Tuesday, November 27, 2012

Governance Failure (1/2): Reason for Concern

Introduction
Jena came twenty years after the death of Frederick the Great; the crash will come twenty years after my departure if things go on like this.  
        Otto von Bismarck's final warning to Kaiser Wilhelm II, 1897
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In the United States, Woodrow Wilson is considered the father of public administration.  In the academic world, Lorenz Von Stein is considered the founder of the study of public administration.  However, I argue that in practical terms it was Bismarck who formalized modern Western notions of public administration.  In this sense, we can consider Otto Von Bismarck the father of administration.  In the quote, Bismarck warns Wilhelm against the folly and extravagance that can ruin a nation.  

As a theory of history, governance failure builds on Bismark's warning: we may have entered a period in American history where the state will loose its capacity to perform the functions it did during the 19th and 20th centuries.  Obviously the US is not a failed state but the likelihood of such a situation emerging in the next 10 to 30 years is rising.  Complex, interdependent, and supposed black swan events in financial markets and the physical environment highlight this possibility.  


As a theory of economics, governance failure is an analog to the theory of market failure.  Under market failure, economists have noted how certain goods lack certain qualities - namely exclusivity and excludability - and thus those markets that exchange those goods do not operate as ordinary theory predicts.  Those markets do not reach the same ordinary and generally beneficial equilibria that other markets do.*  


Governance failure is the condition where the economic and logistical problems, which the state has normally addressed, exceed the capacity of the state.  Like its market analog, people (and circumstance) can seize upon these failures and produce negative economic and political outcomes.  Below are a few mini-case studies in governance failure that involve current events.  I present them not to suggest that government itself is failure prone but simply to document particularly new and meaningful cases of failure and contradiction.  Despite obvious redeeming qualities of the American government (such as a strong national defense and various state-related institutions of civil society), governance in the United States now exhibits a degree of absurdity.


2011 Debt-Ceiling Crisis
The long and short of the 2011 debt ceiling crisis is that, although the Republican and Democrats did create a short term solution, they did not create a comprehensive long term solution; and they failed to avoid a rating downgrade, which left the American taxpayer with real increased tax liabilities in the form of greater interest payments on more volatile debt.  To quote John Canavan of Stone & McCarthy Research Associates, "You increase uncertainty in the markets and the markets will demand compensation for that." Congress's failure to create a solution in a timely fashion - in other words doing the job they are charged and compensated to do - is costing American taxpayers real dollars.**

Iraq Reconstruction Fraud
Reporting on this subject has been alarmingly overlooked.  Since the start of the Iraq War, a number of articles came out addressing pallets of lost American dollars.  (See these photos.)  Various articles covered mismanagement and/or fraud involving different amounts - $6.6B, $8.8B, $9B, $23B$50B, and onward up to $150B - depending on the news source and time.  Both American and Iraqi nationals and others have been successfully prosecuted.  Some recent reports suggest that US funds may have even gone to Iraqi insurgents.  This case highlights a greater and more complex case of 'governance failure' - namely the decision to go to war itself. 

Stop Trading on Congressional Knowledge Act
The Stock Act was first introduced in March 2006 by Louise M. Slaughter (D-New York). The final bill was signed into law in April 2012 and prohibits members and employees of Congress from insider trading.  Early versions of the law covered day trading and political intelligence.  Today the law does not cover political intelligence. Let us ignore that the final law was weaker than Slaughter had hoped.  The deeper question is why did it take six years for Congress to confront a clear case of inequity.  I get that Congress members are not 'insiders' in a classic sense but they are clearly 'insiders' in a material sense.  The only reason they would have dragged their feet on this issue was financial gain.  It begs the question: if you are not up to the task of governing yourselves, are you up to the task of governing the nation?  (Here is a fun watch on the subject.)

Passing Laws Without Reading Them
Representative John Conyers (D-Michigan) has twice suggested that he and others in Congress do not read and perhaps should not read the bills on which they vote.  In response to a question about the Patriot Act, he famously told filmmaker Michael Moore in the film Fahrenheit 911: "Sit down, my son.  We don't read most of the bills".  More recently at a National Press Club luncheon in July 2009 Conyers said of the Patient Protection and Affordable Care Act (PPACA): "What good is reading the bill if it's a thousand pages and you don't have two days and two lawyers to find out what it means after your read the bill?"  

At best, Conyers is himself suggesting that a part of the administrative process of Congress does not function.  Nevertheless, it should not seem stodgy to expect our politicians read the bills on which they vote.  That is among the most simple and critical tasks that a politician can fulfill.  If they can't, then they need to stop passing laws and take the time to audit their own internal procedures and govern themselves.  Here is a related quote.  It is simply Orwellian.  In March 2009, then Representative and now Minority Leader Nancy Pelosi (D-California) said of the PPACA: "We have to pass the bill so that you can find out what is in it."  Need I say more?


Other Cases

Significant other cases of governance failure that deserve analysis include: Hurricane Katrina, the War on Drugs, and almost certainly every environmental issue involving soil quality, fresh water resource availability, and species loss (i.e. biological diversity losses). A particularly significant case that deserves attention is the Emergency Economic Stabilization Act of 2008 and the so-called Too-Big-Too-Fail issue.  However, it is an especially complex subject that deserves care and space not available here.

What might these cases suggest about governance today?  Although a robust and scientific answer to this question requires more space and resources, these cases reflect how our social and political systems and decision methods have not developed in step with our scientific and economic innovations.  Not only have systems themselves become more complex, people have perhaps become less integrous.  As such, the deeper question is not whether more politicking or new reforms are a solution but whether we even have the moral capacity to improve our lives with policy.  With both individual integrity and system complexity in mind, we have this question: is the Western state, as exemplified by governance in the US, on a downward trend?

Postscript:

Please comment!  Part 2 is here!
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* Governance failure is not government failure.  Governance failure addresses conditions where state intervention fails when it rightly should not.  Government failure addresses conditions where state intervention inherently creates bad outcomes.  Governance failure also differs from state failure, which like government failure is a theory of political science. 


** A recent quote from Senator Tom Coburn (R-Oklahoma) on On the Record with Greta Van Susteren focuses explicitly on the issue of Washington honesty and character. Coburn recently released a book titled The Debt Bomb.  In the interview he responds to a question on why he chose to include a quote from President Lincoln regarding character and power: "Because I want people to make an assessment of where we are today and what the character is in Washington.  If we address our problems and honest with the American people, we don't have a problem in front of us we can't solve.  If we continue to lie and mislead the American people as to the seriousness and the urgency of our problems, what you can see [is] that very much replicates the character that I see in Washington today."  It's a rather sincere indictment of an environment he knows well.