Today's date:
Fall 2012

Political Meritocracy and Direct Democracy:
A Hybrid Experiment

Nicolas Berggruen is president of Berggruen Holdings and the Nicolas Berggruen Institute. Nathan Gardels is editor-in-chief of “NPQ,” the journal of social and political thought published by Wiley-Blackwell, as well as Global Services of the Los Angeles Times Syndicate/Tribune Media.

LOS ANGELES—At the turn of the 20th Century when Western power was at its height, Sun Yat-Sen sought to blend the Confucian tradition of meritocratic governance and Western-style democracy in his vision for modern China. With the “rise of the rest” in the 21st Century—led by China—perhaps the political imagination is open once again, this time not only to Western ideas flowing East, but Eastern ideas flowing West as well.

The political imagination has been pried open anew not only because of the sustained success of non-Western modernity in places like Singapore and China, but because democracy itself has become so dysfunctional across the West, from its ancient birthplace in Greece to its most advanced outpost in California. That liberal democracy is the best form of governance ever achieved in the long arc of history is no longer self-evident. Today, democracy must prove itself.

Even Francis Fukuyama, who declared “the end of history” with the triumph of market democracies after the Cold War now seems to doubt his own verdict. He worries that American democracy, above all, has deteriorated into a “vetocracy” in which the general will and long-term sustainability are subverted by special interest lobbies and the short-term mentality of ideologically rigid or narrowly self-interested constituencies. These organized groups have amassed the clout to veto whatever threatens their hold on government. The votes of ordinary citizens are thus steeply discounted, if not virtually meaningless.

As a result, democratic governance in the United States has become divided against itself and paralyzed by gridlock, unable to face the challenges of the future. In this sense, a vote for democracy is a vote for the past because it is a vote for the vested interests of the present. It is a system almost guaranteed to generate debts and deficits while blocking any change in the status quo.

To escape paralysis, politics in the West, however haltingly, is beginning to search out non-partisan “depoliticized” solutions based on meritocratic expertise. Unable to reach a consensus on long-term deficit reduction through the normal workings of the US Congress, a “supercommittee” of the fairest and the wisest among the contending parties was established to find a compromise—at this writing still elusive. A clearer example in Europe was the appointment of Mario Monti as prime minister by Italy’s president to lead a “technocratic government.” Monti, a former European Commissioner and Italian Senator for Life, itself a meritocratic post, was tasked with executing the necessary reforms to overcome the eurocrisis. The elected parties were simply deemed incapable of reaching a governing consensus through politics as usual.

After the crash of 2008-2009 many came to recognize that financial markets are not self-correcting, but in fact tend toward disequilibrium instead of equilibrium. Now, many in the West are coming to suspect that democracy itself, despite the formal exercise of regular elections, is not capable of self-correction without political reforms that introduce the kind of long-term perspective and non-partisan, knowledge-based capacity for consensus associated with political meritocracy.

There is a growing recognition that when the deliberative bodies in democracies wither, inclusive politics dies and the seeming sanity of short-term fixes can result in the wholesale madness of unintended consequences such as exuberant bubbles, mountains of debt and fiscal crisis.

Democracies today must not only cope with internal crises, but a changing external environment as well. Across the board today they face a double challenge. On the one hand, the greater complexity of the interpenetrating trade, financial and information flows of globalization requires greater institutional capacity for competent, delegated authority to manage the systemic links of interdependence. On the other hand, greater diversity and political awakenings everywhere that demand the dignity of meaningful participation—abetted and amplified by social media—require more devolution of power toward the grass roots.

Failure to find an institutional response to this double challenge will result in a crisis of legitimacy for any governing system—either through failure to perform by providing inclusive growth and employment or because a “democratic deficit” that shuts out diverse public voices will undermine effective consent.

Of course, the kind of rule by meritocratic elites long associated with China cannot be the answer to the West’s woes, just as multi-party democracy, with all the problems we’ve described, is not likely to resonate as an effective response to China’s challenges. The two political cultures are as highly distinct as their economies are today intertwined.

