Monday, December 5, 2016

Analysis of Italy’s 2016 Referendum: Beyond the Euro and the E.U.


The predominate axis of analysis in the wake of the Italian referendum in early December, 2016 centered on the euro, the federal currency of the European Union. For example, an article in The Wall Street Journal begins with the following: “Sunday’s referendum vote in Italy reinforced a widening split between the economics needed to sustain Europe’s common currency and the continent’s rising tide of populism.”[1] At the time, however, the populism in the E.U.’s states had more to do with immigration than the federal currency. Even so, analysts predicted that Italian parties antagonistic to the currency could be expected to benefit. Stephen Gallo at BMO Financial Group went so far as to claim, “Eurozone breakup risks are rising,” given “the political currents at work in the Eurozone.”[2] Although he makes a good observation in noting the lack of a political will in the States “to finish building the missing architecture of the single currency area”—implying that the underpinnings of the euro were inherently unstable—he overlooked the matter of the distribution of wealth, and in particular the element of fairness, which I submit is salient in the Italians’ ‘No’ vote as well as in the rising anti-establishment, or shall we say, anti-elite, populism of the day.
The constitutional changes proposed in the referendum were “aimed at streamlining lawmaking and boosting competitiveness”[3] Whereas The Wall Street Journal adds that the ‘No’ vote marked “a sobering start to a defining year ahead for the European Union,” I submit that the pro-business nature of the proposed changes is more salient.[4] Mateo Renzi, Italy’s prime minister who resigned after the vote, had argued in defense of the changes that Italy needed to be more competitive by making it easier for companies to do business there.[5] Translation: the changes would have enriched businesses in the State. To be sure, boosting the State’s economic output would have positively impacted the euro’s underlying stability as well as that of the Union itself. Even so, it is interesting to contrast the pro-business impact of the proposed reforms with the populist, or antiestablishment 5-Star Movement party’s platform’s proposed income guarantees for all Italians.[6] The contrast gets to the real meaning of populism—the populous, or people, as distinct from the mutual-reinforcing economic and political elites. In this light, the resounding 60% ‘No’ vote can be understood as a rejection of the mutual-reinforcing dynamic as well as the increasing concentration of wealth rather than as being primarily about the euro or even the E.U. If so, the question is whether such populism can concentrate enough power of its own to overcome the resistance/power of the financial and political elite. In other words, can populism result in a wholesale change in the political elite when so much money funnels in from the business world. This is a question for every republic, rather than just for E.U. states that use the euro currency.



1. Stephen Fidler, “Italy’s ‘No’ Opens Harrowing Year for EU,” The Wall Street Journal, December 5, 2016.
2. Jon Sindreu, “Euro Falls as Italian Reject Renzi’s Changes,” The Wall Street Journal, December 5, 2016.
3. Fidler, “Italy’s ‘No’.”
4. Ibid.
5. Ibid.
6. Ibid.

Young Japanese: An Early Verdict on Climate Change

Is the verdict in, and have we, mankind, lost our own self-inflicted climate battle? Is this what Japanese millennials were saying in 2016 when, according to a government survey, only 75 percent expressed interest in climate change, whereas close to 90 percent of the same age group (18-29) had expressed interest just a few years earlier?[1] Their intuition may have been the proverbial canary in the coal mine.
Midori Aoyagi, a principal researcher at the National Institute for Environmental Studies in Japan, reports that the young people in her focus groups “always felt a kind of hopelessness” toward their daily lives, their jobs, and social issues.[2] She suggests the pessimism might be “a result of having grown up during a prolonged period of economic stagnation known as the lost decades,” but this would not account for the drop from 90% to 75% in just a few years.[3] Interviews with Japanese aged 22 to 26 elicited a similar attitude. “These young people cited the huge scale and timeline of the problem, a feeling of powerlessness, silence from the media and preoccupation with more important issues.”[4] I want to unpack this revealing piece of evidence.
The huge scale and silence of the media, combined with the political power of the extant energy sector, whose financial benefits are grounded in the status quo, suggests that nothing short of sustained effort aimed at transitioning to clean energy could possibly suffice to obviate the worst of climate change in the decades to come. Not sensing such effort, as per the silence of the media, the young people may have intuited that their time would be more usefully spent on other societal problems, which still had a chance of being solved. To be sure, unforeseen technological developments could at least in theory still redeem the species in spite of its self-destructive urge for instant gratification. Yet without a hint of promise from the species' unique tool-making ability, the young people could not but sense a slipping away of the window for solving the climate-change problem. Indeed, because they could live to see the worst of climate change as it unfolds, the sense of hopelessness makes sense. So it is particularly telling for the rest of us that more of them were moving on to tackle other, more solvable societal problems.



[1] Tatiana Schlossberg, “Japan Is Obsessed with Climate Change. Young People Don’t Get It,” The New York Times, December 5, 2016.
[2] Ibid.
[3] Ibid.
[4] Ibid.

