The Voter's Dilemma and Democratic Accountability

Winner, 2009 Choice Outstanding Academic Title

Why do some democracies adopt effective development policies while others remain mired in stagnation or suffer cyclic crises? Previous studies have emphasized poverty or institutional weakness, but weak accountability and development failure are not limited to low-income countries or to any specific institutional choices. A better explanation, Mona Lyne argues, is provided by her theory of “the voter’s dilemma”: where structural conditions render quid pro quo, or clientelistic, politics viable on a national scale, voters have insufficient incentive to support politicians promising national public goods policies. Under these conditions, Lyne argues, electoral accountability falls prey to the same n-person prisoner’s dilemma that plagues any other large-scale decentralized attempt to procure collective goods. The theory is tested through an examination of four prominent cases. A comparison of postwar Brazil and pre-Chávez Venezuela shows that clientelism debilitated both countries’ postwar development programs, despite Venezuela’s historically strong institutions and abundant oil revenues. Two comparisons—one between contemporary Brazil and pre-Chávez Venezuela, and another between postwar and contemporary Brazil—highlight factors that reduce the risks of rejecting clientelism as providing the best account of contemporary Brazil’s success. Finally, a comparison of pre-Chávez and contemporary Venezuela explains the continuity in flawed institutional and policy choices as a result of continuity in clientelistic politics driven by the voter’s dilemma.

“Lyne’s book constructs a sophisticated micro-logic of citizens’ and politicians’ choices resulting in exchanges based on clientelistic side-payments or policies as ways to perform democratic accountability. Institutions play a contingent role in that process, but Lyne shows how the role of institutions is nested in a political-economic framework. Lyne’s book develops an impressive array of indirect empirical tests of her theory with data from Brazil and Venezuela. Anyone interested in democratic accountability should read this book.”—Herbert P. Kitschelt, Duke University

“In this theoretically groundbreaking work, Lyne expertly identifies gaps in the existing literature on democratic accountability, particularly the inability to explain variations in development policy. This creative look at electoral strategies illuminates new venues for future research.”—M. F. T. Malone, Choice

“The Voter’s Dilemma and Democratic Accountability: Latin America and Beyond presents an elegant and sophisticated logic of democratic accountability and makes a significant contribution to the literatures on democratic accountability, clientelism, and Latin American studies.”—Gustavo A. Flores-Macías, Political Science Quarterly

Mona M. Lyne is Associate Professor of Political Science at the University of Missouri–Kansas City.

Contents

List of Tables and Figures

Acknowledgments

List of Acronyms

Introduction: Theories of Democratic Accountability and Development in Brazil and Venezuela

1. The Voter’s Dilemma: Collective or Clientelistic Goods?

2. Are Voters in Brazil and Venezuela Opting for Policy-Based or Quid Pro Quo Voting?

3. Party Behavior: Policy-Based or Quid Pro Quo Appeals to Voters?

4. Internal Party Organization: Align Individual and Collective Goals to Build a Policy Reputation or to Ensure Efficient Vote Buying?

5. Legislative Organization: Governing Majority Agenda Control or Mutual Veto?

6. Policy Choice: Generate Sustained Growth or Maximize Quid Pro Quo?

Conclusion

Appendixes

References

Index

Introduction:

Theories of Democratic Accountability and Development in Brazil and Venezuela

“Solid fundamentals are not what the world expected from Lula.” As the economic turmoil prior to Brazil’s 2002 presidential election indicated, many doubted that a leftist government led by Lula’s Workers’ Party (Partido dos Trabalhadores [PT]) would continue with basic reforms. But distrust of Lula’s commitment to sustain the development policies initiated by his predecessor, Fernando Henrique Cardoso, was not the only factor driving skepticism about Brazil’s future. A leading newsweekly recapped most analysts’ pessimistic conclusions about the adequacy of Brazil’s institutions: “Brazil is a hard country to change—especially when no party has a majority in a fragmented Congress. The business of assembling congressional majorities . . . is painfully slow.” Even if Lula had the will to move forward, many doubted whether he could match Cardoso’s political acumen in harnessing Brazil’s unwieldy democratic institutions to enact further reforms.

