14

Apr

2017

How Government Insiders Subvert the Public Interest

Written by: Mark A. Zupan

 
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Trump Tower by m01229 via Flickr.

Mark A. Zupan, author of Inside Job, discusses whether democracy - government by the people - can ensure government for the people.

 

Too little attention has been paid to the supply side of political markets populated by rulers, elected officials, bureaucrats, and public employees and the extent to which such government insiders can profit at the expense of the public interest. Existing explanations for national decline focus on capture of the state by special interests operating on the demand side of politics such as businesses, consumer activists, crony capitalists, trade unions, industry cartels, economic elites and so on. Government insiders have the motive, means, and opportunity that investigators focus on when seeking to identify the perpetrator of a crime.

Looking across the broad expanse of time and around the globe, inside jobs have led to the decline of both autocracies and democracies. At the present time, they threaten both the world’s largest democratic economy, the United States, and the world’s largest autocracy, China. In the United States the danger from inside jobs is posed by Congressional representatives who have grown increasingly insulated from electoral competition; a K-12 public education sector whose supply side has become increasingly monopolized over the past fifty years, and rising public sector unionization. In China, inside jobs and the extent to which the ruling class has a vested interest in preserving its wealth and political power threaten to diminish the high GDP growth rates resulting from Deng Xiaoping’s economic reforms.

Historical cases of inside jobs bringing down nations include the New Kingdom of Egypt, the Ottoman Empire, France under the Bourbon monarchy, and the Ming Dynasty of China. Modern examples of government insiders subverting the public interest can be found in the news on a daily basis and range from autocracies such as Venezuela, North Korea, Cuba, Russia, Zaire, and Iran to democracies such as Brazil, Turkey, Argentina, India, Malaysia, Greece, Italy, and the European Union. Inside jobs diminish a nation’s prosperity, curtail citizens’ political rights and civil liberties, erode citizens’ trust in their government, dissipate resources through efforts to capture the rents associated with political power, and promote conflict both within a nation and between nations.

Particularly in democracies that provide more opportunity for demand-side interests to operate, capture of the state often involves a symbiotic relationship between demand-side and supply-side interests. This symbiotic capture is akin to how cancer involves a defect in the genetic code that leads to over-replication of cells to the detriment of the host organism. In our genetic code, the nucleotide base guanine, in one strand of DNA’s double helix, always bonds with cytosine in the other strand while adenine always bonds with thymine. Thus, whenever there is an incorrect nucleotide base on one strand of our DNA it is also paired with an incorrect base on the other strand. This serves to amplify the damage done to the human body through cellular over-replication, or cancer. Analogously, any co-opting of the state by demand-side special interests is likely to be associated with government insiders who simultaneously benefit and thus serve to encrust the political outcome.

The book helps to explain the movement toward democracy and away from autocracy over the last two centuries through the operation of a quasi-market in politics. Such a market responds to changes in the costs associated with autocracy, albeit often accompanied by violence in the course of changes in political power. The costs associated with autocracy have grown over the last two centuries on account of factors such as specialization, education, and trade.

Relying on Transparency International measures of public sector integrity, this book is the first to show that democracy represents an improvement, on average, over autocracies. This is due to the lower slack between citizens and their public officials in democracies versus autocracies. While there are some notable exceptions such as Singapore, the public sector tends to be more corrupt in autocracies than in democracies. That said, democracy, or government by the people, is not sufficient to ensure government for the people. Over a quarter of the world’s democracies, for example, have a lower Transparency International rating for public sector integrity than does the average autocracy. And fewer than half of the world’s democracies score higher than 50, the midpoint of the 0-100 Transparency International scale for public sector integrity where 100 represents a perfectly clean public sector.

Finally, the book perhaps helps explain the success of Donald Trump and Bernie Sanders in the 2016 U.S. presidential election. Both candidates railed against the extent to which government insiders have co-opted the political system to their benefit and at the expense of our nation’s citizens.

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About the Author: Mark A. Zupan

Mark A. Zupan is President of Alfred University, New York. He holds a BA from Harvard University, Massachusetts and a PhD in economics from the Massachusetts Institute of Technology (MIT), and has won several teaching awards. He has served on the boards of several for-profit companies, including Constellation Brands, PAETEC Holdings, Northern Trust...

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