But, undoubtedly, some combination of popular sovereignty balanced by de-politicized deliberative bodies, of delegated authority selected on merit at higher levels of complexity combined with increased participation by citizens in their own communities, is well within the traditions of the West.

Indeed, the American Founding Fathers proposed just such a balance as they sought in their vision of self-government to prevent rule by both monarch and mob. They believed—like the Enlightenment philosophers such as Voltaire who admired Confucius—that governing institutions should empower the natural aristocracy of talent instead of blood inheritance or class. And they sought to filter direct rule by the ill-informed public at large.

The Federalist papers make it clear that they favored a mixed constitutional system that combined knowledgeable democracy with accountable meritocracy as the most intelligent form of governance. Thus, in their original design, a government rooted in popular sovereignty would delegate authority to an unelected Supreme Court, an indirectly elected Senate, a selected electoral college “to enlarge the views” of the public in electing a president and, later, a central bank governed by appointed meritocrats insulated from politics. All were meant to check and balance the immediate passions and constituent interests of a directly elected House of Representatives.

To correct the present dysfunction in the Western democracies today, we need not only to revisit the political philosophy of the Founding Fathers and place it within the framework of the 21st Century; we also need to engage in the actual institutional design of what a mixed liberal democratic constitutionalism might look like.

In California, we have tried to blaze such a path. First, we established a self-appointed, bi-partisan group of some of the state’s most eminent and experienced citizens to convene for a year to deliberate over solutions to fix what ails the Golden State. Second, the group itself made recommendations for structural changes in California’s governing institutions—including an independent deliberative body, appointed by democratically elected officials but insulated from politics, that would propose considered policies to the public for a vote in California’s unique direct democracy initiative process.

REBOOTING CALIFORNIA’S DYSFUNCTIONAL DEMOCRACY | California has long been the bellwether for the United States as a whole. Indeed, as the world’s ninth largest economy that is home to Hollywood and Google, this outpost of creativity and innovation has continent-size influence with a cultural resonance that looms large in the global imagination.

Unfortunately, of late, California’s role as a bellwether has taken on a decidedly negative cast. Where once Californians dreamed of building a society that matched the magnificence of the state’s landscape, in recent years its citizens have settled instead for mountains of debt, disappearing jobs, D+ schools, greater public spending for prisons than higher education and an outdated, crumbling infrastructure that emerging economies like China put to shame.

Every college freshman, entrepreneur, homeowner, new immigrant or retiree in California has shared the sinking feeling that the future the state was once so famously ahead of is passing them by. Facing daunting deficits after years of political gridlock, California has come in the minds of many to epitomize the crisis of democratic governance spreading across the West from Athens to Washington.

Where will California and America as a whole be two decades from now if we don’t find a way for democratic societies to break out of the gridlock that is leading us from an era of promise to a trajectory of demise?

But, true to form as the land where second acts are possible, California seems finally to be reaching a tipping point and is preparing to come back. Once again it is ahead of the curve of the rest of the country.

Despite the successful recall election of a governor in 2003 and the concerted efforts of political leaders in the years since, Californians have come to realize that the real challenge is not so much replacing elected officials as fixing a system that is itself broken. As a result of this experience, the opportunity for the serious reform of California’s governance process has opened up.

In the past five years, Californians have voted for open primaries, redistricting by citizen commission and for a simple majority vote on budgets—all with the aim of ending partisan paralysis in the legislature. And, by a huge margin, they voted for a clean energy future less dependent on foreign oil by protecting California’s landmark climate change law from being overturned.

In 2010, the Nicolas Berggruen Institute (NBI) added a new set of voices to this growing movement by establishing the Think Long Committee for California, a high-powered group of eminent citizens with broad experience in public affairs, labor and business financed with an initial $20 million to fight the requisite political campaigns for structural change. The name of the group itself implied its main objective: to introduce a depoliticized, non-partisan and long-term agenda as a corrective to the partisan rancor and short-term, special interest political culture that has come to dominate California political life.

