10% Less Democracy by Garett Jones

Democracy has brought benefits to society and to the quality of life of individual people. As a rule, functional democracies do not suffer from famines, government massacres, successful coups, or wars against other democracies. The level of democratization necessary to get these benefits is surprisingly low, with freedom of the press and well-developed trade networks predicting them more reliably than democracy itself. As a rule, democracies are wealthier than non-democracies, but their rates of economic growth are similar on average. This raises the question of whether democracy is truly a source of benefits, or whether it’s a luxury good that countries buy for themselves after becoming rich.

Too much of anything is dangerous, and this includes too much democracy. As a group, voters are short-sighted and selfish. Voters are especially dangerous when they are ill-informed or when they harbor hatreds towards other segments of the electorate. Voters broadly support ideas that professional economists broadly oppose, such as import tariffs, price controls, strong employment protections, and giving government bondholders the shaft. Political theorists have long recognized the need for governments to have a blend of democratic (rule by the people), aristocratic (rule by technocratic elites), and monarchical (rule by benevolent actors with a long time horizon) elements. Much as monarchy can lead to tyranny and aristocracy can lead to oligarchy, democracy can lead to mob rule; the best solution is to pit various stakeholders against each other in a system of checks and balances.

No democracy today goes anywhere as far as ancient Athens, where any citizen could vote on legislation and where all government positions were elected for one-year terms. There are many parts of government that are blatantly undemocratic even in the world’s most successful democracies. Many of the world’s leading governments could improve their effectiveness by becoming slightly less democratic in key areas.

Legislative terms. Shorter legislative terms are more democratic and make legislators more accountable to voters, but they also encourage short-sightedness from legislators. Politicians become increasingly timid as elections draw near, avoiding uncomfortable legislation and approving more pork barrel spending. When terms are longer, politicians are more comfortable introducing painful but necessary legislation early in their terms, knowing that voters will soon forget. Terms shorter than four years appear to be counterproductive. It’s also beneficial to have elections staggered in the style of the US Senate so that there is better organizational continuity and so that politicians are not all timid at the same time.

Central banks. Governments have long recognized that the power to increase the money supply is too dangerous and too tempting to be put in the hands of voters or politicians. Voters like easy money and low interest rates, but they go on to hate the inflation that comes with it. In advanced countries, central banks are usually run by committees of appointed officials with long terms who have a clear mandate (usually to keep inflation in a target range) and are unaccountable to politicians once appointed. Countries with more independent central banks have lower average rates of inflation with seemingly no downsides.

Technical government jobs. It makes sense to hold elections to jobs that are heavily values-oriented in nature, but many governments also hold elections to offices that are purely technical. Local governments in which the treasurer is elected tend to pay higher interest rates on their debts than governments where the treasurer is appointed, indicating a lower level of investor confidence. In jobs where it’s relatively easy for insiders to recognize qualified people and to measure their job performance, putting voters in the loop isn’t constructive. Voters have a poor record of booting corrupt or incompetent officials, mainly since such officials become good at erroneously blaming the government’s problems on others.

Judges. Independent and non-political judiciaries have long been recognized as a critical constraint on government power. Many benefits attributed to democracy, most notably the rule of law and the protection of fundamental freedoms, owe more to an independent judiciary than to democracy. In modern democracies, judges are usually appointed to their posts for long (or life) terms with strong job security. Judges who are safe from the potential wrath of voters and politicians are more comfortable ruling against government unreasonableness and overreach; countries with greater judicial independence tend to have stronger property rights protections and less red tape. Judges who are elected rather than appointed have a well-documented bias towards their constituents and against outsiders. Elected judges, much like elected legislators, act differently when elections are near, which undermines the judiciary’s duty to be predictable. Modern unaccountable judiciaries guard against corruption and incompetence by having random assignment of cases and by having high courts consist of committees of judges rather than individuals.

Regulators. Regulators exist to protect consumers from exploitation, but evidence from the field suggests that elected regulators go too far. In jurisdictions where electricity and telecom regulators are elected rather than appointed, prices are lower on average, but interest rates on debts are higher and outages are more frequent. Under short-term pressure from voters, elected regulators usually pick a strategy analogous to rent control, keeping prices low through underinvestment. Corruption is a valid concern when regulators are appointed; as with judges, a common approach is to have regulatory bodies headed by a committee.

Backroom deals. Voters are irrationally contemptuous towards the messiness of democratic lawmaking, especially when it leads to compromises, exceptions, carve-outs, loopholes, pet projects, and shady political favors. The ability to build coalitions and reach consensus behind closed doors is a key benefit of representative democracy that direct democracy cannot match. Party insiders can do a better job than voters at reaching agreements that are broadly agreeable and hurt fewer people. The internal ban on earmarks (formerly 1% of the federal budget) that the US Congress adopted in 2010 appears to have backfired by encouraging a style of politics that is less results-oriented and more ideological and performative.

Sovereign bondholders. Holders of government debt have a lot in common with monarchs and with corporate shareholders; they may be accountable to no one, but they have a selfish stake in the long-term health of society and the stability of the regime. Governments are extremely dependent on the goodwill of lenders; even governments that don’t run budget deficits regularly need to borrow to smooth out the temporary gaps between revenues and outflows. Governments that build themselves a reputation for defaulting on their debts or for paying them back in inflated currency lose the trust of lenders and get brutally punished in the bond market. Even the absolute monarchs of past centuries have had to cower before their creditors; if no one is interested in buying bonds, governments may immediately become unable to pay their day-to-day bills. The power of bondholders is often informal and ad hoc, but when they demand restraint and austerity from governments, governments are forced to ignore the wishes of voters in order to appease them.