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Obama’s Choice

President Obama gave an important speech on National Security Agency’s (NSA) huge metadata collection program.

As is Obama’s style, it was an eloquent and measured speech. It did recognize the concerns about civil liberties and the need for checks on NSA.

But in substance, it looks like Obama’s choice will be to allow the NSA to collect and have access to unlimited metadata (and perhaps more).

Though there will be reviews, and in the future the metadata may stay on the servers of private phone and Internet companies, there seems to be no question that NSA will not be able to access this data or will face meaningful restrictions in its ability to collect such information.

In fact, Obama went further, declaring his unwavering support to the NSA and the intelligence community:

Nothing I learned since indicated that our intelligence community has sought to violate the law or is cavalier about the civil liberties of their fellow citizens.

This declaration might strain credulity, particularly in view of the fact that the NSA and the intelligence community were quite clearly cavalier about civil liberties and tried to hide it and routinely lied about it.

NSA director, Gen. Keith Alexander, for example, said clearly before Snowden’s revelations brought the whole thing to light:

the story that we have millions or hundreds of millions of those years on people is absolutely false.

Obama’s director of National Intelligence, the agency supposed to oversee the NSA, the CIA and the alphabet soup of US agencies, stated categorically in front of a Senate committee that the NSA does not collect any type of data at all on millions of Americans.

Cavalier enough?

Be that as it may, Obama’s declaration should not have come as a surprise given his presidency’s track record on civil liberties.

But it would come as a huge surprise to anybody who followed Obama’s meteoric rise to the presidency.

In the early 2000s, Obama appeared as a passionate defender of civil liberties. In 2003, as a candidate for the Senate, he was a fierce critic of the Patriot Act, calling it “shoddy and dangerous”. (See Ryan Lizza’s New Yorker article “State of Deception” for more details).

The turning point of Obama’s career was of course his moving speech to the 2004 Democratic Convention, where he took powerful aim at the Patriot Act, in particular, at its Section 215 in its so-called “library records provision,” which would become the justification for the NSA’s huge data collection on Americans and foreigners. Obama said:

We worship an awesome God in the blue states, and we don’t like federal agencies poking around our libraries in the red states.

As a senator, he then went on to co-sponsor the Security and Freedom Enhancement Act which would have clipped the wings, or even killed, Section 215 of the Patriot Act. He articulated the case against Section 215 in another one of his brilliant speeches, telling his Senate colleagues that it

seriously jeopardizes the rights of all Americans and the ideals America stands for.

But then everything changed when Obama became president. Obama appears to have put aside his doubts and concerns about the Patriot Act and civil liberties, and supported all of these programs with few scruples.

So what went on?

Of course we don’t know, but three possibilities present themselves, and reasoning about them is informative on whether we can ultimately trust the state and the politicians in charge of it to safeguard our civil liberties.

The first possibility is that after moving to the White House, Obama became aware of information he did not have as a senator, and this information convinced him that it was futile to worry about civil liberties, and led him to conclude that the intelligence community should receive carte blanche.

The second is that Obama’s scruples were about somebody else having the power to violate others’ civil liberties. Once he came to control that power himself as president, albeit indirectly, he became much more willing to tolerate it even if this meant jeopardizing civil liberties. Put differently, Obama became part of the state and it is in the state’s DNA to want to control information and power.

The third is that Obama did not abandon his concerns and sensibilities wholesale, but is a victim of a typical case of  “career concerns”. Any bureaucrat or politician worries about making choices leading to disastrous outcomes — especially if these choices will make them appear responsible in the eyes of the public. But equally problematic is the failure to take actions that could have prevented such disastrous outcomes. This naturally creates a tendency for aggressively taking preventive actions. Given the importance of a major terrorist attack against Americans for the legacy of any president, this means a huge bias towards supporting secret NSA or CIA activities in principle targeted at terrorists, but in reality severely damaging civil liberties and increasing the power of the state over its citizens.

Though we don’t know for sure, the first possibility seems a little far-fetched. The most likely explanation is therefore a combination of the second and third possibilities.

Whatever the details or the exact balance between the second and third possibilities, there is an ominous conclusion from this. However decent and restrained an individual might be, as soon as he ascends to a position of supreme power, he is likely to behave just like other powerful leaders and support the domination of the state or society with little regard to civil liberties.

