Local Government vs Populism

The Virtues of Self-Governance

Very short summary: This essay argues that local governance is less prone to succumb to populism because, compared to national politics, citizens are more empowered and monitoring of elected officials is easier. This provides an argument in favor of political decentralization and polycentrism, though federal states have not been immune to populist ideas and practices.

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The unexpected defeat of the hard-right George Simion to the pro-European Nicusor Dan at the recent Romanian presidential elections doesn’t change the fact that populist, MAGA-style candidates and parties have been quite successful in Europe over the past years. As I’m writing these lines, the second round of the Polish presidential elections promises to be a tight race between the centrist and Warsaw mayor Rafal Trzaskowski and the nationalist Karol Nawrocki, though prediction markets seem to give a slight edge to the former. The point is that having a populist candidate in the second round of a national election in a European country with real chances of winning is the new normal, something that would have been unimaginable less than ten years ago.

In this context, a recent The Economist article makes the interesting observation that big European cities and their mayors are the last refuge where populist ideas and practices have not penetrated:

“Europe’s mayors, particularly those of big cities, are the unsung moderating force of the continent’s politics. Free of patriotic bombast and focused on getting buses running on time, they are the bulwark of moderate governance in a continent that needs it badly…

Across Europe mayors are often cut from a different political cloth to the rest of the governing class. Lefties do notably well locally even when their parties are out of favour nationally—perhaps unsurprisingly, given the cosmopolitan types who choose to make cities their home. Parties of the hard right, which lack the organisational nous to put up candidates for dull city jobs, are notably absent. The municipal discourse thus has a gentler feel to it (at least until the building of cycle lanes is discussed).”

At such, this is not very surprising. Part of the explanation is simply economic and socio-demographic. The population living in big cities is, on average, richer, more educated, and more diverse than elsewhere in any given country. It’s well-established that variables like wealth or education are inversely correlated with the populist vote. Attitudes toward immigration, a strong determinant of the national-populist vote, are shaped by a range of factors, especially education and age, which makes the younger and more educated populations of big cities more tolerant of foreigners. In general, two sets of mechanisms are at play. On the one hand, living in big cities brings direct benefits —in terms of wealth and opportunities— that notably accrue from positive network externalities. On the other hand, populations most likely to benefit from living in big cities (e.g., already well-educated populations) tend to prefer living in the urban areas that the rest of the population doesn’t find so appealing.

However, this is only part of the explanation of why populism has not yet affected big cities. The Economist article only alludes to another one toward the end:

“Cities may seem easy to manage in comparison to countries. Often capitals are the richest part of the nation. Delivering public services is easier in densely populated places with a fat tax-base. But shortcomings are also easier to spot. Managerial ineptitude that exposes the shortcomings of populist national leaders can take years to emerge: underfunded public services degrade only slowly, and few voters follow the intricacies of foreign policy. In contrast, everyone swiftly notices when potholes go unfilled and buses run late. Blowhard politicians often talk about taking back control. Voters should pay more attention to those with a good record of taking care of the rubbish bins.”

“View of Delft,” Johannes Vermeer (1660)

This points toward several considerations that political economists working on federalism and local governments have been emphasizing for decades. First, the larger the polity, the less one’s vote matters. This encourages what Anthony Downs called “rational ignorance,”[1] or even “rational irrationality.”[2] More generally, national politics generates a severe problem of collective action. Besides voting, a single person has almost no possibility of influencing political outcomes. There is therefore a strong incentive for passivity (at best) and costless revelation of often ill-considered expressive preferences. If one really wants to be empowered in national politics, there are not many options, except for entering into politics, either by competing in and winning elections or acquiring the political or economic means to influence elected officials. Few will have the ability or the willingness to do so, which means that in practice national politics is oligarchic by its very nature.