Friday, December 2, 2016

Business CEO’s Overstating Political Uncertainty in the United States


The impact on business of political uncertainty in countries that are seized by revolution can be substantial—so much so in fact that CEO’s and board directors are motivated to avoid the uncertainty itself. I submit that business analysts of political risk tend unwittingly to routinely overstate the uncertainty arising from incoming U.S. presidential administrations. If I am correct in this claim, CEO’s and board directors pay too much heed to political uncertainty itself in the making of major strategic decisions involving operations in the American context.
Although American culture welcomes and even encourages leaps in technological development capable of transforming daily life, another sort of change—one more subject to societal control—is tolerated only if made incrementally. Otherwise, the change is dubbed as radical, which is a charge made more out of fear than according to any objective measure. Clutching at the status quo unduly translates politically into the tyranny of the status quo as powers both in business and government that profit as things are hold back all but incremental change that does not threaten the current basis of benefits. The many points of access into the federal legislative and executive machinery enable the stultifying influence a virtual veto over proposals of serious, or “real,” change. Such change tends to be pulled back until only the tolerated incremental change remains.
A few examples reveal the pattern. In 1986, amid large budget deficits caused in part by the tax cuts of the early 80’s, Ronald Reagan pushed for a wholesale change in the federal income tax, ridding it of its myriad of deductions. Yet as the U.S. Senate debated the tax code, individual senators came forward with rationales for all of the major deductions. The “powers that be” were exercising their prerogatives to continue their respective benefits, which Reagan’s vision for change would put at risk. Business practitioners anxiously pointing to the political uncertainty of a revised tax code were in retrospect overreacting, and thus putting too much emphasis on the uncertainty itself.
In 2008, Barak Obama campaigned under the slogan of “real change.” After his election, political risk analysts were doubtlessly impressed with the sheer uncertainty latent in the very notion of real change. Yet when Congress was considering the Affordable Care Act, Obama dropped his proposal for a public option, which would be useful should private insurers leave the planned exchanges. The president gave into pressure from the insurance industry lobby, the members of which stood to lose benefits should Obama’s healthcare plan instantiate real change even just in terms of there being a public health-insurance option. The resulting law was incremental because the private health-insurance companies were still to be relied on. The anticipated uncertainty regarding the American health insurance system turned out to be much less. The analyses of CEO’s making strategic decisions based in part on avoiding the American context due to the uncertainty would have been distorted, and thus not optimal.
In 2016, when Donald Trump was elected president, the uncertainty in terms of political risk must have been palpable in corporate boardrooms. Trump’s proposal of a substantial tax, or tariff, on American companies that take advantage of lower labor-cost countries and import the resulting products back into the large U.S. domestic market undoubtedly stocked the uncertainty without much thinking-through of how political compromise could take its toll on the proposal as it moves through Congress. Similarly, fears of trade wars resulting from the proposed tariff may have been overblown. That American companies would be subject to the penalty means that foreign companies manufacturing outside of the U.S. and importing into the large domestic market would have a competitive advantage. Pressure from Chinese companies could mitigate the likelihood of a Chinese-stoked trade war even though the pulling out of American companies (i.e., the loss of some manufacturing plants) would have a detrimental impact on the Chinese economy. Of course, such a scenario assumes that the actual tariff is enough to motivate American CEO’s to return their manufacturing to America; the political compromise that may be needed to pass such a tariff might reduce it to an insufficient level and thus effectively discredit the very idea of using public policy to alter the financial calculus of American companies such that they have a financial incentive to return voluntarily in line with maximizing profit.
The American preference for incremental over systemic change puts any genuinely new political proposal at risk of being shrunk to fit through the contours of the status quo, which is so dear to the vested interests. The uncertainty typically thought to exist in the advent of a new presidential administration tends to be overblown in retrospect. The American economy suffers from this bloated condition to the extent that CEO’s and corporate board directors move operations away from the geographically delimited hyper-uncertainty.

Modern Day Mercantilism: Donald Trump Intervenes at Carrier


The tension between the free-market philosophy and mercantilism (e.g., an industrial policy) has been longstanding. I contend that the philosophy of international business (or international economics) is flawed terms of how far comparative advantage is applied, even at the expense of full employment at the city or country level. The case of Carrier in Indiana points to the legitimacy of government intervention even at the expense of comparative advantage.
A mix of ominous threats from Donald Trump as U.S. President-Elect, and enticing financial incentives worth $7 million from Indiana kept roughly 1000 out of 2000 jobs at Carrier, a unit of United Technologies, from being transferred to Mexico. The company had expected to save $65 million by relocating not only the fan coil manufacturing lines, which would still go, but also the lines that build medium- and high-efficiency gas furnaces, which would now stay in Indiana.[1] Carrier’s management must have factored in the likelihood of the upcoming Trump Administration and Republican Congress imposing steep tariffs on imports entering the United States from American companies that have moved production to other countries in order to take advantage of lower wages and comparatively lax regulations. In fact, Trump’s intervention with Carrier undoubtedly had the benefit of reminding other such company managements of the possible additional cost to manufacturing abroad and yet still having access to the huge American domestic market via importing (a tariff would make specific-company interventions unnecessary). So, the single-minded maximizing-profit calculus notwithstanding, we can understand why Carrier’s management agreed to take a bit—albeit just a bit—of a financial hit. “Every penny counts, but if we step back and I’m looking at earnings of $6.60 per share this year, 2 cents is an easy concession if the president-elect listens to some of the company’s bigger concerns,” noted Howard Rubel, a senior equity analyst at Jefferies.[2] The 2 cent per share reduction could in fact be offset (and more) by the possible redressing of such “bigger concerns,” especially if the company and its workers make politically strategic campaign contributions.
Unfortunately, pressures on company managements to focus on quarterly stock prices mean that assuming even a long-term profit-metric can be difficult. The allure of producing abroad and importing products back into the U.S. would likely continue; hence the rationale for a tariff. Lest it be feared that trade wars might be triggered, the companies subject to the tariff would be American rather than Chinese or European. Regarding the free-market alternative, the comparative-advantage philosophy of international business omits the practical need for manufacturing and low-skilled jobs in virtually any geographical area. Not everyone in a given population can be retrained to work in computer-tech industries, or educated to become CPAs, physicians, and lawyers. To say the U.S. (or E.U.) is a knowledge economy leaves a lot of people out—people who could be expected to be dependent on government benefits to live. Therefore, a mercantile government policy oriented to retaining a manufacturing sector makes sense for any government. The free-market logic applied to international economics is flawed because a sizable proportion of a country’s workforce cannot (or will not) be part of a “knowledge economy,” for instance. It also follows that not everyone is going to participate in a “manufacturing economy.” Geographically, economic diversity reflects the diverse makeup of the labor force. Put academically, the logic of international economics has its limits, or drawbacks, and so international political economy is a better, more realistic, approach.



