Power and Politics in Today’s World – Office Hours 2: The Collapse of Communism and its Aftermath II

(upbeat music) (knocking) – So good morning Cristina. Welcome back for our second office hours of the Power and Politics course. And I know you have a number of questions that have come up from
the teaching fellows. So why don’t we get right to it? – Yeah we actually received
a lot of questions this time and the first one is conceptual. In particular on the
principal-agent problem. So if you could explain it again and how you related it to the point that you were making on
privatizing military and prison. – So the idea behind the
principal-agent problem is that when you delegate somebody to act on your behalf, they’re your agent. But because they’re acting on
your behalf in the real world, they rapidly gather a lot
of the kind of information that’s necessary to pursue your interest. That why you’re having them do it. But then they will also
have the advantage, if they are not inclined to
carry out your interests, of having more information
than you do and particularly the information that you
need to monitor them. And so if you have a
divergence of interest between the principle and the agent, the agent is well positioned
to take advantage of that and pursue their own agenda rather than the interests of the principle. And this is a long standing dilemma that economists and game theorists and others have studied
for decades and basically various ways of dealing with that. One is to introduce competition
among possible agents. So I think I mentioned
earlier in the course the idea of His Majesty’s
loyal opposition. Was that His Majesty wanted to have somebody to keep tabs on
His Majesty’s ministers who could replace His Majesty’s minister. So His Majesty then gets the benefit of the information
generated by the opposition and so feeds information up the chain of command if you like. That’s one way of doing it. A second way is to try
and align the interests of the principle and the agent better. So if they both are
looking for the same thing, then the problem sort of dissolves. And then the third is monitoring. But the problem with monitoring
is that it’s difficult. And so, what I said in the
lecture on privatization of prisons and the military is that none of the three standard
paths work very well. First of all, you’ve got multiple
principle-agent challenges because it’s from the
voter to the politician and from the politician to the regulator and from the regulator
to the privatized entity. And there are often
multiple chains within those as we saw particularly in the military. So there many nested
principle-agent challenges. And then there’s not much competition in either of these industries. In fact, as it turns out, the costs of generating the
information to monitor them are very high because there’s
so many nested principle-agent problems and realigning the interests is virtually impossible
because the interests of the voters to not have unnecessary wars and not lock people up unnecessarily and that really runs
diametrically into the interests of the privatized military
or the prison operators. And so, that’s why the
principle-agent problems are so difficult in those contexts. – Thank you, thank you
for clarifying that. So the next couple of questions
are on the rise of the right and the crisis of the left in
the West that we discussed. And the first one is that
there’s sort of a consensus among political scientists
that PR systems, multi party systems are relatively more
democratic to two party systems and can you talk a little
bit about that rise of that consensus among
political scientists? – So there’s no perfect
democratic arrangement. We’re in a world of what
we call the second best and that means there are trade offs. And PR is more representative
at the electoral stage because the Greens get
their people in Parliament and the far left Marxists get
their people in Parliament and the anti immigration
right wing parties get their people in Parliament. Everybody has a seat at the table, in that sense it’s more representative. But it’s less representative
if you think about the accountability of governments for what they actually implement because at the time people are
voting, they have no idea what government is
gonna actually be formed and when it comes around
to the next election, the fact that compromises had
to be made in putting together a coalition mean that
politicians can finger point at one another and say
well, I know we didn’t carry out our mandate that we ran on but we couldn’t because of the deal we had to make in the elections. And I use the example, most recently, of the German national elections where the SPD’s membership had been
very angry about how much had been conceded in previous
coalitions with the CDU and so they chose not to
go back into coalition but then Merkel tried
and failed for six months to create a different coalition
which would’ve produced a very different kind of government if she’d been able to put it together and eventually, out of fear
that another election would make the far right Alternative for
Deutschland do even better, they went back into a grand coalition with the Social Democrats. But, of course, Merkel gave up a lot. She gave up the Ministry
of Finance for example and five other ministries and so, when the CDU is running next time around and her members, well it won’t be her it’ll be her successor’s members,
are angry it’ll be blamed on the costs of having to
put together that coalition and so you either get more accountability at the electoral stage
