Conflict in the public domain is the healthy state

Authoritarian regimes look well organised and powerful, like the clean formations in a military parade. There is a great leader, and everyone is deferential to the positions of the great leader and the inner circle of power.

Once a position is taken, everyone falls in line, in public, with a great deal of flattery. The great leader is incapable of making mistakes and must always be praised. There are disagreements and conflicts, of course, but they take place outside the public gaze, and tend to degenerate into pure power play.

“No government can be long secure without a formidable opposition.”

— Benjamin Disraeli

“The absence of a true opposition has led to the rapid deterioration of democracy into a kind of totalitarianism.”

— C Rajagopalachari

In contrast, democracies look messy. They are riven with debate, dissension, and a tug of war. Power is dispersed across many individuals and many elements of the government. Neutral and intellectual voices weigh in on the conflicts that are played out in the public domain.

This policy process is a world of ideas and rational thinking, and not merely an exercise in power play. The continuous debate in an environment of dispersed power is the reason why democracies work well. The continuous process of criticism and debate finds and solves mistakes.

In the best of times, most people are greatly influenced by voices around them. On most subjects, we do not have deep expertise, and tend to go with the mainstream.

Conversely, if novel proposals are not vigorously contested, there is the danger of oddball ideas taking root. This problem is particularly seen in authoritarian countries. When the establishment takes a certain position, and there is a great deal of sycophantic applause, the climate of opinion shifts.

This is also why authoritarian governments work badly. When we think about criticising the government, it is important to see that government is not a monolithic creature. Government is made up of many individuals and agencies, all of which have different points of view.

Criticism of the stated position of an agency generally strengthens the hand of the reformers within the agency. An environment where all criticism is attacked or proscribed is a recipe for policy paralysis. The really important initiatives will never achieve traction without an extensive reshaping of the larger discourse, in which criticism of the status quo is of central importance.

In some ideal world, government is like a nice NGO. Everyone is imbued with a shared sense of what is good for the people, and all cooperate in harmoniously building a utopia. Conflicts melt away because everyone appeals to the common good. This is an idealised world of agitprop documentaries.

Public choice theory encourages us to see that everyone involved in government works for herself, and all policymaking is marred by conflicts. Conflict is the normal state, and we should not be uncomfortable about it. Differences between persons and agencies are normal and healthy, and should be played out in the public domain. Differences arise out of conflicting interests, differences in information sets, and legitimate differences in how information is analysed.

The protagonists of a conflict criticise each other. The media creates rancour by playing up conflict. We should disagree in polite language, maintain good personal relationships, and work through formal procedures for resolving conflicts. But we should be comfortable with conflict as the normal state.

In fact, it is only in an authoritarian regime that conflict is squelched, as persons are too fearful to speak up. If two people agree on everything, only one is doing the thinking.

The under-supply of criticism

We must recognise that in every society, there is a market failure in the form of an under-supply of criticism. Criticising the government imposes costs upon the critic.

The gains from criticism are diffused; the entire society benefits from the criticism. The self-interest of the critic leads her to ignore the gains for society at large, and thus to under-supply criticism.

In July 2018, Xu Zhangrun, a law professor at Tsinghua University in Beijing wrote a tough review of the hard-line policies of Xi Jinping, the revival of communist orthodoxy and the adulatory propaganda surrounding Xi Jinping and the regime.

Prof Xu Zhangrun’s essay has text such as: “People nationwide, including the entire bureaucratic elite, feel once more lost in uncertainty about the direction of the country and about their own personal security, and the rising anxiety has spread into a degree of panic throughout society.” Such writing by intellectuals is the essence of building a civilised society, and imposes positive externalities upon the Chinese populace.

However, Prof Xu Zhangrun is alone in facing the attacks from the regime. He has been suspended, barred from teaching, investigated and barred from leaving the country. The externalities do not accrue to Xu Zhangrun, while the costs do. A few academics are courageous and speak up like this, but most would prefer silence.

This is similar to the standard economics argument about individual incentive leading to an underinvestment in higher education, as the decision maker does not value the spillovers, the positive externalities for society at large.

