Democracy versus technocracy

The London School of Economics Growth Commission, a panel of academics, former government officials and business leaders, has just published a report on how to improve Britain’s economic performance. “Investing for Prosperity” is a notable piece of work that deserves to be widely read, and not just in Britain.

The report emphasizes policies on human capital, investment and innovation, and the limits of standard measures of prosperity. The latter takes up a theme recently discussed by Bloomberg View - the failings of gross domestic product as a metric of economic success. The authors urge governments and the news media to pay as much attention to median household income as they do to GDP, arguing that it gives a better reading on living standards as experienced by most citizens. Good advice.

I was especially struck, though, by the panel’s recommendations on infrastructure, because these draw attention to a broad and difficult issue that dwells just beneath the surface of many policy debates: What is the proper balance between democracy and technocracy?

On infrastructure, which the panel considers a high priority, it advises the U.K. to create a “new institutional architecture” that would “dramatically reduce the policy instability that arises from frequent changes in political personnel and priorities, particularly in transport and energy.”

As the report documents, the management of public-infrastructure projects has been lamentable. No private firm could survive the errors that governments have made with taxpayers’ money. One multinational review of infrastructure projects, which I warmly recommend, is aptly called “Survival of the Unfittest.” The author, Bent Flyvbjerg, a professor of project management at the University of Oxford, found that nine out of 10 transport-infrastructure projects (across 20 countries and five continents) suffered cost overruns; benefits, on the other hand, were systematically exaggerated.

Flyvbjerg concludes that project promoters and forecasters “intentionally use the following formula in order to secure approval and funding for their projects: Underestimated costs plus overestimated benefits equals funding.”

In Britain, and still less in the U.S., nobody could look around and conclude that the problem is too much infrastructure investment. Rather, the problem is too many badly chosen and badly managed projects and too few well-chosen and well-managed ones.

The U.S. suffers especially from the aging of poorly maintained critical infrastructure that was built decades ago, when the country led the world in this kind of investment.

According to the American Society of Civil Engineers, the cumulative gap between the U.S.’s vital infrastructure needs and likely investments will stand at $1.1 trillion by 2020.

Compounding that problem is the intensely political nature of the selection process for new infrastructure. The long tradition of earmarks - which institutionalizes the principle, “You support my worthless project and I’ll support yours” - has produced impressively empty roads in many parts of the country, while vital aspects of the infrastructure network are crumbling and congested.

The LSE commission’s proposal - put more control of infrastructure in the hands of nonpolitical technocrats, subject to parliamentary oversight and strategic guidance - is an approach that might make even more sense in the U.S. than it would in Britain. Why? Because public policy in the U.S. is far more politicized than in the U.K. Britain’s top civil servants aren’t political appointees. Its public-policy scholars aren’t generally associated with one or another political party. Civil society has a very large, nonaligned component. In the U.S., this isn’t so.

Of course, the American tradition of political alignment and engagement makes the empowerment of a nonpartisan technocracy culturally impossible, even as, in certain areas such as infrastructure planning, it makes such empowerment more necessary. The breakdown of collaborative bipartisan politics in Washington only heightens the dilemma.

When Democrats and Republicans were closer ideological neighbors, transitions of power didn’t call for wholesale reversals of policy.

Since the mid-1990s, the distance between the parties has widened. In this new world, transitions of power are far more disruptive - despite the system’s many checks and balances. A coherent strategy on infrastructure, an unavoidably long-term undertaking, is difficult to form. This may be the biggest threat to the country’s success over time.

The technocratic tendency can certainly be taken too far. This tradition is far more pronounced in continental Europe than in Britain, let alone the U.S. And the European Union - itself a technocratic project par excellence - underlines the drawbacks of letting the tendency go too far.

The challenge is to get the mix right. And the idea, please note, isn’t entirely alien even to the U.S. Consider central banking. Aside from Congress, the Federal Reserve might be the most powerful single institution in the country. It deals with intensely political questions. Yet it’s a technocratic outfit - nonpartisan, subject to congressional oversight but with substantial de facto independence, a freedom it has used to the maximum in the past several years.

And thank heavens for that. Who would want U.S. monetary policy to be run with the same sense of purpose, intelligence and decisiveness that Congress brings to fiscal policy?

Yet the powers granted to the Fed are a glaring anomaly in the American political tradition. As desirable as a measured step toward nonpartisan technocracy might be in fiscal policy, and especially on infrastructure investment and other long-term strategic priorities, I don’t see it happening in the U.S. This is a country too much in love with politics. Let’s hope that won’t stand as the nation’s economic epitaph.

*The author is a Bloomberg View columnist.

by Clive Crook