or more accountability at the governing stage and you have to decide which is more important. – Right. So you touched on this a little bit. This idea of the segmented democracy and one question we received is what is a segmented democracy? And how exactly does
it lead to polarization and why is polarization
necessarily bad for democracies? – So the phrase segmented democracy is a term coined by Douglas Ray in a 1999 paper called Tyrannies of Place. And what he argued there was basically that we are living in, I think he, I’m not sure if he used the example of New Haven but, it is the case in New Haven for example that many people who
spend four years at Yale, never go to many parts
of the city of New Haven. Which have a very different
socio economic make up than the paths in which they travel. So we live in increasingly isolated sub communities if you like where we tend to hang around people like ourselves. So that was the argument that Ray made in 1999 and I think
he pointed out there that the sense that we’re all in the same boat, gets undermined by that
and it creates things called empathy gaps that
I’m gonna be talking more about later in the
course where people stop seeing the world from the
point of view of one another and thinking about one another’s problems. So since Doug Ray wrote that paper, I’ve mentioned two things in
the last couple of decades. One is we’ve seen more of
that kind of segmentation because we’ve seen more
and more red state, blue state sorting and
also more urbanization which means blue cities in red states. So people are more and more living in communities that are like themselves. And we’ll see when we look at things like housing reform,
similar things happening there. And so, that’s just accentuated the problem that he was talking about. And then second is the development
in psychological theory that I mentioned in the course, particularly Connorman and Firsky. Who talked about framing effects. But then subsequent research
by Connorman and Cass Sunstein, who’s now at Harvard,
which tends to show that if you spend time with
people like yourself, or you speak just to people like yourself, people tend to become more extreme. And so, the net effect of
that, it could be people if all you ever see are
people who physically bump into on the way to store, if we go to the store anymore, we do all our shopping online now, but it can also be, and
we’ll be talking more about this as well, it can
be segmented media markets. Where 30 years ago, everybody
watched the same evening news. NBC, CBS or ABC at six
thirty in the evening and it was the same newscasters and people were part of one conversation. Then with he advent of cable
TV we moved into a realm where people on the right get
their news from Fox News and on the left from MSNBC and so forth and now going to Facebook and social media
this takes this even further. So the suggestion is that
this kind of segmentation which is growing more
extreme and taking on other dimensions, is a contributor
to the polarization. Where we see I think 25 or 30 years ago,
about three or four percent of Democrats or Republicans thought they would be unhappy
if their son or daughter married someone from the other party and now that’s gone up
by orders of magnitude. – That’s pretty concerning. How is that related or how is that bad for democratic politics? – So this brings up another set of categories we’ve talked about. Exit, Voice and Loyalty, Albert Hirschman. If people can exit, they have no reason to participate in voice in coming up with policies
that are good for the party as a whole so what you’re gonna find is you’re gonna get people privatizing many provisions
if they can afford it. And those who can’t will just have to scramble and deal with what’s left. We’ll see this repeating itself when we talk about things like education, we’ve already seen it with privatization of local government services and in many other areas. If you have differential
capacities for exit, if the cost of exit are much higher for
some people than for others, that creates very bad
incentives for policy because those who can
bail out will bail out and those who cannot won’t
be able to provide the collective goods for themselves. – So this idea of segmentation
also makes us think about the importance of
relative versus absolute gains and we talked in class
that economists often stress the importance
of absolute gains but thinking about relative
gains can be powerful and can be used in politics. Is that still the case
to the same extent today where we see a crisis on
the left that have always had programs around inequality
and redistributive wealth et cetera and when we see
like Thatcher or even Trump running campaigns that are much more based on absolute gains. Where are we in this debate now? What is more important to the voters? – So the findings in social psychology literature that are not widely understood but, I think, accurate are two fold. One is that relative
differences matter to people but they tend to be
relatively local differences. So running on tax the rich. A popular campaign to run on tax the rich is not likely to be very
effective politically because people don’t compare
themselves to the very rich. Activists do but most voters do not. They tend to compare themselves to similarly situated people. And that can be the source
of gratifying comparisons if the people that are similar to you are rewarded in ways
that are similar to yours and it can also be the source
of invidious comparisons if you think people who
