The Argentine Election and the Limits of the Peter Principle

Posted in: Government

Following national elections last month, Argentina will soon have a new President: Alberto Fernández. It will also have a new Vice President: Cristina Fernández de Kirchner, who was herself President of Argentina from 2007 to 2015. Kirchner’s presidency improved the lives of Argentines in various ways but also ended in scandal. Kirchner and associates faced multiple charges of corruption. She was also implicated in a coverup of the role of Iran in the 1994 bombing of a Buenos Aires Jewish center that killed 85 people. And, like other populists of the right and left, Kirchner appears to be a megalomaniac.

Let us put aside the question whether Argentines made a wise or foolish choice in electing a ticket that includes Kirchner. I want to focus on Kirchner’s own motivation: why would someone who has been President settle for the Vice Presidency? In this column, I discuss the benefits of a demotion.

Biding Their Time

Some demotions are temporary. For example, Vladimir Putin served as President of Russia for over eight years (initially in an acting capacity), then stepped down in 2008 and served in the less powerful role of Prime Minister. Why? Because Article 81 of the Russian Constitution limits a President to two consecutive terms but does not impose any lifetime limits. Putin accepted the Prime Minister position from 2008 to 2012, biding his time until he was eligible to run for the presidency again. He did so in 2012 and again in 2018. The step down in 2008 was merely a prelude to stepping back up.

Section 90 of the Constitution of Argentina operates similarly. A President can serve no more than two consecutive terms, but after a break, she or he may serve another two consecutive terms. Accordingly, it is possible that Kirchner—who has served in the Argentine Senate since 2017 despite ongoing investigations—sees the Vice Presidency as a step back to the pinnacle of power.

Whether they leave office in disgrace or simply because of external circumstances (such as term limits), people in other fields likewise sometimes accept a demotion in the hope that it will allow them to regain the position they formerly held.

Consider head coaches in professional sports. In the top leagues, there are only as many head coaching positions as there are teams. When a team consistently loses, there will often be pressure to make changes. Teams may trade or cut poorly performing players, but long-term contracts can make that course of action costly. Often firing the head coach is the most visible gesture a team can make to recognize the need for new direction—even if the team’s poor performance was not due to any missteps by the coach. Certainly, fired coaches often think that they were unfairly made scapegoats in this way.

How can a fired head coach land a new head-coaching gig? Taking a head-coaching job at a top-flight college program might do the trick, but these positions are also extremely competitive, with rare vacancies because successful coaches tend to stay in their jobs for a very long time. Mike Krzyzewski has been head basketball coach at Duke since 1980; when, in 2011, Joe Paterno was forced out of his position as head football coach at Penn State because he covered up child sexual abuse by his longtime defensive coordinator Jerry Sandusky, Paterno had been in his position since 1966.

Accordingly, the surest way back to a head-coaching position may be to take a job as an assistant. As of last year, 27 former National Football League coaches were serving as assistant coaches; that’s almost as many former head coaches working as assistants as there are teams in the league (32). As the story reporting that statistic speculates, “certainly a majority of these former head coaches aspire to get back to that top spot.”

Accepting the New Reality

But what about people who take a demotion without a realistic prospect of climbing back up the ladder? For them, it might seem more difficult to detect a rationale for accepting a lesser position after occupying a grander one, but it shouldn’t be.

A great many people have little choice. If you had a well-paying assembly-line job in automobile manufacturing but the factory closed, there is a good chance that your skill set does not match any comparable positions near where you live—and family ties may well prevent you from relocating to somewhere that offers positions that match your skills, assuming such positions even exist. Retraining has a mixed track record at best. Thus, your best options could be substantially worse than the job you had. Economic necessity thus explains why people go from a more to a less desirable job.

Even someone with the option of keeping the “better” job may take a “lesser” one because of what economists call “compensating differentials.” Some jobs pay better than others that demand the same level of skill because they are unpleasant or hazardous. The employer must pay a compensating differential—a higher wage—to attract workers to do such jobs. Some high-pay-high-prestige jobs are also high-stress. Thus, someone might leave the “rat race” of a high paying job on Wall Street, say, to open and operate a Bed & Breakfast in Vermont. Despite earning substantially less money, people who follow such a course do not regard the move from financier to hotelier as a demotion at all.

Not Lesser, Different

Perhaps everyone who ends up in a “lesser” job ought to regard the position as merely different, even if they failed in the more elevated position.

The so-called Peter Principle states that workers in a hierarchical organization tend to rise to their level of incompetence. Suppose Jim is an excellent salesman; he will be promoted to sales manager; if Jim does well in that position, he will then be promoted to head of the entire operation; but then, Jim’s job performance will lag, because it turns out his expertise was limited to sales and not the other aspects of the firm’s operations; accordingly, Jim will not be promoted; he will remain as chief operating officer (or whatever his elevated title is called), a job for which he is incompetent.

There is considerable truth to the Peter Principle, but organizations and individuals could do better for themselves if they did not regard every step up in the organizational hierarchy as a promotion. The firm does not benefit from an incompetent COO, so it might eventually fire Jim. It would do better to send Jim back to the highest-ranking job he did well, sales manager. Jim might have to take a pay cut, but he would have a job, and one he does well. To the extent that Jim’s ego and social norms prevent him from accepting the demotion, everyone loses.

Considerations of the foregoing sort will become increasingly important, as we continue to shift from an economy in which many workers expected to stay in the same firm for their entire careers to one in which people move from job to job and occupation to occupation.

We should take John Quincy Adams as our hero. He was a U.S. Senator, Secretary of State, and President. After losing the election of 1824 to Andrew Jackson, Adams could have retired to the after-dinner-speaking circuit. Instead, he dusted himself off and ran for and won a seat in the House of Representatives, where he served effectively for nearly seventeen years. No doubt Adams was able to succeed in the House because he did not regard the transition from the presidency as a demotion. We would all do well to abandon the very concept of a demotion.