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Agenda Control, Intraparty Conflict, and Government Spending in Asia: Evidence from South Korea and Taiwan

Published online by Cambridge University Press:  24 March 2016

O. Fiona Yap
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Abstract

In nations where the executive has budgetary control, how are spending decisions and allocations affected? Is intraparty conflict relevant? This article sets out to show that institutional rules and leadership roles affect budgetary outcomes. It makes the following argument: if intraparty conflict exists in a one-party dominant or majority-party system, the executive reduces spending to punish the party in the legislature; if no intraparty conflict exists, then the executive increases spending to reward or cultivate loyalty to himself as the party leader. If intraparty conflict exists in a minority government or majority-coalition within a competitive multiparty system, the executive increases spending to reward or cultivate loyalty to himself as the party or coalition leader. Evidence from South Korea and Taiwan between the 1970s and 2000 supports the theory. This study advances scholarship in three ways. First, it shows that institutional rules that provide the executive with agenda control also lead to the strategic use of the budgetary process and outcomes to generate loyalty to the executive as leader. Second, it reveals that this strategy affects spending outcomes in election years; this is an important caveat to electoral spending manipulations. Third, the strategic use of the budget to control intraparty conflict occurred prior to and following democratization; this reveals that institutional changes need to include modifications in rules for policy transformations.

Keywords

strategic interactionsintraparty relationselectionsdemocratizationgovernment spendinginstitutional constraints
Type
Articles
Information
Journal of East Asian Studies , Volume 6 , Issue 1 , April 2006 , pp. 69 - 104
Copyright
Copyright © East Asia Institute 

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References

Notes

I thank Stephan Haggard, Gary Reich, Dennis Duermeier, and anonymous reviewers for the Journal for helpful comments and suggestions. The responsibility for all errors rests with the author alone.Google Scholar

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2. Pereira, and Mueller, , “The Cost of Governing,” show that increases in government spending reflect the Brazilian executive's reward of legislative cooperation and that uncooperative legislators are rewarded less frequently and inconsistently. I take the argument further to consider whether the strategic use of government spending leads to a reduction in government spending to penalize uncooperative behavior.Google Scholar

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11. In particular, this treatment of total, civilian, and defense spending moves away from a zero-sum perspective (guns versus butter) to consider that the executive may accommodate the priorities of the legislature as well as personal priorities, by reducing, for example, administrative costs or negotiating lower debt repayments. I thank an anonymous reviewer for asking for clarification.Google Scholar

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17. See, for instance, Reich, , “Coordinating Restraint”; and Lipsmeyer, , “Parties and Policy.” Clearly, the legislators need to build support in the legislature in order to pursue particularistic programs; the existence of pork-barrel policies suggests that the practice is common and not in the least problematic.Google Scholar

18. Studies show that strategic policymaking and bargaining occur in the less democratic countries; this contradicts the conventional treatment that governments in these countries are indisposed to or do not need negotiations. See Yap, , “Non-electoral Responsiveness Mechanisms”; Feng, , “Political Institutions, Economic Growth, and Democratic Evolution”; Mason, , “Modernization and Its Discontents Revisited.” Google Scholar

19. I make no argument and do not distinguish between the reasons why the executive wants to lead the party or why legislators want to win elections, which include: to fill their own coffers, to promote the social good, to reduce criticism or undermine political opposition, to placate supporters, or to promote an ideology.Google Scholar

20. See note 6.Google Scholar

21. On the one hand, the squeaky wheel gets the grease; on the other hand, they may be ostracized or sent to the back benches. For anecdotal support, consider the strengths of the conservative right and liberal left in US politics.Google Scholar

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25. For instance, in the December 1972 presidential elections, President Park won all but two of the 2,359 votes cast by the deputies of the electoral college, the National Conference for Unification, because the two votes were considered invalid (Korea Annual, 1973). Legislative elections suffered equally: for instance, emergency laws against political activities significantly compromised the ability of opposition parties to meet to plan and execute election campaigns. Notwithstanding these efforts, in the 1973 legislature elections, votes for the opposition combined to reach a total of 43 percent, as opposed to the ruling party's 39 percent (Korea Annual, 1974). See also Korea Annual, 1970–1980. Google Scholar

