America’s Broken Political System: Fresh at Project Syndicate

Project Syndicate: America’s Broken Political System: Whether or not the tax bill survives the conference process and becomes law, the big news won’t change: the Anglo-Saxon model of representative government is in serious trouble. And there is no solution in sight. For some 400 years, the Anglo-Saxon governance model–exemplified by the republican semi-principality of the Netherlands, the constitutional monarchy of the United Kingdom, and the constitutional republic of the United States of America–was widely regarded as having hit the sweet spot of liberty, security, and prosperity. The greater the divergence from that model, historical experience seemed to confirm, the higher the likelihood of repression, insecurity, and poverty. So countries were frequently and strongly advised to emulate those institutions.

Nobody would dare offer that same advice today… Read MOAR at Project Syndicate

Very Brief Musings on Democracy

Cf.: Christopher H. Achen and Larry M. Bartels: Democracy for Realists: Why Elections Do Not Produce Responsive Government


Cf: Martin Wolf: Capitalism and Democracy: The Strain Is Showing:

Confidence in an enduring marriage between liberal democracy and global capitalism seems unwarranted….

So what might take its place? One possibility[:]… a global plutocracy and so in effect the end of national democracies. As in the Roman empire, the forms of republics might endure but the reality would be gone.

An opposite alternative would be the rise of illiberal democracies or outright plebiscitary dictatorships… [like] Russia and Turkey…. Something rather like that happened in the 1930s. It is not hard to identify western politicians who would love to go in exactly this direction. Meanwhile, those of us who wish to preserve both liberal democracy and global capitalism must confront serious questions. One is whether it makes sense to promote further international agreements that tightly constrain national regulatory discretion in the interests of existing corporations…. Above all… economic policy must be orientated towards promoting the interests of the many not the few; in the first place would be the citizenry, to whom the politicians are accountable. If we fail to do this, the basis of our political order seems likely to founder. That would be good for no one. The marriage of liberal democracy with capitalism needs some nurturing. It must not be taken for granted…

As I see it:

  1. Democracy has never been an especially good way of choosing smart, technocratic leaders. Democracy has different excellences…

  2. Democracy’s primary excellence is that it rules out the mirage of violent revolution as a chiliastic solution to current disappointments: the problem is not that the people are oppressed but rather that the people chose to be governed by the current group of clowns–and that is the problem that needs to be fixed…

  3. Democracy’s secondary excellence is that it provides a powerful degree of insulation against rent-seeking by the currently rich, who are always in favor of wealth extraction from the rest and generally opposed to the creative destruction that economic growth brings–for they are the ones creatively destroyed…

  4. We have the wrong kind of democracy in Europe: the electorate that matters is the German electorate, and from the perspective of the holders of political power in Germany, depression elsewhere in Europe is not a problem but rather a source of support from an electorate feeling the schadenfreude–as long as Germany continues to be an export powerhouse…

  5. We have the wrong kind of democracy in the United States: the gerrymandered Republican legislators of Capitol Hill see a sluggish economy not as a threat to their position to be solved but rather as a demonstration that they are right in their contempt for the Democratic president…

  6. We have the wrong kind of democracy in Britain–Cameron and Osborne’s economic policy failure has indeed gotten that set of bastards thrown out, but their successors have no better ideas about how to generate economic prosperity than they did…

  7. The result has been the rise of a movement opposed to the norms of representative compromise government that has more than faint echoes of the fascist moments of early twentieth century Europe–but this time not just in Europe and on the fringe in the United States…

  8. Nevertheless, if we can get back to a non-wrong kind of democracy–on the European continent, in Britain, and in the U.S.–its primary and secondary excellences will still be of enormous value…

Must-Read: Dani Rodrik: Brexit and the Globalization Trilemma

Must-Read: Time to fly my Neoliberal Freak Flag again!

I see this very differently than the extremely-sharp leader of the Seventh Social-Democratic International Dani Rodrik does. The Greek and the Spanish electorates vote loudly that they want to stay in the EU and even in the Eurozone at all costs, rather than threaten to exercise their exit option. The German electorate votes loudly that they want fiscal austerity at all costs. The policies are a result of those–democratic–decisions. The problem is not that Europe has too little democracy. The problem is that it has the wrong kind. Issues of fiscal stance are technocratic issues of economic governance in order to balance aggregate demand with potential output–to make the demand for safe, liquid, stores of value at full employment equal to the supply of such assets provided by governments with the exorbitant privilege of issuing reserve currencies and whatever other actors (if any) maintain credibility as safe borrowers. They are not properly what Angela Merkel and company have turned them into: things for the Germany electorate to vote on as it participates in what Dani Rodrik rightly calls a morality play about prudence and fecklessness. The monetary issue of whether to stay in the Eurozone or to pursue adjustment-through-depreciation is also a technocratic issue of economic governance in order to maximize speed and minimize the pain of structural adjustment. It is not properly what it has become: a thing for the Greek and Spanish electorates to vote on in a different morality play, one of whether the Mediterranean is or is not a full part of “Europe”.

Harry Dexter White and John Maynard Keynes were good democrats. Neither would say that Europe’s economic problems now are the result of a deficiency of democracy. They would say that it is the fault of their IMF–that their IMF should have blown the whistle, declared a fundamental disequilibrium, and required one of:

  1. the shrinkage of the eurozone and the depreciation of the peso and the drachma back in 2010
  2. a wipeout of Greek and Spanish external debts, and a fiscal transfer program from the German government to Greece and Spain and to German banks if German authorities wished to avoid such a shrinking of the eurozone.

