Scott Sumner  

Do checks and balances reduce efficiency?

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Commenter msgkings recently made the following observation about the factors behind China's rapid growth:

China has only one party so they are all working together to get growth (and of course stay in power doing exactly that). In the US the two parties now hate each other and prefer fighting to working together. Solving problems isn't really high on their agenda.
I understand how that argument might seem appealing. A strong leader would be better able to push through needed reforms, and one can find (cherry pick?) a few examples to support this claim, such as Lee's Singapore.

But does this hold up to close scrutiny?

Beijing has yet to implement the hundreds of bold reforms promised by Mr Xi in 2013 on which its economic future depends. Among Chinese officials, the new mantra is "just wait for his second term".

Widely recognised as China's most ambitious and powerful leader since Deng Xiaoping, Mr Xi has won plaudits for his graft purge and more muscular foreign policy. "His biggest achievement has been the elimination of political rivals through the anti-corruption campaign," says Zhang Lifan, a Beijing-based historian. 

Accomplishments in the economic realm, especially the party's promise to give the market "a decisive role in resource allocation", are harder to identify.

"Economic reform has not been as fast as many of us expected," admits one Chinese official. However, he says the pace will pick up after Mr Xi has installed more of his lieutenants in key posts at the year-end party congress that will start the clock on his second term. 


Don't we hear that a lot in the United States? "Once re-election is secured, the President will be able to finally push through some needed but controversial policy reforms." In fact, American Presidents are often less effective in their second terms.

Although China is not a democracy, it does have a highly complex government structure with many powerful special interest groups. Top leadership positions are filled by the votes of various committees, where different factions advocate their agendas. There's no doubt that President Xi is more powerful than his immediate predecessors. But even Xi has great difficulty pushing through his reforms.

In the end, I see checks and balances as a feature, not a bug. For every Lee Kwan Yew there are a dozen Mao, Pol Pot, Stalin, Kim Jong Un, Idi Amin and Enver Hoxha-type figures.

Beware of strong leaders.

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COMMENTS (12 to date)
Andrew_FL writes:

Almost every-or possibly every, I don't know Enver Hoxha-bad strong leader you mentioned has something in common besides strength of leadership.

The all adhered to some antimarket ideology.

Mark Brophy writes:

What about tech company dictatorships like the recent Snap IPO, Apple, Google, and Facebook? It seems those that govern well outnumber the failures like AMD and Digital Equipment Corp.

The problem with China is that it is too populous and centralized; only the USA and Japan are populated by more than 100 million people and are rich. Brazil, Russia, India, China, and Indonesia are much poorer.

The USA is on a permanent path of slow growth because it is excessively centralized, too. Should health care policy be decided at the federal level when small countries like Switzerland, Holland, Belgium, and Sweden produce better results?

Alex writes:

It is my understanding that facebook is banned in China. Anyone who praises that political system should explain why is a ban on facebook acceptable.

Scott Sumner writes:

Andrew, Yes.

Mark, Those companies are not dictatorships, and people don't have to pay taxes to them.

I agree about the dangers of scale, and overcentralization.

Alex, I agree, but in fairness I think it's possible to praise some aspects of a system, without endorsing everything. Thus I like some of Singapore's economic policies, but not its extreme paternalistic tendencies (such as draconian drug laws).

Alex writes:

I think that praising a one party system as an example is a monstrosity. Singapore I think is a very particular case not comparable or applicable to most other places because it is more like a city that provides services to other places. It can exist because there are other much bigger places where people are free and require their services. As for a one party system where "all are working together", by what process is that cohesion achieved? What happens if someone disagrees? Not only facebook is banned, also free newspapers and even a blog like this wouldn't stand a chance. People need to have perspective. Look what just happened in the US: power switched from someone like Obama to someone like Trump and I don't know of one person who was killed in the process. Whoever praises a one party system is calling for his own enslavement.

