Functional leadership renews institutions. Dysfunctional
leadership “deinstitutionalizes” them, as the personal accumulation
of power weakens institutions.

The role of leadership—the ability to effectively influence the achievement of certain goals—plays a critical role in political processes, often at critical times. The central role of leadership has encouraged a tendency to view politics more as a matter of personal interaction than as the interplay of institutional incentives. This report urges a careful look at the interplay of institutions, players, rules of the game, and incentives. Nonetheless, it is important to bear in mind the implications of individual leaders’ behavior.

Leadership is the ability of individuals to exert influence that goes beyond the scope of their formal authority. Leadership entails a combination of purpose, commitment, and ability to relate on a personal level that produces outcomes beyond what would be expected in the normal functioning of institutions. Leadership is demonstrated through distinct types of behavior, many of them symbolic. Leadership, thus understood, may be functional or dysfunctional, according to its effects on the structure of institutions and the quality of policies.

Functional leadership facilitates cooperation and inter-temporal bargains that improve the quality of public policy. The value of leadership is best appreciated in moments of change, when imbalances arise that alter the effect of rules on actors’ incentives and generate opportunities for institutional reform. Functional leaders, if they are to exercise influence and power to contain tensions in times of crisis, need to direct change toward renewing institutional frameworks. The region offers many examples of such a positive trend during the transition to democracy. The recent changes of government in countries such as Brazil, Mexico, and Uruguay, which are considered turning points in the political processes of these countries, represent an exercise of leadership, on the part of outgoing as well as incoming governments, that institutionalizes new rules of the game.

In a democracy, functional leadership can rarely be attributed to a single person. Democracy is associated with multiple leaders who serve as catalysts of deliberative process that permit policies and institutions to be adapted to the demands of an open society. One of the challenges facing these leaders is the articulation of political and technical rationales to produce policies of high quality. The region has a rich experience with such leadership, both at the national and subnational level, where cities such as Bogotá and Montevideo have enjoyed innovative and constructive leadership.

Dysfunctional leadership is different in nature. A single person can dominate. While at first its perverse effects may be hidden by the charisma of an individual leader and his effective exercise of power, those perversities eventually come to light. The fundamental characteristic of dysfunctional leadership is that it “deinstitutionalizes,” as the personal accumulation of power weakens institutions. There is a significant risk that the accumulation of unchecked power might lead to arbitrary rule and corruption.

In times of crisis, dysfunctional leaders can hold an irresistible attraction for the public. Leaders can present themselves as having the answer to all problems, while promising to spare society as a whole and individual citizens from confronting their own problems and taking responsibility for them. This interaction between a leader’s charisma and followers’ escape from reality has historically been the route to a dangerous brand of politics.