The Committee ranges from two former secretaries of state, George Shultz and Condi Rice, to Clinton economic advisor Laura Tyson; from Eric Schmidt of Google to former Yahoo! and Warner Bros chief Terry Semel, to former assembly speakers Bob Hertzberg and Willie Brown and former state treasurer Matt Fong, former UC Regents chair Gerry Parsky, former California Supreme Court Justice Ron George, philanthropist Eli Broad, labor leader Maria Elena Durazo and advocate for the poor, Antonia Hernandez, who was formerly chief legal counsel for the Mexican-American Legal Defense Fund.

At our first meeting at Google headquarters in October, 2010 then-Governor Arnold Schwarzenegger shared the table with Gray Davis, the governor he ousted in the 2003 recall. The committee has since worked closely as well with Governor Jerry Brown, who returned to the statehouse after two terms as governor in the late 1970s and early 1980s. The group is advised by the two former state directors of finance, one a Republican and one a Democrat as well as the former chief economic forecaster for the state.

After deliberating for a year in monthly sessions, usually held at the Googleplex in Mountain View, California, the group released its “Blueprint to Renew California” in November, 2011.

Even as the dispiriting gridlock continued to grip Sacramento, and as the so-called “supercommittee” of the US Congress convened to figure a way out of the nation’s fiscal crisis failed to reach consensus, this group of dedicated Californians succeeded in breaking out of the untenable status quo. Putting politics aside, they were able to bridge philosophical divides and agree to a bipartisan plan to reboot California’s dysfunctional democracy.

Unlike many other piecemeal reform efforts over recent years, the Think Long Committee’s plan seeks to modernize California’s system of governance by installing a new civic software that addresses the “double challenge” cited above by devolving power, involving citizens more actively and decision-division. We propose decentralizing power to the local level on the one hand while, at the same time, creating greater capacity for depoliticized deliberation at the state level that incorporates a long-term perspective in governance.

Our integrated set of recommendations range from common sense practices such as a “rainy day” reserve fund to multiyear budgeting; two-year legislative sessions with one year dedicated to oversight; k-12 school reform; aligning the skills and educational outcomes of California’s master plan educational institutions with the needs of our cutting-edge industry; and speeding up regulatory approval to foster job creation.

But the core of our proposal has three parts:

Local empowerment (Devolve and Involve): Returning decision-making responsibilities and resources where appropriate from Sacramento to localities and regions where the real economy functions and government is closer to the people—and thus more responsive, flexible and accountable.

By helping to cover the costs of devolving public safety from the state to the counties, which Governor Brown has proposed, our plan will also help reduce the high costs associated with prisons—on which California absurdly spends more than on higher education.

The Think Long plan would dedicate new revenues annually to counties for public safety and as block grants to cities for infrastructure and other locally determined uses. Counties would be empowered to seek “waivers” from state rules and mandates (exempting environmental and safety standards) to more flexibly pursue locally-devised “strategic action plans,” thus more actively engaging the grass roots.

A De-Politicized Deliberative Council (Decision Division): Creating an independent watchdog for the long-term public interest as a counterbalance to the short-term mentality and special interest political culture that dominate Sacramento.

This impartial and nonpartisan Citizens’ Council for Government Accountability, composed of eminent citizens with expertise and experience in California affairs, would be tasked with both foresight and oversight responsibilities, deliberating on the “big picture” issues of the state and making recommendations to ensure that the public’s long-term priorities are met. As a non-political quality control body, the Citizens Council will ensure that California taxpayers get their “return on investment” through excellence in education, world-class infrastructure, a sustained quality of life, opportunities for good jobs and the strengthening of a vibrant middle class through boosting the state’s competitiveness in today’s global economy.

Critically, the Council would be empowered to place its proposals directly on the public ballot as initiatives for public approval. We will discuss this Council in greater detail below.

A Modern Broad-Based Tax System (Financing the Future): Updating California’s tax system to mirror the real composition of our modern service and information economy and provide a stable, broad-based tax system that is sustainable over the long term.

The ideologically rigid will have a hard time putting the Think Long proposal in any box since it is a pragmatic response to the state’s predicament. The essence of the bi-partisan compromise involves expanding the sales tax to the service sector—not now taxed despite the fact that is comprises half of California’s $2 trillion economy —while at the same time reducing personal income taxes across the board in keeping with the state’s historically progressive tax structure. This combination would generate $10 billion in new revenues annually, apportioned to pay down the state’s wall of debt, fund k-12 schools and higher education, especially the University of California, and finance devolution to localities.