are basically like you are getting ahead in some
way that you are not. Or getting some form of
recognition that you are not and that was the Capuchin
monkeys illustration. So relative differences do matter but they tend to be relatively local comparisons. Then the other thing is that when we think about what
exercises people politically, and this applies to both
relative and absolute, losing things doing worse than you were before or worse than you reasonably thought
you were gonna be doing or having your children
do worse than you did. Those are gonna be more
potent politically. This is Connorman’s
concept of loss aversion. They’re gonna be more potent politically than foregoing a gain. And so the politics of saying
make America great again is a policy of saying something was taken away from you and
I’m gonna get it back and that’s one of the reasons that was a very effective slogan for Trump. – Interesting. So we studied a lot how
the decline in unions had led to a splintering
of parties in general and it was very hurtful for the left and that’s why we see a crisis there. Why has the right sort of benefited from that splintering
at least in PR systems? – Well the reason is, in a nutshell, that social democratic parties that were the mainstay of the social
democracy in the first four decades after World
War Two, were closely connected with industrial
workers and trade unions. And as industrial jobs have disappeared and unions have become weaker, those social democratic parties have been defending their
members but they’re defending a shrinking labor
aristocracy less effectively. It’s shrinking because
those jobs are going away and you get more and more workers who are, they’re not industrial workers and they’re not represented by the
unions so they don’t feel they’re being protected at all like the long term unemployed, or people in service sectors that are not unionized. So they are available for mobilization by other parties. They may go to the Greens, they may go to in Germany to Die Linke,
the far left group. Or they may, as we actually saw on one of the slides in the lecture,
they may get mobilized by the far right as anti-immigrant. If they think their jobs are being taken by immigrants which it’s easy to convince people of whether it’s true or not being beside the point. Usually not true. So that’s one reason. There are fewer and fewer people whereas in days of yore, when virtually the whole economy was
unionized in a country like Germany and they
had in place agreements that the bargaining arrangements made in the unionized parts of industries would be replicated even in the un unionized parts. You didn’t have that
divergence of interest and you didn’t have these people
available for mobilization. Then the second problem is that these left incentive parties are weaker. They’ve all had to make huge concessions in order to get power at all and this is true in two party systems, we saw we talked about New
Labor and the New Democrat but it’s also true in multi party systems. So you see the SPD
implemented the Hartz Reforms in the first five years of this century in Germany which were very pro business. Creating more labor market flexibility. All the things that business tends to want as conditions for retaining power. Though actually they
lost power anyway in 2005 despite having implemented
all of the Hartz Reforms. So it’s basically the
story is a less powerful left of center parties
defending fewer workers and that makes them available for
mobilization by others. – And you just brought it out, it seems like the left
cannot respond anymore effectively to the needs of
workers that have been laid off and kind of are in this post industrial society now where new needs have emerged and is it an unwillingness or is there a structural
reason as to why these central left parties are
unable to these needs anymore? Where do you see this as crises emerge? What is driving it? – Well I don’t think they’re unable to but they have not done and
I think it’s partly not understanding the real
dynamics of what are going on. It’s partly living in the past. It’s partly not seeing and this will be a big theme
of the last part of the course, it’s not seeing that insecurity, long term employment insecurity is a much more serious problem
for most workers than inequality for example. And I think the focus of activists on
inequality doesn’t really serve the political
left well in multiparty systems or in two party systems. While some reduction in
inequality is gonna be important for reasons having to
do with empathy gulfs and other things I’m gonna talk about, the most important medium
term strategy for parties that are going to do well
in the future are gonna be strategies that address
employment insecurity. The fact that somewhere between, most 18 year olds today in
industrialized countries are gonna be facing changing their jobs maybe 12 to 15 times in
their employment lifetimes. That is a completely new world and much of it has to do with technology and the mobility of capital. But attacking immigrants or complaining about inequality will not address it. You really have to see what’s driving, everybody talks about
there’s more polarization, there are more angry voters but they don’t say enough about why,
what’s actually driving it. And the big theme is insecurity and so it’s strategies for
confronting insecurity that are gonna be where the rubber
meets the road going forward. – Interesting so it’s less
of a structural problem and more a problem of lack of innovation and trying to understand how
