The Party

"That is, in essence, the argument in my own book. Let me couch it this way. I think there are three specific roles for government. The first role of government is to provide public goods. In economics, those are goods we all benefit from, but no one bears the sole cost of underwriting them. Infrastructure, national security and education are classic examples of public goods. A very simple example of a public good is a street lamp. We all benefit because it lights up the street at night, but I didn’t pay for it myself and nor did you. The government pays for it by pooling [tax] money to pay for these public goods. Whether you’re left-leaning or right-leaning (ie for a large or small government role respectively) I think everyone agrees there is some role for government in providing public goods. Of course there is the age-old debate about what should qualify as a public good. For example, in the US many people don’t view healthcare as a public good, yet in much of the rest of the world people assume it is. Role number two for government is to provide a regulatory environment. One that is not so onerous that it kills off innovation, but at the same time an effective regulatory infrastructure that ensures that illegal activity doesn’t occur and steps in if the markets fail. As we know the markets failed in the financial crisis. There was systemic risk, and the government had to step in. And the third role of government is to provide a policy framework, that incentivises people to be entrepreneurs and build businesses but broadly incentivises good behaviour. This is why I think Richard’s book is particularly interesting. It’s a sneak peak into the way the Communist Party works. Clearly the Chinese government has succeeded in providing a policy environment that incentivises people to do things – to work hard, to make money – without it necessarily being democratic. Like it or not, they have a rule of law, they have some transparency – certainly enough that foreigners are happy to invest there. It’s not a model of democracy or transparency as we know it in the West, but it’s clearly a good enough system that people feel they want to invest their money there. Absolutely. And if you ask me if having elections so often actually hampers the ability of policymakers in the US, and across democratic countries, to implement more long term, strategic policies that are important to avert long-term decline, then my answer is yes. That doesn’t necessarily mean you should throw out democracy. In fact, there are different things you can do within a democratic society that can get around this problem of hyper-politicisation. For example, you could have longer political terms. You don’t have to have elections every two years, you could have them every six years as Mexico does. Such a system just might give policymakers a little more wiggle room to focus on the more structural or longer term issues, such as (in the case of the US) education reform, energy and infrastructure build-outs which tend to fall by the wayside in short-term politics. I think if people recognise that there is sub-optimal policymaking going on because government policymakers are inherently myopic and very rationally focus on short-term issues, then they will start considering ways of working within a democratic system to extend the policy framework. China is an extreme example of how, without the shackles of multiparty elections every two years, a government can implement very beneficial long-term policies."