Political Economy

World Values Survey Map 2004

POLITICAL ECONOMY

“Political economy” has been described by The Oxford Handbook of Political Economy (2008) as “interdisciplinary studies drawing upon economics, sociology and political science in explaining how political institutions, the political environment, and the economic system—capitalist, socialist, communist, or mixed—influence each other.”

It is distinguished from “economics,” which is the analysis of the economy absent from social and political considerations (to the extent that is at all possible).

The World Values Survey (WVS) series, which has been conducted since 1981, is a good example of political economy. The findings and insights of the survey series relate economic development to transformations in values and attitudes worldwide.

Using factor analysis to analyze survey responses, WVS identifies two underlying variables:

- Traditional vs. Secular-Rational Values

- Survival vs. Self-Expression Values

The latest version (2010-2014) of the World Values Survey map is at this link:

http://www.worldvaluessurvey.org/WVSContents.jsp 

 

—World Values Survey website

Basic positions of the cultural groups relative to each other remain the same.

Inspection of the World Values Survey map will reveal that the most prosperous countries are those in the upper right quadrant, namely, Western European countries. Also showing high economic performance are the Confucian countries of Japan, South Korea, and China.

A study that I conducted in 2010 affirms the above observation by demonstrating the aforementioned relationship between culture and economic performance:

“The direction of the associations indicates that cultures which demonstrate attitudes that tend toward survival rather than self-expression are more likely to be less democratic and more corrupt.

“Corruption is, thus, associated with poverty. Ostensibly, prosperity allows people to focus beyond survival on the exercise of their political and related freedoms, and it is the effective exercise of the freedoms guaranteed by a democratic society that, presumably, checks corruption.

“Cultures demonstrating attitudes that are more traditional, less secular-rational are also more likely to be less democratic and more corrupt. However, in contrast to the positive association between ‘survival’ attitudes and corruption, the association between ‘traditional’ attitudes and corruption is weaker.”

See: https://oddsandendsgonzalinhodacosta.blogspot.com/2017/09/culture-corruption-and-prospects-for.html

In addition, this study shows that democratization and associated changes in governance for the better reduces corruption, the latter which is negatively associated with economic development:

“Time series analysis projects gradual change in democracy and governance, and corruption measures, and gradual change at relatively high levels of corruption at that.”

Other studies readily demonstrate the relationship between good governance and economic advancement, for example:

“Throughout the article, the relation between the governance indicators and the Human Development Level (HDL) is investigated. The analysis is conducted by using Panel Data Regression Method. The valid annual data of World Governance Index between the years 2002–2012 for 33 member and candidate countries of European Union (EU) is collected from World Bank’s official website. To measure HDL, data of Human Development Index (HDI) belonging to 2002-2012 term is gathered from United Nations Development Programme’s official website. The analysis concluded that, at least three of the governance indicators as Government Effectiveness, Regulatory Quality and Rule of Law have significant positive coefficients in the panel data regression model. It means that better governance performance for any country provides better performance at the HDL.” 

See: (PDF) Governance and Human Development: The Impacts of Governance Indicators on Human Development (January 2018) by Ahmet Keser

Available from:

https://www.researchgate.net/publication/322488600_Governance_and_Human_Development_The_Impacts_of_Governance_Indicators_on_Human_Development 

 

—Ahmet Keser and Yunus Gökmen, “Governance and Human Development: The Impacts of Governance Indicators on Human Development,” Journal of Public Administration and Governance (January 2018) 8(1):26

The simple, straightforward conclusion: good governance advances economic development.

EDGE OF CHAOS

Degrees in hand from Harvard, Oxford, and American University at Washington D.C., Zambian-born international economist Dambisa Moyo brings high intelligence and considerable knowledge to bear on issues of global political economy. Her approach is distinguished in this respect: she proposes changes in democratic political systems as solutions to economic problems, demonstrating the fundamental assumption that political and economic systems are inextricably intertwined, that is, that political economy is a coherent systemic whole.

In Edge of Chaos: Why Democracy Is Failing to Deliver Economic Growth—and How to Fix It (2018), she takes up the current global crisis of restive populations in democratic countries opting for autocratic rule in repudiation of liberal democracy. This development she attributes to two causes principally: weak economic growth and income inequality.

“A generation after the fall of the Berlin Wall, the world is once again on the edge of chaos. Demonstrations have broken out from Belgium to Brazil led by angry citizens demanding a greater say in their political and economic future, better education, healthcare and living standards. The bottom line of this outrage is the same; people are demanding their governments do more to improve their lives faster, something which policymakers are unable to deliver under conditions of anemic growth. Rising income inequality and a stagnant economy are threats to both the developed and the developing world, and leaders can no longer afford to ignore this gathering storm.”

