In his article, ‘The Decay of American Political Institutions’, political scientist Francis Fukuyama coined the term “vetocracy” to explain why the American political system collapsed. He used the term to describe today’s political reality, where checks and balances, originally designed to prevent the executive from becoming too strong, are involved in a grid-locked decision-making system in which Miscellaneous persons have the power to stop the implementation of public policies by exercising their veto only.
Ironically, Fukuyama’s veto-based system was initially introduced to prevent an individual (or small group of individuals acting together) from becoming powerful enough to act without oversight or accountability. However, in today’s polarized political environment, the veto is more frequently used than to make a political statement, rather than being used as a legitimate tool of governance. According to Fukuyama, this is the reason why in America today, some powerful interest groups have been able to block the implementation of various policies favoring the majority of the population.
When we use this lens to evaluate governance systems, it becomes clear that these concepts occupy two different ends of the same spectrum. At one extreme is autocracy, a system of governance in which individuals can make important decisions without permission, even if doing so is potentially risky and disruptive. At the other end is Fukuyama’s “vetocracy”, where any implementation of a new policy requires the signatures of a large number of diverse actors, any one of whom alone can prevent it from taking effect.
In a recent article, the creator of the Ethereum blockchain, Vitalik Buterin, used this formulation to analyze governance systems in the digital world. He pointed out that while in the physical world, at present, there can be too much vetocracy, with the digital realm full of autocracy. They argue that this is why technology platforms are able to eliminate such widespread cross-sectoral disruption, none of which would have been possible under vetocratic conditions.
However, Vitalik believes that once the status quo is disrupted, it is important to ensure that autocratic processes are replaced by vetocratic systems in order to maintain trust in the system. Failure to do so will result in technology platforms becoming so powerful that they can operate without monitoring. He believes this is why blockchain-based systems such as DAOs (Decentralized Autonomous Organizations) that enable decentralized governance of digital projects have grown in popularity.
Over the past decade, India has seen its own unique brand of digital disruption. We have built layers of digital infrastructure for public goods, starting with identity and payments and, more recently, extending to data-driven decision making and unbundled commerce. If we are to evaluate the success of these measures, we need look no further than the Unified Payments Interface (UPI), which currently handles over 3 billion transactions a month.
The ubiquitous adoption of this infrastructure is largely because we took advantage of the unfettered inflexibility inherent in the code to convince legacy institutions to adapt their systems to the specifications of this new infrastructure. That said, rolling out basic infrastructure is the first step. As these systems become more widely used, new features and products need to be added in response to the demands of the evolving (and maturing) market.
When we have to decide which features should be included (and, more importantly, what not), we won’t be able to use the same autocratic approach we used at launch. There are now a large number of participants who have a real stake in the ecosystem, and any such decision must be appropriately inclusive, taking into account the concerns and misconceptions of each of them. Unilateral (autocratic) action will destroy trust in the entire system. Also, if we create a purely vetocratic regime, there is a risk that we will be caught in the kind of stagnation that is currently plaguing the US government.
We need to find an optimal balance that ensures that the system does not fail as some actors can do uncontrollably bad things on the one hand, and also prevent decisions in the interest of the entire ecosystem from being held hostage. Some persons who exercise veto over others. We need to give votecratic assurances that critical infrastructure cannot be occupied by a privileged few, but at the same time, the market needs to be reassured that innovation will not be sacrificed at the altar of consensus.
One way to address these concerns would be to implement vetocratic procedures to protect the institutional core; i.e. the central principles that create trust. In the context of our data empowerment and protection architecture, this may relate to the principles of personal empowerment and privacy by design that are at the core of its framework. But once we have achieved this central objective, the rest of governance processes must be relaxed enough to ensure that innovation is not compromised.
India’s digital public infrastructure is universally well regarded. It is important that the governance system that sustains them should be equally strong. And that would come down to achieving the right balance.
Rahul Mathan is a partner in Trilegal and also has a podcast called Ex Machina. His twitter handle @matthan . Is
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