[1] Nelson Schwartz, “Trump Sealed Carrier Deal with Mix of Threat and Incentives,” The New York Times, December 1, 2016.
[2] Ibid.

Wednesday, November 30, 2016

Springtime for China's Coal Industry: Is China Too Big to Swerve Enough to Avoid the Climatic Iceberg Ahead?


Even as Chinese government officials “called on the United States to recognize established science and to work with other countries to reduce dependence on dirty fuels like coal and oil,” China was “scrambling to mine and burn more coal.”[1] Notably, short-terms concerns were dominant. “A lack of stockpiles and worries about electricity blackouts” were “spurring Chinese officials to reverse curbs that [had] once helped reduce coal production.”[2] By December, 2016, coal mines were reopening, and with them coal miners were returning to work. The renewed activity would of course make it more difficult for China and the world to meet CO2 emissions targets, “as Chinese coal is the world’s largest single source of carbon emissions from human activities.”[3] In fact, China’s use of coal results in more emissions “than all the oil, coal, and gas consumed in the United States.”[4] The implications for being able to contain the global rise in temperature within 2 degrees C are not bright from this real-life scenario. It is important, therefore, to grasp the underlying dynamics behind China’s plight.
Even as 2014 had brought “the autumn of coal,” and 2015 and early 2016 instantiated the winter, the new spring later in 2016 came during what would be the hottest year for the planet since record-keeping began. The cyclical pattern evinced here does not fit with the maximizing nature of global warming.
The Chinese government was not adjusting fast enough, given the climatic toll even by the closing months of 2016. The sheer scale involved is likely the main culprit—China’s population being over a billion. Despite ambitious hydroelectric-dam projects and “the world’s largest program to install solar panels and build wind turbines,” coal still produced almost three-quarters of the country’s electricity.[5] Even with conservation measures on the use of electricity—which, by the way, are practically non-existent in sunbelt republics like Florida and Arizona—a billion people must necessarily consume a lot of energy cumulatively. Even with the one-child policy, the sheer size of China’s population was something the government could not ignore.
The dynamic I have in mind is that of the Titanic, the largest ship of its day (1912) and yet with a rudder that was too small, given the size of the ship, to turn it sufficiently in time to avoid the upcoming iceberg. By analogy, a climatic “iceberg” was approaching Earth so fast and was so close even by the end of 2016 that the governments of large, empire-scale, countries like China and India would need larger rudders in order to steer close enough to alternative energy sources to have even a chance of avoiding a collision with full-blown climate change. The culprit, in other words, lies not only in the proclivity of human nature to privilege instant gratification backed up by short-term politics and thinking; our ships of state are outmoded, given how large we’ve allowed our species to become. The problem is thus not in China’s rough transition from central-planning to a government-regulated free market.



[1] Keith Bradsher, “Despite Climate Vow, China Scrambles for Coal,” The New York Times, November 30, 2016.
[2] Ibid.
[3] Ibid.
[4] Ibid.
[5] Ibid.

Tuesday, November 22, 2016

The Courts Go After Gerrymandering: Deconstructing a Conflict-of-Interest


In the U.S., the boundaries of both federal (e.g., U.S. House of Representatives) and state legislative districts are redrawn every ten years after the census to “ensure that each district contains roughly the same number of people.”[1] Both major political parties in state legislatures “often remap districts to favor themselves, either by cramming opposition voters into a single district or by dividing them so they are the majority in fewer districts.”[2] I contend that a simple majority vote is problematic, given the irresistible temptation to redraw the districts for partisan advantage rather than merely to take account of changes in population.
By a 2-to-1 ruling, the U.S. District Court for the Western District of Wisconsin found in November, 2016 that the Wisconsin Assembly’s redrawing the legislative chamber’s districts was an unconstitutional partisan gerrymander favoring the Republican Party. U.S. courts had struck down gerrymandering on racial grounds, but never on “grounds that they unfairly give advantage to a political party.”[3] For the first time, a court offered a clear mathematical formula for measuring partisanship in a district. The Court found that the legislature’s redrawing of its districts violated both the First Amendment and the Equal Protection Clause of the 14th Amendment because the remapping “aimed to deprive Democratic voters of their right to be represented.”[4] The motive here is problematic, for it puts partisan advantage above the duty to act for the public good by fairly adjusting for changes in population.
In other words, the ability of the party that controls a legislature to use the census-adjustment responsibility for private (i.e., party) ends puts the party in a conflict of interest. The party being in the majority of a state legislative chamber is sorely tempted to put partisan goals above the democratic aim of achieving fair districts. Democracy itself suffers so a majority can remain in the majority.
One solution to this conflict of interest is to require a 2/3rd majority (or majorities in both parties) to approve changes in the districts. The latter pertain to the entire legislative chamber, as part of its basis in representative democracy, so it is only fair that at least some of the minority party approves.
My main point here is that going by simple majority enables, or sets up, the conflict of interest. Given the overwhelming force of the partisan temptation, the conflict should be deconstructed. In fact, all institutional conflicts of interest that can reasonably be taken apart should be, due to how ongoing temptation plays out in human psychology/nature.



