On Democratic Accountability

The populist insurgencies taking place in many Western countries have been broadly explained as being caused either by the rise of economic inequality or the old fashioned racism of whites who detest the changes occurring to the ethnic make-up of their countries. Undoubtedly these motives play a role, but ignored in this account is the pervasive sense that, to take a much abused phrase, “the system is rigged”. Although Donald Trump sundered the meaning of that term to mean the system is rigged only when he loses, at the level of the common person the expression has a simpler—and more accurate—meaning: the pervasive sense that political elites do not pay for their mistakes or for breaking their promises.

Western democracies operate under a basic assumption: elections keep leaders accountable. When we unpack what accountability actually is, it becomes evident that contemporary democracies do not meet the standard. Accountability is a specific kind of relationship between policy makers and policy takers. The former refers to those with political decision making power, and the latter are the citizens who are on the receiving end of policymakers’ decisions. Nobel Prize winning economist Joseph Stiglitz has helpfully shown that for democratic accountability to occur, three conditions are required: 1) policy makers have clear objectives, 2) policy takers have a reliable way of assessing whether objectives are met, and 3) policymakers face consequences, or punishments, if the objectives are not met.

Actions need consequences

It would be a stretch to say that Western politicians have been accountable in this sense. When objectives are not met, politicians blame failure on either poor implementation or unforeseeable consequences. The incentive structure of contemporary politics helps to explain this enduring pattern: decision makers are personally unmoored from the consequences of their decisions. They may lose elections, but such an outcome can hardly be described as a “punishment” since, after leaving office, they continue to live a life of privilege via the wealth and social networks accrued during, or as a consequence of, their time in power.

Voters perceive the inherent injustice of this system, and it is this that explains why many are willing to vote for populists. Thus policymakers need to start thinking about ways of restoring legitimacy to the system by making politics more accountable.

The most urgent need is to change the incentive structure of politics so that it accords with the third criterion on Stiglitz’s framework, i.e., decision makers are punished in some form if their stated objectives are not met. This can begin with the establishment of a personal financial stake in their enacted policies. When they introduce a significant new policy, promises would be followed by a clause that stipulates what they are personally willing to lose if they are wrong. For example, Prime Minister Justin Trudeau is proposing a carbon tax, promising, among other things, that it will help create jobs in the green energy sector. In the current system, if Trudeau is wrong, and his energy policies seriously undermine living standards, the worst that can happen is that he angers enough people to lose the next election. Meanwhile, he will continue to enjoy all the perks and privileges of being a wealthy insider; even worse is that his socioeconomic class insulates him from the damage his policy might cause.

Now imagine that Trudeau announced that he would be willing to have a personal stake in the policy by announcing that, if he is wrong, a portion of his assets would be donated to charity. There would be multiple benefits: he would signal genuine confidence in his promises, his personal stake in the outcome might make him more cautious and more willing to listen to those who disagree with him, and, most importantly, there would actually be a real punishment, however small, if his promises do not occur. This would be a small step towards introducing a dose of accountability into the political process.

           

 If others followed Trudeau’s virtuous example, a beneficial selection process could ensue. Politicians who did not really believe that their proposals would produce the stated outcomes would be reluctant to make promises. Others who did make promises might be more diligent. For voters, it would be a signal of good and honest leadership. Candidates who made promises, but were unwilling to have a personal and financial stake in them, would rightly be deemed not credible and would be more likely to lose elections. Crucially, it would help restore a sense that even the powerful face consequences when their decisions harm others.

A reform of this nature would introduce a number of procedural difficulties, such as how it will be enacted and who will be the arbiter of whether a policy succeeds or fails.

           

Initially at least, it would be completely voluntary. Principled and courageous candidates and political leaders would include a personal financial stake in their significant policy proposals, such as a percentage of their total assets. The stake would be proportional to wealth, ensuring that the rich pay more for their mistakes.  As more leaders voluntarily make this kind of commitment, others will follow and it could become a customary practise, similar to the way releasing tax returns is in the US.

 

Another complexity would be the definition of whether a policy succeeds or fails. An independent body would have to be established for the evaluation of each policy and whether expected outcomes were achieved. Western democracies already have experience with these kinds of agencies as watchdogs of public finances, which help to introduce an element of transparency in the budgetary process by providing independent and objective accounts of the spending and tax policies of the executive.

Such a reform would not cure the ills that afflict many Western countries. But it would go in the direction of correcting the flawed notion that the threat of losing an election imposes accountability. By establishing a personal stake in their policies, leaders would signal to voters that they have thought deeply and carefully about the potential consequences of their legislative proposals. If their policies fail to achieve declared outcomes, decision-makers would be punished with a personal financial loss. Political elites might think twice about making exorbitant promises or exaggerating the benefits of their proposals. Voters’ faith in the system could potentially be restored. This could take much of the fuel out of the populist insurgencies that threaten to burn down the entire edifice.