to cater to these new needs. – Well I think it’s a structural problem but it’s a different structural problem than a lot of people are focusing on. The basic structural problem is the changed nature of labor markets. It’s not a cyclical problem,
it’s a structural problem and so, even though in the U.S. now we have less than 4% unemployment, that’s not a relevant
statistic politically because you have a lot of people employed who might be working at
McDonalds who 15 years ago were working on an assembly line as a middle level or maybe
even lower level manager. So they might be employed but
they’re downwardly mobile, they’re making less money,
they may well be only being able to put bread on the table by having two rather than one
wage earner in the family. They may have children in their 30s who are not employable or
certainly not employed. So they don’t show up as
unemployed but they are deeply disaffected people
with very good reason, and unless politicians can come up with policies to address
the needs of those people, then we’re gonna get more of the sort of politics we’ve been seeing since 2016. – Interesting. So let’s shift gears a little bit. We also received a lot of
questions on privatization and I know you had this little
poll with the audience where you asked the terms neoliberalism
and Washington consensus. Kind of which one is more negative. That has more negative connotation. And could you clarify
again why neoliberalism is a more negative term than the Washington consensus here
in the United States? – Well I would say, I thought it was very revealing when I did the poll in the class that more people thought neoliberalism is a pejorative term than the
Washington consensus. – [Christina] Oh I asked this question wrong so should I say it again? – Pardon? – [Christina] I asked
the question incorrectly so should I say it again? – I think when I ran
the poll in the class– – [Christina] People said
neoliberalism was more. – People perceived neoliberalism
to be a pejorative term but not so much the Washington consensus. However, as you know
because you’re an expert on the global south. Go round the global
south, go around Africa, go to India and ask about
the Washington consensus and you get a very different answer and so, I think the take
away there is simply that the idea that we should
be tightly disciplined isn’t so appealing as the
idea that other people should be tightly disciplined. I don’t think it’s more
complicated than that. – Another question we received is what are some of the analytical frameworks that are useful in
helping us to think about the impact of privatization
on the role of the state? – I think the Exit, Voice and Loyalty is the heart of the matter there because, if you think about privatization, when we come back to the issue of housing. So people used to think gated communities were things for rich people. Right? Rich people would shut themselves off and that’s no longer true. We’ve got these community
interest developments in the U.S. 10 years ago, which was the most
recent data I could find, there were over 60 million people. That’s 20% of the U.S. population. It’s probably 70 million people today, living in these communities. And so this connects back
to the segmented democracy. Go to Miami or Fort
Lauderdale for example, you’ll just see moving a quarter of a mile back from the water, a different price from multi million to 80,000 dollars. If you get far enough away. And so you’ve got gated communities that correspond to different income levels. And then of course those
who can’t afford any but the problem is gonna be if
some people can bail out and provide their own policing
and their own utilities and their own street lights
and their own garbage pickup and their own swimming
pools, then you’re gonna get the under provision of
public goods for the rest and that’s gonna be the problem. And we see this with education. We’ll spend a whole class on education but essentially the fact that you have a system in which people can
either bail out physically into suburban towns or
can bail out fiscally by sending their kids to private schools mean that all of those people have incentives to under provide good schools for the rest of the country. We see it in healthcare. Once you no longer have the individual mandate which
was part of the Obamacare law that was repealed as part
of Trump’s 2017 tax reform, the individual mandate was repealed. The problem then is you
get what economists call adverse selection in
insurance markets because the only people who voluntarily
wanna buy insurance then are sick people but that creates very expensive pools to insure. The whole idea of insurance pools is that everybody’s in them and so you drive down the price that way. So insurance markets
will just unravel just as if you said we don’t have to have auto insurance. The most dangerous people wouldn’t insure. The people who had no
assets anyway and so. So there’s certain kinds of markets where, unless everybody participates, you get this problem of adverse selection and the markets unravel. So that’s the problem when you have very different capacities for exit. Just one more example in
Oregon I think it was, they were trying to decide which
procedures would be covered in Medicaid, which is
insurance for poor people. And they held deliberative town hall meetings about
that to vote and to debate and to vote on which
procedures would be covered. But then it turned out
that the great majority of the people there were not on Medicaid. So, for them, it’s an academic question or, even worse, they don’t wanna provide paying more Medicaid is partly federal