1. Michael Wines, “Judges Find Wisconsin Redistricting Unfairly Favored Republicans,” The New York Times, November 21, 2016.
2. Ibid.
3.  Ibid.
4. Ibid.

Sunday, November 20, 2016

The Electoral College: Beyond the Conventional Wisdom


The matter of how the U.S. President is to be selected was a tough nut for the delegates in the Constitutional Convention in 1787 to crack. Mason observed the following in convention, “In every Stage of the Question relative to the Executive, the difficulty of the subject and the diversity of the opinions concerning it have appeared.”[1] The alternative proposals centered around the Congress, State legislatures, the governors, the people, and electors designated for the specific purpose as the possible determiners. Although the delegates were men of considerable experience, their best judgments about how the alternatives would play out were subject to error as well as the confines of their times. In re-assessing the Electoral College, we could do worse than adjust those judgments and rid them of circumstances pertaining to them that no longer apply. For example, the Southern States no longer have slaves, so the question of whether those States would be disadvantaged by going with a popular vote no longer applies; the alternative of going with the popular vote nationwide no longer suffers from that once-intractable pickle. Yet lest we rush headlong into a popular vote without respect to the States, we are well advised not to dismiss the points made by the convention delegates, for we too are constrained by our times, and we may thus not be fully able to take into account points that have been forgotten.
 
Before turning to the views expressed at the convention, I briefly touch on the Electoral College. I discuss the apparent dichotomy between the College and popular vote, after which I discuss the relevance of federalism.
 
American citizens vote for slates of electors by state, and those electors then meet, again by state, to cast votes for the U.S. President. Because the electors are elected by popular vote, the dichotomy between the Electoral College and the popular vote is misleading. The question regarding the false dichotomy is actually whether to go with the popular vote by state or nationally. To be sure, electors in four states do not have to vote according to the popular vote in the state, and electors in the other states can vote contrary to that vote in those respective states but must pay a fine. The point lost on most Americans by the twenty-first century is that one of the original selling points of the Electoral College was that the electors could be a check on the momentary passions of the masses precisely by being able to vote contrary to the popular vote in electors’ respective states. Should the U.S. be attacked and the citizens have an emotional reaction to go to war, electors could say, in effect, “well, I’m not so sure we should go with the war hawk.” In short, the Electoral College is geared to protecting the best interests of the people even if they are blinded to it.
 
The Electoral College also gives some heed to the sovereignty retained by the States as members of the U.S. The U.S. Senate is the federal institution that represents the republics. In the College, the number of electors a State has equals the number of its U.S. senators and House representatives. Because this number is not by population and each State has two federal senators, less populated States have disproportionately more electors than the big States do. Besides the fear at the convention that the “big” States might pick the president either by electors or if by a national-level popular vote, the sovereignty retained even by the “small” (i.e., less populous) States warrants some role in the selection of the executive of the Union. To dismiss this point is to ignore what the U.S. is as a Union composed of semi-sovereign States. What I’m getting at here is that to dismiss these ongoing reasons for the Electoral College is to forget what the U.S. is (or are). When you no longer know what you are, you can be in real trouble when you act. Hence, it behooves us to take seriously the various points (and alternatives) discussed and debated in the convention. The answer may not be the Electoral College. In this case, the status quo is broken. In fact, the Electoral College has never performed as intended—most significantly in this regard as a check on “excess democracy” that can come with direct democracy even at the voting booth. Yet this does not necessarily mean that shifting from state popular votes to a national popular vote is wise. Considering the points raised by delegates in the federal convention, hidden downsides to a national popular vote can be seen, and this in turn may precipitate new ideas that are optimal. I turn now to the delegates in hopes that their wisdom might inform our public discourse on the topic.
 
Franklin, being quite elderly by the time of the convention, could afford to sit back above the debate and see the “big picture” in terms of democratic theory. “It seems to have been imagined by some that the returning to the mass of the people was degrading the magistrate. This he thought contrary to republican principles. In free Governments the rulers are the servants, and the people their superiors & sovereigns.”[2] The question of whether or not the people have what it takes to select a capable person of good character and standing for the presidency was debated at several points during the Convention. Referring to the federal executive, Morris urge, “He ought to be elected by the people at large. If the people should elect, there will never fail to prefer some man of distinguished character, or services; some man, if he might so speak, of continental reputation.”[3] Similarly, Madison said: “The people at large was . . . as likely as any that could be devised to produce an Executive Magistrate of distinguished Character. The people generally could only know & vote for some Citizen whose merits had rendered him an object of general attention & esteem.”[4] Already, these delegates were anticipating the expansion westward of the then-Thirteen-State Union. Morris and Madison were assuming that anyone attracting enough votes across a continent to win must be renowned, and thus distinguished of character or significant accomplishment.
 
Yet given the vast number of voters spread over a vast territory, or country, the sheer distance between the electorate and the candidates would mean the former could not really size up the latter. Mason “conceived it would be as unnatural to refer the choice of a proper character for chief Magistrate to the people, as it would, to refer a trial of colours to a blind man. The extent of the Country renders it impossible that the people can have the requisite capacity to judge of the respective pretensions of the Candidates.”[5] Lest it contended that the modern media closes in the distance, the media companies and their journalists and commentators have their own agendas and ideological biases, and the concentration of the media has enabled “groupthink,” wherein the public “airwaves” are unanimous in a judgment, even if very wrong as in the prediction of a near-certain Clinton landslide in 2016. Democracy at the empire-scale is not at all optimal.
 
