Still in Politics 1.0 After 237 Years? (Part Three)

“Whether a cat is black or white makes no difference.

As long as it catches mice, it is a good cat.”

——Deng Xioping

Copyright. All rights reserved by HitAndRun

Copyright. All rights reserved by HitAndRun

This was one of the major ideas behind Deng Xiaoping’s profound transformation to China. In other words, there is no substitute for good performance, far beyond any other consideration, including political ideologies.

Sadly, as 2013 draws to a close, the manifestations of Barack Obama’s incompetence are too conspicuous to ignore. The healthcare debacle seems to be the cherry on top of the proverbial cake. Obama’s administration has characterized itself by permanently overpromising and continuously underdelivering (OPUD).

There is no question about some strong assets Obama has. Probably heading the list is being a very able public speaker, coupled with a charismatic personality. Unfortunately, his shortcomings are too many, and in critical areas for the presidency. Chief among those shortcomings is his lack of  prior executive experience, paired with an apparent inability to learn from his inexperience with sufficient humbleness and lucidity. The multiple missteps and fumbles along his presidency are an uncontroversial evidence of it. His credibility abroad has also suffered ostensibly.

Even Bill Clinton, the Dean of the democrats, has recently turned against Obama, in connection with the healthcare fiasco. Clinton’s opinion carries a lot of weight given the extraordinary results that he delivered during his presidency, on the average. While in office, Clinton showed a very pragmatic way of doing things, far from the typical rigidity and dogmatism of most political parties —be it left, center, or right-wing. Clinton’s performance was indeed outstanding.

How did the most powerful, and debatably the most advanced nation on Earth get itself into this big mess?

If a careful analysis is made, this should not come as a total surprise. It is no exaggeration to state that this was an accident waiting to happen. The US, as most contemporary societies, operates under a highly dysfunctional political system, with very few, limited, and highly ineffective checks-and-balances practices in critical fronts.

Most corporations in the US —in fact, all over the world— have a pretty much refined methods  and practices for selecting their chair people, CEOs, and all management positions, including lower level jobs. Even so, given the inevitable complexities of selecting the most able individuals for top management, it is not uncommon at all to occasionally end up with deplorable results. Yet, on the average, due to the multiple checks and balances, and particularly to a well proven set of management practices, most of the time good results are obtained; moreover, when the result is unacceptable, most private organizations tend to react swiftly, firing the incompetent managers and replacing them with new ones.

Then, how come the US and world’s politics have evolved largely disconnected to the best practices on corporate management?

Quite easily! The world of politics, for practical purposes, is an island in the middle of society, but run in many ways very differently from the rest. The incentives system currently in place in the political world is a near perfect reflection of this painfully simple and humiliatingly obvious and sad reality.

In a nutshell, the major effort of most politicians, in any country, is devoted to trying to perpetuate their party’s position in power, preferably winning elections most of the time; simultaneously, politicians also try to personally remain in power as long as possible. It’s human nature in the raw. This leaves little room for true statesmanship, and for the genuine pursuit of the common good.

As clearly stated in Part Two of this series, contrary to popular perception, in politics there are neither absolute victories nor absolute defeats. Yes, for the losing candidate, sometimes his/hers political career could be over. For the defeating party, however, that’s seldom the case. Thus, the rules of the game are markedly tilted towards maintaining the status quo, since even when losing, the privileges and political power remaining most of the time are substantial.  Hence, nobody within the political system in his/hers right mind has any incentive to go beyond, more so when what is required is a profound restructuring of the incentives and the political system as a whole. According to current rules of the game, the risk/reward ratio makes it extremely unprofitable and risky to behave differently to what is already established. Hence, logical evolution and continuous improvement have mostly been negated in the political system.

Thus, it is safe to state that contemporary political systems have essentially been operating in a different reality than the rest of the business world and society in general. They have been doing so simply because that’s where their comfort zone is, the area of the minimum resistance path, where the maximum benefits and minimum risks lie, according to the primitive current rules of the game. Politicians try to maximize their performance according to the rules established, as they know them.

Regrettably up to now, society has been fairly complacent about how the system works, despite so many blatant shortcomings and limitations.