block grants but it’s also taxes raise it to state level. They don’t have any interest
in paying more taxes to cover more Medicaid procedures
that they’re not using right? So this is the problem
if you have different capacities for exit but
not for decision making and that’s the real, I think it’s a Hirschman story. – That makes a lot of sense. So this Trump privatization,
as a category, seems to be covering a lot
and it’s often justified in terms of how we precisely
define public goods and we talked about the definition brought forward by economists and a student was interested in how does the rhetoric of public versus private use actually function in political discourse and has it shifted over time and is the term public good deployed differently now than a few decades ago? – Well public goods as it’s
used in common discourse is much broader than public
goods as it’s used by economists because the number of
things that are really public goods in the economist
sense is very small. Like you think clean air is a public good. Even that, if we could all have bubbles over our heads and
backpacks with oxygen tanks maybe even clean air would
stop being a public good because for something to be a public good in the economist sense, it must be both supplier non excludable
so giving it to me, if we build a road for me we
can’t stop you driving on it and non rivalrous. So if I enjoy sunshine, it
doesn’t stop you enjoying it or if I enjoy driving on the road. It’s very narrow. Most people think
education is a public good. Education doesn’t fit that definition. It’s easy to exclude people from education and think about five people consuming a teacher’s time versus 50 people consuming
a teacher’s time, it clearly is rivalrous
because they’re gonna get much less well educated if
they’re 50 than if they’re five. So education, in the economist
sense, is not a public good but nine out of 10 people think
education is a public good. And so I think in common understanding people wanna quote public goods are things that have a lot of negative externalities. So if you have a bad
public education system, even if you are educating your
children at private school, there are gonna be a lot of fallout for having a bad educational system, you’re not gonna have a
well educated labor force, you’ll probably have a a lot of crime, you’re gonna have all these other, so you get a lot of negative externalities but that’s not the same thing as saying that education’s a public good. So then the question becomes how to manage the externalities. So I think that’s the conceptual point and so, economists’ definition of a
public good is much too narrow certainly to cover a lot of what people have been talking about privatizing. Many many things. And I think there, the theory
of privatization is just that government’s not
very good at doing things. As Reagan said, “Government
is the problem.” and so, so you think about other solutions and I think that’s where a lot
of the impetus to privatize things like railroads and
utilities and so on came from. And then you have to
trade off the way that externalities are handled
when the government’s doing it with the ways externalities are handled when the private sector’s doing it. So if you privatize the railways, well yeah but there may be communities that don’t have enough
people to make it worthwhile for anybody to run a train there and so again you’re gonna get
a Hirschman problem start. The people who can exit will
exit to happy conditions and those who are left
behind will be worse off. – You just talked about CIDs
and I know in class we also talked about their negative
implications for example, how do you still cater to
the needs of the homeless? All of that? Another negative implication could be also just the impact that the
elite secession has on just what the government provides for the population in general because the elite has more power
to demand public goods from the government and if the demands of the elite are met by private solutions, then we could end up with situations like in the developing world
where these public goods are not being provided anymore. Or they’re just decreasing in quality as we see maybe in the U.S. or in Europe. So what is your comment on that? – So this is gonna be a
major theme of the last part of the course so I’ll just
speak briefly to it now but a big part of the source of our politics since 2016 is a by product of the elite’s complacency about exactly that. So, in the 30’s when we had 20% unemployment
and a Communist system out there competing for
the hearts and minds of American workers,
there were many people among business elites who
understood the importance of not creating a situation
where workers felt they had nothing to lose but their chains as Marx and Engels had put it
in the Communist manifesto. After the collapse of
Communism, where there’s no real alternative out there,
the path of least resistance to move to the suburbs
and build more prisons, or move to gated communities and sort of out of sight, out of mind it’s a very easy path to go but the cost is all of these vulnerable, underserved
populations who are being left behind by all the
technological innovation. Eventually turning into
dynamite, political dynamite that can then be mobilized in ways that the elites are not gonna like. And so, the complacency of
the elites has fed this idea that they can exit, to
come back to Hirschman, has fed a lack of attention
