Friday, June 10, 2011

Democracy, debt and delusion

The Economist's 'Buttonwood' recently cited a BCA Research report which predicts - on the basis of some plausible assumptions concerning the continuation of current voting patterns relating to age, ethnicity and gender, and demographic trends - that the Republican Party will fade as a major force, and that even Texas will be a solidly Democratic state by 2030.

BCA believes that the deficit problems in the U.S. will not be tackled until 2013, and (this is based on new research from the Pew Research Center) that spending cuts - especially to Medicare and Social Security - will be resisted by voters. Taxes will rise substantially:

"[H]igher taxes will lead to lower labour supply and slower capital accumulation. Eventually, further tax hikes will become self-defeating. At this stage, the U.S. will likely experience a fiscal and political crisis on a scale that has few parallels in history."

The problems of American democracy are mirrored in many other Western democracies today, and they go beyond the fortunes of particular parties and indeed beyond politics.

The Western liberal democratic model seemed until relatively recently to have stood the test of time and to have achieved a degree of stability. But increased populism and the gradual erosion of traditional institutions within Western countries has led inexorably to chronic budget deficits and accumulating public debt.

In the dark days of the 1930s and 40s, a group of European and American thinkers tried to articulate a social philosophy which had at its core the key principles of economic liberalism. Ludwig von Mises and F.A. Hayek played leading roles in the movement, but there were many others, now mostly forgotten.

They shared, by and large, a belief that human reason could help to define economic and social possibilities and impossibilities as a guide to policy-making. They developed a very sophisticated understanding of the way free markets operate and are able to process and assimilate complex information. But their thought also had a socio-political dimension.

These thinkers shared a distrust of majoritarian democracy which they saw as a potentially fatal flaw in Western political thought and practice.

It is only in recent decades that the complex, traditional structures and institutions of the West (structures which often embodied privilege and elitism, but also social complexity and autonomy) have been effectively dismantled - leaving what? Naked majoritarian democracy and its corollaries, political populism and an unsustainable welfare state.

The idea of freedom, that as far as possible people should determine their own lives, is a powerful one, and most Western countries have managed - until now - to deliver a high degree of freedom with social order and prosperity. But the relative freedom and prosperity enjoyed in the West over the past two centuries or so was not just the result of a particular political model. It was also dependent on deep social, cultural and historical factors or preconditions.

And, arguably, those preconditions for an effective and prosperous free society are no longer in place in the U.S. and many other Western countries.