Philo writes:

Checks and balances would not much hinder the pursuit of a social objective if all the checking and balancing agencies enthusiastically agreed on that pursuit. In that case, the checking and balancing would be just a matter of consulting various constituencies, all of which would be found to be on board. Checks and balances are a hindrance primarily when there is disagreement on the objective, so that the proposed activity of some agencies is *checked* (even vetoed) by others. But in that case it is the more likely that the objective is not good and so should not be pursued, efficiently or otherwise. In a well-designed system the checks will prevent primarily undesirable social actions.

ChrisA writes:

Totally agree Scott. Democracy is messy and perhaps less efficient for any single decision, but taken overall it makes for societies significantly less fragile, and with much less risk of adverse events that ones led even by benevolent, genius dictators.

Also another point, people misunderstand where China is, given its many years of repression, it is still a relatively poor country. Therefore it is easy for decision makers there to see things that can be improved where almost everyone can benefit, like roads or public transport. When you have rich countries, like most of Europe or the US, most of the clearly exploitable benefits have been exploited, so any new change requires very complex trade offs between affected groups. Like a new highway near to an area where lots of families live with small children in nice housing, is much harder to justify than a new highway past a slum.

This makes comparing the competence of Chinese decision makers to western ones very difficult.

Jon Murphy writes:

I'm reminded of the great joke in The Simpsons:

Homer: Bart, there's the right way to do something, the wrong way, and the Max Powers [Homer's new name for himself] way.

Bart: Isn't that the wrong way?

Homer: yes, but faster!

-Homer to the Max (season 10, episode 13)*

Just because something is fast, doesn't mean it's more efficient.

*I'm doing this from memory so I may be slightly wrong

Scott Sumner writes:

Alex, I agree. I would add that Singapore does have elections, and multiple political parties, so it's in between pure democracy and pure dictatorship.

Philo and Chris, Good points.

Hazel Meade writes:

I think everyone is questioning the wisdom of Democracy right now, which isn't necessarily a bad thing.

I can see how with a competent leader in charge for a substantial period of time, a one-party state could be a more effective government. The trouble is that it's nearly impossible to get a competent leaders AND not have corruption AND be able to remove him at the right time. We aren't governed by philosopher kings.

The authoritarian route is a fall-back because people aren't sure what other options there are besides democracy.

But personally, I think there might be some other democratic styles worth exploring. We've all heard of various voting schemes that the public choice theorists have come up with. Maybe we should give some of them a chance.

http://listverse.com/2016/02/10/10-alternatives-to-conventional-liberal-democracy/

Cole D. writes:

George Friedman has an interesting perspective on why the American government was designed to be inefficient:

"The American founders took a completely different approach to government. In their view, government was not the center of society, and politics was not the most important thing. Government was a necessary evil that had to be kept to the margins of society. The center of things was civil society, which, for the founders, included businesses, churches, fantasy football leagues and all the rest that made up the texture of everyday life. Today, the concept has degenerated to small political groups on the fringes of society.

The founders did not trust politicians. They also did not trust the people. They understood that the public could be as venal, ignorant and corrupt as politicians. They also understood that the public could experience as much fractiousness and mutual hatred as politicians. There was nothing magical in the people, save that the people were to form a more perfect union. And that union had certain characteristics. First, it limited the power of the state over society. Second, it structured the state so that it could accomplish little. The founders’ goal was political paralysis to protect society, and they most surely would not regard copious legislation as a good sign."

(Complete article found here: https://geopoliticalfutures.com/the-use-and-abuse-of-referendums/)

In essence, the founding fathers intended to have a government as decentralized as possible. Yes, a centralized government could create effective growth due to an ability to dictate policy, but they would be equally capable to hamstringing the country for decades with poor policy decisions.

Lorenzo from Oz writes:

Which is why I am much more Brexit-friendly than many folk. At the margin, I will chose clear lines of accountability over some policy value (even economic freedom) every time, because accountability (which requires checks and balances) is so much the better long term bet.

As Chinese history demonstrates. Between about 500BC and 1500 most significant inventions not to do with horses were invented in China, for largely Smithian reasons (scale of market, over space and time). Yet China failed to capitalise on those inventions anywhere near the level the Europeans did. A centralised political system was not, it turned out, a long term advantage. A recent essay by Joel Mokyr is a good place to start to see why.

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