Over the coming years, the Think Long Committee will seek to implement these integrated set of reforms by placing constitutional and statutory amendments on initiative ballots for a public vote in 2014 and 2016 and by working directly with the Governor and legislature where possible.

New Innovations in Democratic Governance | Like the convening of the Think Long Committee itself, the group’s proposals with respect to governance seek to integrate more knowledge-based consensus-building capacity into the one-person-one-vote system through a combination of (a) deliberative polling (educating the voters); (b) reform of the initiative process and (c) the establishment of the Citizens’ Council (directly offering voters policy recommendations for their approval after thorough deliberation by a select body with experience and expertise). In short, we have tried to advance toward a knowledgeable democracy with elements of accountable meritocracy.

DELIBERATIVE POLLING | In the summer of 2011, the Think Long Committee joined with another reform group, California Forward, to sponsor a weekend-long deliberative poll of 412 voters chosen on a random scientific basis to contemplate and debate changes in the way the state is governed.

The results of that poll, which indicatively represented the electorate at large, informed the drafting of the Government Performance and Accountability Act (GPAA), a constitutional amendment that went before voters on the November 2012 ballot. Provisions of that initiative included a “pay-go” requirement for legislation (the legislature must show where the revenues or offsetting cuts will come from for new spending or tax credits), performance-based budgeting on two-year cycles with oversight review and enabling more flexibility for county governments to make their own decisions about how to deploy state funds.

INITIATIVE REFORM | The mechanisms of direct democracy in California —the initiative (making laws), referendum (amending or nullifying laws) and recall (of public officials) provisions of the Constitution—were once heralded as the hallmarks of progressive government. Under Governor Hiram Johnson, the state adopted the Swiss system of popular initiatives in 1914 as part of a series of reforms to give the public a way to challenge the railroad barons and large landowners that controlled state government.

While the initiative process was used sparingly until the 1970s, it became thereafter the chief battleground of state politics, nearly a “fourth branch” of government. Because of the high costs of gathering qualifying signatures and waging media campaigns in such a large state (usually in the tens of millions of dollars), this venue of the people has too often been subverted by special interests for their own ends or captured by ideological zealots who exploit short-term populist sentiments to advance their agenda.

As Andreas Kluth wrote in the Economist in its April 23, 2011 issue:

“The initiative culture as it exists in California today may resemble James Madison’s worst nightmare. Passions are inflamed rather than cooled. Confrontation replaces compromise as minority factions (special interests) battle one another with rival initiatives.”

In 2009, Ronald George, at the time California’s chief justice, worried publicly about the effect on liberty: “Has the voter initiative now become the tool of the very types of special interests it was intended to control, and an impediment to the effective functioning of a true democratic process?”

The Think Long Committee’s reforms on initiatives thus involve providing more information and analysis to voters about the various propositions, including electronically, than the 100 or so words allowed on the ballot summary written by the Attorney General. They further involve mandating transparency on who is funding the proponents and opponents of a given measure. The proposed reforms would also revert California’s system to the original Swiss process in which the proponents of initiatives are required to negotiate with the representative legislature so they can act on issues without going to a public ballot. Failing agreement, both the legislature’s and the proponent’s initiative would appear on the ballot side by side. By presenting alternatives, the process becomes more deliberative and less prone to special interest manipulation; it would become more collaborative and less adversarial, restoring the balance between representative and direct democracy.

THE CITIZENS COUNCIL | The most innovative and far-reaching proposal of the Think Long governance reforms—the Citizens’ Council for Government Accountability—would improve on California’s unique mix of representative and direct democracy through the establishment of a depoliticized deliberative body that checks and balances both.

As noted above in brief, the Council would be both a deliberative body tasked with foresight and oversight. It would ferret out waste and poor performance in state government while promoting the long-term priorities of the public: jobs, excellence in education, a clean environment, world-class infrastructure and the fiscal health of state finances.

