When states lose the ability to govern, populism rises

Stephen Kotkin, global geopolitical expert and Stanford academic, has warned that there is an “increasing governability challenge in high-income democracies” where government departments face declining capacity to perform core functions due to complex regulatory systems and bureaucratic tasks. 

This has enabled populist politicians – who “don’t want to fix the government” but “want to remove the institutional constraints on executive power” – to thrive, said Kotkin, a senior fellow at the Hoover Institution. 

“They don’t want governance to function. They want to disable those governance structures so that they have what they consider free reign,” he told the Top1000funds.com Fiduciary Investors Symposium.   

“This is a deep and fundamental problem that we don’t have a solution for.” 

Looking at historical data in the US and European Union countries, while the population and size of government have only increased marginally since 1979, the regulations and responsibilities government has to carry out have experienced an “exponential” jump, Kotkin said.  

“Each regulation has a kind of logic, but they just accumulate. Something happens in the world, whatever it might be, and people say ‘Do something. Don’t sit on your hands’. So they pass a rule, a regulation or maybe even a law through the parliament,” he said.  

“In a complex system, nothing interacts with the other things the way you expect. One regulation might be for environmental restrictions, to defend the environment, but then it becomes the principal instrument for not building any more housing. 

“It’s the tasks of government that we’ve put on them that they are not designed to do and can’t cope with. So when they mess up, the populists come along and say, ‘government is failing’.” 

US president Donald Trump’s Department of Government Efficiency (DOGE), previously headed by Elon Musk, is the most notable attempt recently made for the purpose of improving government performance. As of October, it claimed to have saved $206 billion in government spending on its website.  

However, Kotkin is of the view that reducing the number of federal employees is not ultimately about cost-cutting, but “political purging”.   

“The federal bureaucracy is predominantly leftist, and if you are a Republican, elected-by-the-people president, you face this again and again and again that the bureaucracy sabotages your programs,” he said. 

“It happened to Bush. It happened to Reagan. It happened to the first Bush. It happened to Nixon. It’s a long-standing problem.” 

DOGE is a failure because it failed to understand that the public sector does not function like a private company, but a big, interwoven system where few people understand its inner workings, he said.  

“My argument is not getting rid of the officials, it’s getting rid of the tasks that the officials are being imposed with. Because there’s too much that we expect them to do, that they cannot do, that they don’t have the bandwidth for if they’re not designed to do those things, and those things are now perversely used.” 

There is a difference between a policy’s intention and its outcome, and not every government official has grasped the idea. Kotkin noted that things like subsidies can look like a clever fix but often backfire. Subsidising ethanol, for example, could be considered support for a cleaner fuel alternative, yet its production depends on oil-powered farming of corns which props up the industry and its lobbyists.  

He suggested that politicians refocus on the real challenge when enacting new policies, which is not to come up with ideas, but to get the system to enact them.  

“And not the imaginary system at a [policymaking] seminar where you go for sherry when you’re done, but the actual system that you’re facing. 

“I agree that we could think about what those [government reforms] are, but I just want to know how I’m going to implement them with the system that I have, with the politicians that I have, with the incentive structures that I have and with the voters’ preferences that might change over time.”