“If an agent is hired by a principal to work until a particular task is completed, then by completing the task the agent is putting himself out of a job. This phenomenon may be particularly important in politics. It is often claimed that some politicians are elected because they are “the person for the job” perhaps because they have a particular skill or comparative advantage. Once the job is over this skill will be less valued and the politicians, even if they have successfully completed the job for which they were selected, may be replaced…. In this paper we develop a political economy model of this need for enemies, showing how a politician who is good at undertaking a particular task has an incentive not to complete it fully since he needs to keep the task alive in order to maintain his strategic advantage in an election.”
From the Introduction of the newly released NBER working paper, “The Need for Enemies”, by Leopoldo Fergusson, James A. Robinson, Ragnar Torvik, and Juan F. Vargas.
They test their idea, with plenty of data and controls, on a relevant recent historical example: “We test these implications of our model using data from Colombia. In 2002 Alvaro Uribe was elected president on an explicit platform to fight against the left-wing insurgent guerilla groups the Fuerzas Armadas Revolucionarias de Colombia (FARC) and Ejército de Liberación Nacional (ELN). Uribe, whose father was murdered by the FARC, was widely seen as having a major political advantage in his loathing for the groups, particularly relative to the traditional politicians who had a long history of trying to negotiate with them. Thus Uribe was a politician for the job who intensified the fight against the guerilla … our model suggests that Uribe’s incentive to attack the guerilla would have been mitigated by the fact that had he eliminated them, he would have removed his own electoral advantage. To the extent that Uribe valued rents from office as well as peace, this could have reduced his incentive to eliminate the FARC and ELN, just as our model predicts.”
So much for their very interesting paper. Which raised in my mind some analogies with the European crisis, especially the one of a few countries dealing with a deep financial crisis, well synthesized by high spreads on their sovereign issues of bonds.
Simply because some of these countries (Greece and Italy) have dealt with the recent crisis, at different moments, with the selection of a Prime Minister with technical economic expertise, widely perceived as the most capable of dealing with a financial crisis.
Would the Robinson et al. paper provide relevant implications also for the Greek and Italian management of the crisis? Relevant question. Is our PM Monti here to free ride on his well-deserved reputation not to implement the reforms Italy needs so as to remain in power?
Let me first start with Greece. Insofar as Greek Prime Ministers do not rule but obey the recommendations of the Troika, the model clearly does not apply. There is no and there can be no opportunistic behavior on their part.
So maybe this is relevant also for other European countries that are under the spell of financial aid and conditionalities. Which leaves us with Spain and Italy. Spain is still relying on a politician with no specific “feature” of competence, a traditional politician we would say. In this regards, Spain remains the true European exception.
What about Italy? Monti? An interesting intermediate example. The more so as the famous “Italian spread”, to which Mr. Monti’s fate was linked from the beginning of his tenure, has not been able to decline and has sometimes dangerously flirted around the levels it was under his predecessor, Mr. Berlusconi, whose reputation at the time of his resignation was abysmal.
Indeed one might see a case for a high spread justifying the need to “keep Monti on the job”. While some Italians argue that Monti’s reforms so far have been ineffective and that his technical government should resign for having failed to meet expectations, the high spread in Italy is still playing the role of boosting the perception that Monti is needed for the job.
And anyway the Italian parliament seems absolutely unwilling/incapable right now to challenge Mr. Monti’s position.
A position which theoretically could be much more threatened by a lack of satisfaction at the European level. This is why some Italian commentators have argued that Monti these days is more keen on travelling across Europe that on looking into the nitti-gritty details of Italian economic policies. This would seem a rather dangerous strategy that might backfire: by not caring about his own turf he might create opposition in Europe. Three factors would however help him to stay firmly in command: a) the fear of a Berlusconi comeback, b) the imperfect knowledge abroad of the quality of Italian reforms and c) the ambiguity of the message sent by Italian spreads, currently being attributed more to the failures of Europe than to the ones of Italy.
Obviously there is another possibility for why Mr. Monti remains on board. The firm belief by everyone involved that he is not interested in politics but only in the future of Italy and Europe.
As the paper argues, “a salient historical example may be Winston Churchill who, though not particularly successful as a peacetime politician, was thought to be the man for the job in 1940 to lead Britain to victory in the Second World War as prime minister. As soon as the war was won in 1945, British voters, instead of rewarding him, immediately removed him from office… Winston Churchill … did the job (he was) appointed to do because the stakes were high. Not defeating Hitler would have been a disaster for Britain and Churchill. Churchill… (was) selected because … thought to be particularly good at removing a particular threat, Nazi Germany… and … (while) the stakes for society were high, the rents for the politicians were not because of the well functioning system of accountability.”
So overall, Mr. Monti might remain engulfed in this long war against the spread which is not going to be won easily for the reason we might appreciate the most: because he cares.