In an era of rapid technological advance and the competitive pressures of globalization, there is little chance to achieve these goals without a determined strategic agenda such as the council would pursue to move the state forward.

Although the council of 13 members would be appointed for six-year terms by the governor (nine members) and legislative leaders (four members) under procedures that would ensure its independence, any policies it might propose must be approved by the voters. Empowered to evaluate initiative proposals as well as place initiatives directly on the ballot on behalf of the public interest, the council would short-circuit the influence of special-interest money that has come to dominate the politics of propositions.

Working with the California State Auditor, it would also possess subpoena power to audit spending and review programs to make sure that taxpayers get what they are paying for.

To help ensure its constitutional integrity, the council idea was formulated with the prudent advice of Ron George, the chief justice of the California Supreme Court for 15 years and a member of the Think Long Committee.

Reporting on the Council proposal, the Economist (April 23, 2011) predicted that, “the next few years in California might see perhaps the liveliest debate about freedom and governance since Federalists and Anti-Federalists argued in 1787-88 about whether or not to ratify America’s new constitution. Lovers of democracy and liberty everywhere still study that old debate. Now they will also pay attention to California’s, for it will provide lessons for everyone.”

It is useful here to rehearse the arguments in our public campaign for the Citizens Council because they reveal the points of contention that arise when proposing the introduction of meritocratic elements of governance in a democratic culture that distrusts the delegation of authority.

LACK OF CAPACITY IN THE LEGISLATURE | Because of their limited terms, legislators generally lack both the time and incentives either for devising a long-term agenda or for performance review of the policies they put in place, sunsetting of laws or follow-through. Since they are in office for only a short period, there is little accountability other than to the special interests that sponsor them, the lobby­ists that influence them.

At one time, such a big-picture, long-term role was played by the California Senate as an “upper house” like the US Senate, based on geographical instead of population representation. Since 1968, however, the Senate and the Assembly in California have duplicated each other’s role with overlapping districts based on population. This has meant a necessarily narrow focus by legislators on the particular, short-term concerns of local constituents rather than on the state as a whole.

The point of the council is to create an institutional counterbalance to the short-term, special-interest political culture of Sacramento as well as to a narrow constituent focus.

Like the rest of the US, California needs a long-term strategic agenda if it is going to prosper in the decades ahead. The Legislature is just not disposed or equipped to fulfill this task.

ACCOUNTABILITY AND LEGITIMACY | First, the Council would be appointed by the state’s democratically elected officials. Second, what it might propose can go into effect only if approved by the public at the ballot box. Third, council members can be removed for corruption or malfeasance by the Senate.

Some pundits have quipped that the Council would be being granted “king’s power.” Others have called it “A House of Lords.” This is nonsense. What king, or hereditary nobility, ever had to go to the public at large in a general election to approve or reject their policies?

The Council meets the criteria of both legitimacy and accountability: Its members would be selected by democratically elected representatives of the people, and its proposals would be approved or rejected through the direct democracy of the initiative system.

The reason the Council would be appointed instead of elected is to insulate it from the same short-term, special-interest influences that result from electoral campaigns.

While the Council’s legitimacy must necessarily derive from appointment by elected officials, council members would be appointed in a way—with strict limitations on political contributions they can make to the appointing officials and with terms that cross electoral cycles—that would ensure their independence and long-range perspective while avoiding the patronage, cronyism and partisanship that has immobilized state governance.

NOT TOO MUCH POWER TO THE GOVERNOR | The concern has been voiced that because the governor would have the majority of appointments to the council, the body would do his bidding.
First of all, this is a structural proposal for governance that is meant to be in place for decades, and not just for one governor or another. The staggered six-year appointments across political cycles would result in a mix of different gubernatorial appointments over time, as is the case with the California Supreme Court, the Regents of the University of California, the Public Utilities Commission and the Coastal Commission.

The logic of giving the governor the most appointments is that, though the Legislature represents specific constituencies, the governor represents the “general will” because he is elected statewide and is thus best positioned to select council members accordingly.

