Tackling short-termism


The FT reports that:

Hungary’s government is trying to introduce legislation that would allow the state to charge three former prime ministers with “criminal” mismanagement of economic policy after the national debt spiralled upwards in the last decade.

Superficially attractive as this might be, it is of course completely wrong. You cannot justifiably convict someone of doing something that was not a crime when they did it – especially not in a fairly blatant attempt to use the power of the state against your political rivals.

Nevertheless, this does raise an interesting issue: how do you deal with the fact that politicians typically only think as far as the next election, and as such do not as a rule pay much attention to the long term effects of their decisions?

Short-termism in politics is a chronic affliction, manifesting itself both in inaction (let’s not bother reforming social security – its eventual collapse is going to be someone else’s problem) and in action (let’s have a fiscal giveaway now and worry about the deficit once we’ve bought ourselves the next election). But is there anything we can do about it?

It’s an imperfect solution, but I think the only realistic way to counter political short-termism is to place on government the kind of legally binding restraints that we outline here. Force governments to balance their budgets over a defined period; prevent them from raising new revenues without direct electoral approval; make them account honestly for all future liabilities; and so on.

Politicians would still think short-term. They’d still focus on winning the next election. But the less discretion you give them, the less damage they can do.