Political Myopia




The conflict between short political mandates and long-term objectives is an old and well-known problem in electoral politics. To galvanize political support, policymakers often resort to “benevolent” political measures, such as short-sighted tax reductions or infrastructure investments, which are often more beneficial to their own election polls than to their electorate. Such political myopia is alarmingly common and stands in the way of effective, sustainable policy making.

Risk management is one of the fields in which effective action tends to be impaired by political myopia. For instance, implementing comprehensive regulation in the financial sector or imposing stringent environmental requirements on certain industries would help managing the risks of financial or environmental crises. Similarly, the installation of early warning systems could provide decisive information for preparation and timely evacuation.

However, such public risk management measures often fail to be implemented – partly because they often come with considerable upfront costs. Such costs are likely to be observed closely (and critically) by the public and political opposition, which may underestimate the risk of a contingency.

Even when necessary resources for such measures are available, policymakers are often reluctant to devote them to risk management. This is largely because the benefits are likely to materialise only long after the end of their mandates.

This non-observable quality also means that it is very difficult to monitor and measure good risk management and its results, and for policy makers to be held accountable for their risk related decisions. As a consequence, policymakers tend to not manage risk before projects, but are biased towards less effective but more visible responsive action. For instance, between 1980 and 2009, only 3.6pc of disaster related development assistance was spent on disaster prevention and preparedness, whereas the rest was spent on post-disaster response and reconstruction.

In addition, policy makers will bear in mind the political stakes of risk management measures. The existence of powerful interest groups, which naturally oppose regulation, can prevent risk management measures even in the presence of strong scientific evidence.

This is not least due to opposing interests: stricter regulation in favour of managing risks may result in the loss of revenues in sectors where risk management was previously suboptimal. Despite such seemingly bleak incentives for bold action on risk management, such challenges of the political economy can and must be overcome.

In order to establish a systematic and integrated approach to coordinating and monitoring risk management, the creation of National Risk Boards could bring significant progress. The driving impulse for such an institutional arrangement may come from reformist political leaders, the international community, or from the direct experience of a crisis, which may increase public awareness and support for risk management in its aftermath.

By mandating such a single oversight body with the assessment of risks, governments can coordinate policy measures across ministries and prioritize action. TheUKand theNetherlandshave conducted such national risk assessments for several years in order to prevent and plan for crises and emergencies, regardless of the nature and origin of the risk (such as natural, technological or terrorist risks). Such a systematic and clear definition of risks helps explicitly spell out the need for risk management, and may deter policy makers from only addressing selected risks with the potential for visible short-term benefits.

Using such risk assessments, national risk boards can also make progress in the assessment of the quality of risk management, by developing indicators that reward risk-sensitive policy making. Continuous risk monitoring and policy assessment can also help to ensure that risk management is consistent across time and changing cabinets.

Only when the importance of effective forward looking risk management, with long-term time scales is fully and publically recognized, will policy makers devote resources to such measures – even with election polls in mind.

 



By Jun Rentschler
Jun Rentschler is a research analyst for the World Development Report 2014. Previously, he was an economic adviser to the German Foreign Ministry.

Published on Sep, 15, 2013 [ Vol 14 ,No 698]


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