically bankrupt and panic ensued.

 One conclusion one can safely come to in this sorry affair is that government officials, up and down the line, made grievous mistakes both in terms of their active involvement and their inexcusable lapse in regulatory responsibility.  But I want to make a larger point-i.e., our government is not only capable of making mistakes, but that it is capable of little else no matter what it undertakes.

Look carefully into any federal program and you will find the same waste, corruption, inefficiency, ill-advised actions, and, like as not, counterproductive outcomes.  True, some programs are less worse than others and naturally there are always bound to be beneficiaries.  Naturally, if the government spends one-hundred dollars, some fraction of that is bound to benefit someone.  But that is hardly a valid test of the efficacy of the program as a whole.  By any rational accounting system there simply are no efficacious government programs.  A closer look at the workings of Congress reveals why this is so.

THE DRIVE FOR MEDIOCRITY

Start with the electorate itself.  It should be self-evident that anyone drawing governmen­tal subsis­tence or a government paycheck should not be allowed to vote on grounds of conflict of interest.  It does not, after all, take a very large block of government employees handing out cash along with a second block of receiving it to determine the course of an election.  Imagine, for example, that among the general population of ten million, 52% prefer a change in government and 48% are in favor of the status quo.  Given this distribution, one would, of course, expect a turnover of power in the next election.  However, if in addition to the general population, there exists a voting block of 500,000 government workers and handout recipients-a mere 5% of the population-then the next election would retain the existing government by a margin of 100,000 votes.  And it goes without saying that such a government would dedicate itself to expanding its locked-in constituency from 500,000 to 750,000 before the next election to widen its margin of safety still further.  Obviously, it would not take many such iterations to cement one-party rule in a nominally democratic society.

A second perversity that distorts our elections is our preoccupation with the sheer quan­tity of votes-the absurd assumption being that, no matter how badly informed, the public can be counted on to make the right de­cision pro­vided the number of votes cast is high enough.­  By the same reasoning, one could argue that a classroom of illiterates should be graduated with honors provided the class size were only made large enough.  However ap­parent are the failings of individual ignorance, somehow it is assumed that collec­tive ignorance in large enough concentrations has some magical ability to sum­mon divine, and presumably enlightened, intercession.  It doesn’t.  All that happens is that the votes of knowledgeable citizens are effectively drowned out by the numbers game.

If these first two internal drawbacks were not enough to incapacitate the election process, external factors surely accomplish whatever else is needed.  Our media-dominated election circuses are little more than beauty contests in which the candidates are judged on the basis of their appearance, articulateness, professed sensitivity, glibness at spouting platitudes, and other superficialities that have absolutely nothing to do with their eventual competency in office.  All that is missing is a swim suit competition and it would not surprise me over much if that too were made a fixture in future campaigns.  Sadly, the political attributes most touted are actually counter-indicatory to what is really wanted in public office: personal integrity, intellectual accomplishment, in-depth understanding of national issues, a realistic sense of how to deal with them, and managerial ability to take action.

Lack of proven competence is not the only qualification our political system requires of its practitioners; cynicism is another.  Every candidate worth his salt is expected to be able to lie through his teeth whenever the occasion warrants, while masking his deception behind an earnest, pure-as-the-driven-snow countenance.  Such cynicism is best exemplified by each candidate’s heartfelt pledge to spend whatever taxpayer dollars are necessary to demonstrate the depth of his compassion.  Throughout his campaign he assures his constituents that their every need will be fulfilled once he is in office, be it healthcare, education, a well-paying job, adequate housing, a safe environment, or whatever else they fancy as essential to their contentment.  Don’t worry about the cost, he adds, with a perfectly straight face.  The source of funding necessary to accomplish all these good things will be magically revealed to one and all at some future, post-election date.

Our election process further requires candidates to kowtow to particular constituencies.  In that virtually every ethnic, religious, economic, and social group has some legitimate grievance against the rest of society dating back to some point in its history, it is not difficult to persuade a targeted group that its case is special and that its particular grievances are most egregious of all.  Vote for me, the candidate proclaims, and I’ll see to it that ultimate justice shall prevail.  You victims shall be recompensed in accordance with a master ledger on which all such injustices have been duly registered along with their appropriate compensation.  That such fraudulent appeals are destructive to America’s social fabric and ultimately to her success as a nation, is, of course, a matter of secondary importance when the main object is winning the race at all costs.  Victory at the polls is paramount.  All’s fair in love, war, and politics.

Taken together, these defects in our election system practically guarantee a government of mediocrities.

