(Chrystia Freeland is a Reuters columnist. Any opinions
expressed are her own.)
By Chrystia Freeland
NEW YORK, May 23 (Reuters) – We are living in the age of the
technocrats. In business, Big Data, and the Big Brains who can
parse it, rule. In government, the technocrats are on top, too.
From Washington to Frankfurt to Rome, technocrats have stepped
in where politicians feared to tread, rescuing economies, or at
least propping them up, in the process.
Technocrats are in vogue within the intelligentsia, too. It
is well nigh impossible to pick up a book about any social or
political issue nowadays (including, I hasten to admit, my own)
without coming across some data-heavy social science research.
And the familiar pleas for common sense and a centrist approach,
free from the taint of ideology, usually boil down to a call to
put the technocrats in charge.
Technocrats have a lot to recommend them. We do, after all,
live in the age of Big Data, and ignoring it or not being able
to use it is a sure path to either bankruptcy or humiliation –
witness the data jock extraordinaire Nate Silver and his
legendary smackdowns of columnists who rely on anecdote and
intuition.
But, particularly in the wake of 2008, a global crisis that
technocrats both helped cause and failed to predict, there are
also sound reasons not to rely mechanically on technocratic
solutions. That’s why it is worth reading a new paper by Daron
Acemoglu of the Massachusetts Institute of Technology and James
Robinson of Harvard University.
In their seminal 2012 book, “Why Nations Fail,” Acemoglu and
Robinson offered a powerful new framework for understanding why
some societies thrive and others decline – those based on
inclusive growth succeed, while those where growth is extractive
wither.
Their new study, “Economics Versus Politics: Pitfalls of
Policy Advice,” will be published later this year in the Journal
of Economic Perspectives and is available now in draft form as a
National Bureau of Economic Research working paper. It tackles
an essential subject in the age of technocracy: the limits of
technocratic thinking as a basis for policy.
Their critique is not the standard technocrat’s lament that
wise policy is, alas, politically impossible to implement.
Instead, their concern is that policy which is eminently
sensible in theory can fail in practice because of its
unintended political consequences.
In particular, they believe we need to be cautious about
“good” economic policies that have the side effect of either
reinforcing already dominant groups or weakening already frail
ones.
“You should apply double caution when it comes to policies
which will strengthen already powerful groups,” Acemoglu told
me. “The central starting point is a certain suspicion of
elites. You really cannot trust the elites when they are totally
in charge of policy.”
An example discussed in the paper – and an issue on which
Acemoglu changed his own mind in the course of writing it – is
the role of trade unions.
“My view for a long time was that labor organizations had
become rent-seeking,” he said, using the economics term for
groups that specialize in getting a bigger share of the pie
rather than making it grow overall.
“Now, my view is that, even though we are not transitioning
from dictatorship to democracy, you need some labor
organizations as a counterweight to business lobbying.”
Acemoglu and Robinson make the argument at greater length in
the paper: “Faced with a trade union exercising monopoly power
and raising the wages of its members, most economists would
advocate removing or limiting the union’s ability to exercise
this monopoly power, and that is certainly the right policy in
some circumstances. But unions do not just influence the way the
labor market functions; they also have important implications
for the political system. Historically, unions have played a key
role in the creation of democracy in many parts of the world,
particularly in Western Europe.”
Two other important examples the study dissects are
financial deregulation in the United States and privatization in
post-Soviet Russia. In both cases, economic reforms that made a
lot of sense in the abstract and in terms of economic efficiency
had the unintended consequence of strengthening already powerful
political interests.
As the powerful often do, they overplayed their hand. The
result was a political spiral which in the United States helped
set off the 2008 financial crisis and in Russia led to the rise
of President Vladimir V. Putin and his authoritarian regime.
This paper reminds us of something important, which critics
of the elite often don’t understand or don’t want to understand.
In both the United States and in Russia, the reforms which
strengthened powerful vested interests didn’t begin as a cunning
plot by a wealthy cabal, intent on further enriching itself.
Instead, they were endorsed and advocated by today’s high
priests, the technocrats, who sincerely believed they were
acting in the common good.
“What our paper is targeted at is, there is a certain
hubristic attitude among economists – we are the queen of the
social sciences because we use numbers and data,” said Acemoglu,
who is a professor in MIT’s department of economics. “But that
can ignore the implications of political power.”
That reminded me of a Russian oligarch who once told me he
had been prepared to pay a bribe to influence the privatization
process in his favor. But, he delightedly recalled, he soon
discovered that all he needed to do was explain that the policy
would further the cause of market reforms in Russia. Then, as he
put it, “like little darlings,” the technocrats in charge
hastened to put it into action.
That’s the big takeaway from the Acemoglu and Robinson
paper: There is no such thing as pure policy, and we should
check our pockets and lock our doors when someone tells us
otherwise.
(Chrystia Freeland is the managing director and editor,
Consumer News at Thomson Reuters. Prior, she was U.S. managing
editor of the Financial Times. Before that, Freeland was deputy
editor of the Financial Times, in London, editor of the FT’s
Weekend edition, editor of FT.com, UK News editor, Moscow bureau
chief and Eastern Europe correspondent. From 1999 to 2001,
Freeland served as deputy editor of The Globe and Mail, Canada’s
national newspaper. Freeland began her career working as a
stringer in Ukraine, writing for the FT, The Washington Post and
The Economist.
She is the author of two books: “Plutocrats: The Rise of the
New Global Super-rich and the Fall of Everyone Else,” published
by Penguin in 2012 and “Sale of the Century: The Inside Story of
the Second Russian Revolution,” published by Crown Publishing
books in 2000.)
(Editing by Jonathan Oatis)