Indeed, some observers would point to the scandals that plagued Lula’s first administration to support the view that Brazil’s institutions prohibit effective policy making and to underscore Lula’s missteps in dealing with Congress. Yet what remains striking, despite alternation between a center-right and a leftist government, as well as damaging scandals, is that successive Brazilian administrations have continued to hew to a path of gradual reform. Two terms under Cardoso were marked by the elimination of inflation, refocusing development strategy on regional and international trade, constructing a more agile state bureaucracy, and initial social security reform. Lula’s first government followed with a major and crucial overhaul of the public social security system, judicial reform, and the consolidation and amplification of novel antipoverty programs. In his second term, Lula is concentrating on massive investment in long-needed infrastructure goods and has shown no sign of deviating from sound macroeconomics and continuing structural reforms. Both the Economist and the World Bank concur that the combination of solid fundamentals and an aggressive approach to poverty eradication has contributed to Brazil’s lowest level of inequality in the past thirty years.

At least as unexpected as Brazil’s relatively successful experience with reform over the past decade was the implosion of Venezuela’s democracy, one of the most vaunted and long-standing in the region. After a forced devaluation in 1983, Venezuelan politicians repeatedly failed to adopt reforms that were widely believed to be essential to staunching a growing crisis. Even as Venezuelan politicians dithered through a decade, many remained confident that Venezuela’s solid institutions would eventually facilitate the emergence of viable reforms. The actual outcome is now only too well known.

Venezuela’s two major parties proved ultimately hapless in addressing declining per capita income and a steady increase in poverty rates over the decade of the 1980s. Moreover, the only serious attempt at reform in the early 1990s was torpedoed by the very parties previously viewed as effective stewards of Venezuela’s polity and economy. After orchestrating the impeachment of Carlos Andrés Perez in 1993, the once dominant Democratic Action (Acción Democrática [AD]) and Political Electoral Independent Organization Committee (Comité de Organización Política Electoral Independiente [COPEI]) parties were superseded in 1998 by strongman Hugo Chávez as the central figure in Venezuelan politics.

It is too early to fully assess the ultimate effects of Chávez’s transformation of Venezuela’s political institutions and economy. Nevertheless, his concentration of power in the executive and his program to implement a “socialist revolution” through extensive nationalization and worker-owned cooperatives, and the consequent decline in investment and production, are all too familiar in the developing world. Chávez’s adroit use of oil revenues to provide short-term benefits to the previously disadvantaged, while masking many of the underlying disequilibria created by his reforms, is also a well-worn pattern. Although Chávez currently enjoys wide popularity as a result of these policies, and his rhetoric notwithstanding, most economists agree that just as with AD and COPEI before him, he is failing to “sow the oil” in a way that will lead to sustained growth when oil prices eventually decline.

The surprising success with reform in contemporary Brazil and questionable results, at best, under two very different regimes in Venezuela become even more puzzling if we consider a fourth case: the democratic government in place in Brazil from 1945 to 1964. Brazil’s postwar democracy not only was governed by institutions nearly identical to those currently in effect, but also was beset with a remarkably similar crisis. In the early 1960s as well as the early 1990s, Brazilian legislators were confronted with accelerating inflation; inefficient industries; a bloated bureaucracy; and a social security system that was regressive, exclusionary, and fiscally disastrous. In the earlier regime, however, the only legislation that could muster sufficient support to become law exacerbated these problems—boosting spending without increasing revenues, augmenting subsidies for inefficient producers, enlarging the public bureaucracy, and expanding underfunded pension benefits for the few while continuing to exclude the majority. In the wake of numerous failed reform attempts, the regime was overthrown by a coup in 1964.

These four cases are indicative of a larger paradoxical pattern; why such dramatic variation in elections’ ability to discipline politicians’ development policy choices? Intuitively, polling the citizenry to select political leaders should drive governments to adopt effective development policies. Considerable empirical data support this intuition: the wealthiest, most developed countries in the world are all democracies. Moreover, most scholars concur that electoral sanctions are what drive politicians to adopt welfare-enhancing policies in the advanced industrial states. Yet many other democracies, including pre-Chávez Venezuela and postwar Brazil, have mediocre records of development, at best. This democracy-development paradox remains poorly understood.

Recent scholarship has emphasized poverty, development, or institutions as the key factors undermining democratic accountability and effective public policy in some democracies. Yet these approaches cannot account for patterns in Brazil and Venezuela. Why didn’t the lauded Venezuelan democracy, favored by strong institutions and rising per capita income, yield elections that could better discipline development policy? Why has Chávez chosen a path of change that has a long pedigree of failure despite his success in sweeping away the institutional constraints of the earlier period? And why have politicians in contemporary Brazil succeeded with reforms while those of the postwar failed, despite both being governed by strikingly similar institutions that are universally considered to be weak? Finally, why have some of the most economically developed of the developing democracies in a given period collapsed, as was the case with postwar Brazil and Argentina and pre-Chávez Venezuela, rather than evolved into thriving democracies? A theory that can convincingly explain the democracy-development paradox must account for the anomalous patterns in these four prominent regimes.