Unfortunately, a relatively few “designing” men—or associations thereof—could take advantage of the sub-optimality. Gerry suggested that private associations not confined by State could take advantage of the problem. “A popular election in this case is radically vicious. The ignorance of the people would put it in the power of some one set of men dispersed through the Union & acting in Concert to delude them into any appointment.”[6] Such a “set of men” might in modern terms be a large corporation, or even an oligarchy. That is to say, large concentrations of private wealth could profit politically from the electorate being so large and dispersed.
 
That the U.S. was and is an empire not only in scale, but also in that it is made up of (early modern) “kingdom-level” polities (i.e., States) that differ culturally, just as the E.U.’s States do, presents additional problems for the popular election of the federal president. Sherman got at this when he said that “the people at large . . . will never be sufficiently informed of characters, and besides will never give a majority of votes to any one man. They will generally vote for some man in their own State, and the largest State will have the best chance for the appointment.”[7] The people cannot really get a sense of a candidate’s real character through the media—and almost the entire electorate could not possibly meet the candidates in person. Furthermore, the expanse of territory and the difficult cultures mitigate against a candidate being of such a reputation as to be acceptable in all of the States. In fact, the largest States in population could dominate the elections. To wit, Williamson claimed, “The principal objection [against] an election by the people seemed to be, the disadvantage under which it would place the smaller States.”[8] Pinkney got at the both points—that such a large, extended electorate could be easily manipulated and the electorates in the large States could dominate.  “An Election by the people being liable to the most obvious & striking objections. They will be led by a few active & designing men. The most populous States by combining in favor of the same individual will be able to carry their points.”[9] Williamson combined the “large State” problem with the extent of territory mitigating the chances of there arising a reputation of sufficient reach. “There are at present distinguished characters, who are known perhaps to almost every man. This will not always be the case. The people will be sure to vote for some man in their own State, and the largest State will be sure to succeed.”[10] In modern America, candidates would need only campaign along the crowded Northeast coast, the Bay Area in California, Southern California, and Chicago to get a majority of the popular vote. People in the rest of the States would be left out except for cases in which the election is close.
Dickenson had an interesting idea. Although he “leaned towards an election by the people which he regarded as the best & purest source” he surmised the greatest difficulty was “the partiality of the States to their respective Citizens. But, might not this very partiality be turned to a useful purpose. Let the people of each State chuse its best Citizen. The people will know the most eminent characters of their own States, and the people of different States will feel an emulation in selecting those of which they will have the greatest reason to be proud. Out of the thirteen names thus selected, an Executive Magistrate may be chosen either by the [National] Legislature, or by Electors appointed by it.”[11] What would keep the candidates from the largest States from winning election after election? 
Of all of those objections, I submit that the sheer size of the voting electorate—around 120 million in 2016—is the largest drawback of popular election. The problem is reflected in the extraordinarily long “campaign seasons”—16 months in the case of the 2016 presidential election—as candidates must campaign in what in Europe would be “country after country.” Even so, so very few voters can possibly have first-hand knowledge of even just one of the candidates that the electorate as a whole is left at the mercy of the concentrated media and the marketing-driven campaigns. The electorate in 1920 did not knew that Warren Harding had been a patient in a mental hospital five times, and Richard Nixon’s rather severe pathology only came to light after the Watergate scandal. For all the electorate knows, a candidate could be acting—even, as in Ronald Reagan’s case, be a professional actor.
 
We can expect the inordinate, self-invested influence of giant corporations and, moreover, the infamous “1 percent” because they know how (and have the means) to use the media to “steer” the public discourse and finance the candidates launching empire-scale campaigns. That the concentrated media companies are also large corporations does not reduce the risk of the onslaught of plutocracy by taking advantage of what the delegates sometimes called “excess democracy.” That the electorate can be so easily manipulated gets scant attention.
 
Thomas Jefferson and John Adams agreed in retirement that an educated and virtuous citizenry is essential for an ongoing republic. We the American electorate better educated at the very least in civics, the people could better fend for themselves against designing corporations and demagogues. Hence, Gerry pointed to a real problem: “The people are uninformed, and would be misled by a few designing men.”[12] He felt the problem so grave that the “popular mode of electing the chief Magistrate would certainly be the worst of all.”[13] We are dependent on the media and the candidates’ marketing campaigns. By in large, we see what the candidates and journalists want us to see. Hence, Mason observed, “It has been proposed that the election should be made by the people at large; that is that an act which ought to be performed by those who know most of Eminent characters, & qualifications, should be performed by those who know least.”[14] Mercer insisted that the “people can not [sic] know & judge of the characters of Candidates. The worst possible choice will be made.”[15] Doubtless this opinion would resonate with a considerable number of the electorate in 2016 of both parties.
 
Unfortunately, rarely do advocates of a nationwide popular vote take into account how grave those concerns were in the convention, and thus how many (but not all!) of the delegates felt about an empire-wide popular vote. It’s much more convenient to feel a sense of entitlement that throws caution to the wind. Hence the shared advice from Jefferson and Adams. So I think Morris got it backwards in saying, “It is said the people will be led by a few designed men. This might happen in a small district. It can never happen throughout the continent.”[16] In a small district (i.e., a small electorate), a larger proportional of the electorate have direct knowledge of the candidates, and so can dodge the “designing” ones. It follows that the relatively small number of electors in the Electoral College is within range of being able to “meet and greet” the candidates and their close friends (and detractors). Yet this assumes that the electors are independent not only of the majority of voters in the respective States, but also the political parties, and this has not been so since the College’s first day on the job.
 
