Machiavellian Economics

There is a powerful pragmatic argument against Machiavellianism, as well as a principled one. Given modern communications, a cover-up of the kind engineered by Mussolini in 1931 would most likely be unsustainable today. Moreover, any attempt to misrepresent requires further and more complex misrepresentations, which have serious consequences as subsequent decisions come to be based on erroneous assumptions.

To revert to the example of Depression-era Italy: the state holding-company edifice created to save the banks and maintain confidence proved to be an increasingly bureaucratic and costly burden on the Italian economy. A nearly indestructible behemoth outlasted Mussolini’s regime and survived for 50 years.

Markets work by a process of continuous discovery of information. Choking off the flow of information leads to distortion, not confidence. And, as we are now witnessing in the Middle East, the same is true of political systems. Still, no economic crisis or political revolution is likely to change governments’ inherent proclivity to think that they can know better.

Harold James is Professor of History and International Affairs at Princeton University and Professor of History at the European University Institute, Florence. His most recent book is The Creation and Destruction of Value: The Globalization Cycle.

Copyright: Project Syndicate, 2011.www.project-syndicate.orgFor a podcast of this commentary in English, please use this link:

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