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39. Also known as the Formosa Incident, the Kaohsiung Incident occurred on December 10, 1979, when military police and demonstrators clashed at a World Human Rights Day organized by Formosa magazine. The Formosa magazine began publishing in the summer of 1979 as a journal highly critical of the KMT government.Google Scholar

40. See Taiwan Communique (Chevy Chase, MD: International Committee for Human Rights in Taiwan, 1990-1993).Google Scholar

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42. See Yap, , Citizen Power, Politics, and the “Asian Miracle,” p. 27.Google Scholar

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44. See, for instance, National Budget (South Korea, 2001, p. 15); Budget Act (Taiwan, 2003: Article 31).Google Scholar

45. Both Taiwan and South Korea provide some flexibility for government spending during the fiscal year. Thus, in Taiwan, government agencies may apply for additional expenditures during the fiscal year (Article 79 of Budget Act, 2003) while in South Korea, transfers between budget accounts and items are allowed (2001 National Budget, South Korea). Article 83 of the Budget Act in Taiwan stipulates that the executive may propose a supplementary budget under any of these four circumstances: (1) national defense emergency or war; (2) major economic event; (3) major calamity; (4) major political event that takes place “irregularly or once every few years” (Directorate-General of Budget, Accounting, and Statistics, 2003). Article 56 of the South Korean constitution provides that the legislature must approve the supplementary budget. See Constitution of the Republic of Korea (Seoul, 2003), (accessed January 2005).Google Scholar

46. See Constitution of the Republic of China , 2003. Taipei, , (accessed January 2005); Budget Act (2003), Article 3, and its subsections were recommended by the National Development Conference mentioned earlier in the text, adopted by the National Assembly on July 18 and promulgated by the president on July 21, 1997. See also Chapter 5, Article 83 of the Budget Act (2003). The fiscal year for Taiwan was July to June until FY 1998/99. For FY 2000, it ran from July 1999 to December 2000. Since 2000, it has followed the calendar year. See CIA Factbook (2005), (accessed June 1, 2005).Google Scholar

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50. In particular, economic data for Taiwan are obtained or calculated from the Taiwan Statistical Data Book (Taipei: Council for Economic Planning and Development, 1970–2003) and the Yearbook of the Financial Statistics (Taipei: Ministry of Finance, 1980–2002), respectively. Data on elections and legislative fragmentation on Taiwan are gathered from figures released by the Central Election Commission, which may be found in several sources, including Annual Review of Government Administration (Taipei: Research, Development, and Evaluation Commission, 1976–1990) and Taiwan Communique (1990–2003). For Korea, South, economic data are based on figures reported by the Asian Development Bank and the IMF's Government and Finance Statistics Yearbook (Washington, DC: 1990–2002). Data on elections and legislative fragmentation are gathered from Korea Annual (1965–2002) and Elections Around the World (www.electionworld.org/index.html, Wilfred Derksen).Google Scholar

51. See Lebovic, , “Spending Priorities and Democratic Rule in Latin America”; Kwon, Hyeok-yong, “Economic Reform and Democratization: Evidence from Latin America and Post-Socialist Countries,” British Journal of Political Science 34, no. 2 2003):357–368.Google Scholar

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54. Substantively and statistically, the effects from using this ordinal scale from 2 to 14 are the same as using a [0, 1] score, where 1 reflects the highest level of democracy and 0 the lowest or a dichotomous measure of democracy (0, 1), where Taiwan is considered democratic in 1996 and South Korea democratic in 1992. The 1996 and 1992 dates consider both nations to be democracies only following the direct election or installation of civilians as presidents. See Kwon, , “Economic Reform and Democratization”; Oh, , Korean Politics; and Cheng, and Haggard, , “Democracy and Deficits in Taiwan.” Google Scholar

55. Briefly, time series data such as GDP or prices exhibit trends or non-stationarity that conflate interpretation. Such data need to be transformed before use to avoid biased findings. See Kennedy, Peter, A Guide to Econometrics , 5th ed. (Cambridge: MIT Press, 2003); Greene, William, Econometric Analysis, 5th ed. (Upper Saddle River, NJ: Prentice Hall, 2003).Google Scholar