However, one way to remedy this concern is to follow the precedent of the appointment process for the Commission on Judicial Performance in Article 6 Section 8c of the California Constitution. This would allow for five of the governor’s selections to be appointed for an initial two-year term and then be eligible for appointment to the full six-year term after that tenure. The other four members would be appointed to the full six-year terms. In this way, a staggered schedule would be set in place giving future governors as well as the current governor a key role.

NOT ANOTHER LAYER OF BUREAUCRACY | The council would not be an agency of bureaucrats, but a body of citizens—paid on a per diem basis and bound by strict conflict-of-interest rules—charged with the responsibility of being a deliberative watchdog for the public interest. This body would be a quality-control body that will make sure the taxpaying public gets a long-term “return on its investment.”

SAFEGUARDING THE INITIATIVE | The Council truly empowers citizens by being a nonpartisan advocate for the long-term public interest.

It is misleading to argue that the initiative process as it exists today provides a venue of recourse for the ordinary citizen. Although historically the initiative process has played a key role in giving the public a direct voice in governance, the mounting costs of signature gathering and media have led to the process being captured by special interests and ideological causes pursuing short-term aims. It is these organized interests that have usurped the citizens’ power. The council would recover that power for the citizens.

All citizens would be welcomed to submit proposals for initiatives to the council.

Unless we remove money from the politics of ballot propositions, this proposal provides the public with the best option for California’s future because it will be an advocate for the public at the ballot box and a trusted guide for an electorate busy with family and work to sort through the thicket of spin and special interests that initiative campaigns have mostly become.

The council may in fact be the public’s best safeguard of the initiative process.

THE NEXT STEPS | As devolution and “realignment” of responsibilities and revenues to localities proceeds over the coming years in California and the state government assumes a leaner and more strategic role, it would make sense in time to make two further structural changes. First, the current state Senate, which, as we explained, has become a purely representative, non-deliberative body like the state Assembly, would be replaced with the Citizens Council as a genuine deliberative “upper house.” Second, the representative districts of the Senate and Assembly would be merged into one lower house with a stepped form of elections to promote more grass roots citizens engagement.

Conceivably, the present Senate (40 members) and Assembly (80 members) would be combined into one non-partisan legislative chamber with 120 representatives and a strong committee structure. This would allow the size of the districts to be smaller (300,000 or so instead of 1 million citizens), thus making legislators more responsive and accountable by bringing them closer to their constituents. Districts would be held to a population of 300,000, with more seats added as the population grows.

Each district of 300,000 could be divided into 6 neighborhood councils of 50,000 each. Each of the 6 neighborhoods would elect one delegate to the district council. That council would in turn elect the representative for that district to the state legislature.

This new civic software would be more efficient, less redundant and less contentious, also greatly reducing the overhead costs of two houses. It would dampen the influence of money in politics (necessitated by fundraising for media in large jurisdictions) by limiting the population size of districts and curbing the power of lobbyists who play one house off against the other. Above all, it would close the distance between the represented and the representative and involve local citizens more meaningfully in setting the rules that govern their lives.

Replacing the Senate with a genuine upper house with deliberative responsibilities would further balance the short-term and local nature of constituency representation of the lower house, as historically intended.

Change along these lines would shift California toward a modern system of governance that has the capacity for decisive action, reflects the complexity and diversity of its population and economy and is more suited to the challenges and opportunities of the 21st Century than the one inherited from the time of ranches and railroad barons.

Above all, the checks, balances and incentives of this new civic software would imbue governance with a public-interest political culture that replaces the rancor of polarization with the non-partisan spirit of pragmatism and long-range perspective associated with the great builders of the state in the 1950s and 1960s—Republican Governor Earl Warren and Democratic Governor Pat Brown—who laid the foundations in the post-WWII era for the prosperity and quality of life that California enjoyed for decades. 

If Californians embrace such an approach, they could have a fiscally sound government that can weather the ups and downs of the business cycle and foster the high-wage jobs linked to California’s cutting edge industries from bio-tech to information technology to clean energy. Upward mobility could be ensured through excellent schools with affordable higher education, accessible to all Californians, that provide the innovative and highly-skilled workers who are key to building competitive new industries. Environmentally friendly, livable cities that use energy and water smartly could be a model for the world.