But if so, it would be naïve for us to expect the state to police itself.

If the state will be restrained, if it will be responsible and accountable to its citizens and civil society, if it will respect civil liberties, it will not do this out of its own volition. It will do it because society will force it to do so.

If so, Obama will not pardon him and Obama will not thank him, but perhaps we should all thank Edwards Snowden.


Democracy's pains

Disillusionment with political leaders is spreading across the globe. In the United States, the approval ratings of the President and the Congress are at all-time lows, and probably for good reason. There is general dissatisfaction with the ruling class across much of Europe, particularly in the South. But this is much broader than a Western world phenomenon.

Protests and alternatives to the Congress Party’s domination of Indian politics are growing, fueling support for fringe activists such as Anna Hazare, the new anticorruption Am Aadmi (common man) party, and the prime ministerial ambitions of Narendra Modi.

In Turkey, hundreds of thousands poured into the streets in the summer to protest Prime Minister Erdoğan’s increasingly authoritarian rule, and the discontent is now spreading more broadly with the unfolding corruption scandals in which many of the leaders of Erdoğan’s ruling party appear to be implicated.

Discontent with the rule of establishment politicians is also growing in Bangladesh, Cambodia and Indonesia.

So what’s going on?

Two factors seem to be at work, one healthy, one unhealthy.

First, citizens seem to be increasingly unwilling to put up with the antics of unaccountable political elites, often all too willing to pursue policies that their voters do not approve of.

Protests against the ruling parties have the potential of bringing greater accountability in imperfect electoral democracies such as India or Turkey. Where the ballot box offers few attractive alternatives, non-electoral constraints on politicians have an important role to play.

The role of such protests is much greater in places like Cambodia where elections are fraud-ridden and Prime Minister Hun Sen rules in the manner of an autocrat.

The situation isn’t too dissimilar in the United States and Europe, even if some of the discontent, such as the Tea Party’s anti-government spending fervor or the anti-Europe backlash fanned by the UK Independence Party or other parties with anti-foreigner, anti-immigrant rhetoric in continental Europe, is fueled as much by confusion as by a viable alternative to policies that governments embattled by the financial and fiscal crisis have had to adopt.

All in all, even if the details vary across countries and even if some of the discontent is driven by confused notions and sometimes even by unsavory characters and ideas, a greater unwillingness by the masses to let their political elites run amok is broadly welcome. Democracy will function better, and has a better chance of approximating our ideal “inclusive political institutions,” when complemented by non-electoral constraints, which includes not just the media but also the willingness of ordinary people to get up and protest in the streets.

The second sort is quite different, however. In several countries, vocal and well-organized minorities are proving unwilling to accept elected governments that have brought to power previously disempowered groups.

In Egypt, the unwillingness of many urban, relatively well-educated Egyptians as well as parts of the elite to give time for the incompetent government of Mohammed Morsi to depart as it had arrived, through the ballot box, brought back the anti-democratic, repressive military back in full force, most likely destroying the prospect of democracy in this country for the next decade.

In Thailand, however many times Thaksin Shinawatra, or his sister Yingluck Shinawatra acting as his proxy, receives electoral support from the majority, many urban Thais, the military and parts of the state bureaucracy appear unwilling to accept such election results. Just as in Egypt, they seem to have a case when they complain of Thaksin Shinawatra’s patronage-based populism, corruption and authoritarian tendencies. But is the solution to dispense with electoral democracy?

The situation in Turkey is not entirely different. Though Erdoğan’s critics have a strong case, the current polarization owes as much to the unwillingness of parts of the Turkish elite, state bureaucracy and military to accept a government representing the underclass and the pious provincial businessmen as to Erdoğan’s increasingly authoritarian rule.

Though the conundrum of patronage-based elections under imperfect institutions has no simple solution, a good case can be made that the way to increase the inclusivity of political institutions is not to ignore the ballot box, but to utilize it, together with protests when necessary. But so long as elites and a vocal minority refuse to accept electoral results they don’t like, the path to a healthy democracy and truly inclusive institutions will be long, arduous and perhaps blocked for a long time.


Modeling Ideas

So how can we model ideas and their impact on political economy?

