Monday, June 11, 2012

Economy and Democracy

Fareed Zakaria argues that the democratic system, namely the electoral system, may be part of Europe's economic problems, because politicians cannot get elected without offering more spending to voters, which in turn only perpetuates economic problems from the inability to afford more spending or even the same spending levels. The issue may be deeper: Are voters reasonably informed of all their election choices, or is there a political establishment only informing voters of some of their choices? Take the recent Alberta provincial election as an example in which the two out of nine parties had over 65% of the election coverage (see report below), or the last Canadian federal election, in which a private media consortium only allowed party leaders from four out of nineteen registered parties in the national debates. If voters need to make the most informed choice, all candidates and parties need to have reasonable opportunities to present their policies, platforms etc. to the electorate. Also, the electoral system needs to be set up fairly (in terms of fair opportunity) and equally (in terms of equal treatment) for all registered candidates and parties. Are the shortcomings of current western democracy linked to the demise of western economies? These are the 2011 FDA electoral fairness ranking results for 30 countries. Only five countries out of 30 were in the passing zone. Only 2 out of 8 European countries were in the passing zone. All North American countries were in the failing zone.

1. France 91.75% (A+)
2. Venezuela 85% (A+)
3. Bolivia 78.75% (B+)
4. Norway 58.5% (D+)
5. New Zealand 54.75% (D)
6. Spain 42.25% (F)
7. Finland 40.75% (F)
8. Lebanon 37.5% (F)
9. Iraq 35.25% (F)
10. Denmark 35% (F)
10. Russia 35% (F)
12. Sweden 34.5% (F)
13. Argentina 32.5% (F)
14. United States 30% (F)
15. Canada 25.75% (F)
16. Azerbaijan 25% (F)
17. Afghanistan 23.75% (F)
18. Mexico 22.5% (F)
19. Tunisia (under Ben Ali) 10% (F)
20. Democratic Republic of Congo 3.75% (F)
21. Cameroon 2.5% (F)
22. Yemen (under Saleh) 1.25% (F)
23. Bahrain 0% (F)
23. Egypt (under Mubarak) 0% (F)
23. Iran 0% (F)
23. Jordan 0% (F)
23. Libya (under Gaddafi) 0% (F)
23. Saudi Arabia 0% (F)
23. Syria (under Bashar al-Assad) 0% (F)

Is Democracy Part of Europe's Economic Problems?

By Fareed Zakaria, CNN

Everyone is looking at Europe these days as economic and political protests mount across the continent.

The downward spiral has produced a great debate about the virtues of "austerity," the idea that governments with large budget deficits must reduce these deficits -– mainly by cutting spending. If they don't get their budgets in order, so the idea goes, they won't be able to borrow money and will face a fiscal nightmare of ever-rising interest rates.

The problem is that as these governments cut spending in very depressed economies, it has caused growth to slow even further -– you see government workers who have been fired tend to buy fewer goods and services, for example -– and all this means falling tax receipts and thus even bigger deficits.

So, economists like Paul Krugman urge: abandon the austerity program, spend more and get budgets in order once the economy has recovered. The problem, in the mind of Keynesians like Krugman, is that European elites, particularly in Germany, have embraced the wrong economic doctrine.

Now, having been in Europe briefly earlier this week, I don't think Europe's elites -– especially German elites -– have really embraced some alternative view of economics. Most do understand that cutting spending during a recession slows down the economy further.

But here is what motivates them: They don't believe at all that any of the governments in question would ever get their budgets in order once the economy recovered. They believe that many of these countries in trouble have economies that are uncompetitive, hobbled by bad regulatory and tax frameworks and also by large and inefficient governments, with ever-increasing entitlements doled out to their citizens. The crisis provides an opportunity to start wholesale reform. Markets have signaled that they will not lend to these governments unless they take measures to get their houses in order, so this is a golden opportunity to get this reform process going.

Many Germans and northern Europeans I have talked to do seem to understand that, economically, the smart thing to do might be to spend now and to cut later. But many in Europe, especially in Germany, believe that later will never come.

In reality, governments spend in bad times and then spend more in good times. So the disagreement may not really be over economics, but over politics.

This is a sad state of affairs because what many people are worrying about, at root, is whether democracy has become part of the problem.

After all, politicians have gotten elected over the last four decades in the West by promising voters more benefits, more pensions and more health care. The question is, can they get elected offering less?

That's what stops many Europeans from abandoning austerity and embracing another round of stimulus spending. And I think these worries are shared by many in the United States as well.

European Debt Crisis Solution

 Media Bias in the Alberta Election

2011 FDA Global Electoral Fairness Report on Canada

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