Link: https://www.littlebrown.co.uk/books/detail.page?isbn=9781408710906 

 

—“Book Description: Edge of Chaos by Dambisa Moyo,” little, brown website

Moyo observes democracies have the capacity to redress income inequality.

“As Moyo notes, left to its own devices, capitalism produces income inequality. This, however, is within the power of governments to redress. While inequality has risen in Europe as well, progressive taxation and robust social safety nets have kept the gap there manageable.”

Link: https://www.nytimes.com/2018/06/07/books/review/dambisa-moyo-edge-of-chaos.html 

 

—Stephen Rattner, “Dambisa Moyo’s Proposals for Saving Democracy,” The New York Times (June 7, 2018)

On the other hand, rousing democracies from the economic doldrums is problematic. No ready formula exists for attaining vigorous and sustained economic growth, which, according to Moyo, is the crux of the solution to the present political tumult.

Her principal thrust in the book consists in advancing proposals to retool political systems so that democracies realize this type of growth. She proposes ten reforms of liberal democratic systems:

 - Bind governments and their successors more firmly to public policies in order to ensure the continuity of those policies, reducing uncertainty and bolstering economic growth.

- Decrease the undue influence of wealthy voters on elections and on public policies dependent on electoral outcomes by regulating campaign contributions.

- Improve the quality of the terms of public service by increasing the compensation of politicians so that it is competitive with that of the private sector. Increases should be linked to individual performance and deferred during the term of office, possibly being paid only at the end, and reward the advancement of broadly beneficial long-term goals.

- Extend terms of office to approximately six years, corresponding to a typical business cycle, so that the politicians are motivated to deliver economic growth over the same period.

- Impose term limits so that politicians are held adequately accountable and do not become entrenched, authoritarian, and complacent.

- Require politicians standing for office to get “real-world” experience in “nonpolitical” jobs so that they develop an adequate understanding of society and the economy.

- Foster competitive elections to the legislature by reducing the number of uncontested seats and by resisting gerrymandering.

- Make voting compulsory in order to broaden the electoral base and increase voter turnout.

- Educate voters and establish minimum voter qualifications with respect to knowledge about key public policy issues.

- Introduce weighted voting based on professional standing, educational attainment, civics test performance, age—indicating, presumably, life experience—and other similar attributes.

The principal critique of Moyo’s proposals to address the economic failings of democracy focuses on their intention to undermine democracy itself. Stephen Rattner in The New York Times, for example, describes as “incredible” her proposal to impose literacy tests on voters and to weight votes in favor of the educated elite. The context of his exclamation:

“Turning to politics, Moyo documents how trust in government has fallen as polarization and gridlock have risen. For this, she blames ‘short-termism.’ Eager to win elections, politicians make decisions to maximize voter support rather than those that would do the most for long-term growth. Meanwhile, in Washington, gridlock has slowed action to a crawl.

“It was not always thus and Moyo takes a valiant stab at explaining why. She cites the move in recent years toward more laissez-faire capitalism, the rise of the 24-hour news cycle, the emergence of social media and a shift in power toward corporations and wealthy philanthropists. Gerrymandering and an avalanche of political money, for both electoral campaigns and lobbying, are additional (and related) flaws.

“These and other villains dance across her stage before Moyo unveils her proposed fixes, all designed to reform the American political system so that capitalism can flourish. They number 10, from the incontrovertible (getting money out of politics) to the incredible (imposing what amounts to literacy tests on would-be voters and weighting voting toward “the best-informed segment of the electorate”). Her other ideas include longer terms for elected officials coupled with term limits, less gerrymandering and mandatory voting. There are oddities as well, like restricting the ability of successor governments to modify long-term agreements entered into by their predecessors and setting minimum qualifications for officeholders.

“Helpfully, Moyo includes as an appendix a chart showing how 14 leading countries rank in terms of her goals for reforming democracy. By her tally, unsteady Mexico ranks at the top (having achieved five of Moyo’s milestones) while Europe’s economic engine, Germany, ranks at the bottom, with a goose egg.”

Link: https://www.nytimes.com/2018/06/07/books/review/dambisa-moyo-edge-of-chaos.html 

 

—Stephen Rattner, “Dambisa Moyo’s Proposals for Saving Democracy,” The New York Times (June 7, 2018)

In a more developed exposition, James Crabtree in The Financial Times says something similar:

“As a remedy, Moyo presents a manifesto of 10 fixes to counter ‘the corrosive short-termism that has beset the democratic process’. The first eight are moderately interesting, ranging from campaign-finance reforms to electoral cycles that last longer than five years.