MEDIOCRITY AT WORK

Under our perverted political system, elections are the main events and the intervals between little more than staging periods for the battles ahead.  Just as it is said that ‘diplomacy is war by other means,’ so office-holding is thought to be ‘election by other means.’

Once in office, most politicians have every intention of staying there and the one sure way of doing so is to buy as many votes as necessary.  And, obligingly, the political system makes great sums of public monies available for the purpose.  At one time in the distant past, vote buying was confined to paltry sums more or less openly proffered on election day in exchange for a voter’s one-time support.  Now that politics has become more sophisticated, however, the practice has expanded from one-bribe-one-vote to a continuous flow of goodies to entire voting blocks in exchange for their lifelong support.

This advance in the brazenness of civic bribery is evidence of a systemic fault in the workings of representative democracy.  On the one hand, there sits this pile of public funds seeming to belong to no one in particular, and, on the other hand, there are these hordes of special interest groups hungrily milling around it.  As the officially designated middlemen between these two mutually-attracting elements, what are the poor, vote-dependent politicians to do?  The very least that tradition demands is that monies be sprinkled among the poor and downtrodden with all the noblesse oblige of medieval monarchs;  that a profusion of earmarks be handed out to demonstrate the politicians’ attachment to their humble roots; and that juicy allowances be advanced to every friendly corporation and nonprofit under the sun.  And who would be so crass as to call attention to the fact that the money, with which our compassionate public servants are so generous, is not their own?

Sooner or later, everybody who can makes their way to the trough.  Majority groups push through legislation giving them special status at the expense of minority groups.  And, at the other end of the scale, focused “rent-seeking” minorities obtain disproportional benefits for themselves because the cost, spread over the entire base of taxpayers, appears inconsequential.

It’s not only votes that are on sale in the Washington marketplace, so are politicians.  And the commerce thrives.  Money flows out and in-both in good measure.  Political campaigns require money and lots of it.  Indeed, the mere display of a bulging war chest is enough to ward off political rivals in the same way that a bull moose’s wide rack of antlers poses a warning to sexual rivals.  Not surprisingly, then, our good representatives devote much of their time and energy to bulking up their campaign funds.  Thus they constantly solicit contributions by implying that any such donations would not go unnoticed when the next opportunity arises to hand out political favors.  Naturally, contributions flow largely to the most likely winners-that is to say, those incumbents already well financed-creating a self-reinforcing cycle that has the effect of turning incumbency practically into a monarchical right.

One might wonder at the scale of campaign contributions-in the millions annually-until he becomes aware of how much they can buy, often at relatively modest cost.  Every group-be it a corporation, trade association, religious faction, farming cooperative, racial minority, labor union, rent-seeking profession, and so on-would rather compete on a playing field tilted in its favor.  And who is in a better position to do the tilting than a government empowered by legalized force?  Thus petitioners have every motive to contribute and their thankful beneficiaries every motive to further expand their authority so as to have more favors to put on sale.

As yet another distortion of the democratic process, consider the practice of gerrymandering.  To perpetuate their control over supporters concentrated in certain specific areas, state politicians twist and turn boundaries until their voting districts appear to be literally howling in pain.

What it boils down to is that a goodly portion of a politician’s time and energy is spent, not on the nation’s business, but on his own with the result that, though the former may be neglected, the latter will be faithfully attended to.

STRUCTURAL PROBLEMS

But stay.  Perhaps I have been unduly critical of our public servants.  Certainly there are among them a number of energetic, intelligent, trustworthy, altruistic members of Congress.  Does not that alter the negative portrait of the institution that I have painted?  Not at all.  Even if we filled every seat in Congress with the likes of these dedicated legislators, it would still be prevented from functioning properly by a number of structural problems that beset all representative democracies.

First, a command political system cannot work any better than a command economic system.  After multiple failed attempts at central planning, economists have come to recognize that such a system can’t possibly keep track of the myriad perturbations of the marketplace.  It is time that centralized law-makers recognize that they suffer from the same sort of delusions and hubris as centralized planners.  The difference is we have allowed the former to stay on the job.  Like the socialists of yesteryear, we maintain the pretense that our legislators can successfully distill all the pertinent information emanating from their respective constituencies and from that distillation effectively govern from afar.  Then we express dismay when the laws they pass fall wildly off the mark or, more probably, are so divorced from any mark whatsoever as to be altogether pig-headed.  Indeed, we rightly consider ourselves fortunate on those rare occasions when the laws emanating from Washington do not actually exacerbate the problems they meant to address and trigger another round of law-making to correct the shortcomings of the last.