No one will contest the statement that governing is a very serious matter. The repercussions caused to society from the quality of leadership and management —or lack thereof— cannot be overestimated. Additional costs and foregone benefits of a highly inefficient and ineffective government, run in the hundreds of billions of dollars a year of missed output —in the US’ case—, not to mention the painful harm done to the unemployment front.

The ancient Greek sages very clearly advocated that top government positions should be occupied by the most able and wisest citizens.

The great classic Greek philosophers had it right, with a crystal clear concept of meritocracy. Contemporary political systems are miles away from that axiomatic ideal. Thus, contemporary political systems have a great deal of work ahead of them in order to truly advance, consistently and permanently in the meritocracy direction.

Greek treeManagement science has continually and considerably evolved and progressed in the past decades. Peter Drucker (1909-2005), the father of modern management, a naturalized US citizen, made tremendous contributions to the then nascent science, since the 1930s. Numerous contributions have been made from many more management experts ever since, most of them US citizens.

Let’s take an example. Job descriptions are one of the most basic concepts in any organization, including many in government. The same can be said about the screening processes to select the best and the brightest. However, these job descriptions and screening processes are conspicuously absent when it comes to selecting public officials —be it legislators, presidents or prime ministers. Granted, there is a relatively short and very elementary list of some very basic legal prerequisites for candidates to office: to be a national of the country, to be an adult, and so on. There is not, to my knowledge, any written criteria and requirements about competence and former experience, as well as about the selection process itself.

President Obama is an articulate, intelligent person, a Harvard graduate. Most unfortunately, he arrived to the presidency with very poor prior experience and credentials. Even as a legislator, he was an inexperienced junior senator. Furthermore, and most unfortunately, he has not shown any particular proclivity to learn from his mistakes.

The US’ political system is fairly representative of the rest of the world’s. The same shortcomings and limitations apply all around the world. If there is any doubt in this regard, let’s take a quick look to Italy, where Silvio Berlusconi, had an exaggerated political influence for around two decades, until recently. Berlusconi’s influence in Italy’s fate was disproportionately high, unfortunately the wrong type. Berlusconi’s ascension to power in Italy was achieved by navigating through the loopholes of an extremely primitive way of doing politics, quite often outside the law.

All over the world there is an abundance of examples of highly incompetent, and not too rarely also very corrupt elected officers that were able to arrive to top government positions due to the very lax rules of the game, as generally understood and practiced today. Some extreme examples are Venezuela and Argentina, among many others. Governing well is a tough command.

Substantial improvements in governance systems, procedures, and practices in no way guarantees excellent results. However, in many cases, the absence of them is an almost assured failure.

In other words, in the way politics are being played today there is a lot to lose, and virtually no substantial gain to attain. A deplorable cost/benefit relationship. In fact, a truly suboptimal situation. The world should not continue to operate under the Politics 1.0 umbrella. It is extremely costly, ineffective, and dysfunctional.

Despite the severe limitations of contemporary political systems, once in a while and very fortunately, when extraordinary statesmen appear in the scene, personal virtuosity tends to prevail. In varying degrees, there are some examples of gifted statesmen —and stateswoman— in the recent past and in the last quarter of the 20th century: Lula in Brazil, Reagan and Clinton in the US, Winston Churchill and Margaret Thatcher in Britain, Nelson Mandela in South Africa, Sir John Cowperthwaite in Hong Kong, Deng Xiaoping in China, Alvaro Uribe in Colombia, and Lee Kuan Yew in Singapore. Though this list is not in any way an exhaustive one, it is not that far from being it.

Nonetheless, It is utterly irresponsible and naive, to say the least, for any political system in the world to be dependent upon rather exceptional personal virtuosity.  A well conceived, modern political system that truly incorporates what the best practices have to offer should function so effectively that even with relatively mediocre top officers at the helm, things will tend to run smoothly. That should be the main aim in mind. Nothing else will do.

The logical response to this type of atrocious dysfunctionalities in modern political systems —like highly incompetent politicians at the helm— should be constructive change. The concept of the political world as an island where proven practices elsewhere do not apply cannot go on any further. It all boils down to effective management. The opportunity cost of keeping the status quo is unbearably high.

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About Martin Marmolejo

Global Investment Manager | Founder & Managing Director at MMA Global Investment Management | Proud husband and father | Follow me @globalmarmolejo.

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