The delegates at the convention considered other ways in which a relatively small number of people could select the federal president. Certainly having the Congress select would eliminate the problem of the selectors not being able to know (or get to know) the candidates. Additionally, the members of Congress could see to it that the candidate selected can execute the laws that the Congress legislates. After all, the delegates understood the purpose of the U.S. president to be “to carry into execution the [national] laws.”[17] According to Pinkney, “The Nat’l Legislature being most immediately interested in the laws made by themselves, will be most attentive to the choice of a fit man to carry them properly into execution.”[18] This could mean, however, that the legislature would be able to exercise control over the executive.
Hence Morris warned the other delegates, “If the Executive be chosen by the Nat’l Legislature, he will not be independent [of] it; and if not independent, usurpation & tyranny on the part of the Legislature will be the consequence.”[19] The check and balance that the separation of powers affords would be lost. As Morris explained, “the checking branch must have a personal interest in checking the other branch, one interest must be opposed to another interest. Vices as they exist, must be turned [against] each other.”[20] Hoping to be re-elected, or having to honor deals made with particular members of Congress in order to get elected in the first place, the president would not have a personal interest in checking the federal legislature even were it to over-reach at the expense of the liberties of the people. Hence, “A particular objection with [Wilson] against an absolute election by the [legislature] was that the [executive] in that case would be too dependent to stand the mediator between the intrigues & sinister views of the Representatives and the general liberties & interests of the people.”[21] Maintaining the liberties is of course the aim of the checks and balances in the separation of powers. Madison put the matter well. “If it be essential to the preservation of liberty that the [Legislative, Executive and] Judiciary powers be separate, it is essential to a maintenance of the separation, that they should be independent of each other. The Executive could not be independent of the Legislature, if dependent on the pleasure of that branch for a reappointment . . . a dependence of the Executive on the Legislature, would rending it the Executor as well as the maker of laws . . . then according to the observation of Montesquieu, tyrannical laws may be made that they may be executed in a tyrannical manner.”[22]
A second major problem with having Congress select the federal executive is that the choice could invite corruption. Morris predicted, “If the Legislature [i.e., the Congress] elect, it will be the work of intrigue, of cabal, and of faction; it will be like the election of a pope by a conclave of cardinals; real merit will rarely be the title to the appointment.”[23] According to Madison, “the candidate would intrigue with the Legislature, would derive his appointment from the predominant faction, and be apt to render his administration subservient to its views.”[24] Ingenuously, Morris flipped the argument back to the people deciding:  “The people of [the most populous] States cannot combine. If their [sic] be any combination it must be among their representatives in the Legislature.”[25]  Furthermore, “It is said the multitude will be uninformed. It is true they would be uninformed of what passed in the Legislative Conclave, if the election were to be made there; but they will not be uninformed of those great & illustrious characters which have merited their esteem & confidence.”[26] Morris could be right about a legislative conclave and yet wrong on the popular election if he did not take into account the future westward expansion of the Union across (and beyond!) the continent.
A third problem with having Congress select the president can be labeled an opportunity cost. Simply put, all the divisiveness of the contest for the high office could compromise the ability of legislators to work together on legislation. Of the “insuperable objections” to the Chief Magistrate being elected by the National Legislature,” Madison claimed that “the election of the Chief Magistrate would agitate & divide the legislature so much that the public interest would materially suffer by it. Public bodies are always apt to be thrown into contentions, but into more violent ones by such occasions than by any others.”[27] Just imagine the 2016 general election campaigns of Hillary Clinton and Donald Trump infecting Congress—what that would have done to the members of that institution!
 
Besides the popular vote and Congress, the delegates also debated whether state legislatures or governors should select the federal president. Such an approach enjoys the support of federal theory, especially as it was known at the time of the convention when federalism applied to international alliances such as the Netherlands, Switzerland, and Germany, which were had been considered empires in the Middle Ages. By the time of the convention, those polities had become nation-states equivalent to the Early Modern kingdoms such as the UK and France, and this might have been why the delegates believed putting a national government at the federal level would be workable.
 
Yet federal theory still maintained that the first level of polities in a federation selects the officials at the federal level. In the case of the U.S., this would mean that the State legislatures or executives would select the federal president, whereas the people would of course elect the State-level officials. So democracy itself would be maintained; elected State officials would select the federal president. Bringing in the bit about smaller electorates being closer to candidates for public office (i.e., at the local and State levels), the federal theory’s rationale can be understood to be the following: The people are more likely to get good people into the State-level offices, so the people can have confidence in those officials as selectors of the federal president. That the number of state officials—especially governors—is much less than the American electorate as a whole means that the problem of the large electorate is also avoided. To continue to have a federal system yet dismiss federal theory is like a person who acts as if she no longer knows who she is. Such a person is likely to get into trouble.
 
To be sure, leaving the decision to State legislatures or governors is not without pitfalls. Also, complicating the traditional federal theory is the delegates’ decision to add a directly-elected body of representatives to the federal level: The U.S. House of Representatives. The federal government would represent the people and the States—the latter being the members of the U.S. Senate, a body founded on international-law principles. As Elseworth explained, “We were partly national; partly federal. The proportional representation in the [U.S. House of Representatives] was conformable to the national principle & would secure the large States [against] the small. An equality of voices [in the U.S. Senate] was conformable to the federal principle and was necessary to secure the Small States [against] the large.”[28] By “federal” here is meant international. Hence, the equality of votes for each State in the U.S. Senate comes out of international law (e.g., alliances, and international organizations including the United Nations). This “partly national; partly federal” applied to the federal level is how the convention advanced federal theory. This advancement complicated matters in the convention. A State’s number of electors voting in the Electoral College, for example, equals the number of U.S. House representatives whose districts are within the State plus the number of federal senators, so the Electoral College was designed to take into account both bases of the federal legislature: the people and the States—or, in other words, the “partly national, partly federal” nature of the U.S. Government. Reducing the Electoral College to the nationwide popular vote would ignore the ongoing federal element. This could certainly happen if few voters are aware of the international component of the U.S. Government (e.g., a Union of semi-sovereign republics), and, moreover, of the balance therein.
 