Despite its current travails, California is rightly known for its can-do creativity. If that can be turned toward the task of good governance, all Californians will be empowered to get back to the future with the government they want and deserve.

LESSONS OF THE CALIFORNIA EXPERIENCE | If the reforms proposed by the Think Long Committee can take hold, California is well positioned in other respects to face the coming era. Its fundamentals are strong—a diverse population of hard-working immigrants from everywhere, an entrepreneurial energy linked to venture capital resources unmatched elsewhere in the world, world-class universities, abundant agriculture, a temperate climate and magnificent natural landscape. The most vibrant new industries on the planet—represented by companies from Genentech to Intel, Google and Facebook to SunPower—have emerged in recent years from this fertile California environment.

Yet, despite what appears to be a growing openness to reform on the part of the public, the obstacles to change we have encountered remain daunting.

The first lesson is that good policy can be bad politics—and bad policy can be good politics. This is at the root of the incapacity of the one-person-one-vote system to self correct absent the counterbalance of a deliberative body that takes into account the long-term consequences of the quick fixes popular democracy favors.

Facing deep cuts in education and social programs, the temptation of politics as usual is to look for a solution that polls well instead of fixes the state for the long-term. This is precisely what happened in 2012 when Governor Brown, the California Federation of Teachers and other groups, fueled by the 99 percent movement, sought to close the state’s funding gap by taxing the easiest target—the rich. They did so because it is far more politically viable to tax “others” than the broad middle class that makes up most of the voting public, even though, as our Think Long Committee recommended, a modern broad based sales tax on services in which everyone pays slightly more would stabilize revenues for years to come.

While there is much to be said, and with which we agree, about the need to stem growing inequality, California is already perched on a narrowly volatile tax base where the top 5 percent of earners account through income and capital gains taxes for 67 percent of revenues. As we have explained, the boom and bust of the budget cycle that results from this narrow reliance means programs funded in a good year (for example when Google or Facebook go public and capital gains skyrocket) simply have to be drastically cut when there is an economic downturn and top end revenues drop dramatically. The situation is made worse by the absence of a “rainy day” savings fund—which the same groups oppose precisely because it would curb spending in good years.

The end result is a dysfunctional system that generates perpetual deficits, drives up borrowing costs and deprives the state of a growing source of future revenue needed to invest in precisely those public goods—higher education and infrastructure —that are the structural answer to growing inequality.
Other lessons of our effort to bring “intelligent governance” to California could easily be lifted from the texts of political scientists like Francis Fukuyama or economic theorists like Mancur Olson.

In its short history, California has, in the broadest sense, followed the same trajectory of the rise and political decay of systems of governance as seen in the ups and downs of China’s millennia-long experience or that of the Ottoman Empire that Francis Fukuyama documents in his magisterial The Origins of Political Order. In each case, once robust institutions of good governance eventually corroded because they failed to adjust to new conditions or succumbed to the relentless resurgence of what Fukuyama calls “patrimonialization”—or the dominance of special interests over the general interests of the public.

As Fukuyama writes, “Institutions are created in the first place to meet the competitive challenges of a particular environment...when the original conditions leading to the creation or adoption of an institution change, the institution fails to adjust quickly to meet the new circumstances. The disjunction in rates of change between institutions and the external environment then accounts for political decay and deinstitutionalization.”

This has certainly been true of California. The state rose to become the world’s ninth largest economy during the post-World War II years when it became the thriving outpost of the American empire with a vast military-industrial complex—largely located in California—and cheap energy that fueled its sprawling growth. In those days, a growing middle class that still saved more than it consumed was willing and able to finance infrastructure investments in the future, from a quality education system that included the expansion of the University of California to the state’s famed network of freeways to the system of canals that brought water from the snowy Sierra Nevada peaks and wet north to the parched south.

With the advent of a mass consumer culture in the 1960s and the commensurate emphasis on the single-family home instead of the public weal as the locus of the California Dream, the real estate bubble that finally burst in the sub-prime mortgage crisis of 2008-2009 began to build. Along with that now bursted bubble came the end, for the foreseeable future, of a decades-long boom in construction jobs.

