As the UK staggers deeper into the Brexit process swamp, things are again bubbling in the Eurozone. To the point of Project Syndicate opining at some length on the core issues.
Harvard’s Dani Rodrik asks a pertinent question: How Democratic is the Euro?
By joining the euro, Italy surrendered monetary sovereignty to an external, independent decision-maker, the European Central Bank. It also undertook specific commitments with respect to the conduct of its fiscal policy, though these constraints are not as “hard” as those framing monetary policy. These obligations place real limits on the Italian authorities’ macroeconomic policy choices …
Such external restraints on policy action need not (sic) conflict with democracy. Sometimes it makes sense for the electorate to tie its hands when doing so helps it achieve better outcomes. Hence the principle of “democratic delegation”: Democracies can enhance their performance by delegating aspects of decision-making to independent agencies.
Hmm. No doubt it all depends on how the ‘delegation’ of decision-making was in fact done, and how far such a decision can be changed democratically if things aren’t working out? Voting for intelligent delegation is one thing. Voting for irreversible delegation is something else.
Rodrik quotes senior UK banker Paul Tucker:
Delegation is warranted at best in the conduct of policy that serves politically determined objectives. Tucker argues, correctly, that few independent agencies are based on a careful application of principles that would pass the test of democratic legitimacy.
This shortcoming is far worse in the case of delegation to international agencies or treaties. Too often, international economic commitments serve not to fix democratic failures at home, but to privilege corporate or financial interests and undermine domestic social bargains. The European Union’s legitimacy deficit derives from the popular suspicion that its institutional arrangements have veered too far from the former to the latter.
If the euro – and indeed the EU itself – is to remain viable and democratic at the same time, policymakers will have to pay closer attention to the demanding requirements of delegating decisions to unelected bodies.
This does not mean that they should resist surrendering sovereignty to supranational agencies at all costs. But they should recognize that economists’ and other technocrats’ policy preferences rarely endow policies with sufficient democratic legitimacy on their own. They should promote such a delegation of sovereignty only when it truly enhances the long-term performance of their democracies, not when it merely advances the interests of globalist elites.
We mere taxpayers might well struggle to work out what this means when it’s decoded. It seems to be saying that the Eurozone’s core operational principles make little democratic sense?
Let’s step back a few paces.
What does it mean to say that “If the EU is to remain viable and democratic ..?“
The EU only works by systematically diluting ‘democracy’ in favour of international technocracy. Take the UK case.
We vote for MPs who in turn vote to set up a majority government in Parliament. That government strikes deals with other EU governments on what is now a vast range of issues. Much of the work for creating the EU-level rules is done by international civil servants with no formal national loyalties but who are paid to take a view on the interests of the EU space as a whole.
Member states get to haggle with each other in EU processes and as necessary vote on EU decisions. On most EU decisions there is ‘qualified majority voting’, a form of voting that gives far greater weight to the notional votes and voters of smaller EU countries by population. Decisions taken at EU level can not get seriously challenged by national parliaments, whether that country’s government have been on the winning side of the QMV decision or not.
Beyond all these layers of dense processes there are the separate bodies that issue decisions affecting the EU/Eurozone as a whole including the European Central Bank and the European Court of Justice.
The latter is a painfully difficult one for Brexit. How can you have Real Brexit if you have not escaped the bony fingers of the ECJ? But how to have Sensible Brexit or even Workable Brexit and stay closely linked to the EU’s economic space without accepting (some) ECJ jurisdiction?
In all this the link between us voters and actual decisions is now so remote as to cease to exist. As John O’Sullivan has put it, the EU is a post-democratic space:
But the great undiscussed problem of modern democracy is that liberalism without democracy is the system of government towards which the West has been moving for a generation or more.
There has been an increasing shift of power from elected and accountable bodies, such as Parliament, to semi-independent bureaucratic agencies that make their own laws (called regulations), to the courts, and in more recent years to European and other transnational bodies …
Over time, majorities ceased to be the dominant decision-makers and became merely one player in the system. Majoritarian democracy mutated into a system that the Hudson Institute’s John Fonte calls post-democracy, in which elites and the institutions they control increasingly exercise more power than the voters and their elected representatives.
Was the Eurozone itself a ghastly mistake? My emphasis:
Italy has been performing poorly since the euro’s launch. Its real (inflation-adjusted) GDP in 2016 was the same as it was in 2001.
But the eurozone as a whole has not been doing well, either. From 2008 to 2016, its real GDP increased by just 3% in total. In 2000, a year after the euro was introduced, the US economy was only 13% larger than the eurozone; by 2016 it was 26% larger …
The euro was supposed to bring shared prosperity, which would enhance solidarity and advance the goal of European integration. In fact, it has done just the opposite, slowing growth and sowing discord.
When the Eurozone was set up all Eurozone member states signed up to a simple idea: everyone wants to benefit from Germany ceding the healthy Deutschmark in favour of the Euro, but the new scheme will work only of everyone promises to adopt German financial and other disciplines or something close to them.
The baffling problem (it turns out) is that not all Europeans are Germans. Top economist Michael Spence moves into a needy mode:
For starters, the Italian government needs (sic) to root out corruption and self-dealing, and demonstrate a much stronger commitment to the public interest. The populists are probably right about these problems. And they are probably right that a reassertion of greater sovereignty over the key flows of globalization is necessary (sic) to counter the centrifugal political, social, and technological forces sweeping across advanced countries.
That seems to mean that Italians at all levels must (sic) stop being so darn Italian. Does it also mean that they need (sic) to find a way to be modern Italians and embrace smart economic growth, but that that can be done only by taking back from Brussels a lot of decisions over Italian affairs?
It all boils down to this.
‘Democracy’ requires a subtle but real sense of accountability and transparency and popular input into decision-making. The EU long ago moved on from such mundane considerations, erecting ‘filters’ of all shapes and sizes that qualify or rule out substantive democratic input at the EU level.
Yes, the UK led the way in not wanting more EU-level ‘democracy’ eg by wider powers for the European Parliament. But that was because we (democratically) preferred to try to keep some sort of national grip on EU-level decisions that we would be subsidising, rather than giving up and floating away in a balmy Euro-demos.
That said, it turns out that both for the Eurozone and more generally (see Brexit) our politicians have created such a thicket of laws and rules and norms and directives intertwining in domestic and EU law that it is impossible to escape from the thorny jungle without widespread carnage. Democracy? Nowhere.
Which is more absurd and depressing? The substantive Brexit writhings of the UK, or the anti-Brexiteers hooting that leaving the EU in this way is ‘undemocratic’?