Crises, structures, and managerial choice in economic policy making: presidential management of macroeconomic policy in Argentina and the United States.

Author:Bonvecchi, Alejandro
Position:Report
 
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What explains presidential choices of management structures for economic policy making? The literature on the organization of the presidency has hitherto proposed two main answers: personality traits or institutional constraints. The personality explanation argues that presidents with higher predisposition to learn from their advisers would develop stable advisory systems based upon collegial management structures, whereas presidents with higher predisposition to control the work of their employees would be more inclined to change advisory systems and adopt hierarchical management structures (Preston and't Hart 1999; Kowert 2002). The institutional explanation argues that presidents with weak unilateral powers operating in decentralized policy-making environments would typically build presidential advisory agencies to work alongside or compete with cabinet departments; whereas presidents with strong unilateral powers operating in more centralized policy-making environments would typically control policy processes by politicizing cabinet agencies or centralizing decisions (Dickinson 1997; Lewis 2003; Inacio and Llanos 2015). The personality explanation would therefore predict as much change in presidential management choices as there are changes in presidents, while the institutional explanation would only predict change in management choices as long as there are changes in the institutional capacity of the presidency. However, neither of these outcomes obtains, which makes both explanations incomplete.

The limit to these explanations lies in the question of crises. As extensively argued in the literatures on foreign policy and natural disasters, crisis situations typically challenge both the personalities of leaders and the policy-making structures they ordinarily employ, thus effectively testing which factor weighs in what way in managing such situations. But crises need not lead to changes in personality or institutional power: leaders may face them using the same institutional capacities and decision-making styles employed in ordinary times. Sometimes, however, management structures do change under crises although personalities and institutions remain the same. When, why, how do crises elicit each outcome? A more complete theory of presidential management choices for economic policy making needs to incorporate the effect of crises.

This paper offers such theory on the basis of cognitive approaches to managerial choice. Following Walcott and Hult (1995) and other authors, I argue that presidents structure and manage policy making according to the prevailing features of cognitive contexts--i.e. the frames with which they perceive reality and develop preferences and behavior. When confronted with contexts marked by certainty about problems and options, they choose hierarchical structures to implement their preferred policies; when confronted with contexts marked by uncertainty they choose collegial or competitive structures in order to search for diverse information and advice. Crises are typically uncertain contexts, so when confronted with them presidents would develop economic advisory units in their own purview to compete or collaborate with preexisting cabinet agencies. But if crises become more frequent, they turn into more certain situations, so collegial or competitive organizational arrangements become sources of conflict and gridlock, and presidents would eventually choose hierarchical structures of economic policy making that empower specific agencies--typically cabinet ministries--to deal with the emergency. Hence crisis frequency is a key element for understanding managerial choice: the more frequent the crises, the less institutionalized the economic advisory agencies in the organization of the presidency and the more hierarchical the management structures presidents employ.

To test for these alternative explanations across countries in a significant number of years is virtually impossible due to informational constraints: there are no studies--let alone systematically collected primary evidence--on the personalities of presidents; and the data on the organization of the presidency is notably scarce (Bonvecchi and Scartascini 2014). So while quantitative analyses relating the number of crises to changes in economic policy and institutional structures are certainly possible, they are not enough to test explanations of managerial choice because neither the dependent variable--management structures--nor one of the independent variables--presidential personalities--are available or systematically collectable for a representative sample. This paper therefore attempts an initial contribution towards large-N studies through a most-different-cases comparison between two cases for which most information is available: the United States and Argentina. These countries diverge in their institutional environment, the personalities of their presidents and their experience with economic crises. While the United States is the most stable presidential democracy in history, grants little institutional power to the presidency, has been mostly governed by professional career politicians, and only experienced three macroeconomic crises since World War II, Argentina is one of the most unstable presidential polities, grants strong institutional power to the presidency, has been governed as much by military officers and political outsiders as by career politicians, and experienced thirteen macroeconomic crises in the same period. Still, presidents in both countries have changed the management structures of economic policy making to face economic crises--and have done so in similar directions when crises became more frequent.

To develop these arguments, this paper is structured as follows. The first section discusses the extant explanations of presidential management choices for economic policy making, proposes an alternative cognitive-based account, and describes the methodology employed for empirical research. The next section presents data on the institutionalization of economic advisory agencies in the presidencies of Argentina and the United States and shows the limits of personality and institutional explanations. The next section compares the processes of change in economic policy-making management structures in both countries focusing on the timing and direction of change. This comparison shows that in both the United States and Argentina presidents tackled initially rare economic crises using collegial management structures and eventually resorted to hierarchical structures when crises became more frequent. The final section recaps the findings and sets an agenda for further research.

How Presidents Choose Management Structures for Economic Policy Making

The literature on presidential decision making in the United States has theorized the choices presidents make in managing their government during ordinary times, as well as in foreign policy crises. Management practices are the ways presidents organize staff operations to provide themselves with information and advice; when routinized through formal or informal interactions, these practices develop into governance structures (Walcott and Hult 1995: 11). These structures or management patterns vary in their degree of centralization--that is, in the extent to which policy making is concentrated in the president's office, and presidents involve themselves in the process. While several categorizations have been proposed (Porter 1988; Walcott and Hult 1995; Ponder 2000; Rudalevige 2002), their conceptual logic pivots around Johnson's (1974) basic typology, according to which presidents may use three patterns: competitive, in which they stand at the center of decision processes by overlapping jurisdictions, duplicating assignments, and developing rivalries amongst advisers; formalistic or hierarchical, in which they delegate authority to top advisers who run a hierarchical organization with clearly specified functions, and who filter information and policy alternatives; and collegial, in which presidents operate as the hub of a wheel the spokes of which are a group of advisers who collectively discuss and propose alternatives. Competitive arrangements are deemed useful for maximizing presidential control and factoring in considerations of bureaucratic feasibility and political viability, but they generally demand considerable time from the president to manage and solve staff tensions. Hierarchical structures would be useful for maximizing diversity in information and advice in the face of a relatively decentralized Executive organization, but may generate upwards distortions and slowness in crisis situations. Collegial patterns would be useful for maximizing technical optimality and bureaucratic feasibility in either centralized or decentralized Executive organizations, but they require time and skill in maintaining a working group dynamics (Burke 2009).

The literature on presidential politics suggests two possible explanations of presidential management choices for economic policy making. One is presidential personality: Preston and 't Hart (1999) explain presidents' managerial choices as functions of their need for power, their cognitive complexity, and their prior experience. Presidents with high need for power and policy expertise or low cognitive complexity want to maximize control over policy making, so they typically prefer centralized and hierarchical governance structures; whereas presidents with low need for power and policy expertise and high cognitive complexity look to maximize information, rather than control, so they typically prefer decentralized, more deliberative advisory arrangements.

The other potential explanation of presidential management choices for economic policy making is institutional: management structures are a function of the president's institutional power to centralize decision-making processes. When presidents are...

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