to the sorts of problem that are now exploding in their faces. – Very interesting. So shifting gears a little bit, a student also had a
question on the military. And we discussed how kind of using military contractors,
reduces the cost of war. So it might make the U.S. more likely to go to war in the first place. At the same time in the U.S. we also have an all volunteer force
that appears increasingly isolated from the population as a whole. So is it necessary to
make war cheaper on the contractor front if we already
have this other development, it’s all volunteer anyways and it is becoming more isolated to
the general population. – So I think the arithmetic
there’s just wrong. So if you compare the
first Gulf War in 1991, where even then we had a
lot of military contractors we used about half a
million troops in that war. When we’re talking about Afghanistan, we’re talking about very small numbers nowhere near that we try to keep our American troops below 10,000 in Afghanistan and, first of all if you really wanted to hire half a million military
contractors to occupy a country, probably couldn’t do it. So, I mean the cost would
be, I don’t even know there would be half a million but
the cost would be enormous. So if you’re gonna fight a successful war, it’s still gonna be very expensive. Now it is true that the technology of war is changing rapidly and so in terms of just
destroying a country, we’ll be able to do it with drones but we’ve had that capacity since the advent of nuclear weapons. And the truth is, having the capacity to destroy
a country does not translate into the capacity to subdue
it’s population and govern it. As we’ve seen with the now, 17 year ungovernable Afghanistan and look just at Iraq. 25 million people in Iraq and we occupied them, despite Abu Ghraib and all the haphazard use of vicious force that I talked about as a sign of a weak state, we were not able ever
to govern effectively. Or just look at Syria where we’ve, again,
been involved since 2012 and failed miserably in
that civil war context. So I think that the idea that
you can subdue populations without large numbers
of troops is a fantasy and if you’re really going to
try and do that with… If you think of the
wars we’ve been fighting in Afghanistan, in Iraq, in Syria. Paying a professional army to fight those would be colossally
expensive and it’s probably not possible to turn over the governance of an occupied country
to a mercenary force. So I don’t think, everybody focuses on the
technology of war but, and I’m gonna talk more about
this in upcoming lectures, that has very little to do
with creating a Weberian state that can monopolize a coercive use of force in a given territory. – So our last question
brings us back to the lecture we had on Thursday on
prisons and I know that you showed two graphs that
were very interesting. So there was a decrease in
violent crimes over time but then we see an increase
in incarceration rates and we talked about the
reasons for the decline in violent crimes for example,
more education for women. But can you clarify the puzzle here that, despite the decrease in violent crimes, we do see an increase
in incarceration rates? – So as I said there multiple
competing explanations for that out there including the argument that incarceration is working. If you look at the data, I
don’t find it very credible but. Based on my reading of the literature, the biggest predictor of
violent crime in a country is males in a population
between the ages of 18 and 25. I actually thought the
more interesting puzzle was not that one but
the next graph I put up which shows that violent
crime had been going down but people believe that
it’s been going up. One student came and talked to me about it at the end of the class, was
this a by product of 9/11 because that’s when the
perception that crime is going up, really takes off? There might be something to that but I think there’s been, for
a much longer term that that, a big disjunction between how much violent crime
people believe there is and how much violent
crime there actually is. As with, for example, illegal immigration we’ve seen this play out now. There’s a massive
disjunction, most people think it’s going up but it’s actually been going down for a very long number of years and I think the answer here is in that work I mentioned of a political scientist called Stuart Scheingold and it’s essentially what
economists call cheap talk. It’s very easy to run for
office on these issues because you find a bogeyman,
you find somebody to blame which is always easy in politics and then most of the solutions turn out not to be expensive to you politically. So federal politicians can
run on getting tough on crime but most conviction and
incarceration occurs in state prisons so it’s
essentially creating unfunded mandates on the
states for the most part. And if you think about immigration, Trump said, “And Mexico will pay. “And Mexico will pay.” But they’re not paying. And that’s partly why he’s
run into so much opposition now to actually build
his wall because it’s gonna cost American tax payers if they really do it and representatives including even when the Republicans
control both houses of Congress, he couldn’t get them to ante
up the money for his wall. But that’s atypical. Most of the running against crime, it’s cheap talk for
politicians to whip up support for something that’s not gonna be costly to them down the road politically. – Great, these were all the
questions for this time. – Well see you again soon.
– [Christina] Thank you.

Maurice Vega

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