One obvious way is to approach it as a Bayesian learning problem. Perhaps we can think of new ideas as states of nature which had very low probabilities before being proposed or developed by some agents (“idea entrepreneurs”, and once those proposed, people may come to believe that they are more likely through Bayesian updating. If this happens, behavior will change.

This sort of modeling would tap into a long tradition in economics and political economyThough the Bayesian approach is both useful and standard in general and may also be a promising research direction in the context of ideas, it does not feature idea innovations in the sense that from the beginning, even if some states of nature have low probability, all agents are aware of all states of nature, so there are no surprises and no eureka moments. 

An alternative would be to partially depart from the Bayesian framework and assume that agents start with a limited state space (a limited set of possible states of nature) and are unaware of the full set of states of nature. This type of unawareness has been modeled in economics by, among others, HalpernModica and Rustichini, Li, and Heifetz, Meier and Schipper.

These approaches make individuals unaware of states of nature. An alternative might be to make individuals unaware of potential political states. For example, people in the Middle Ages may not have been able to conceive of democracy because they were unaware of the political system in which political power is not monopolized by the king or the aristocracy. 

The implications for political dynamics of this type of approach could be quite interesting. If at some point a political entrepreneur uses the argument that a monarch’s power is not divinely granted but based on his ability to dominate society, then this can make people aware of a new political state (or in fact a whole new set of political states without such monarchical monopoly of power). Interestingly, when such possibilities are taken into account by potential clinical entrepreneurs and organizations, there will be other game theoretic interactions. For example, if the political entrepreneur who wants to empower the middle class is afraid of power shifting to poorer segments of society after they become aware of organized social groups to be able to increase their political power in the world no longer divinely dominated by the monarch, then he may not want to start using arguments and strategies that will change their awareness, even if these arguments and strategies would, in the short run, enable him to shift power to the middle class. This of course has a nice parallel to what Daron, Georgy Egorov and Konstantin Soninhave have called the “slippery slope” in the context of dynamic political economy (though in a model without this sort of unawareness issues and the possibility to make sense of the importance of ideas).

A complementary approach might be to relax the Bayesian approach to allow for manipulation of ideas. This could be, for example, through indoctrination and inculcation (and a few papers in economics have investigated this, for example, this and thisor through the ability of inflation allegiance or thought leaders to convince others of certain ideas (for example as in this work).

Yet another possibility is to relate ideas to arguments. It might well be that people are more likely to understand (less likely to misunderstand) arguments that they have encountered before. This would imply that political and thought leaders might have to use and combine arguments that have already been used a lot in order to avoid misunderstanding and be more effective. But then this may then restrict what they can communicate. At some point, this restriction may become too burdensome, inducing them to experiment with new arguments even if this will lead to some temporary misunderstanding. 

The bottom line is that there seem to be lots of interesting ways to approach ideas within political economy, and many of them use already existing tools and sometimes even insights in political economy even if their details and of course implications will be quite different once they come to the worked out systematically.


How Ideas Matter

In the last several posts (here, here, here and here), we have discussed the role of leadership in political economy and organizations. What about ideas?

For example, Dani Rodrik has recently argued that ideas are much more important than the political economy literature admits.

Is this true? If so, how could this role of ideas be incorporated into political economy and more broadly economics?

There are two senses in which ideas could be important in political economy. The first is that important political dynamics can be explained mainly by certain ideologies or ignorance. This is a view we have argued against in Why Nations Fail, for example in our discussion of the “ignorance hypothesis”.

We also pointed out on this blog that even the best case for this view, the emergence and persistence of communist regimes, isn’t so clear-cut. In fact, these regimes cannot be understood as a result of people slavishly following an ideology. Nor is the state control over resources, production and distribution something that was invented out of thin air by the followers of Karl Marx. Rather, it was “invented” in history many times over because it has an attractive political logic for those dominating political power.

The second sense in which ideas matter is more plausible. Ideas interact with institutions and interests.

There are several ways in which this may happen.