Proposition 13 in 1979 marked the revolt of the homeowner/taxpayer, which significantly deprived the state of its most stable source of financing for local services and education by severely limiting property taxes. Even as the population doubled and immigration from Mexico swelled, the state could never make up the difference, going deeply into debt just to maintain operations, much less invest in the future.

With the end of the Cold War, the military-industrial complex withered. Easy credit dried up with the financial crash as the housing market collapsed. With the rapid growth of China and India, global energy demand is conjoining with Middle East turmoil to end the era of cheap fuel.

Yet, despite increasing acceptance of the need for reform, Californians have remained in denial, as if they were historically entitled to a future as promising as the past has been.

Fukuyama also posits “repatrimonialization”—the resurgence of special interests who capture the state—as a cause of political decay. In this his argument is similar to that of Mancur Olson in his classic 1982 book, The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities.

Using rational choice theory, Olson argued that organized special interests, whether labor unions or business associations, assert their interests more effectively in a democracy than individual citizens because the return on their activism is higher as a collective body than it is for the diaspora of unorganized individual citizens—the general public. Thus, public employee unions can garner hefty pension deals or business lobbyists can garner hefty tax breaks, or avoid taxation. These interest groups thus become the primary “stakeholders” in the public budget, accreting like barnacles onto state government.

Any California reform effort, as was true for the Think Long Committee, runs directly up against these “stakeholders” who have taken the state government hostage. Especially with term limits on legislators, their lobbyists are more a permanent presence in Sacramento than the people’s representatives and, because they sponsor the election campaigns, elected officials are largely beholden to them.

This situation is compounded by the initiative process in California. Once the venue of public recourse, initiatives, as former California Supreme Court Justice Ron George mentioned above, as often as not have become a battleground of well-funded special interests fighting each other.

When deciding which issues to take to the public ballot, the main consideration of the Think Long Committee is who will oppose it and how much they might spend to defeat reform that threatened their interests. If you want to raise revenues, the anti-tax lobby will spend $40 million against you. The huge entertainment conglomerates based in California will likely spend whatever it takes to stop a 5 percent services sales tax on tickets for movies or theme parks, revealing their societal priority of amusement over education.

If you want to reform k-12 schools, the California Teachers Association will spend $50 million to keep teacher tenure and avoid evaluation. If you want to close the tax loopholes on commercial property, the large land and commercial real estate corporations will spend $100 million to stop you. If you want to impose an oil severance tax the large oil companies will spend what it takes to prevent that from happening

But it is not only the special interests that abuse the initiative process. So does the public, which, through this tool of direct democracy, has contributed significantly to California’s political decay. Mainly, this is because the public irresponsibly mandates spending which it then refuses to pay for with sufficient taxation. Locked in spending and locked out revenues is at the core of the state’s fiscal crisis.

The most egregious example of this was the “Three Strikes” initiative, which required imprisonment after a third felony conviction, and mandatory doubling of the sentence on the second “strike.” While this understandably appealing attempt to improve public safety was overwhelmingly approved at the polls, no commensurate spending plan to build more prisons was included. As a result, a decade after the passage of this law by initiative, the US Supreme Court, in May 2011, ordered the release of 36,000 prisoners from California jails because overcrowding violated their human rights.

As already noted, the famous Proposition 13, voted into law by the public in 1978, is another case in point. By limiting the property tax collections by localities to 2 percent of the assessed value of their homes, California homeowners were able to escape increasingly burdensome taxation. Yet, this deprived government of the requisite resources for education and public safety services, never yet to have been replaced.

The point of representative democracy was to create deliberative bodies that would take into account the longer-term ramifications of their decisions. The inherent short-sighted nature of direct democracy, which has tied California’s finances in knots, was exactly what America’s Founding Fathers such as James Madison and Alexander Hamilton, in their wisdom, sought to avoid.

The California experience suggests not only that good governance must guard against the age-old onset of political decay as a result of rigidity in the face of changed conditions and repatrimonialization. It also warns against a common assumption that more direct democracy ought to be part and parcel of the knowledge society. Good governance requires checks and balances not only on government, but on the public as well.