When an Andrei Sakharov goes up against a regime, the critic instantly earns respect. When an individual goes up against a billionaire, the details are more intricate, billionaires are able to resort to tactics that governments cannot employ, and there is less moral clarity. There will thus be an even greater under-supply of criticism of billionaires.

In a village economy, everyone knows everyone else, and economic relationships are efficiently organised under conditions of high information. In a modern market economy, however, many key relationships take place under substantial asymmetric information. In an environment where information is suppressed, there is greater fear about what lies beneath. This hampers trust and arm’s-length relationships.

As an example, in 2012, the research firm Veritas Investment Research Corporation wrote a research report about a firm. Two years later, the authors of the report were taken into custody by the Gurgaon police. After such an event, arm’s-length investors became more concerned about the possibility that there is bad news about firms in India that is not being honestly revealed into the public domain.

Voting turns conflict into better decisions

Consider a formal or informal meeting where multiple persons, with diverse interests, come into a room to make a decision. How can the conflict be channelled most effectively, so that the knowledge and the interests of all persons in the room are well represented and a good compromise is obtained?

When multiple viewpoints come to the table, they are normally intermediated by informal systems of power. The persons in the room are all in a repeated game, and there is a give and take across many different elements of these relationships. It is all too easy for this process to collapse into an autocratic arrangement, where all power is placed with one or two people. Our cultural mores in India tend to give disproportionate power to the oldest or richest person in the room.

The give and take which occurs in these informal meetings is part of a larger game between these individuals. A person may sacrifice the interests of a certain constituency in one particular meeting in return for pay-offs in unrelated settings. Each person who gets a seat on the table has the opportunity to non-transparently make certain trade-offs. In the limit, persons in the room sacrifice the interests of constituents or the public interest in return for personal gains.

How can conflicts be channelled into better decisions? Formal voting systems are a great tool for improving the quality of the discourse. It is useful to think of three stages of a meeting. Stage 1 is an approximate statement of position, by various persons, and a free-format debate. Stage 2 consists of defining sharp propositions. Stage 3 consists of voting on them. What prevents persons in the room from arranging side payments in exchange for votes? Public disclosure of each vote, with a rationale statement, helps ensuring personal accountability of each person for the position taken.

In India, two formal voting systems are in place: benches of judges in the judiciary, and the Monetary Policy Committee (MPC). In the MPC, the stage 2 is clear. Every meeting of the MPC has a narrow range of discrete choices that can be taken. In this case, the propositions that require voting upon are well understood. An MPC meeting then involves only stage 1 and stage 3.

The Indian MPC has three votes for RBI staff and three votes for outsiders. When there is a tie, the RBI governor has a casting vote. This suffers from the problem that the two RBI staffers are likely to be deferential towards the third vote, which is the RBI governor’s. Thus, in effect, the governor controls the outcome of the MPC.

A better design would have one vote for the RBI governor and four votes for independents. In that design, in order to have her way, the RBI governor would need to persuade at least two out of the four independents. This seems like a healthy reduction in the power of the governor.

Decision making through a vote, with genuine dispersion of power, qualitatively improves meetings. When one or two persons dominate a room, others tend to be listless and uninterested. The knowledge and interests of all person are not vigorously brought into the room. When a certain set of persons have a vote each, each of them is fully energised to participate in the discussion, knowing that she has equal power and that her vote counts. This improves the very discussion that precedes the vote.

When a meeting ends in a vote, everyone in the room thinks better and participates more. This idea can be used in a wide variety of meetings in order to improve the dispersion of power and the brainpower that is brought to bear on a question.

Formal voting systems, backed by transparency, provide a powerful mechanism for aggregating knowledge and resolving political conflicts. Particularly in an early-stage liberal democracy, where the art of give and take in political negotiation is only weakly understood, formal voting systems can often mark a big step forward from the autocratic ways.

In Service Of The Republic

Excerpted with permission from In Service Of The Republic: The Art And Science Of Economic Policy, Vijay Kelkar and Ajay Shah, Allen Lane.