I argue that the key to explaining the democracy-development paradox lies in recognizing that voters face a heretofore underappreciated collective action problem in using elections to hold politicians accountable—what I call the voter’s dilemma. The central insight of the voter’s dilemma is that under certain structural conditions, holding elected leaders accountable for effective public policy is not as straightforward as it might appear. As a result of two inherent features of the voter-politician relationship—collective accountability and asymmetry of excludability—voters sometimes face high risks in using their vote to reward good public policy. Political accountability is inherently collective—the individual voter can neither elect nor remove his or her representative—the voter’s representative is determined by electoral laws and vote counts in the district. Moreover, there is asymmetry of excludability between clientelistic and collective goods. All voters receive the collective benefits of effective development policy, such as a professional bureaucracy, efficient property rights, and economic growth, or any other collective goods, whether they voted for them or not. By definition, however, clientelistic benefits are provided only if the vote is traded in a quid pro quo.

If we consider the possibility of widespread machine-style clientelistic benefits traded directly for votes, it becomes clear that under some conditions voting for good public policy presents voters with a strategic problem akin to a prisoner’s dilemma. If elections result in clientelistic politicians’ control of national office, citizens who voted for politicians advocating collectively beneficial development programs are left with nothing. Conversely, if elections result in collectively minded politicians’ control of national office, citizens who trade their vote in a quid pro quo will still receive the benefits of public policy.

Strictly speaking, the logic of the voter’s dilemma implies that a given voter is always better off defecting and opting for the clientelistic candidate, no matter what other voters do, as in the classic prisoner’s dilemma. In practice, whether it is risky for voters to cooperate and vote for the collectively minded politician depends on how structural conditions affect equilibrium electoral strategies. If structural conditions render valuable clientelistic offers viable on a national scale, then the equilibrium electoral strategy will be clientelism, and direct voter-politician links will predominate. If structural conditions rule out valuable clientelistic offers on a national scale, then the equilibrium electoral strategy will be collective goods provision, and indirect voter-politician links will predominate. When the equilibrium electoral strategy is clientelism, then voters face high risks in rejecting clientelism—delivered and monitored votes provide the only access to government benefits in these types of systems. The voter who votes against clientelism under these conditions receives the sucker’s payoff of exclusion from most government-provided goods. When the equilibrium electoral strategy is collective goods provision, then the political goods a voter receives are unconnected to his or her individual voting behavior, and thus voters can vote for clientelism or collective goods with little impact on their enjoyment of government-provided goods. In other words, structural conditions also create asymmetry in the voter’s return on the same kind of vote.

Linking structural conditions to the microfoundational logic of the voter’s dilemma allows us to generalize our body of theory of democratic accountability in a fashion that subsumes many anomalies that plague currently predominant approaches. The new institutionalism has provided one of the most important recent generalizations of our understanding of democratic accountability. As with all other theories built upon the current positive theory of elections, however, the failure to consider ubiquitous direct exchange has limited the explanatory reach of the new institutionalism. New institutionalism predicts politicians’ strategies based on how institutions shape winning electoral strategies, beginning with the baseline assumption that the equilibrium strategy is some level of collective goods provision. Institutions alter the degree to which pure collective goods provision will redound to individual politicians’ electoral success and thus alter the mix of national and locally targeted collective goods that politicians will supply. Notably, the new institutionalism links institutions to variation in the scope of the goods provided (national or local collective goods), but has no analytic apparatus to capture variation in the directness of the exchange and the possibility of exclusion.

Yet if structural conditions determine the equilibrium electoral strategy to be clientelism, then the baseline assumption of this theory does not hold. To correctly understand the effects of institutions when the clientelist equilibrium prevails, we must theorize about how institutional variation alters the link between electoral success and efficient production of clientelistic goods, rather than the production of national collective goods. If we generalize our theory of how institutions shape politicians’ strategies depending on which equilibrium electoral strategy prevails, we can greatly enhance our understanding of institutional effects and resolve the anomalies that plague the current version of the theory.

Developmentalist theories such as modernization theory posit a direct link between structural change and variation in democratic accountability, but these theories foundered on the failures of postwar Brazil and Argentina, as demonstrated by O’Donnell (1979) in his classic study. The logic of the voter’s dilemma endogenizes structural conditions to a microfoundational logic of electoral sanctioning and thus resolves important anomalies that plague developmental theories. The voter’s dilemma can explain cases in which economic and political modernization fail to foster more effective accountability, as well as cases in which very moderate development is associated with effective democratic accountability. Structural changes that accompany economic modernization (emergence of industry and a working class) do not in and of themselves alter voters’ vulnerability to clientelism. In the absence of structural change that reduces the risk to rejecting clientelism, a very modern economy employing state-of-the-art technology will not be sufficient to shift voters’ choices away from clientelism.

