Freie Universität Berlin

After three weeks of intense public debate, only few are still speaking about the government shutdown a month later. This seems somewhat surprising, given the fact that the US Congress led the United States and, for that matter, the global economy to the brink of a renewed global recession—one, as some commentators insisted, that would have dwarfed the crisis following the fall of Lehman Brothers in 2008. The absence of a public debate is equally astonishing if we remind ourselves that the same question about raising the debt ceiling will need to be addressed again in January 2014. Why not have a somewhat less heated and perhaps more insightful debate now? Perhaps this interlude, this moment of silence in the eye of the hurricane, can serve as a basis for a more theoretical reflection.

In periods of crisis, its interpretation is almost as important as the crisis itself, because it sets the course for future political action. Since others have already provided us with potential interpretations, rather than adding another one at the risk of being redundant, however, let me suggest, in a somewhat polemical manner, how not to interpret the crisis!

More specifically, I am interested in two major conceptual frameworks, which I would like to critique: that is, the shutdown and its economic repercussions could be seen as a consequence of government failure and of market failure. These concepts are usually seen as either/or propositions. And both arguments could be made to a certain extent, as we will see, but I will argue that the terms of the debate are skewed in this simple, but dominant binary.

Now, this sounds unnecessarily abstract, and perhaps an analogy helps to make my point clearer. In urban studies research in recent years, it has almost become a truism that infrastructures become visible upon their breakdown: When we are stuck in a traffic jam, when water drips from our bath tub, when bridges fall apart; these are the moments when we realize the importance of material infrastructures to our seemingly post-industrial lives.

I would like to use this metaphor to argue that what we see in the 2013 government shutdown is that institutional government infrastructures have equally become visible upon breakdown. From this perspective, we can understand the shutdown as a case in which the work that governments do to maintain seemingly free-floating markets becomes plain for us to see. Who was familiar with the scope of services that would discontinue on September 30, 2013? Who was aware of all the support structures provided by the state? Who knew that the National Zoo’s Panda cam was government-run? Who was aware that all the tourists that entrepreneurial cities are supposed to attract, actually came to see parks and museums that were maintained and paid for by tax payers’ money?

Of course, I am exaggerating the point here, but I am doing so for a reason: I would like to use this visibility to make a single analytical point: The government shutdown is a great example for us to see how the clear-cut distinction we tend to make between a government failure and a market failure is only analytical and artificial.The distinction is even potentially dangerous, as I will conclude, because it obscures the fundamental causalities at work and the more important questions that we need to address.

 

Government Failure or Market Failure?

Let me just briefly sketch the two positions and the kind of argument they provide us with. The first one is that of government failure, a conceptual framework which I would like to explore from the perspective of public choice theory. Public choice theory, which gained traction in the 1950s and 1960s, is often used to explain how and why decisions taken by politicians can have negative effects on the general public. In this Hobbesian reading of human nature, the central argument is that government officials act in ways that benefit the maximization of their own value—rather than of the public. Over the course of the past four decades, the normative dimension of this theory has bolstered demands to reduce government intervention and increase marketization in all arenas of society, because markets are supposed to be more efficient and a-moral in the allocation of resources.

On descriptive terms, public choice theory could be maintained, if we wanted to, when we turn our attention to the recent crisis: The 2013 government shutdown can certainly be explained as the consequence of rational government bureaucrats. ‘Rational’ does not mean, of course, that their actions were guided by some sort of universal rationality. Indeed, according to different estimations, the US economy has lost US$ 300 to 550 million per day during the 17-day shutdown. The rating agency Standard & Poor’s even estimates the overall damage to the US economy to amount to US$ 24 billion or 0,6 percent of economic growth this quarter. Moreover, 800.000 public employees were furloughed and 1.000.000 had to work without getting paid.