Regarding the appointment of the National Executive by the States’ legislatures, Madison believed this option to be objectionable. “The Legislatures of the States had betrayed a strong propensity to a variety of pernicious measures. One object of the [National Legislature] was to [control] this propensity. One object of the [National] Executive, so far as it would have a negative on the laws, was to [control] the [National] Legislature, so far as it might be infected with a similar propensity. Refer the [appointment] of the [National] Executive to the State Legislatures, and this [controlling] purpose may be defeated. The Legislatures can & will act with some kind of regular plan, and will promote the [appointment] of a man who will not oppose himself to a favorite object. Should a majority of the Legislatures at the time of election have the same object, or different objects of the same kind, [the national] Executive would be rendered subservient to them.”[29] In hindsight, considering the extent of consolidation of power at the federal level, perhaps had the State legislatures selected the president the federal system itself would be more balanced today. Also, the State legislatures would not have been so left out—whereas in the E.U. they play a direct role at the federal level.
 
 
In the convention, Gerry “moved that the [federal] Executive be appointed by the Governours & Presidents of the States.”[30] What we moderns know as a governor is essentially a president at the State level. At the time of the convention, New Hampshire had a president. Gerry’s rationale is symmetrical, and thus interesting. “He urged the expediency of an appointment of the [federal] Executive by Electors to be chosen by the State Executives. The people of the States will then choose the 1st branch [i.e., the U.S. House of Representatives]: The legislatures of the States the 2nd branch of the National Legislature [i.e., the U.S. Senate, the senators of which were selected by the State legislatures until 1913], and the Executives of the States, the National Executive. This he thought would form a strong [attachment] in the States to the National System. The popular mode of electing the chief Magistrate would certainly be the worst of all.”[31] It might be added: from this perspective, having the people vote for the federal president does not make sense because it is out of step with the symmetry. The U.S. House of Representatives was intended to be the place for representative democracy at the federal level—like the European Parliament in the E.U. The U.S. Senate, like the European Council (and the Council of Ministers) was to represent the state governments, so they could protect their retained sovereign powers. It made sense to Gerry that the State executives would select the federal executive. But why through electors?
 
Madison provides the rationale: “An appointment by the State Executives, was liable among other objections to this insuperable one, that being standing bodies, they could & would be courted, and intrigued with by the Candidates, by their partizans, and by the Ministers of foreign powers.”[32] When Barak Obama resigned as a U.S Senator of Illinois to become the U.S. President, the governor of Illinois tried to sell the empty senate seat to the highest bidder. Gerry was doubtless worried that governors would sell their vote to the highest bidding candidate for president. Electors would provide some insulation, yet they too could be swayed.
 
We can see this from Williamson’s view on electors being chosen by state legislatures. “He had no great confidence in the Electors to be chosen for the special purpose. They would not be the most respectable citizens; but persons not occupied in the high offices of Govt. They would be liable to undue influence, which might the more readily be practised as some of them will probably be in appointment 6 or 8 months before the object of it comes on.”[33] Butler, on the other hand, thought “the Govt should not be made so complex & unwieldy as to disgust the States. This would be the case, if the election [should] be referred to the people. He liked best an election by Electors chosen by the Legislatures of the States.”[34] But it seems to me that the addition of electors only to elect the federal president makes the system more complex and unwieldly. The experience of the Electoral College quickly showed how easy it was for the major political parties to dominate the slates of electors per candidate; it isn’t even a question of corruption, and there is little chance that said electors could provide a check on the passions of the people.  
 
Hence Madison preferred popular election (i.e., nationwide popular vote). “The option before us then lay between an appointment by Electors chosen by the people—and an immediate appointment by the people. He thought the former mode free from many of the objections which had been urged [against] it, and greatly preferable to an appointment by the [national] Legislature. As the electors would be chosen for the occasion, would meet at once, & proceed immediately to an appointment, there would be very little opportunity for cabal, or corruption. . . . The remaining mode was an election by the people. . . With all its imperfections he liked this best.”[35] There being no political parties by the time of the convention in the U.S., Madison could not have foretold the fate of the electors at the hands of the parties, and yet he preferred election by the people anyway. Two difficulties he thought had weight. “The first arose from the disposition in the people to prefer a Citizen of their own State, and the disadvantage this [would] throw on the smaller States.”[36] The second difficulty “arose from the disproportion of qualified voters in the N. & S. States, and the disadvantages which this mode would throw on the latter.”[37] Only the first objection still exists, as candidates needing only a majority of the nationwide vote could treat many of the less-populated States as fly-over territory devoid of merit politically speaking. That those States, including their respective citizens, are also part of the Union—and more specifically part of the federal system—should give us pause as to the implications of Madison’s preference. Madison “thought too much stress was laid on the rank of the States as political societies.”[38]
 
Some delegates viewed the existing States as artificial political societies, and thus as unnecessary obstacles. Morris insisted that “State attachments, and State importance have been the bane of this Country.”[39] It is as if the States existed solely because their respective government officials did not want to lose their power. “Can we forget for whom we are forming a Government?” Wilson asked. “Is it for men, or for the imaginary beings called States?”[40] The States then existed, so in what sense would they have been imaginary? Furthermore, having territory even just on the scale of the thirteen States at the time, and more definitely across a continent, the United States must naturally contain much diversity in going from place to place. Madison pointed out that “the States were divided into different interests not by their difference in size, but by other circumstances.”[41] He points to climate, but we can add religion, political ideology, and industry as differing across large expanses of territory. It is natural, therefore, that political societies would emerge. Were there no such polities, the United States with only “one size fits all” centralized laws would suffer increasing political pressure building up from the unexpressed diversity that cannot but exist at such a scale as across (and beyond) a continent. In other words, one size does not fit all where the size of the polity is so large that there must be significant ideological/cultural differences from region to region.
 