The voter’s dilemma logic also introduces strategic interaction between voters and thus resolves key anomalies that plague poverty-based theories of weak democratic accountability. Area and development specialists have long emphasized the relationship between highly inegalitarian distribution of income and weak accountability. Poverty-based theories of democratic accountability, however, predict that rising income should reduce clientelism and that only the poorest democracies would be thoroughly penetrated by clientelism. Theories that rely exclusively on poverty thus can tell us little about weak democratic accountability in many middle-income countries, such as Venezuela; cannot explain why all poor countries are not clientelist; and finally, are confounded by rich countries that are dominated by quid pro quo politics.

The prisoner’s dilemma logic of the voter’s dilemma, however, demonstrates that it is often not the individual characteristics of a given voter, but the strategic nature of the voting choice, that drives the outcome. If structural conditions favor the clientelist equilibrium, not just low-income voters, but all voters are excluded from even the most basic government-provided goods. Regardless of income, if the standard of living of voters depends on clientelist exchange, they run substantial risk in voting for effective collective development policy. If voters have alternatives that are comparable to but not dependent on the clientelistic bargain, then they lose little by opting for the developmentally oriented politician regardless of their income, even if other voters do not.

The combination of abundant resources and limited economic opportunities that are immune from clientelist control can explain why elections failed to discipline Venezuelan politicians’ policy choices in the pre-Chávez era, despite rapidly rising per capita income and strong institutions. Oil-rich governments in Venezuela had considerable margin with which to increase the value of quid pro quo benefits, and thus elected leaders were able to make an anticlientelist vote risky for many, even as per capita income rose. A dynamic very similar to that in pre-Chávez Venezuela also played out in postwar Brazil—structural conditions meant options to clientelist offers were few, and politicians were able to maintain quid pro quo benefits that made policy-based voting risky for most citizens. The result was that despite strong institutions, rising GDP per capita, and the benefit of hindsight, Venezuelan development policy in the 1960s and 1970s had many of the same flaws as the import substitution industrialization (ISI) development policies followed by the Southern Cone countries in the 1940s and 1950s. As with postwar Brazil, Venezuelan governments subsidized any and all producers regardless of future potential for efficiency, and both countries failed to implement the second stage of an infant-industry policy: gradual reduction of subsidies and protection to induce maturation and the emergence of competitive producers.

The ISI policies adopted in both Brazil and Venezuela eventually led to chronic economic and political crisis in the 1980s. Yet only one of these countries has adopted coherent structural reforms that are fostering sustained and steady economic growth. Why is it that Brazil has moved to a path of viable and sustainable reform, whereas Venezuela has chosen policies that will likely provide only an apparent short-term reprieve and that will ultimately yield to an even more difficult future crisis?

If structural change alters the balance between resources and demands such that national politicians can no longer maintain clientelistic offers that voters find valuable, the electoral equilibrium shifts and politicians can compete on the basis of collective goods reform. If this balance shifts such that clientelistic politicians can no longer meet voters’ demands, the risks of policy-based voting are reduced, and these structural changes create the conditions for effective democratic accountability. This is what has occurred in contemporary Brazil and this is why, in a case unique among the four examples, Brazilian politicians have adopted viable reforms. Although Brazil’s institutions remain unwieldy and continue to foster considerable localism in Brazilian politics, structural conditions now make it possible for voters to exercise policy-based sanctioning, and the equilibrium electoral strategy is collective goods provision. The result is that elections are now rewarding those politicians who succeed in steering Brazil’s cumbersome politics in the direction of good public policy, particularly more effective development policy.

However, as Venezuela under Chávez and many other cases highlight, the key to the shift is not crisis—crisis does not necessarily lead to effective structural reform. Only when crisis is associated with the inability to continue making clientelist offers that voters find valuable will collective goods policy reform become electorally viable. If resources remain sufficient to continue making clientelist offers, even if at levels below pre-crisis offers, and as long as voters find them valuable, the risks associated with rejecting such offers will lead to a result in which the politician who can reorganize clientelism to address the crisis will be the new winner. As will be shown in subsequent chapters, this argument makes sense of many of what appear to be contradictory and self-defeating choices in Chávez’s institutional and policy changes.

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