Friday, January 20, 2012

Faltering democracies

Buttonwood has a piece about the tendency of the "rationally irrational" majority (which does not take an interest in the details of politics) to have systematic biases - including an anti-market bias, and a view that favors short term make-work schemes over the improvements in productivity which underlie long-term prosperity. Democracy, it seems, is fatally flawed; it remains to be seen whether the established democracies of the West can survive.

Technocrats have taken over in Greece (too late!) and Italy. In the United Kingdom, Conservative Prime Minister David Cameron has made some progress in trying to undo the disastrous legacy of previous Labour governments. And in Spain a conservative government was voted in late last year to replace the socialists.

The mildly entertaining democratic processes of the United States lumber on, and (who knows?) they might result in an administration which begins the Sisyphean process of turning the country around. The next question would be whether the electorate would continue to support a President and a Congress committed to making hard, and (if the research Buttonwood alludes to is correct) unpopular, decisions in the interests of productivity and long-term prosperity.


  1. "Democracies perish when the people realize they can vote themselves money" is variously attributed.

    I don't think Keynes foresaw that the eventual result of his strategies, is that if there's no ultimate control on government spending, the politicians will buy their seats with greater promises to current constituents while taxing future voters. If there's nothing like a balanced budget in the constitution or gold backing to prevent the infinite disbursement of fiat money, vote-seeking politicians will NOT provide the ultimate back-up of the currency.

  2. A balanced-budget amendment or 'debt brake' looks like a good idea to me. The Swiss example seems to combine rigor with some flexibility. But the issue of productivity would still need to be addressed.

    I'm more skeptical about a return to the gold (or similar) standard. There is little mainstream support for it. And, if it succumbed to political pressures in the past, why would it fare any better in the future?

  3. The main concern I have with a BBA is that it might lead to increased taxes in the short term. (Voters, who generally dislike taxes as a rule, probably would correct for that in the long term.) Since everything in politics is a tradeoff, however, it still seems like a good idea. I would rather slightly higher taxes in the short term than institutional collapse in the long term.

    At the very least politicians would hesitate to set up huge stimulus packages during recessions. They could always say that their hands are tied.

    1. It seems clear that hands do need to be tied if a democratic system is to work these days. In general, the choice seems to be between a constrained, technocratic democracy and something more straightforwardly authoritarian. The former would be not only more acceptable than the latter but also more stable.

      The US is a special case. Tying the hands of politicians seems right in line with the American ethos, but any suggestion that democracy itself is flawed or needs to be constrained would be resisted, I would think.

    2. It depends on what you want from a democracy.

      If one wants a stable set of government institutions with limited powers and a system for the peaceful transition of power from one administration to the next, then technocratic democracy works quite well.

      If one wants a more majoritarian democracy where the government has a more leeway in what it can do - and where voters' choices can affect major change in the country - then one won't be content with a technocratic system of managers.

      Me, I'm content with the former, but the latter is quite the fetish in Western culture. The expression of the will of the people seems to be the only virtue of constrained democracies which is appreciated in the West. The miracle of the bloodless revolution where all the governing institutions remain intact (i.e. the swearing in of a newly-elected government) is vastly underappreciated.

    3. I think the technocratic ideal has a long history in French political thinking. A conservative social philosopher I did some work on talked a lot in the 1940s and 1950s about comp├ętences. The general idea was that specialist academics and the like should play a major role in government. The term has since been picked up by writers on business and management. And the French have that system of grandes ├ęcoles which trains an elite for government service etc. The irony is that - historically speaking - the French system has been anything but stable.

    4. Oddly, I was thinking about Napoleon III when I was thinking about the problems of unconstrained democracy, and particularly of 'one man, one vote, one time' democracy.

  4. It's true that to constrain politician's propensity to spend, the government needs a control that's stronger than the political mechanism for spending is. Having a debt ceiling, for example, doesn't really control anything if it can be raised using the same voting procedures that approves the spending.

    I understand the argument both for and against a BBA. The budget doesn't have to balance every year, it just has to be paid back over reasonable time frames. It would have been perfectly acceptable to run a debt during the Baby Boomer's young adulthood (roughly 1965-85) if it had then been paid back during their prime earning years (1986-2010). But there's no budgeting life-cycle in Congress, like an individual or family uses.