Kemal Derviş* highlights what he sees as the crucial problem facing political systems. "Around the world, the stock of financial assets has become so large, relative to national income flows, that financial-market movements can overwhelm most countries. Even the largest economies are vulnerable, particularly if they are highly dependent on debt finance."
But citizens, according to Derviş, want to debate policies and give or withhold their consent. "Thus a more supra-national form of politics is needed to re-embed markets in democratic processes."
This, essentially, is the problem the EU is grappling with - so ineffectively. "Nonetheless, unless globalization can be slowed down or partly reversed, which is unlikely and undesirable in the long run, the kind of 'politics beyond borders' for which Europe is groping will become a global necessity."
"Indeed," Derviş continues, "the European crisis may be providing a mere foretaste of what will likely be the central political debate of the first half of the 21st century: how to resolve the tension between global markets and national politics."
Though this last prediction seems very plausible, the analysis as a whole betrays a degree of wishful thinking. Politics beyond borders may be a global necessity, but democracy is not.
Democracy will of necessity be constrained by the operation of global markets as the power of smaller and/or indebted states to determine the rules they live by is diminished.
On the other hand, the role of mega-states like China is becoming more significant as they relentlessly extend their spheres of influence. It seems likely that we are in the early stages of a new imperial age.
*Former Turkish Minister for Economic Affairs and head of the United Nations Development Programme.
Showing posts with label democracy. Show all posts
Showing posts with label democracy. Show all posts
Saturday, February 18, 2012
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.
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.
Friday, December 16, 2011
Paul Krugman on Europe
It's always salutary to read or listen to - at least occasionally - those whose ideological perspectives are different from one's own.
Sometimes it's simply a matter of being confirmed in one's current views. Like the time I read a political book by Noam Chomsky (whom I respected as a linguist). I was staggered at the degree of anger and irrationality and extremism evident in Chomsky's prose. I had begun the book with an open mind, ready to be convinced: I was wavering ideologically at the time and had no vested interest in any particular system (beyond some investments in equities which could easily have been put into something else if I came to the view that capitalism was bad). But I found there was a huge gulf between where Chomsky was and where I was. I have no idea how he got there, and I was damned sure that I wasn't going to go there.
Paul Krugman is another kettle of fish, a distinguished economist who is also a liberal polemicist. I recently read an opinion piece by Krugman on political and economic trends in Europe, suggesting that we should call "the current situation what it is: a depression." Even putting aside the (unresolved) euro crisis, lack of growth and high levels of unemployment is leading to immense anger and resentment (against Germany, for instance), risks to social cohesion and a clear move in the direction of authoritarian governments.
Last month, the European Bank for Reconstruction and Development "documented a sharp drop in public support for democracy in the 'new E.U.' countries." Hungary, for instance, a country with a turbulent and tragic history, is in dire economic straits. According to Krugman, it has "suffered severely because of large-scale borrowing in foreign currencies and also, to be frank [Krugman acknowledging his ideological position!], thanks to the mismanagement and corruption on the part of the then-governing left-liberal parties."
This led to Fidesz, a center-right party, winning an overwhelming parliamentary majority last year. But now Fidesz, by a series of constitutional and legal measures and media control, seems to be moving towards authoritarian rule "under a paper-thin veneer of democracy." Krugman sees what is happening in Hungary, "in the heart of Europe," as a sign of things to come on the troubled continent. As he puts it, the breakup of the euro may be the least of Europe's worries.
My concern is that Krugman's ideological preoccupations may be distorting his analysis. He is hostile to German-inspired attempts to encourage austerity, suggesting that such an approach is leading to the death of democracy and to authoritarian forms of government. But the crisis was caused, at least in part, by profligate government spending (exacerbated in some countries by their participation in an ill-conceived experiment in monetary union). And something like the pragmatic German model may be the only alternative to fascism or whatever forms of nationalistic collectivism are currently garnering support.
Sometimes it's simply a matter of being confirmed in one's current views. Like the time I read a political book by Noam Chomsky (whom I respected as a linguist). I was staggered at the degree of anger and irrationality and extremism evident in Chomsky's prose. I had begun the book with an open mind, ready to be convinced: I was wavering ideologically at the time and had no vested interest in any particular system (beyond some investments in equities which could easily have been put into something else if I came to the view that capitalism was bad). But I found there was a huge gulf between where Chomsky was and where I was. I have no idea how he got there, and I was damned sure that I wasn't going to go there.
Paul Krugman is another kettle of fish, a distinguished economist who is also a liberal polemicist. I recently read an opinion piece by Krugman on political and economic trends in Europe, suggesting that we should call "the current situation what it is: a depression." Even putting aside the (unresolved) euro crisis, lack of growth and high levels of unemployment is leading to immense anger and resentment (against Germany, for instance), risks to social cohesion and a clear move in the direction of authoritarian governments.
Last month, the European Bank for Reconstruction and Development "documented a sharp drop in public support for democracy in the 'new E.U.' countries." Hungary, for instance, a country with a turbulent and tragic history, is in dire economic straits. According to Krugman, it has "suffered severely because of large-scale borrowing in foreign currencies and also, to be frank [Krugman acknowledging his ideological position!], thanks to the mismanagement and corruption on the part of the then-governing left-liberal parties."
This led to Fidesz, a center-right party, winning an overwhelming parliamentary majority last year. But now Fidesz, by a series of constitutional and legal measures and media control, seems to be moving towards authoritarian rule "under a paper-thin veneer of democracy." Krugman sees what is happening in Hungary, "in the heart of Europe," as a sign of things to come on the troubled continent. As he puts it, the breakup of the euro may be the least of Europe's worries.
My concern is that Krugman's ideological preoccupations may be distorting his analysis. He is hostile to German-inspired attempts to encourage austerity, suggesting that such an approach is leading to the death of democracy and to authoritarian forms of government. But the crisis was caused, at least in part, by profligate government spending (exacerbated in some countries by their participation in an ill-conceived experiment in monetary union). And something like the pragmatic German model may be the only alternative to fascism or whatever forms of nationalistic collectivism are currently garnering support.
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.
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.
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