We did not have such an IMF back in 2010. But that we did not have such an IMF is not the result of a deficiency of democracy in Europe.

Or so I think: I could be wrong here.


Dani Rodrik: Brexit and the Globalization Trilemma: “My personal hope is that Britain will choose to remain in the EU…

…without Britain the EU will likely become less democratic and more wrong-headed…. Exit poses significant economic risk to Britain…. But there are also serious questions posed about the nature of democracy and self-government in the EU as presently constituted. Ambrose Evans-Pritchard (AEP) has now written a remarkable piece that… has little in common with the jingoistic and nativist tone of the Brexit campaign….

Stripped of distractions, it comes down to an elemental choice: whether to restore the full self-government of this nation, or to continue living under a higher supranational regime, ruled by a European Council that we do not elect in any meaningful sense, and that the British people can never remove, even when it persists in error…. We are deciding whether to be guided by a Commission with quasi-executive powers that operates more like the priesthood of the 13th Century papacy than a modern civil service; and whether to submit to a European Court (ECJ) that claims sweeping supremacy, with no right of appeal….

The trouble is that the EU is more of a technocracy than a democracy (AEP calls it a nomenklatura). An obvious alternative to Brexit would be to construct a full-fledged European democracy…. But as AEP says,

I do not think this is remotely possible, or would be desirable if it were, but it is not on offer anyway. Six years into the eurozone crisis there is no a flicker of fiscal union: no eurobonds, no Hamiltonian redemption fund, no pooling of debt, and no budget transfers. The banking union belies its name. Germany and the creditor states have dug in their heels….

Democracy is compatible with deep economic integration only if democracy is appropriately transnationalized as well…. The tension that arises between democracy and globalization is not straightforwardly a consequence of the fact that the latter constrains national sovereignty…. External constraints… can enhance rather than limit democracy. But there are also many circumstances under which external rules do not satisfy the conditions of democratic delegation…. It is clear that the EU rules needed to underpin a single European market have extended significantly beyond what can be supported by democratic legitimacy. Whether Britain’s opt out remains effective or not, the political trilemma is at work….

When I was asked to contribute to a special millennial issue of the Journal of Economic Perspectives… I viewed the EU as the only part of the world economy that could successfully combine hyperglobalization (‘the single market’) with democracy through the creation of a European demos and polity…. I now have to admit that I was wrong in this view (or hope, perhaps). The manner in which Germany and Angela Merkel, in particular, reacted to the crisis in Greece and other indebted countries buried any chance of a democratic Europe…. She treated it as a morality play, pitting responsible northerners against lazy, profligate southerners, and to be dealt with by European technocrats accountable to no one serving up disastrous economic remedies…. My generation of Turks looked at the European Union as an example to emulate and a beacon of democracy. It saddens me greatly that it has now come to stand for a style of rule-making and governance so antithetical to democracy that even informed and reasonable observers like AEP view departure from it as the only option for repairing democracy.

Must-Read: Gideon Rachman: Xi Jinping Has Changed China’s Winning Formula

Must-Read: Gideon Rachman: Xi Jinping Has Changed China’s Winning Formula: “What Mr Xi has done is essentially to abandon the formula that has driven China’s rise…

…created by Deng Xiaoping… and then refined by his successors…. In economics, Deng and his successors emphasised exports, investment and the quest for double-digit annual growth. In politics, China moved away from the charismatic and dictatorial model created by Mao Zedong and towards a collective leadership. And in foreign affairs, China adopted a modest and cautious approach to the world that became colloquially known in the west as hide-and-bide…. Under Mr Xi, who assumed the leadership of the Chinese Communist party towards the end of 2012, all three key ingredients of the Deng formula have changed….

China has moved back towards a model based around a strongman leader…. The years of double-digit growth are over…. The Xi era has seen a move away from hide-and-bide towards a foreign policy that challenges US dominance of the Asia-Pacific region….

In economics… the shift to a new model is perilous… an unsustainable splurge of credit and investment…. China still has to get used to lower rates of growth…. A healthy economy is crucial…. The country’s leaders have relied on rapid economic growth to give the political system a ‘performance legitimacy’, which party theorists have argued is far deeper than the mandate endowed by a democratic election…. When it comes to politics, in the post-Mao era the Communist party has… embrace[d] a collective style of government, with smooth transitions…. Mr Xi has broken with this model…. Many pundits believe that Mr Xi is now determined to serve more than two terms in office…. At the same time as economic and political tensions within China have risen under Mr Xi, so the country’s foreign policy has become more nationalistic….

The key to the Deng formula that created modern China was the primacy of economics. Domestic politics and foreign policy were constructed to create the perfect environment for a Chinese economic miracle. With Mr Xi, however, political and foreign policy imperatives frequently appear to trump economics. That change in formula looks risky for both China and the world.

An Ongoing Discussion: Democracy and Plutocracy

At the end of the 1970s, America undertook a grand experiment. By a relatively narrow margin Ronald Reagan’s political coalition took control, with its belief that America suffered from “too much”: too much government, too much regulation, too many gas lines, too much inflation, and too slow growth. The cure was supposed to be that if we would only let entrepreneurship and enterprise rip–and tolerate a somewhat-higher degree of income and wealth economy–we would have an acceleration of economic growth that would not only enrich the well-off, not only boost the growth rate of real GDP, but also raise general economic welfare as well. With a bigger pie, even a smaller slice would be more pie.

Thirty-five years later, it is as clear as things could be that it did not work.

Continue reading “An Ongoing Discussion: Democracy and Plutocracy”