First take once more the case of communism. As we have argued, communism would not have emerged and lasted if it was simply a (mistaken) worldview in which well-meaning, selfless leaders and their followers came to believe in. Rather, it became a powerful system because of the interplay of the interests of the party leaders and the ideological framework it provided for them and their followers. In particular, communism became a powerful “ruling ideology” because it successfully centralized political power in the hands of the party leaders; because it provided them with economic tools to extract resources from society (e.g., collectivization and state control of much of production); and because it also created a language and a set of beliefs that, combined with the right type of repression, kept a sufficient part of the population silent or even willing to collaborate. North Korea’s dystopic dictatorship powerfully highlights all of these points, even though Soviet Russia and China also illustrate the same ideas.

Second, consider our discussion in Why Nations Fail of state centralization among the Bushong. We put a lot of emphasis there on King Shyaam’s being able to centralize power, which was beneficial for him and for the Bushong elite. But how did he do that? Ideas probably played two important roles. First, the idea that a stable order with the Bushong elite centralizing power in their hands could be forged may not at first have been obvious. Somebody had to come up with this idea and make it operational. So there was an aspect of “idea innovation”. Second, this process of state centralization likely went hand-in-hand with its own brand of indoctrination — or manipulation of beliefs. For example, King Shyaam was presented as a powerful religious leader in addition to being a political leader.

Third, consider the march of democracy in 19th-century Britain, which was also discussed at length in Why Nations Fail. Though this was mostly a classic political economy problem, as we argued in our first book, Economic Origins of Dictatorship and Democracy, ideas and beliefs played an important role also. Organizations vying for greater political inclusivity often used arguments and imagery from earlier periods to legitimize their claims. For example, Chartists named themselves after the “Charter,” the Magna Carta, with the argument that their demands for the broader franchise were simply a continuation of the process that the Magna Carta started.

In all of these examples, ideas play an important role, but this is not despite of interests or institutions. They do so by strengthening, organizing or enabling underlying interests, and they became powerful in the context of a given set of institutions and political conflicts.

In view of this, we agree with Rodrik that ideas need to be more systematically integrated into economics models, but not with the conclusion that “ideas trump interests”. Rather, ideas become powerful in conjunction with interests and institutions.

And what about modeling them more systematically? Well that’s easier said than done, but as we will argue in our next post, there are also some promising directions here within the economics literature.


Limits of Leadership

We dubbed the challenge of incorporating leadership into the study of political economy Nelson Mandela’s challenge because Mandela powerfully illustrates the role of a visionary, talented and shrewd leader who can critically impact the course of affairs.

But Mandela’s legacy also points to a dilemma of leadership.

Leaders can form and hold together new coalitions and change beliefs in a way that expands the set of political feasible options. But if all of this is embedded in the skills, trustworthiness and networks of the leader, most of their achievements can be reversed or at the very least will slowly wither away when they disappear from the stage.

At some level, his huge leadership success in manufacturing reconciliation and a peaceful transition to democracy in South Africa notwithstanding, Mandela has perhaps not been as successful in building institutions.

This is reflected in part in the troubles of the African National Congress (ANC), which despite its huge mandate from South Africans, has not been able to form an effective government. It has not been able to deal with the huge inequality — and inequality of opportunity — challenge that is central to South Africa’s economy today. And South Africa has failed to play a constructive role in helping peaceful transitions to democratic institutions in neighboring countries, most notably in Zimbabwe, whose kleptocratic autocrat, Robert Mugabe, still receives implicit or explicit support from many ANC leaders.

Rather, the ANC has concentrated power in the hands of a small group of leaders that have mightily benefited from their newfound status. It has been mired in corruption scandals which it has not shown any ability to control or properly investigate. What’s more, it may be in danger of splitting between an “anti-reconciliation” wing, epitomized by Julius Malema, the former head of its Youth League, and a “business-as-usual” wing, entrenched in and benefiting from power.

This all raises the question of whether there are two kinds of leadership to be distinguished and separately modeled. The first is leadership that at some level transcends institutional realities and as such is truly inspiring, but does not entirely transform the institutional dynamics already set in motion. We argued, for example, in a previous post about Venezuela that Hugo Chavez’s leadership was (fortunately!) of this sort, though without making this conceptual distinction.

The second is institutions-building leadership, perhaps more in the mold of George Washington’s leadership in the United States or Seretse Khama’s role in building Botswana’s inclusive institutions which we discussed at length in Why Nations Fail.

So it seems there are many more questions to ponder about leadership.

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