BackDo expert ministers lead to better policy outcomes?
Technical experts are often appointed as ministers during a time of crisis to signal resolve to deal with the crisis
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One of the earliest and loudest critiques of the Narendra Modi government, and a critique that is still heard repeatedly, is that Modi’s council of ministers is weak on individuals with the presumed technical competence to run their respective ministries.
The fact that Smriti Irani, the education minister, doesn’t have a university degree, for instance, is widely held as a black mark against her. On the other hand, observers have praised the induction of new ministers seen to have relevant expertise in the fall expansion of the council of ministers. For example, Jayant Sinha, a former fund manager, has been hailed as being a good fit as junior finance minister. Most recently, the appointment of economist Arvind Panagariya as vice-chairperson of the Niti Aayog was widely praised, given his pro-reform credentials.
All such arguments implicitly make the assumption that
field-wise technical competence is a requirement, or at any rate a valuable component, in successfully managing a ministerial portfolio. Or, put another way, that individuals with technical expertise are better policymakers than those who lack such expertise. Is this really true?
Such arguments take the view that the chief constraint on good policy management—and let us, henceforth, confine ourselves to economic policy—is the selection of an individual, or individuals, with the necessary technical competence. This is what may best be described as an institutionally thin, technocratic conception of policymaking. By contrast, historical, journalistic and anecdotal accounts often stress individual-specific political acumen—unrelated to domain technical expertise—as decisive in pushing through good policy outcomes.
Let us make the question more concrete, and bring it home to India. The Congress government is widely credited with ushering in the first phase of economic reforms after the 1991 crisis, sweeping away the worst excesses of the licence-permit-quota raj, and paving the way for a globalized, modern economy. Until recently, it was commonplace to credit then finance minister, Manmohan Singh—a PhD in economics from Oxford—for the success of the reforms programme. Yet, after Singh’s failure as prime minister to jump-start the second generation of reforms during the 10 long years of the United Progressive Alliance (UPA) rule, most would now discount Singh’s role in the earlier period and credit instead the political savvy of P.V. Narasimha Rao, prime minister from 1991 to 1996, in shepherding the reforms programme against bitter opposition from the Left parties and others.
Surprisingly, there is little serious academic research exploring the relationship between the technical competence of individual policymakers, and the nature and quality of policy outcomes—perhaps because conventional political economy stresses the role of the classic three Is of ideas, institutions and interests—and discounts the role of a fourth I, the individual. One exception is the important work in the 1980s and 1990s by political scientist Jean Blondel, who found that specialists (those with prior expertise in their ministerial portfolios) were far less common in European governments than generalists (those with no relevant prior experience). Interestingly, specialists tended to be concentrated in economics-related areas such as the finance ministry.
As it happens, there is good, recent economic research that speaks about the broader question at issue and goes beyond Blondel’s early work. Economists Mark Hallerberg and Joachim Wehner, in a 2013 research paper, deploy a new data set on the educational and occupational backgrounds of economic policymakers (by which they mean prime ministers or presidents, finance ministers and central bank governors) from 1973 to 2010, spanning a range of advanced and emerging economies (mintne.ws/1sGikj1).
A principal finding of the research, entirely in keeping with common sense, is that, other things equal, governments are more likely to appoint technically competent economic policymakers during times of economic or financial crisis. Their motivating example—the nearly contemporaneous appointments in November 2011 of Lucas Papademos and Mario Monti as prime ministers of Greece and Italy, respectively, when both economies were in a tailspin and facing serious risk of bankruptcy—fits this finding perfectly. The rationale is that, in a time of crisis, those in power need to signal both to markets—domestic and international—as well as voters that they have a grip on things, and appointing a technocrat serves to signal exactly this. In this sense, the appointment of Singh as finance minister by the Rao government fits this signalling idea perfectly.
A second finding is that left-leaning governments, other things being equal, tend to appoint more technically competent economic policymakers, especially during times of stock market turbulence. The reason is that leftist governments, which may have ties to trade unions and the like, need to convince markets that they are serious about the economy, and appointing a respected technocrat is, again, a way of signalling this.
India’s recent history is a case in point. The UPA government, given its proclivity for creating large social welfare schemes and its reliance on social activists as advisers, was clearly on the left, and it featured a PhD economist as prime minister, also as planning chief, and appointed a PhD in finance and former International Monetary Fund chief economist—Raghuram Rajan—as central bank governor. The appointment of Rajan, in particular, succeeded in assuaging markets at a time when growth was faltering and inflation was rising.
A third, unsurprising, finding is that new democracies in Eastern Europe and elsewhere, other things being equal, appoint more technically competent economic policymakers than established democracies in the West. This, too, matches common sense. A new democracy must prove to markets that it understands economics, can run a sensible monetary policy and so forth; an established democracy has a track record of economic management and a rich institutional memory to tap into, making the selection of any particular individual with technical competence less important.
A final finding to which I wish to draw attention to concerns the institutional structure within which economic policymakers are appointed and this can often be crucial. The study finds that, other things being equal, presidential systems are more likely to appoint technically competent finance ministers than parliamentary systems. Thus, for instance, in the US, the president may appoint anyone of his choice as treasury secretary, provided that individual is confirmed by Congress, and thus may pick a PhD economist or someone with relevant private sector expertise, if he or she wishes. By contrast, in a Westminster parliamentary system, the finance minister must sit in one of the two Houses of Parliament, and this constrains importantly the choices available.
In theory, in a Westminster system, it is possible to circumvent this limitation to some extent by appointing a technocrat, and then getting him or her into the Upper House, which may be appointed or indirectly elected. In India, we have experience of exactly this model, as Singh, both as finance minister and then prime minister, sat in the Rajya Sabha. Indeed, his one and only attempt to get elected from the Lok Sabha was a dismal failure. The current finance minister, Arun Jaitley, also sits in the Rajya Sabha. He, too, unsuccessfully contested a seat to the Lok Sabha in the April-May 2014 general election.
In other Westminster countries—such as the UK and Canada—this work-around is more difficult, as, by convention if not the letter of the law, the prime minister (along with other key ministers) is expected to sit in the House of Commons, not the House of Lords (UK) or Senate (Canada). Famously, the last British prime minister to sit in the Lords, Alec Douglas-Home, disclaimed his peerage four days after becoming prime minister in 1963, to contest a seat in the Commons.
The bottom line is that when observers praise the appointment of a technically competent economic policymaker for good economic policies which subsequently are put into place under his or her watch, they may be confusing cause and effect. In the Indian case, it would be more accurate to say that Singh became finance minister in 1991 because Rao wanted to push ahead with economic reforms, rather than saying that reforms took place because of Singh.
This piece of common sense wisdom, as it turns out, is entirely consistent with the nascent academic literature on the topic.
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