April 2021. GrowthPolicy’s Devjani Roy interviewed Richard Zeckhauser, the Frank P. Ramsey Professor of Political Economy at Harvard Kennedy School, on his latest book, The Dragon, the Eagle, and the Private Sector. | Click here for more interviews like this one.
Selected Books: The Dragon, the Eagle, and the Private Sector: Public-Private Collaboration in China and the United States, with Karen Eggleston and John D. Donahue (Cambridge University Press, 2021) | Collaborative Governance: Private Roles for Public Goals, with John D. Donahue (Princeton University Press, 2011) | The Patron's Payoff: Conspicuous Commissions in Italian Renaissance Art, with Jonathan K. Nelson (Princeton University Press, 2008)
GrowthPolicy. Your latest book, The Dragon, the Eagle, and the Private Sector), makes a persuasive case for collaborative governance in both the U.S. and China, a phenomenon you define as “innovative ways to create public value by sharing responsibility and discretion with the private sector” (p. 5). I am interested in the origin story underlying your project. What prompted your interest in the U.S. and China as case-studies for private-public collaboration?
Richard Zeckhauser: There were three major justifications for choosing China and the United States as the basis for study. First, they are the two most powerful countries in the world in terms of their economies, their militaries, and their influence beyond their borders. Second, although they differ significantly in their political and economic systems and their histories and stages of development, they both utilize public-private collaboration extensively to meet public goals. Third, I had Karen Eggleston available as a terrific collaborator, in addition to my established coauthor, Jack Donahue. Karen is deeply knowledgeable about Chinese policy across a range of areas.
GrowthPolicy. One of the book’s most interesting chapters is on healthcare (“Show Me Where It Hurts: State and Market in Health Care”). While China’s government once completely dominated health-care financing and service delivery, the country’s contemporary health sector, like that of the U.S., works through collaborative governance today. In what ways has the COVID-19 pandemic revealed the fault lines in the public healthcare systems of both China and the U.S.?
Richard Zeckhauser: Virtually no country has done a terrific job in dealing with the treatment of COVID-19. Healthcare systems in most countries function reasonably well when meeting traditional and common, or even fairly uncommon, circumstances. COVID-19 was an extreme outlier, the most challenging public health crisis to confront the world in a century. Highly complex systems, such as those that prevent disease and deliver health care, operate through a tangle of relationships that impede rapid adjustments. Across the developed world, for example, many nations failed to protect their highly vulnerable citizens in nursing and retirement homes, invested heavily in the wrong resources (such as ventilators), and failed to swiftly identify promising treatments and to dismiss those that performed poorly.
China fared much better than the United States in the pandemic. For the purpose of controlling this disease, China’s firm command-and-control system, with strength concentrated at the center, served as an advantage. The United States, with its elaborate distribution of authority; the intense politicization of its approach to the disease; its strong tradition of individual rights; and, perhaps, its overreliance on its fabled medical-care system, did much less well in controlling transmission.
Fareed Zakaria, famed author and commentator (and generous blurb-er of our book) insightfully captured the book’s central lesson in a piece of his own: “COVID-19 should be a wake-up call. The United States needs to rebuild its government capacity. The goal is not a big state or a small state but a smart state. For now, what we have is stupid.”
And as we note in the book: “An effective response to COVID-19 required regulatory and scientific collaboration on the development of testing methods, vaccines, and therapies, and community-oriented policies to mitigate the social and economic impact on the most vulnerable (e.g., sick leave, healthcare access, unemployment support). In China, after initial complacency and cover-up, unprecedented measures were undertaken to contain the virus. The health system was much better prepared than it was during SARS 17 years ago. Indeed, that previous crisis spurred China to reach universal health coverage.”
Vaccine development epitomized “collaborative governance, Chinese-style”: a centrally led effort through state-owned enterprises, complemented by global scientific collaboration among entities with multiple ownership forms. China has repeatedly suffered vaccine scandals, including one in the summer of 2018 that prompted calls for investigation from Xi Jinping himself and led to the removal of dozens of officials. Similarly, in 2020 the problematic initial response to the COVID-19 outbreak led to dismissal of local officials and a concerted effort to control the public narrative. On the positive side, scientists and other public and private actors—in China as well as internationally—collaborated to discover vaccine candidates and find appropriate therapies for the new coronavirus, SARS-CoV-2.
If both China and the United States can wisely apply collaborative governance approaches appropriately in “building back better” post-pandemic, they will both benefit. Victor Fuchs, esteemed friend, co-author, and constructive commentator on our book, sees a glint of hope from the COVID-19 crisis: “This is a time to think more boldly about the future of the US health care system. The health care system is dysfunctional for many individuals in the US; it is too costly, too unequal, and too uncertain in its eligibility and coverage … Distrust of the government is difficult to dispel, but it is possible to do so. ... Even though it has seemed that major reform of health care would only occur in the wake of a major war, a depression, or large-scale civil unrest that changed the political balance, it now appears that the COVID-19 pandemic may provide the dynamic for major political change. If that occurs, major health care reform will be more attainable.” (Source: Victor Fuchs, “Health Care Policy After the COVID-19 Pandemic,” JAMA 324, no. 3 (2020): 233-234.)