“But the final two certainly catch the eye: first introducing minimum voting requirements, for instance by requiring voters to pass a civics test; and then weighted voting, meaning a system in which those judged to be more qualified would see their votes count for more than those who do not.

“It seems odd to try and fix what ails democracy by doing away with one of its few elements that still commands almost universal approval — the egalitarian principle.

“Taken together, Moyo claims, these two reforms could create ‘three tiers of voters’: unqualified, standard qualified and highly qualified. The result would be ‘a fully informed and participating electorate’ capable of taking the difficult, long-term decisions needed to rekindle economic vitality.

“…The idea of weighted voting itself isn’t absurd: it is often used in the corporate world, for instance, to give extra oomph to different classes of shareholders. Even so, it seems odd to try and fix what ails democracy by doing away with one of its few elements that still commands almost universal approval — the egalitarian principle that every citizen’s vote should count equally.

“Proposals to give extra weight to educated voters seem especially wrong-headed. The divide between those with university degrees and those without is already one of the deepest in western democracies, and among the most reliable predictors of voters’ views on Brexit or US president Donald Trump.

“Moyo insists hers would in fact be a ‘truly meritocratic’ system, in the sense that all citizens should at least have the chance to win enhanced status. Yet putting all that to one side, her proposal fails even on its own terms. ‘Democracy dominated by the ill-informed many can also prove hazardous to growth,’ she argues. Yet it is far from obvious that tilting voting in favour of existing elites would actually see them support wise, long-term policies, rather than their own narrow short-term interests. The idea that changes to electoral rules will reliably lead to an increase in long-run growth seems fanciful.

“…Yet the answer to these problems of short-termism are unlikely to be found by introducing divisive voting reforms that would hurt the interests of those who already feel voiceless. Indeed, in a moment of popular anger against elites, few proposals seem more precisely targeted to bring about just the kind of popular revolt against democratic capitalism that Moyo says she is ostensibly trying to prevent.”

—In “Should Democracy Favor the Elite?” The Financial Times (May 1, 2018)

Pointedly, Peter Coy in Bloomberg.com argues:

“As is often the case, though, Moyo’s solutions aren’t as persuasive as her diagnosis. If you think about it, even devoted democrats draw the line somewhere on ballot box access: The right to vote is generally denied to prisoners, children, noncitizens, and people judged mentally incompetent. But imagine the envy and anger that would be unleashed if voting power were based on profession or education. Who would decide how to divide the public into first-, second-, and third-class citizens? Would biology professors be certified as ‘highly qualified’ but high school history teachers ranked ‘standard qualified’? What about journalists vs. carpenters vs. actors vs. the unemployed? And how much of the public would be consigned to the lowest tier of ‘unqualified’ voters—would it be 1 percent or 10 percent or more?

“A civics test seems a more defensible way to implement weighted voting, but not really. It implicitly equates knowledge with good judgment, which experience tells us isn’t a sound equation. As the conservative writer William F. Buckley Jr. once said, ‘I’d rather entrust the government of the United States to the first 400 people listed in the Boston telephone directory than to the faculty of Harvard University.’

“In the end, Moyo comes across as a well-meaning meritocrat. Democracy has its flaws, all right, but elitism isn’t the way to cure them.”

Link: https://www.bloomberg.com/news/articles/2018-04-19/dambisa-moyo-edge-of-chaos-review 

 

—Peter Coy, “To Save Democracy, This Economist Wants to Kill Its Core Principle,” Bloomberg.com, April 19, 2018

Where does the Philippines fit in this picture?

The Philippines is a country in the lower half of global development rankings. Although it is not a bottom dweller, the country is poor nonetheless. In no small measure, the reasons for the economic state of the Philippines are cultural and political.

The Philippines belongs to the Latin American cluster of countries, which is notorious for underdevelopment. On the other hand, three countries in Latin America have as of this writing risen in the assessment of the World Bank to the status of “high-income economies”—Argentina, Chile, and Uruguay.

Latin American countries tend to have high scores in “Traditional Values” and moderate scores in “Self-Expression Values.” The former in particular consists of cultural values and attitudes associated with underdevelopment.

High “Traditional Values” and “Survival Values” are positively associated with negative political attributes, specifically, weak democratization—which goes hand in hand with deleterious authoritarianism—degraded governance, and higher levels of corruption.

Philippine economic performance will significantly improve if the country moves in the direction of stronger democratization, better governance, and lower levels of corruption, all attainable outcomes. They are advanced by political actors, particularly by the Philippine voting population itself, which is responsible for putting political leaders into office.

In the spirit of Dambisa Moyo, the Philippine people have it in themselves to bring about their economic advancement through political action. Will the Philippine people take charge of their own destiny and work the levers of political economy for the better?