PRESIDENTS, PARLIAMENTS, AND POLICY Advocates of parliamentary rule have been highly critical of presidentialism for dividing powers and providing the opportunity for gridlock between branches. Fixed executive terms can saddle publics with ineffectual leaders who are not easily removed. Yet the great theorists of presidential rule, beginning with the Federalists, saw very different qualities in the same institutions: a desirable combination of strong leadership with checks on executive discretion. These diverse assessments arise because we have surprisingly little comparative work on how presidential democracies function. The introductory essays in this volume lay the theoretical groundwork for such comparative analysis. Drawing on detailed cases of economic policy making in Asia, Latin America, and Central Europe, this book shows the diversity of presidential systems and isolates the effects of presidentialism from other factors that influence public policy, such as party systems. In doing so, it casts doubt on the critique of presidential rule and underscores the continuing vitality of this particular form of democracy. Stephan Haggard is a professor at the University of California, San Diego Graduate School of International Relations and Pacific Studies. He is the author of Pathways from the Periphery: The Political Economy of Growth in the Newly Industrializing Countries, Developing Nations and the Politics of Global Integration, and The Political Economy of the Asian Financial Crisis and coauthor with Robert Kaufman of The Political Economy of Democratic Transitions. Mathew McCubbins is a professor of Political Science at the University of California, San Diego. He is coauthor of The Democratic Dilemma, Legislative Leviathan, and The Logic of Delegation and has coedited various books including Elements of Reason, The Origins of Liberty: Structure and Policy in Japan and the United States, and Congress: Structure and Policy. Professor McCubbins is the editor of the journal of Law, Economics, and Organization.
POLITICAL ECONOMY OF INSTITUTIONS AND DECISIONS Series Editors Randall Calvert, University of Rochester, New York Thrarinn Eggertsson, Columbia University and University of Iceland Founding Editors James E. Alt, Harvard University Douglass C. North, Washington University of St. Louis Other books in the series Alesina and Howard Rosenthal, Partisan Politics, Divided Government, and the Economy Lee J. Alston, Thrainn Eggertsson, and Douglass C. North, eds., Empirical Studies in Institutional Change Lee J. Alston and Joseph P. Ferrie, Southern Paternalism and the Rise of the American Welfare State: Economics, Politics, and Institutions, 1865-1965 James E. Alt and Kenneth Shepsle, eds., Perspectives on Positive Political Economy Jeffrey S. Banks and Eric A. Hanushek, eds., Modern Political Economy: Old Topics, New Directions Yoram Barzel, Economic Analysis of Property Rights, Second Edition Robert Bates, Beyond the Miracle of the Market: The Political Economy of Agrarian Development in Kenya Peter Cowhey and Mathew McCubbins, eds., Structure and Policy in Japan and the United States Gary W. Cox, The Efficient Secret: The Cabinet and the Development of Political Parties in Victorian England Gary W. Cox, Making Votes Count: Strategic Coordination in the World's Electoral System Jean Ensminger, Making a Market: The Institutional Transformation of an African Society Kathryn Firmin-Sellers, The Transformation of Property Rights in the Gold Coast: An Empirical Analysis Applying Rational Choice Theory Clark C. Gibson, Politics and Poachers: The Political Economy of Wildlife Policy in Africa Ron Harris, The Legal Framework of Business Organization: England 1720-1844 Continued on page following index
PRESIDENTS, PARLIAMENTS, AND POLICY Edited by STEPHAN HAGGARD University of California, San Diego MATHEW D. MCCUBBINS University of California, San Diego CAMBRIDGE UNIVERSITY PRESS
cambridge university press Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo, Delhi, Tokyo, Mexico City Cambridge University Press The Edinburgh Building, Cambridge CB2 8RU, UK Published in the United States of America by Cambridge University Press, New York Information on this title: /9780521773041 Stephan Haggard and Mathew D. McCubbins 2001 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 2001 A catalogue record for this publication is available from the British Library Library of Congress cataloguing in publication data Presidents parliaments and policy / edited by Stephan Haggard Mathew D. McCubbins. p. cm. (Political economy of institutions and decisions) Includes bibliographical references. isbn 0-521-77304-0 1. Presidents. 2. Comparative government. 3. Economic policy. I. Haggard, Stephan. II. McCubbins, Mathew D. (Mathew Daniel) 1956 III. Series. jf255.p75 2000 330.9 dc21 00-029247 isbn 978-0-521-77304-1 Hardback isbn 978-0-521-77485-7 Paperback Cambridge University Press has no responsibility for the persistence or accuracy of URLs for external or third-party internet websites referred to in this publication, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate. Information regarding prices, travel timetables, and other factual information given in this work is correct at the time of first printing but Cambridge University Press does not guarantee the accuracy of such information thereafter.
