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The International Writers Magazine: Politics

Democratic Compromise
• Tom Kilcourse
Democratic society is a collaborative institution in which each is enabled to express individuality by surrendering to mutually agreed constraints. We each accept certain regulations expressed through law or social convention because of the benefits we receive in exchange.


Those regulations change over time as we recognise the legitimate concerns of some sections of society. It is a wonderful invention, but one that is constantly threatened by those who wish to replace the consensual rules by a set of their own making. This can happen when a religious sect, for instance, has the power to impose its beliefs on the rest of us.

The democratic compromise is now threatened by those who would replace socially agreed rules by regulation from a different direction: the market. Our elected politicians continue to pay lip-service to the social consensus while genuflecting in reality to what they see as the irresistible force of ‘markets’, and particularly to financial markets. It has been said that we now live in a casino, but that description is misleading. A casino has rules constraining gamblers’ freedom, whereas our institution is now run by the gamblers who make up the rules to suit themselves. Losers are increasingly deprived of influencing the way things are run, but what happens when losers are in the majority in a state that retains the trappings of democratic legitimacy?

Events in Greece and Spain have generated much debate and speculation on the eventual outcome, but by focussing on such episodes we perhaps ask the wrong questions. Rather than discussing isolated incidents we should be examining the underlying process giving rise to them, and asking whether or not we wish that process to continue. If we do not, then how can it be reversed?

Before examining those questions though, I wish to dispel a couple of myths surrounding the issue. First, the process is in no way the result of ‘natural forces’, it is man-made and sustained by human decision. Secondly, the terms ‘economic’, ‘commerce’, ‘market’ and ‘finance’ are not synonyms. Economics, more correctly political-economy, is a generic term embracing the others, of which the nature of each is open to debate. The term ‘market’ for instance, does not necessarily imply private finance nor the absence of state control. For example, the NHS could use market forces to raise finance without any privatisation of services.

The process is not easily identified under any single, concise label, though ‘globalisation’ may be useful shorthand. It involves the internationalisation of finance and the freedom of capital movement across international borders. This process was set in train by political decisions taken by sovereign elected governments to surrender some of their controls. It is claimed to have raised millions of people around the world from poverty, but it has done so by enfeebling democratic government and the democratic process, a largely western phenomenon, and empowering international, stateless corporations.

Because of the enfeeblement of the state we have democratically elected politicians, who are complicit in the process, misleading their electorates by pretending to powers they have surrendered, and continue to surrender. That pretence is necessary to their continued claim to legitimacy. If they revealed the truth the electorate would be entitled to ask why they should be in office. They mask their true position by claiming to follow the only rational approach to difficult, technical problems. An example close to home is the British Chancellor’s claim to have a long-term economic plan that will make Britain once again prosperous. In truth, making such a plan credible requires one to be in the driving seat. As state powers have been surrendered to volatile, short-term market forces the ‘economic plan’ is no more than an aspiration.

Avowed opposition to such ‘rationalism’ is derided as an unrealistic denial of economic ‘laws’, of spitting into the wind of market forces. But who enhanced the power of those forces by relaxing the regulatory framework if not the elected politicians who have ruled over us for decades? Neither Labour nor Conservative parties can plead innocence of the situation in which we now find ourselves. Both parties today see austerity as the only option open to us, yet both must know that there is an alternative: growth. Should the opportunity arise to question any of these ‘rational’ politicians, ask them to name a country in which austerity has led to economic growth. Ah! I hear, austerity Britain is experiencing rapid economic growth. Really?

It is worth noting that today’s ‘leaders’ focus almost exclusively on Gross Domestic Product (GDP), expressed as a total figure rather than per capita, as evidence that their policy is working. However, perhaps we should pay a little more attention to some other variables, such as the Current Account (Balance of payments) which shows that Britain is ‘not paying its way’, to coin a phrase. Nor do our politicians ever draw a distinction between GDP and National Income, the two are not the same.

I have seen it said frequently that the foreign ownership of British assets doesn’t matter. That is only true if one does not distinguish product from income arising from that product. National Income differs from Gross Domestic Product in that the former includes the net flow of income from foreign assets. British assets, including previously publicly owned assets, have been sold enthusiastically to overseas investors. Good! I hear. Well yes, sort of, but it does mean that when British GDP rises because of growth in transport, energy, or numerous other sectors, the effect is to increase the National Income of France, Germany, India, China etc., by as much or more than that of the UK.

In several countries people are beginning to realise that the apparent helplessness of the state is in fact a construct of previously taken political decisions. They wish to see their states re-empowered as institutions prepared to negotiate with other interests on behalf of all their people, and to negotiate from strength, not by throwing in the towel beforehand. The market is not omnipotent, and is open to manipulation. It is simply the balance of calculations by diverse groups as to what is in their interest. That perception can be affected by organisations, such as states, that are prepared to bargain from strength. For small states such as Greece to do that in isolation is extremely difficult, but if a number of like-minded states, or the more powerful states were prepared to consider a tighter regulatory framework it could be done.

That could yet become the next phase in the process as people elect like-minded politicians, i.e. nationalist politicians of left or right. Perhaps we need to rediscover collaboration as a counter to competition.The solution really is, if you don’t want the market genie, stop rubbing the lamp.

© Tom Kilcourse Feb 1st 2015

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