Undercover Economist

Exit, voice, or loyalty… what should we do when things go wrong?

“Under any economic, social or political system, individuals, business firms, and organizations in general are subject to lapses from efficient, rational, law-abiding, virtuous, or otherwise functional behavior.”

That is the first sentence of the economist Albert Hirschman’s book Exit, Voice, and Loyalty, published in 1970. No kidding; look around. Rational, law-abiding, virtuous and otherwise functional behaviour is in short supply.

Hirschman’s book is about how we register our discontent with such lapses, and whether our discontent makes a difference. Do we walk away? Do we protest? Or do we suffer in silence?

The instinct of the economist, used to studying competitive markets, is to think of “exit” as the most straightforward and powerful protest. If we don’t like the product or we don’t like the price, we take our custom elsewhere. The alternative is “voice”: we complain, in any form from a muttered grumble to a Molotov cocktail.

In many ways, exit is easier than it has ever been. A citizen of the US can move to a different state; a citizen of the EU can move to a different country. (Irish passports have become popular among the British citizens who can obtain them; people value the option to exit.) We have an endless choice of entertainments to enjoy, news sources to consume, companies from which to purchase. Niche political movements abound. The exit door never seems far away.

And yet, many of us have rarely felt so trapped. Yes, it’s possible to leave Facebook or stop using Google. But it is hardly as simple as switching to a different brand of toothpaste.

And for an age in which politics is supposed to be in endless flux, it is surprising how little changes. US president Donald Trump’s unpopularity is astonishingly consistent, with disapproval ratings of 53-56 per cent. The popularity of his predecessors ebbed and flowed; Mr Trump’s is frozen in ice.

In the UK, the sense of paralysis is palpable: we’ve had an election, a generationally defining referendum, a new prime minister, another election, another new prime minister, and now yet another election. Lots of politics but not a lot of progress. And nobody has managed to assemble a policy platform that commands broad support.

What is going on? Hirschman pointed to an intriguing case study: railways in Nigeria in the 1960s. Despite poor roads and an 800-mile journey from the peanut farms of northern Nigeria to the ports of Lagos and Port Harcourt, Hirschman observed that trucks comfortably outcompeted the railways. Why?

One might have expected that as peanut shippers quit trains and leased trucks instead, the railways would have responded. Hirschman argued that the reverse was true. The railways were propped up by the Nigerian state, so exit was no threat. Instead, the threat was voice, in the form of unhappy customers lobbying the government and generally raising hell. But those customers didn’t bother; they quit instead.

Typically, we think of exit and voice as complementary. Your complaints will be taken more seriously if you can credibly threaten to leave, as anyone who has called to cancel a mobile phone contract can attest. But sometimes exit can silence voice. That is particularly true when “voice” means something more than a mere complaint — taking time-consuming action such as attending council meetings, going on strike or actively campaigning. If you have another option, it is tempting to walk away and take it.

A similar logic applies to the two-party system that defines the US and remains strong in the UK. Like the Nigerian railways, the dominant parties seem to be a part of the landscape. They are propped up by tradition and the logic of first-past-the-post voting. Exit seems to be no threat to them, especially not to the hardliners who would rather lose than compromise.

What about voice? As with the Nigerian railways, voice has been weakened by exit. Some moderates have been thrown out of their own parties — notably Philip Hammond, who was UK chancellor of the Exchequer just a few months ago. Many others have decided they’ve had enough, and few people begged them to stay. What is true for members of parliament is true for party members, too. The extremists are delighted. The moderates have quit in disgust. The parties have moved ever further from the median voter.

That might matter less if both parties had not decided to give the final say over leadership to the party base, rather than to MPs, who know what it takes to get elected. It is an idea that looks better on paper than when put to the test. As it is, both the Conservatives and Labour are led by men who seem to inspire rapture among a narrow clique of supporters, but whom many voters find somewhere between laughable and contemptible.

The situation seems unsustainable. But will it change? As Hirschman was finishing his book, Nigeria was consumed by civil war. The country’s railways continued to stagnate for decades. I am hopeful that British democracy will bounce back a little more quickly; I just wish I could see exactly how.

Written for and first published in the Financial Times on 29 November 2019.

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