Second, national politics is complex and filled with uncertainty and ambiguity. So many factors are at play at the same time that it is often difficult, if not impossible, to assess the decisions made by officials. This makes the monitoring of elected officials more complicated. The relationship between citizens and officials is what economists call a principal-agent relationship. The more it is difficult to assess the decisions of officials, the higher the risk of “moral hazard,” i.e., decisions that officials make for their benefit but that are likely to harm citizens. One well-known consequence of the moral hazard problem is that principals (in this case, citizens) may prefer to pass up the opportunity to conclude a mutually advantageous contract with agents (here, elected officials). In the political context, this is likely to mean a lack of trust and an anti-political elite sentiment.

Populism has been taking advantage of the relative disempowerment of citizens and the difficulty of monitoring officials at the national level. National populist politics is the result of the deadly cocktail of generalized political indifference, lack of accountability, and the low cost of expressing prejudices, emotions, and unconsidered judgments through a vote. However, local politics is less prone to be affected by the same combination. In his widely-cited 1956 article on local government, the economist Charles Tiebout formalizes the ideal case where individuals can freely and without any cost “vote with their feet” by moving to the neighborhood that provides the bundle of public goods that they prefer at the lowest cost (i.e., lowest taxes).[3] In a world where mobility costs are null and information is perfect, citizens will spontaneously move to the local polity with the best government from their point of view. In turn, this creates strong incentives for local governments to provide as effectively as possible the kind of public goods that citizens demand.

Consider how competition between local governments significantly addresses the disempowerment and monitoring problems. When individuals vote with their feet, they are strongly incentivized to internalize the costs and benefits of their decisions.[4] Moving to a suboptimal locality is costly for individuals —they are what economists call the “residual claimants,” i.e., they support the full or at least most of the marginal opportunity cost of their decision. This is even more true if, as is the case in reality, moving is costly. Making an unconsidered vote has no impact, but making an unconsidered move can seriously affect one’s life. That means that people will tend to think twice before voting with their feet.

The good side is that individuals also have considerably more leverage at the local level. Collective action problems are less serious and less difficult to solve the smaller the population, by the sole power of numbers. It’s also far easier to assess decisions made by elected officials. Determining whether or not the bundle of local public goods (e.g., the maintenance of a public park) is effectively provided is easier than evaluating a country’s industrial policy. Individuals generally have the local knowledge to evaluate the provision of local public goods, and the web of causal relations between the decisions of local officials and the observed outcomes is far less complex than at the national level. That means that even if voting with one’s feet is actually not so easy, citizens have more incentives and ability to exert their “voice” and control officials.

I have argued more than once in this newsletter that populist politics largely builds on the myth of the People taking back control of their lives. This is a myth insofar as it pretends to do so at the national or even international level. This rhetoric is far less effective at the local level because, in fact, people do have relative control. An appropriate response to populism is therefore to strengthen self-governance by empowering local governments. This aligns with the broad Tocquevillian idea that political indifference is best fought by a dynamic civic associative life that promotes self-governance, commitment, and accountability.[5]

These considerations strongly militate in favor of decentralized and polycentric forms of political governance. However, there are some caveats. First, polycentricity generates problems of its own, and complete decentralization is in any case impossible. Second, depending on a country’s political history and traditions, the transition toward a reinforced polycentrism might be difficult to achieve (the case of France comes to mind). Third, populism has also flourished in countries with a federal political system (e.g., the U.S.A., Germany), and it’s not clear that federalism has helped slow down populist politics, neither at the national nor at the local level (the AfD has been performing well at local and state elections recently). There is clearly no magical remedy to populism. But more emphasis on local government can surely help.

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[1] Anthony Downs, An Economic Theory of Democracy, First Edition (Boston: Harper and Row, 1957).

[2] Bryan Caplan, The Myth of the Rational Voter: Why Democracies Choose Bad Policies - New Edition, Revised edition (Princeton, NJ: Princeton University Press, 2008).

[3] Charles M. Tiebout, “A Pure Theory of Local Expenditures,” Journal of Political Economy 64, no. 5 (October 1956): 416–24.

[4] Ilya Somin, Free to Move: Foot Voting, Migration, and Political Freedom (Oxford University Press, 2020).

[5] Paul Dragos Aligica, Public Entrepreneurship, Citizenship, and Self-Governance (Cambridge, United Kingdom: Cambridge University Press, 2019).