Regulation, Discretion, Democracy

25 Oct

Congress refuses to spend anymore but never fear, the Fed is contemplating a new round of quantitative easing and Obama is extending an (admittedly weak) administrative program to reduce housing debt. In a broad sense, what we are seeing is a familiar feature of crises – real or manufactured: the expansion of discretionary, especially executive, power. After all, who controls the deeply undemocratic Fed? A Fed able to undertake an entirely independent economic policy from actual apparatus of government. And while Obama has been reluctant to use executive power to put the squeeze on banks, improve financial regulation, and prosecute fraud, he too seems able to do a bit of an end-run around the slower, conflict-ridden legislative politics.

But more is at stake here than just a question of the relations between branches of government, or of the relations between elected officials and barely accountable bodies like the Fed. A second issue is the relationship between the daily practice of governing and democratic representation. Call this the representation game and the first one the discretionary power game. The first game tends to boil down to trying to limit and reduce the kinds of unchecked or arbitrary power exercised in the name of managing a crisis. That is an important project in a democracy, but it’s not the only one.

After all, modern states are currently saddled with an enormous administrative apparatus that cover a wide range of issues. The size and complexity of the modern economy, and the speed with which events take place unavoidably lead to the creation of administrative bodies like the SEC, FDIC, Treasury, and so on. To be sure, the specific bodies created, their formal authority, their composition, their mandate, are all a question of politics, not necessity. But it remains the case that governing in any particular area requires some kind of body that engages in the day-to-day activities of ruling, and this is almost never an activity of elected representatives themselves.

Again, representatives could be a lot better about congressional or parliamentary oversight, and about carefully crafting mandates rather than producing vaguely defined agencies with expansive regulatory powers. But to a degree, discretion will be built into the administrative apparatus. It cannot be eliminated.

This changes the democratic game, and shows us why movements like Occupy are important. The mainstream view is that the central democratic task is to elect representatives who will serve the public interest, or at least be responsive to the majority. And that democratic power is exercised by holding these representatives accountable for their actions. The anti-mainstream view, sometimes found in the Occupy movement, is that real democracy rejects representation and majority rule; instead, it is about direct participation and consensus. This debate misses a vital dimension of democratic self-government that goes directly to the management of the economy, and to questions of whose interests are served by the actual exercise of state power.

The missed dimension is how the actual governing apparatus – the regulatory bodies, the administrative agencies, the courts, the consultative groups, and other myriad authorities – uses its power, especially its discretionary power. Will it prosecute systemic fraud, use every measure it can to force banks to modify underwater mortgages, police banking practices, issue advisory and mandatory rules spreading risk fairly? Or will it try to force attorneys-general into weak settlements with banks and shovel fraud under the rug? As we have written before, the nature of a settlement on mortgage fraud is very important not just as a matter of immediate justice, but also of managing risk and future regulation. To a degree these regulatory outcomes depend on calculations about what will eventually happen at the ballot box – and thus on the familiar question of formal accountability. But even those electoral calculations depend on the current ability to mount pressure on the government. Those forms of pressure feed into predictions about what will happen electorally. And that latter power is a matter of social mobilization.

Moreover, the day-to-day contest over governing is also a matter of knowledge and ideas – specifically the knowledge and ideas that are in play, among the chattering classes, out in the public, and within the halls of power. Here again, social protest is part of transforming the kinds of ideas and the pieces of knowledge to which the state must respond. We have already seen the ability of the Occupiers to change national and international conversations. The power that movements like Occupy wield is always more nebulous because it has no formal, legal backing – it is not like a vote. But it is no less important for attempting to influence the ineliminably discretionary power exercised by administrative agencies. Constant social pressure and attention is probably the main way of securing a (more) democratic form of representation by these bodies, who are otherwise so easily influenced by powerful, wealthy interests.

To be sure, there are limits to this democratization of administration. At least from a democratic standpoint, it would be better if the Fed, or whatever lender of last resort there is, were more directly under public control. And there are agencies that it would be better to get rid of or slim down. Indeed, the dizzying array of agencies, and the simultaneous contraction of fiscal stimulus at the local, state and now federal level, alongside the expansion of (deeply regressive) monetary stimulus makes it difficult even to get clear on lines of responsibility and causal effects. But the apparatus of day-to-day self-government, especially when it comes to economic policy, will necessarily be administrative as well as legislative. Oversight, regulation, even just administration of the rule of law, are all exercised mainly by non-elected officials. Shaping the exercise of that power – so easily captured by those better able, and better financed, to operate in the halls of power – is one of the singular tasks of a social movement. Unresponsive representatives are not the only political agents that need whipping into line in a modern republic.

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