Beyond democracy

Apr 28, 2023

Something I've been thinking about for a while is how, despite China never having been an electoral democracy, it has succeeded in becoming the largest economy in the world and is well on its way to becoming a high-income country.

To be fair, China is one of the largest countries in the world, both by land area and population size, so it's able to do everything at scale. Nevertheless, size isn't enough to build a large economy; the right policies, social architectures, and investments are needed to get there.

It took China longer to build its "economic engine" than it did for the oil giants in the Middle East, but now it's here, and it's a behemoth. And what it took to build it has led to improvements in Chinese society across disparate areas. Whether it's global university rankings, military size, patents, etc.

I already think China is successful on the world economic stage, on par with the best. For me, what's more interesting is that in the Western Hemisphere, there has long been this idea that all countries that wish to become rich and successful must eventually become democratic in order to allow innovation and free markets and whatnot to be fully unleashed. China has shown that this is not the case.

China's story shows is that the political system that runs a country doesn't need to have a bearing on its economic potential, even though it often has.

Side note: Although there are other non-democratic rich countries like Saudi Arabia, the Chinese example is particularly interesting to me because they didn't just use Western technology to dig natural resources out of the ground to sell. Instead, they industrialised their economy on a massive scale through decision making and management.

In fact, China's story is so compelling that Western powers see the story itself as a threat to their hegemony. It got me to think more deeply about the advantages of China's model vis-a-vis democracy. At this point, I believe democracy is insufficient for the future. Deeply insufficient.

I'm going to give a simplified outline of the Chinese political model as I see it.

Voting only happens at the very local village or town level. All higher levels are selected from within the party itself, without public input. To get to a very high level of power (e.g central government, the presidency, etc.) one has to work one's way up the ladder, often over many years.

What this means is that the majority of the central government executive members will have extensive political experience and competency by the time they reach that point. Plus, a lot of decisions are carefully built up over time through a committee-like approach. This means they are unlikely to make any rash, absurd decisions. The downside is that they could be slow to respond to changing circumstances.

Overall, I believe part of the reason for China's success is the generally high level of competency amongst central government party members, and this comes down to not being able to simply parachute into the top jobs without any previous political experience or competency, unlike in the West. Now, there is a tonne of corruption in the Chinese political system, so no doubt there are many who rise up because of that. But even in that scenario, I would argue that someone skilled enough to manipulate their way up the ladder at least has that skill as a competency; at the very least, they'd make for a challenging foe in the geopolitical arena.

Democratic countries mostly run representative democracies, where voters choose the people or parties they want to lead the country. But the representatives in these slots are often people with zero to little political and/or economic experience needed for the key roles they end up taking. So straight away, you have a problem of competency - the prime minister could be somebody who lacks a basic understanding of economics.

This points to what I think is the fundamental problem of democracy: It's not optimised for electing the most competent leadership.

Instead, democracy is optimised for the worst outcome, i.e. that you get a terrible leader who must then be ousted. In these circumstances, democracy is a great system because it provides an escape hatch - there is a peaceful, standardised process for replacing the leadership and giving someone else (hopefully someone better) a go.

Whereas in China, if the central leadership turns out to be bad actors who are grossly incompetent, there's no way of peacefully replacing them or the CCP without a full-on revolution or military coup taking place. And this means blood.

The Chinese model optimises for competency but doesn't provide an exit valve.

To ensure competency in current democracies, we have to ensure our education system and culture nurture competent people who wish to lead and that our voters (i.e. us). I don't think relying on voters to have good judgement regarding leaders or policies is workable. Most non-poor democracies encounter voter apathy and most voters vote irrationally. So it really does come down to electing the right people in the first place.

At this point, I'd also like to mention something else: how China is able to get things done quickly in terms of new policy rollouts and technological uptake within the country. The CCP, despite being constituted of a multitude of committees and rival factions, ultimately acts like a unified organism when it comes to big ticket items like the 5-year plans. Whereas over in the West, there is constant political bickering between rival parties to the point where the incoming government will undo actions taken by the previous government simply because.

Vitalik's lateral take on this is interesting: "bulldozer vs veritocracy political axis" (https://vitalik.ca/general/2021/12/19/bullveto.html). In a nutshell, sometimes it's good to have committee-based decision-making (veritocracy), and sometimes it's necessary to have unliteral decision-making (bulldozer) in order to break the mould and move society forward.