Let me close this answer by emphasizing the remarkable story of COVID-19 vaccine development. Its importance is vastly underplayed, since it is impossible to identify the millions of individuals saved by the astounding speed with which collaborative science went from identification of the genome of the virus—published by Chinese researchers in January 2020—to fully-tested vaccines in arms providing powerful protection. Neither can we foresee how advances in vaccine technology due to this effort will enable us to fight future pathogens.
A broad swath of nations employed public-private collaboration in highly effective fashion in creating effective vaccines in a remarkably short period. New relationships were established across the public and private sectors, significant monies flowed, and information was exchanged in record-breaking times. Part of the explanation for this success, we believe, was that there were not strong in-place relationships that inhibited rapid moves to new modes of behavior.
GrowthPolicy. Your book offers a delegation decision tree and a four-step cycle for structuring, conducting, and continually refining the collaborative process between the government and the private sector. You offer that, “Before addressing any issues of delegation, the first task is to determine what goods and services should be a public responsibility in the first place.” (p. 25). In the U.S., public debates about the role of government have become increasingly partisan over the past five years. In such a high-charged and volatile political environment, how must policy makers find justifications and clear red lines for selecting appropriate government roles and roles better left to the private sector?
Richard Zeckhauser: Your question is quite challenging. If the United States cannot dampen its extremely polarized political environment in the coming years, politics will continue to see a tug of war in each of a broad array of policy domains. There will be little of the adjustments back and forth—a dollop or three more [of] government influence in [domain] A, a dollop or three less in [domain] B, and a recasting of public-private cooperation in [domain] C—that would be required to move the nation in directions that would win widespread approval. Yet such ways exist. There was hope that a major infrastructure initiative in 2021 would gain broad support. Unfortunately, it is already clear that any infrastructure legislation will go far beyond building infrastructure. It will almost certainly create intense political temperatures across a range of political issues. Political heat withers effective policy.
As we say in our book, “No process of natural selection inexorably guides a nation, whatever its political system, to the correct policies for creating social value. Indeed, social value can be destroyed if the political system goes awry, as it did in China during the Cultural Revolution, and not a few would argue is the case today in the United States with its uneven electoral engagement and toxic ideological polarization.” Later we also note, “[A] one-party state can take the long view and is mostly spared the need to respond to short-term public sentiment in order to retain power. A competitive democracy … is more likely to have a productive battle of ideas, as we have seen in the American experience with charter schools or medical care insurance. This is an important advantage when (as we believe is commonly the case) the right policy approach is far from self-evident at the start. Once the right approach is identified, however, China has advantages [in swift implementation, bolstered by rapid economic growth].”
GrowthPolicy. This is your second book in a decade on the topic of collaborative governance. The last one was Collaborative Governance: Private Roles for Public Goals in Turbulent Times (2011). Over these ten years, what are the features that have changed in the public-private collaborative landscape?
Richard Zeckhauser: The Obama years were a hopeful time for public-private collaboration, mainly because thoughtful leaders were searching for better ways to accomplish public goals. Ideological battles, though certainly present, were on a low simmer relative to what we saw in the Trump years and are seeing in the early Biden Presidency.
The Trump years were pitched toward allowing private-sector entities to do what they want. The Biden Administration has already snatched back significant government power, and will continue on that course. The major question, possibly a 6.4-trillion-dollar question, is whether Biden, and his Administration, will reflect the moderate message of his campaign, therefore utilizing public-private collaboration to advance the public’s interest. Or, alternatively, will it succumb to the pressures being brought on it by the progressives in the Democratic Party? If the latter, collaborative governance will be shuttled to a back burner.
Fortunately, the nation has the salient example of vaccine policy that serves as an effective and widely known exemplar of collaboration. Even the rollout of vaccinations, the critical second step, represents a success of public-private collaboration. State governments set the priority rules. For-profit and nonprofit organizations deliver the jabs. Swift adjustments have been made to distribution policies and practices as lessons were learned. Despite the expected political finger pointing, and the occasional cut ahead in line, protection is being delivered in record time.
We are optimistic. Smart political leaders in the not-too-distant future will draw on this salient exemplar to explain their plans to employ public-private collaboration to enhance the performance of public policies, and not just tilt the economy toward the public or the private sector. The American public is much more moderate than either of its political parties, or the folks who speak most actively in the public square. Efforts to carefully craft public-private collaboration would thus represent a widely welcomed step back from the polarization that has troubled so many ordinary citizens. It also has great potential to improve public policy, using tools that we outline in our book. It’s hard to see how we can curb climate change, bolster education, and build an economy that works for all without effective collaboration.