56. For instance, the Database of Political Institutions reports “0” as the fractionalization index of the governing party in South Korea between 1972 and 1997, that is, until a majority coalition was created in South Korea following the 1997 elections. Similarly, the fractionalization index for the ruling party in Taiwan is coded as “0” for the entire period of the data (between 1975 and 2000). See Thorsten, Beck, Clarke, George, Groff, Alberto, Keefer, Philip, and Walsh, Patrick, “New Tools in Comparative Political Economy: The Database of Political Institutions,” World Bank Economic Review 15, no. 1 2001):165–176; Korea Annual (1963–1988); Hood, , “Political Change in Taiwan: The Rise of the Kuomintang Factions”; and Cheng, and Haggard, , “Democracy and Deficits in Taiwan,” report intraparty conflicts before 2000.Google Scholar

57. Sources used are country reports, such as the Korea Annual (1964–2003) and the Republic of China Yearbook, which was preceded by the China Yearbook (1960–2004); these are verified by country expert annual accounts, such as in Asia Survey, China Quarterly, and Pacific Studies. We also use news reports, including Nikkei Weekly, United Press International, The Economist, The Financial Times, The FT Asia Intelligence Wire, The Daily Yomuiri, Janet Mathews Information Services, and Xinhua News. Google Scholar

58. See also Collier, David and Adcock, Robert, “Democracy and Dichotomies: A Pragmatic Approach to Choices and Concepts,” Annual Review of Political Science 2 (1999):537–565; Yap, , “Non-electoral Responsiveness Mechanisms,” p. 498.Google Scholar

59. Specifically, the variables measuring presidential elections were statistically insignificant over time for both South Korea and Taiwan. Also, the addition of the variable inflated errors and decreased the variance explained for the model. See also Cheng, and Haggard, , “Democracy and Deficits in Taiwan.” Google Scholar

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61. See, for instance, Korea Annual (1971); China Yearbook (1966); and Annual Review of Government Administration (1981); Barro, Robert, “Government Spending in a Simple Model of Endogenous Growth,” Journal of Political Economy 98, no. 5, part 2 (1990):S103–S125.Google Scholar

62. See, for instance, Annual Review of Government Administration (1986, 1990); Brown, and Hunter, , “Democracy and Social Spending in Latin America, 1980–92”; Bawn, Kathleen, “Money and Majorities in the Federal Republic of Germany,” American Journal of Political Science 43, no. 3 (1999): 303–334; Krause, George, “Partisan and Ideological Sources of Fiscal Deficits in the United States,” American Journal of Political Science 44, no. 3: 541–559; Lebovic, , “Spending Priorities and Democratic Rule in Latin America.” Google Scholar

63. This is not surprising, given the transformations of the data. The Augmented Dickey-Fuller and Phillips-Perron tests were used to evaluate for unit root problems and the Durbin-alternative and Breusch-Godfrey LM tests for serial correlation. The results are substantively similar and report no unit root or serial correlation problems in the data. See discussion of lagged variables in Christopher Achen, “Why Lagged Dependent Variables Can Suppress the Explanatory Power of other Dependent Variables,” paper presented at the annual meeting of the Political Methodology Section, July 20–22, 2000, http://polmeth.wustl.edu/.Google Scholar

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65. Briefly, the Chow test compares a restricted regression model, which contains the observations for the entire period, and unrestricted models, which are based on subsets of the period. See Greene, , Econometric Analysis , and Kennedy, , A Guide to Econometrics, for further discussions. We use Chow tests to evaluate both 1987 and 1992 as possible break points in South Korea, and 1992 and 1996 in Taiwan. See note 55 for discussion of the years as break points. The results were not statistically or substantively different; both report that government, defense, and civilian spending patterns were not structurally different using either break points.Google Scholar

66. For a similar argument that democracy indirectly (not directly) affects growth and that, consequently, only tests that model the indirect effects provide accurate interpretations, see Baum, Matthew and Lake, David, “The Political Economy of Growth: Democracy and Human Capital,” American Journal of Political Science 47, no. 2 2003):333–347.Google Scholar

67. The results of these tests show that political, economic, and social variables do not explain defense or military in South Korea and Taiwan. Instead, as the reduced equations show, the most important statistical predictors are the lagged dependent and total spending variables.Google Scholar