Wednesday
Apr252012

American resilience

There are clear and present dangers for US institutions: increasing economic inequality; increasing political inequality; super PACs and all that; failing educational institutions; huge incarceration rates, especially for African-Americans; and erosion of civil liberties.

Hard not to be pessimistic.

But we have also argued that there are reasons for optimism: we have been here before, and rebounded. The most direct parallel is with the Gilded Age, when despite the huge economic and political power of the elite at the time, US institutions turned out to be more open and resilient than most feared (see here ). The major reforms of the Civil Rights era, which ended the disenfranchisement of a large fraction of the population, are also grounds for believing that the US can rebound from the challenges it is facing today.

A very interesting recent paper finds hope about the resilience of the US institutions in an unlikely place — in the corruption of US politicians. Pablo Querubín and James Snyder study whether elected US congressmen have been able to enrich themselves between 1850 and 1880. (Full disclosure: Pablo was a student of ours, and James Snyder is a former colleague of Daron and a current colleague of James). Used as we are to revolving door lobbyists, staffers and politicians, it would appear obvious that the answer should be yes.

Corruption was in fact in the air. Historians describe the periods both before and after the Civil War as apogees of corruption. For example, Mark Summers writes in The Plundering Generation: Corruption and the Crisis of the Union, 1849-1861:

In every way the decade before the Civil War was corrupt. The 1850s were as depraved as any other age, and, at least from the evidence available to historians, far more depraved than the 1840s.

But the striking result in Querubín and Snyder’s paper is that both before and after the Civil War, US congressmen were not able to enrich themselves.

Whether politicians have been able to use office for personal gain is not an easy question to answer empirically. It would not be sufficient to compare the wealth of a politician before and after office, as many entered Congress at the peak of their careers, so it would be only natural that their wealth would increase during that time. It would also not work to compare congressmen to others in similar professions, since they would have proved to be different by their choice to enter politics. And it would also not be sufficient to compare them to all candidates who run for the same offices and did not win, because we might expect that the winners, the actual congressmen, are more talented than those they had defeated.

Querubín and Snyder, instead, use a regression discontinuity approach, comparing congressmen that barely won election (with a small vote margin) to those who have run but barely lost. This approach thus zeroes in on a group of candidates who are very similar, at least in the eyes of the voters — a group mainly distinguished by winning just above and below the vote margin necessary for election. (And what makes the paper a phenomenal amount of work is the collection of wealth data for all of these candidates).

Once they do all this work, Querubín and Snyder find that both before the Civil War and immediately after it, congressmen who just won election accumulate no more wealth than the candidates who just lost.

The second striking result in the paper, and the one that receives more emphasis from the authors, is that during the Civil War, a very different pattern emerges: now politicians seem to be able to use their office for personal enrichment, and do so quite brazenly. Querubín and Snyder find that those winning election with a close margin accumulated about 40% more wealth in the decade straddling the Civil War than candidates losing with a close margin — a very substantial effect.

Why was the Civil War era different? Querubín and Snyder show that this was most likely for two reasons: first, there was a huge spike in government spending associated with the war, and it was precisely the congressmen who had their fingers in that much bigger pie (e.g., those from states with significant military mobilization and those serving in committees responsible for military appropriations) who made up like bandits. Second, the media, perhaps the most important monitor of politician malfeasance, was preoccupied with something else — the war.

Not good news for those who still believe in the integrity of our politicians — if any of them are left. But actually surprisingly good news about how well US institutions used to work during regular times — so much so that they were able to control these thieving incentives fairly well.

This research raises two substantial questions:

First, how was it exactly that US political institutions checked the behavior of congressmen? Querubín and Snyder suggest media might have played a role, but there is no direct evidence of this. One might also suspect that it wasn’t just media. If so, which were the features of US political institutions that played a role in taming politician malfeasance?

Second, whatever US institutions had in 1850, do they still have it today? Can they regain it?

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