A Further Perspective

The Challenge of Credibility

As long as patronage dominates Western politics, we are headed for a disaster -- as surely Messrs. Romney and Ryan well know.

By 8.30.12

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In his candidature -- and also in his nomination speech -- Mitt Romney has been given a unique opportunity to transcend narrow U.S. politics and set an example to Western statesmen. Due to a crisis of credibility and a rise in the politics of patronage, the speech comes at a time when the quality of democracies on both sides of Atlantic is at a low point. And the U.S. presidential election is probably the only political event in the world that has the power to reverse that decay.


What exactly is the root of our troubles? Traditionally, in advanced democracies, candidates competed on their policy platforms, whereas in places like Brazil, Mexico or Ghana, politicians would buy votes in exchange for favors. Those could range from $7.50 gift cards, as in the recent Mexican presidential election, to entitlements, jobs or subsidies for specific groups.


The reason is simple. In well-governed countries, politicians can credibly promise policies that are in the general interest. Voters then tend to elect the platform that offers the most appealing bundle of policies and public goods. In contrast, in places where politicians' promises are generally not trusted, political competition is dominated by patronage. As a result, politicians promise special favors to intermediaries – "patrons," or "godfathers" -- who then mobilize the needed political support amongst the voting public -- the "clients."


The developing world is rife with examples of direct vote buying or in-kind handouts to supporters of particular parties. But, sadly, the politics of patronage and clientelism have been making a comeback in the United States and Europe too -- in subtler forms, but with potentially disastrous effects nonetheless.


Take an extreme example -- Greece. Since the end of the military dictatorship in 1974, the two dominant parties in the country have essentially monopolized the political arena, distributing rents, privileges, and publicly-funded largesse in exchange for political support. It is widely known that practically all jobs in the public sector are given to people loyal to PASOK and New Democracy -- known also as the "green" and "blue" children.


Patronage also accounts for the rise in public sector employment -- from a little over 740,000 government jobs in 1985 to over 1 million in 2008, while the country's population changed only modestly over the same period. Throughout this period, labor costs rose much more rapidly than anywhere else in the European Union, mostly because the successive governments used pay rises as a tool for building popularity.

Lack of credibility, and the resulting use of patronage and clientelism, is precisely what makes Europe's fiscal crisis so deep. In spite of repeated bailouts and commitments to slash spending, Greek debt is now at 165.3 percent of the GDP, compared to 145 percent last year. The new cabinet of Antonis Samaras has yet to push through the 11.5 billion euros of cuts that have been demanded by the country's creditors. Wish him luck.

The point is that Greece is not alone in lacking leaders who can govern in the public interest. Greece is just an extreme example of the deficit binge that has been driving public sector behavior in France, Italy, Portugal, or the United Kingdom for decades. With a few exceptions, public debt in advanced industrial economies has been growing to historically unprecedented levels over the recent decades.

What is the reason for this growth? Neither wars nor financial crises, but simple political convenience of using debt to fund transfers to political constituents. Even in fiscally prudent Germany, notes a 2011 Geneva Report on the World Economy, co-authored by Barry Eichengreen and Charles Wyplosz, "the ratio of spending on transfers and subsidies rose by 9.5 percentage points of GDP between 1970 and 1995, while total revenues increased by only 6.1 percentage points."

Worse yet, the United States suffers from the same problem. The vote-buying scandal in July in Kentucky is only a sad joke when compared to the big-picture patronage and clientelism pervasive in the nation's politics. Think about the country's agricultural subsidies, auto bailouts, and entitlements such as Medicare. It is no coincidence that Paul Ryan's plan to reform Medicare is being met with a mixture of hostility and disbelief. For those whose political success depends on buying the votes of the elderly in exchange for targeted favors, attempts to turn Medicare into a private healthcare insurance plan are simply not palatable -- regardless of whether Mr. Ryan's plan has any chance of success.

The inability of Western political elites to address their countries' fiscal woes is a sign that our politics revolves more than ever before around patronage and clientelism, and not around responsible policymaking. To turn the tide, we need a profound transformation of how day-to-day politics operates, and we need leaders who can do more than promise (and deliver) lollipops to their constituencies. But can Messrs. Romney and Ryan stand up to the challenge?


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About the Author

Dalibor Rohac is an economist at the Legatum Institute in London.