What has happened to Europe?

I turn now to democracy. The founders of European unity whose ideas moved the European Movement wanted a "united democratic Europe." The Europe that emerged from the Second World War had learned certain things from bitter experience that it was not going to forget. Perhaps the foremost idea was the importance of democracy, giving each person not only a vote but also a voice. If democracy in the form of periodical elections is firmly instituted in the constitutions of most European countries, the commitment to have preparatory public discussion before taking large policy decisions is no less ingrained in contemporary European values. Walter Bagehot defined democracy as "government by discussion" - following a line of political analysis that John Stuart Mill had done much to clarify and champion - and the visionary leaders initiating the quest for European unity never wavered on this dedication.

I shall presently argue that some of the policies that were chosen by the financial leaders and economic powers of Europe were certainly mistimed, if not downright mistaken. But even if the policy decisions taken by the financial experts were exactly correct and rightly timed, an important question of democratic process would remain. For example, the decimation of something as fundamental as the public services that are essential pillars of the European welfare state could not be appropriately left to the unilateral judgments of financial experts (not to mention the error-prone rating agencies), without public reasoning and informed consent of the people of the countries involved. It is, of course, true that financial institutions are extremely important for the success and failure of economies, but if their views were to have democratic legitimacy, that must be through a process of public discussion and persuasion, involving arguments, counterarguments, and counter-counterarguments.

If democracy has been one of the strong commitments with which Europe emerged in the 1940s, an understanding of the necessity of social security and avoidance of intense social deprivation has surely been another. Even if savage cuts in the foundations of the European systems of social justice had been financially inescapable (I don't believe they were, but even if they had been), there is a need to persuade people that this is indeed the case, rather than trying to carry out such cuts by fiat. The disdain for the public could hardly have been more transparent in many of the chosen ways of European policy making.

Quite aside from that question of democratic legitimacy, there is also an important issue here of political practicality - the practice of the "art of the possible" (as politics is meant to be). People could be denied their voice, but given the democratic institutions, they could not be denied their votes in periodic elections. Not surprisingly the people excluded from taking part in the process policy making could not be politically silenced, and in election after election, the incumbent governments carrying out the dictates of financial superpowers have been deeply threatened and sometimes summarily removed. And voting rights without effective policy voice have also made it very difficult for practical solutions to emerge, with appropriate attention to well-reflected priorities and to acceptable give and take. Public reasoning is not only crucial for democratic legitimacy, but also for better epistemology on the basis of considering divergent perspectives. It is also essential for more effective practical reasoning, which can bring out which particular demands and protests can be restrained in interactive public reasoning, in line with scrutinized priorities between a cluster of quite distinct demands (a process of "give and take" that many political analysts from Adam Smith and the Marquis de Condorcet in the eighteenth century to Frank Knight and James Buchanan in our time have made us appreciate better).

I move now to the soundness of economic policy making. There are two issues that arise immediately: (1) the viability of the common European currency, the Euro, and (2) the policy of austerity - chosen by or imposed on - European countries in financial difficulty. On the first question, most of the attention has tended to be concentrated on the short-run survival of the Euro, through providing liquidity to the troubled countries, by one means or another. Many alternative rescue efforts are being considered right now, such as new bail-out packages helped by the financially stronger countries, or the floating of guarantee Euro bonds, or the purchase of Greek, Spanish other high-interest bonds from troubled countries by Germany (thereby earning high interest, without much risk, so long as the Euro survives in its present form). Many of these "rescue" proposals are worth considering and may prove useful, but none of these rescue proposals address – or are meant to address - the long-run viability problem arising from the inflexibility of the exchange rate through the shared Euro, even as countries with relatively lower productivity growth (such as Greece or Spain or Italy) fall behind other countries in the Euro zone in terms of competiveness in trade. A country, such as Greece, may find that it has increasingly less to offer for sale at the fixed exchange rate of the Euro, unless what is not done by exchange rate adjustment is brought about by the brutal process of cutting wage rates – even in terms of the national currency – to an extent that would not be otherwise necessary.

©RIPRODUZIONE RISERVATA