In his article, ‘The Decay of American Political Institutions’, political scientist Francis Fukuyama coined the term “vetocracy” to explain why the American political system was broken. He used the term to describe the political reality today, where the checks and balances originally designed to keep the executive from growing too strong have ossified into a grid-locked decision-making system in which diverse individuals have the power to prevent the implementation of public policies by simply exercising their veto.
The irony is that the veto-based systems of checks and balances Fukuyama refers to were initially introduced to prevent an individual (or small group of individuals acting together) from becoming so powerful as to operate without oversight or accountability. However, in today’s polarized political environment, instead of being used as a legitimate tool of governance, vetoes are used more often than not to make political statements. This, according to Fukuyama, is why in America today, a few powerful interest groups are able to prevent the implementation of various policies that the vast majority of the populace are in favour of.
When we use this lens to evaluate systems of governance, it becomes obvious that these concepts occupy two different ends of the same spectrum. At one extreme is autocracy, a system of governance in which individuals can execute important decisions without asking for permission, even if doing so could be potentially risky and disruptive. At the other end is Fukuyama’s “vetocracy”, where any implementation of a new policy requires the sign-off of a large number of diverse actors, any one of whom could single-handedly prevent it from coming into effect.
In a recent article, Vitalik Buterin, creator of the Ethereum blockchain, used this formulation to analyse governance systems in the digital world. He pointed out that while the physical world might, at present, have too much vetocracy, the digital sphere is rife with autocracy. This, he argues, is the reason why technology platforms have been able to wreak such broad cross-sectoral disruption, none of which would have been possible under vetocratic circumstances.
However, Vitalik believes that once the status quo has been disrupted, it is important to ensure that autocratic processes are supplanted by vetocratic systems so that trust in the system can be retained. Failure to do so would result in technology platforms becoming so powerful that they will be able to operate without oversight. This, he believes, is the reason why blockchain-based systems like DAOs (decentralized autonomous organizations) that enable decentralized governance of digital projects have grown in popularity.
Over the past decade, India has witnessed its own unique brand of digital disruption. We’ve built layers of digital infrastructure for public goods, starting with identity and payments and extending, most recently, to data-driven decision making and unbundled commerce. If we have to evaluate the success of these measures, we need look no further than the Unified Payment Interface (UPI) that currently clocks in excess of 3 billion transactions a month.
The ubiquitous adoption of this foundational infrastructure is largely due to the way we leveraged the autocratic inflexibility inherent in code to convince legacy institutions to alter their systems to conform to this new infrastructure’s specifications. That said, rolling out foundational infrastructure is just the first step. As these systems become more widely used, they need to evolve, adding new features and products in response to the demands of an evolving (and maturing) market.
When we have to decide what features should be included (and, more importantly, what should not), we will not 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 misgivings that each of them may have. Unilateral (autocratic) action will erode faith in the system as a whole. At the same time, if we build a purely vetocratic governance system, there is a risk that we will get mired in the sort of stagnation that currently ails the US government.
What we need to do is find an optimal balance that ensures that the system doesn’t fail because a few actors can do bad things unchecked, on one hand, and also prevents decisions in the interests of the entire ecosystem from being held hostage by a few individuals who wield a veto, on the other. We need to offer the vetocratic assurance that vital infrastructure cannot be captured by a privileged few, but at the same time, need to assure the market that innovation will not sacrificed at the altar of consensus.
One way to address these concerns would be to put in place vetocratic processes to protect the institutional core; that is, the central principles that engender trust. In the context of our Data Empowerment and Protection Architecture, this might relate to the principles of individual empowerment and privacy by design that are at the core of its framework. But after we have achieved this central objective, the rest of the governance processes should 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 systems that sustain them should be equally robust. And that will come down to achieving that fine balance.
Rahul Matthan is a partner at Trilegal and also has a podcast by the name Ex Machina. His Twitter handle is @matthan
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