Haggard and Noble: Power politics

Haggard and Noble. 2000. Power politics: Elections and electricity regulation in Taiwan. In Presidents, Parliaments, and Policy, eds. Haggard and McCubbins.

MAIN IDEA

Like Cohen, McCubbins, and Rosenbluth (1995), Haggard and Noble argue that institutions affect regulatory policy. The authors refer primarily to "separation of power and purpose," but their concept is essentially the same as Cohen et al's: veto points. They illustrate their argument by following Taiwan's regulation of electricity (Y) through three periods in which X (degree of separation, i.e. number of veto players) varies: early authoritarianism (KMT dominant but subject to US pressure), consolidated authoritarianism (a single veto gate--KMT--with a long time horizon), and democracy (many veto gates).

HYPOTHESIS:

The hypothesis resembles Cohen et al's. As the number of veto gates increases,

• the ability of the government to approve new plant construction declines, thus the CREDIBILITY of promises to do so falls.
• the ability of the government to give key supporters better electric rates declines, thus the COHERENCE of policy increases

MAIN FINDINGS

There are many findings, but the two main conclusions about the effects of democracy (i.e. more veto players) closely mirror Cohen et al's:

1. It's harder to build new plants when more veto players can prevent it. This has had two results:

• There is less excess capacity than there used to be (since demand has grown faster than supply)
• Thus, Taiwan has been forced to allow independent power providers to compete with Taipower

1. It's harder to buy off adversely affected groups (with side payments) when there are more veto players, since there are too many affected groups with a say.
2. Democratization has led to the creation of more oversight mechanisms, which makes it easier for legislators and interest groups to participate in rate-setting.

KEY IMPLICATIONS FOR THEORY:

1. If external actors can exert credible threats (e.g. US threatening to stop sending aid), then they can constrain executive discretion
2. Democratization may help or hinder efficiency. It helps by reducing the influence of cronies (sounds like Becker: the most efficient rents possible). It can hinder when candidate-centered electoral rules open so many veto gates that no new projects can be approved.

AUTHORITARIAN TIMES

Immediately after the war, the KMT was dominant, albeit with some internal factions. Chang Kai-shek moved quickly to consolidate his personal power, banning opposition parties and such. However, Taiwan was heavily dependent on foreign aid (from the US), especially in rebuilding (electricity) infrastructure. Thus, although the KMT wanted to favor state-owned industries (and it did, because there were no institutional incentives to heed rural or commercial constituencies), the US had a veto over regulatory policy (since it could cancel funding). THUS, the US forced the KMT to abandon its goal of cheap power for key supporters and instead charge enough to eventually make its electric utilities self-sufficient (i.e. the US made them raise rates high enough to fund future investment, so the US could quit sending aid).

As aid was reduced, the KMT might have reverted to its old ways--BUT the successful export-led growth strategy and increasing electrical shortages made it worth KMT's while to ensure continued building of new power plants. Moreover, Taipower's newfound profitability could serve other political ends. Thus, it became rational for KMT to continue this strategy.

TRANSITION TO DEMOCRACY

The transition to democracy involved adopting the single-nontransferrable vote (like in Japan), creating strong incentives for candidate-centered politics. Thus, the shift to democracy meant a shift FROM a strongly centralized policy with autonomy from many interest groups TO a democratic system that gives candidates strong incentives to build up an independent base--i.e. to listen to interest groups.

Legislative and electoral competition meant that legislators would use influence to prevent new power plants from being built (e.g. for environmental reasons). This decreased investment in utilities, thus reducing electrical capacity (as demand continued to grow). Although the KMT retained a legislative majority, it was unable to push through new plant legislation (since many KMT legislators would oppose the party line). In one case, Taipower was able to win approval only by paying millions to the communities around the chosen site.