Contents Tables and Figures Contributors Acknowledgments page ix xiii xv 1 Introduction: Political Institutions and the i Determinants of Public Policy STEPHAN HAGGARD AND MATHEW D. MCCUBBINS Part I Theory 2 The Institutional Determinants of Economic Policy 21 Outcomes GARY W. COX AND MATHEW D. MCCUBBINS 3 Institutions and Public Policy in Presidential Systems 64 MATTHEW SOBERG SHUGART AND STEPHAN HAGGARD Part II Budgetary Policy Cases 4 Budget Procedure and Fiscal Restraint in 105 Posttransition Chile LISA BALDEZ AND JOHN M. CAREY 5 Political Institutions and Public Policy in Argentina: 149 An Overview of the Formation and Execution of the National Budget MARK P. JONES 6 Democracy and Deficits in Taiwan: The Politics of 183 Fiscal Policy 1986-1996 TUN-JEN CHENG AND STEPHAN HAGGARD Vll
Contents Part III Regulatory Policy Cases 7 Political Institutions and Economic Development: 229 The Case of Electric Utility Regulation in Argentina and Chile WILLIAM B. HELLER AND MATHEW D. MCCUBBINS 8 Power Politics: Elections and Electricity Regulation 256 in Taiwan STEPHAN HAGGARD AND GREGORY W. NOBLE 9 Privatization in Transition Economies: Politics as 291 Usual? PHILIP KEEFER AND MARY SHIRLEY 10 Conclusion: Policy Making in Presidential Systems 319 STEPHAN HAGGARD, MATHEW D. MCCUBBINS, AND MATTHEW SOBERG SHUGART References 325 Index 351 vin
Tables and Figures TABLES i.i Combinations of Separation of Purpose and Power page 4 2.1 Institutional Rules and Policy Authority 34 2.2 Electoral Rules and Their Party System Effects 44 2.3 Power, Purpose, and Decisiveness 61 3.1 Constitutional Powers of Presidents over Legislation: 79 Argentina, Chile, and Taiwan 3.2 An Index of Presidential Powers over Legislation 80 3.3 An Index of Institutional Factors Favoring Unity or 92 Separation of Purpose 3.4 Comparison of Presidential Systems in Two 98 Dimensions 4.1 Deficits/Surpluses in Latin American Democracies: 106 1985-1996 4.2 Distribution of Seats Across Coalitions in Chilean 119 Congress 4.3 Total Appropriations and Defense Appropriations 137 4.4 The Impact of Proposed Cuts to Women's and Youth 145 Programs in the 1996 Budget 5.1 Population and Representation in the Argentine 154 Congress: 1992-1995 5.2 Actual Composition of the Argentine Congress by 156 Party: 1996 5.3 Composition of the Chamber and Senate Budget and 157 Finance Committees by Party: 1996 5.4 Percentage of Seats Held in the Chamber of Deputies 171 by Party: 1983-1997 IX
Tables and Figures 5.5 The Predicted Impact of President's Party on 177 Transfers 5.6 Determinants of Federal Government Transfers 178 During the Alfonsin Presidency: 19 8 5-19 8 8 5.7 Determinants of Federal Government Transfers 179 During Menem Presidency: 1990-1996 6.1 Fiscal Policy in Taiwan: 1980-1995 184 6.2 Central Government Expenditures: Shares by Broad 185 Category (%) 6.3 Central Government Budget Bill: Expenditures by 186 Functional Category (% change from previous year) 6.4 National-level Election Results: 1986-1996 198 7.1 Preprivatization Rate Ratios by Consumption 241 Category (SEGBA) 7.2 Total Electric Energy Consumption in Argentina 241 7.3 SEGBA Electricity Sales (MWh) 241 7.4 Postprivatization Annual Profits, Argentina 242 (EDENOR) 7.5 Postprivatization Electricity Tariffs, Argentina 244 (EDENOR) 7.6 Argentine Tariff Structure: 1988-1992 (US$/kWh) 246 7.7 Average Electrical Energy Prices in Chile (US$ cent/ 248 kwh) 7.8 Chile: Average Electricity Prices (US$ cent/kwh) and 249 ENDESA Profits: 19 8 2-1990 7.