One of the main benefits of a federal system is in fact that it enables the political expression of the diversity that is necessary in an empire-scale country or alliance. The delegates viewed the U.S. in itself as an empire. Morris referred to “the dignity and splendor of the American Empire” and even insisted that any person deserving the presidency must be such that his character is “proclaimed by fame throughout the Empire.”[42] Ghorum, too, referred to the U.S. as “the Empire.”[43] At the time, empires were known to consist of kingdoms; hence an empire is inherently diverse (i.e., the kingdoms differing from each other).  Hence the fit of federalism especially for empires.
 
Because of the diversity from “kingdom” to “kingdom,” it follows that political dynamics must exist at the empire-level government that do not exist at the State level. Reducing the selection of the federal president to nationwide popular vote effectively ignores this distinction and treats the office as if it were on the State level. To treat the U.S. itself as if it were like one of its States is to commit a category mistake in logic. Williamson insisted, for example, that “the case is different here from what it is in England; where there is a sameness of interests throughout the Kingdom.”[44] A kingdom may be homogenous, whereas an empire is of such size that internal heterogeneity exists geographically and must be accommodated. Otherwise, political pressure naturally builds up and the empire eventually splits apart.  So the injustice that some delegates, including Madison, saw in conciliating the smaller States and therefore a minority of the U.S. population by not going with the nationwide popular vote can be understood and even justified by reference to the U.S. as an empire necessarily composed of different States, each of which needed to retain some sovereignty to accommodate its distinctive features.[45] As Mason put it, “The United States will have a qualified sovereignty only. The individual States will retain a part of the Sovereignty.”[46] The Electoral College was meant in part to reflect this point, which is in turn based on the belief that the U.S. even then constituted an empire. Just because the College never worked as intended or designed does not mean the fundamentals on which it is based are faulty—that is, what the United States are (or is). To wit, Elseworth noted, “the U.S. are sovereign on their side of the line dividing the jurisdictions—the States on the other—each ought to have power to defend their respective Sovereignties.”[47] Consolidate the sovereignties at the federal level and the empire has lost its way of accommodating political pressure naturally coming from within any empire.
 
I wish to make three points in conclusion. First, the matter of whether to retain the Electoral College, which reflects popular vote at the State level, or go with a nationwide popular vote is complex. Adding to the difficulty is this very dichotomy, which is false both in the sense that popular vote and the Electoral College are mutually exclusive and that no viable alternatives exist. The debates in the Constitutional Convention attest that alternatives do exist, and that some of them may fit better the nature of a federal system than either a nationwide popular vote or the Electoral College.
 
To be sure, the debates also tell us that no alternative is salvific. Alternatives beyond those debated in 1787 may be needed. In fact, this essay is geared to fostering such creativity, which the debates can enrich and keep grounded. Perhaps one possible useful alternative—one not considered by the delegates—is the way Germany selects its federal president. All representatives in the federal Budestag are joined for the purpose by an equal number of delegates chosen by the regional governments. In this way, both the regional governments and the federal legislature have a say. Such balance is good for a federal system. This method could be adjusted, such as by having a majority of the governors of the American States and a majority of representatives of the U.S. House of Representatives both agree on a person.
 
Finally, the experience of the Electoral College tells us that compromise is not always the best option; the College never worked as intended—as a check on the passions of the people. Even just having electors specifically for the purpose of elected the federal president adds complexity that may be unnecessary. Rather than proceeding from a political compromise (or, even worse, a partisan desire for nationwide popular vote or a desire for tradition for its own sake), distinct alternatives can be formulated and debated without losing the arguments made in the Constitutional Convention. Both as regards the length of the presidential campaign “season” and the lack of a sustained focus on public policies even in the so-called “debates,” the process is clearly broken. When the nationwide popular vote favors one of the candidates and the Electoral College favors the other, the vulnerability of the method becomes particularly transparent. Once the status quo has been found to be broken, the question becomes one of which alternative should be selected. I submit that considerable attention should be placed on the formulation of such alternatives, taking account of the delegates’ respective arguments—some of which have turned out to be more valid than others—rather than dismissing them in favor of a media-driven (and constrained) public discourse that is unrooted and without (historical) context.   

 



[1] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 370.
[2] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 371.
[3]  James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 306.
[4] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 327.
[5] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 308-9.
[6] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 368.
[7] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 306.
[8] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 368.
[9] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 307.
[10] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 309.
[11] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 368-69.
[12] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 327.
[13] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 327.
[14] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 370.
[15] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 405.
[16] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 307-8.
[17] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 310.
[18] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 307.
[19] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 308.
[20] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 233.
[21] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 307.
[22] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 311.
[23]  James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 306.
[24] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 364.
[25] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 307-8.
[26] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 308.
[27] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 363.
[28] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 218.
[29] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 364.
[30] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 363.
[31] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 327.
[32] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 364-65.
[33] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 329.
[34] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 366.
[35] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 365.
[36] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 365.
[37] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 365.
[38] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 213.
[39] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 241.
[40] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 221.
[41] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 224.
[42] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 255, 324.
[43] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 321.
[44] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 357.
[45] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 239.
[46] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 491.
[47] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 493.