So it's not just a matter of ensuring competent people get to lead. It's also necessary for them to be able to plan for the long term and institute whatever policy changes are necessary to move the country forward.

We don't run businesses as democracies. Having competent leadership that is able to execute decisions without interference makes for a smoother ride for everyone. Yet somehow we insist on running our countries in the opposite direction.

Whether one has competent leadership is orthogonal to whether citizens can elect their leaders. Voters are irrational. So voting is, at best, about curbing the potential of bad actors.

Putting it all together, what we need is a system that satisfies the following requirements:

  1. Optimises for the highest level of competency in government.
  2. It provides an escape hatch mechanism for the public to peacefully replace bad government.
  3. Allow for the bulldozer approach when needed and the veritocracy approach when needed.

I don't yet have a concrete solution to the above problem, but I'm currently toying with the idea of a GovCo.

The government's political apparatus could operate like a business, with employees, departments, and department heads. The CEO would be the chief executive of the country, the deputy would be the deputy leader, etc and so on. Let's call this a GovCo.

People would be able to apply to work at GovCo at any position, though internal promotion would be preferred to nurture and reward talent and experience. Promotions would be based on performance as well as peer review. Those who wanted a career in government and were willing to do a good job would be rewarded meritocratically with better pay and opportunities. Restrictions could be placed on the top-level roles to optimise for top talent, e.g at least 6 years of government company experience is needed, etc.

GovCo's board of directors would be comprised of members of the public and would be elected by members of the public. If the public is unhappy with GovCo leadership, they can call for a reshuffle or the hiring of outsiders to shake things up. The board would represent the public on most matters except for foundational issues such as changing the constitution of the country or the general structure of GovCo.

Laws would be formulated within GovCo by the executive leadership and employees, but would need the approval of the board to be put into effect. The board would in effect be acting like the House of Lords in the UK - able to request modifications to laws but unable to craft them themselves.

The size of the board would be reflective of the number of regions, states, and localities within the country, similar to how Senate seats work in the American Congress. The board would face re-election once a year, and there would be a term limit of 5 terms (i.e 5 years) for any given board member to keep things fresh.

Local governments could replicate this structure with their own LocalCo, with members of the public as the board of directors. These LocalCos would be subsidiaries of GovCo.

So that's the rough model I have so far.

The best part of it is that pandering to voters is gone. There are no political parties. Although rivals will no doubt exist within the company, ultimately the GovCo will act as a unit.

Let's take this further. Could GovCos become country-agnostic?

In a given industry, competing companies have to work hard to survive. Market competition ensures badly performing companies eventually exit the market, and vice versa for well performing companies. This encourages companies to perform at their best and deliver results for their shareholders.

In the case of GovCo, the shareholders are the public. But right now, unlike a normal company, these shareholders cannot simply exit their holdings and take their money elsewhere unless they leave the country. This points to one of the fundamental problems with all national governments today:

Citizens of a given country cannot easily switch governments to ones that are better performing without leaving the country. Thus, any given national government has a "monopoly" in its national market and no competition, leading to poor results in the long run.

This, by the way, is partly why today's electoral democracies are good in that they at least allow for members of the national government to be replaced by "shareholders".

Let's split the board of GovCo into a separate pseudo-company called a BoardCo. BoardCo would still act as the oversight board for GovCo but would now have the power to replace GovCo with another GovCo. We could then have a market of GovCos that compete with each other for the chance to run different countries under the oversight of said countries' BoardCos.

This is akin to how football team managers rotate between teams. Or like career CEOs rotating between companies. We've just gone up a level to having professionally run GovCos that are able to go into a given country and get to work.

Over time, we'd have standards for measuring the performance of GovCos, and there would certainly be specialisations of GovCos focusing on different locales, etc. Perhaps a given GovCo could service multiple countries just like a consultancy would. If this can be made to work, we should expect to see more countries run much better. Perhaps we will one day have a SingaporeGovCo that many small countries can hire and do better with.

An interesting side note: the BoardCo + GovCo structure turns out to be similar to the DAO + Company structure in many established crypto projects. DAOs don't develop features and/or execute software; they simply vote to approve or disapprove a change. The companies developing the protocol are responsible for execution.

A lot can be said on this topic. I'm still thinking about possible models. But it's clear to me that we need to do better. I'm convinced that current democratic systems are not going to be enough to solve the big issues facing us in the world. We need to be willing to experiment and play with new governance models and allow for innovation in governance systems.

Or else we're doomed to fail.