^ Electricity Generation, Chile (thousands of kwh) 253 8.1 Taipower Preferential Rates 262 8.2 Cost of Service by Class of Customer: 1978-1981 272 8.3 Changes in Rate Schedule I: Metered Rates (NT$ / 274 kwh) 8.4 Changes in Rate Structure II: Combined Lighting and 275 Power (Demand Charge, NT$ per kw per month; Energy Charge, NT$ per kwh) 8.5 Changes in Rate Schedule III: Power Rates (Demand 276 Charge, NT$ per kw per month; Energy Charge, NT$ per kwh) 8.6 Taipower Installed Capacity and Reserve Margins 280 9.1a Percentage of State Owned Enterprises Sold by 1994 292 9.1b Foreign Exchange, in Millions of US $ 292 9.2 Progress in Transition 295
Tables and Figures 9.3 Private Sector Share of the Economy and 295 Employment 9.4 Labor Productivity 296 9.5 Unemployment 296 9.6a 1991 Polish Parliamentary Election Results (the Sejm) 302 9.6b 1990 Czech Parliamentary Elections (Federal 302 Assembly) 9.6c June 1992 Czech Parliamentary Elections (House of 303 the People) 9.7 Polish Budget Deficits: 1989-1995 311 FIGURES 2.1 Summary of the Argument in Section 3 46 2.2 Outline of the Argument in Section 5 52 4.1 Three Budget Proposal Games 109 4.2 Expected Policy Outcomes Under Three Different no Budgetary Procedures 4.3 Item Veto Bargaining on the X-Axis 112 4.4 Item Veto Bargaining on the Y-Axis 112 4.5 Appropriations, Fiscal Balance, and GDP 132 4.6 Chilean Government Spending as % of GDP 134 4.7 Defense Share of Appropriations and Expenditures 138 4.8 Defense Personnel/Nonpersonnel Spending as % of 140 Total Spending 4.9 Provision for Financial Obligation and Total 143 Appropriations 5.1 Changes in the Size of the President's Party Variable's 180 Estimated Coefficient Between 1985 and 1996 7.1 Installed Capacity by Type of Ownership, Argentina 247 XI
Contributors Lisa Baldez John M. Carey Tun-jen Cheng Gary W. Cox Stephan Haggard William B. Heller Mark P. Jones Philip Keefer Mathew D. McCubbins Gregory W. Noble Mary Shirley Matthew Soberg Shugart Washington University, St. Louis Washington University, St. Louis College of William and Mary University of California, San Diego University of California, San Diego University of Nebraska Michigan State University The World Bank University of California, San Diego Australian National University The World Bank University of California, San Diego xin
Acknowledgments This project was sponsored by the World Bank, and we graciously acknowledge its support. We would also like to thank the Institute on Global Conflict and Cooperation for its institutional support. We further thank Paul Drake, Gary Jacobson, Rod Kiewiet, Brian Loveman, Skip Lupia, Roger Noll, Sam Popkin, and Barry Weingast for their participation in this project. We also thank Scott Basinger, Greg Bovitz, Andrea Campbell, Chris Den Hartog, Jamie Druckman, Shu Fan, Michael Ensley, and Jennifer Kuhn for their editorial and research assistance. xv