What is meant instead, then, is that members of Congress, in this case, acted rationally because they acted in a self-interested, value-maximizing logic. Some have plausibly argued, from this perspective, that Congressmen were acting fully rational, but that the political system (most notably the practice of congressional districting, the institutional influence of moneyed interest, and the primary system) had produced systemic flaws that enabled certain, potentially radicalized, members of the tea party to hijack the Republican Party and, in turn, to threaten Congress and the US government.

I do not want to critique public choice theory on these grounds but  rather critique the problematic policy recommendations that spring from such an assessment shortly.

Second, one could argue that this is only part of the explanation. The government shutdown had such drastic effects on the economy, not only because public officials did not do their job in a manner that served the public good. The goods and services that were no longer provided were precisely those goods and services that markets have difficulties to provide in the first place. In other words, in a slightly more indirect reading, we could argue that we are catching a short term glimpse of a longer term problem: market failure. Such failure is generally defined as a situation in which certain goods are not procured pareto-efficiently by the market. In a public good market failure, which we would see at play here, goods and services are non-exclusive and/or non-rivalrous in consumption: we cannot exclude individuals from consumption and/or use-value does not decrease with a rising number of users.

This is true for the general legal and operational support system of the free market. For instance, customs officials did not get to work, seriously affecting international trade; authorization procedures were adjourned, and court decisions postponed. The criteria of a public good market failure equally apply—if, perhaps, not to the case of the National Zoo’s Panda Cam—to national parks, security, public safety, etc.

The conceptualization of market failure, similarly to that of government failure, only goes so far in its explanatory power, I have to admit. But even though both concepts are not fully satisfactory in themselves, perhaps one might want to argue that the shutdown was a combination of both short term government failure and long term market failure; that it was both/and: Because of flaws in the political system, individuals took problematic decisions—a clear case of rational irrationality—and because of that we were able to catch a glimpse of the fields in which the market fails.

 

Neither/Nor

As convincing as such an explanation might be at first glance, the type of argument that flows from such conceptualizations are problematic. Both interpretations take the analysis down to the micro scale, to individual actors and to their immediate institutional surroundings. From both a government failure and a market failure perspective, policy recommendations focus on these specific (technocratic) conditions. This implies that, we could get it right: if only the incentive structures were different, if only we could nudge politicians to take rational decisions that are conducive to the interests of the general public. In turn, we need to fix those systemic flaws that there are in the government, we need to ensure that government agents are fully aware of the costs they are producing (and have them internalize them).

This distinction on the micro-scale, which has its advantages when it comes to articulating policy recommendations, has a serious flaw, however. Methodological individualism distracts us from important questions that we might need to ask in order to come to terms with the stakes that are raised in the debate. It gives us a transhistorical account of a historically specific situation: Why now? Although the debt ceiling has been raised ten times since 2001? In whose interest? For whose benefit?

Two important sets of questions come to mind that are elided through such a narrow perspective and that political scientists need to grapple with during the intermediate time before the debate re-gains in momentum (and loses in depth) in early January.

First, why are we talking about a debt crisis at all? If we take a step back, the crisis was not one that was simply staged by individual Congress members in the United States, but it was a result of a longer standing reinterpretation of a banking crisis into a sovereign debt crisis. This debate about why sovereign debts are problematic is not held in public and not even in political science circles.

Second, in a longer term perspective: If governments’ institutional infrastructures are generally invisible and if, as I have argued, their breakdown provides us with a glance into the work of maintenance that is necessary for free markets to work, how helpless is the nation-state really, given globalization processes that are often portrayed as external and overwhelming? If the state does have such an important function as a facilitator of the free market: are its actions legitimate and democratic?

Der Beitrag wurde am Montag, den 11. November 2013 um 19:37 Uhr von Boris Vormann veröffentlicht und wurde unter Allgemein abgelegt. Sie können die Kommentare zu diesem Eintrag durch den RSS 2.0 Feed verfolgen. Kommentare und Pings sind derzeit nicht erlaubt.