Second, the competitive nature of general elections leads inevitably to the formation of political parties which, in turn, practically ensure that consequent infighting between them will triumph over rational law making.  To gain public office, every candidate must first sell his soul to the devil-i. e., in order to obtain the recognition and acceptability that comes with party affiliation, he must commit himself to surrendering his independence of thought.  And once elected, he may be sure the devil collects his due.  He must keep looking over his shoulder for the current party line and, whether he agrees with it or not, vote accordingly.  Whatever his better-self leanings, he finds himself acceding to cloakroom deals, attacking policies with which he may be secretly in accord, defending policies with which he is in basic disagreement, and otherwise acting as a foot-soldier in the political wars.  And what political wars accomplish is what wars accomplish generally: unnumbered casualties, torn up landscapes, and the ruination of national treasuries.

Third, representative democracy has a built-in growth factor.  Bureaucracies spring up like green shoots after the rain-makers’ law-making sessions and, once established, burgeon under government’s tender care.  Unlike nature’s offspring, bureaucracies have no natural enemies and thus manage to keep taking on more responsibilities, adding more staff, and positioning themselves so as to claim to be more and more indispensable to the nation’s well being.  Managers have little incentive to make their bureaus more efficient but much incentive to seek greater funding; have little incentive to go to the trouble of firing incompetent unionized employees and much incentive to hire additional people to make up for the shortcomings of other workers; have little incentive to do anything constructive and much incentive to cater to the whims of legislators in whose hands their funding depends; and, for that matter, have little incentive to promote effective government and much incentive to devote their time and energy to self-preservation.  The result, not unexpectedly, is that governmental apparatus becomes more and more encumbered with overlapping bureaucracies, bloated staffs, unimaginable volumes of paperwork, ever more intrusive computer systems, snarled communication, diluted responsibility, and growing paralysis.

Fourth, representative democracies lack the ability to correct themselves.  No matter how outdated, how inefficient-for that matter, how destructive-a governmental activity has become, political cover for maintaining it is always at hand.  The ‘do nothing’ official can count on the support of the special interests benefiting from the status quo and the opinion of the in-house ‘experts’ who had recommended the failed policy in the first place.  On the other hand, attempts to introduce real change, however urgently needed, have no natural champions.  Instead any official attempting reform finds that he has handed his opponents a lethal political weapon for use in the next election in the form of whatever controversial side effects his proposal introduces.  Thus every legislator soon learns ‘don’t rock the boat.’  The result: political inertia.

Fifth, then there is the all-important matter of what representative democracies fail to do.  The most efficacious time to address a problem is when it is in its infancy, but our public officials are motivated to do just the opposite.  The media obliges them to focus their attention on issues that command the greatest public notice at the expense of what may well be more important, but less sensational, problems.  Thus critical issues fester until reaching the point that corrective action is either prohibitively expensive or virtually impossible.  For example, the maintenance of public infrastructure is normally a back-burner issue until newspaper headlines scream of a major bridge collapse that took with it a score or so of passenger-filled cars.  Then every political foghorn in the country is turned up to its loudest volume lambasting the guilty parties and demanding the inspection of every still-standing bridge in the country forthwith.

CONCLUSION

Back in 1787, when American democracy took shape, there was no better way to channel the voice of the people into governmental action than through a freely elected legislative body.  Indeed, at that time, the legislative process was considered ‘state of the art,’ a bold, innovative way to govern without the monarchial rule that prevailed elsewhere.  Our Founding Fathers rediscovered the beautiful flower of democracy that had sprouted in ancient Athens and lovingly transplanted it in North America.

But, as has been discussed, our government has become dysfunctional.  ‘Vox populi’ is heard so distantly as to be inaudible.  Year after year goes by without significant improvement in our educational system, with no lessening of the traffic congestion on our roadways, with no letup in governmental waste and extravagance, with no better control of the budgetary process, with no solution to the inevitable shortfall in social security funding, and with no meaningful remediation in drug use despite billions spent on the effort.  Millions of Americans are jobless, homeless, and broke.  The beautiful flower from Athens has been overgrown by a thicket of kudzu.

There has not been a lack of reforms proposed to overcome our government’s failings: term limits, restrictions on campaign financing, and any number of other measures have been proffered in the name of better government.  But none of these, I contend, would correct its systemic problems.  Fundamental reform won’t be found by tinkering at the edges.  When one thinks of alternatives to representative democracy, such autocratic forms as monarchist, fascistic and socialist states come to mind.  What, in all probability, doesn’t come to mind is a radically improved version of democracy itself, starting with a clean slate.  Nevertheless, the following segments of this essay consider just such a possibility.