On democracy

I have had cause recently to blog about the difference between a republic and a democracy, at least in the eyes of the early US political theorists.

At the same time I could write about the number of books that make an assumption that political democracy was meant to be only a pathway to economic democracy (as an example Paul Fot's The Vote). It is in this context that the reaction to democracy can be understood - not that letting people have a vote per se was a bad idea but that once you gave the poor a vote wouldn't they just vote for economic redistribution.

Two items on Business Spectator today take the old fashioned concern for the perils of democracy too far. First Robert Gottliebson ponders the question of democracy devoring itself. Under this thesis Government's are evidently making "populist decisions" that risk our economic well-being.

The evidence offered isn't extensive. It included "The other day I was talking with the chief of a major global company who ranks the rise of international populism as the greatest challenge he faces." The two areas of argument offered for Australia are Industrial Relations laws that "take us back 25 years" and "considering a resources rent tax". The former is an assertion about consequences not yet proven, in fact you would be hard pressed to find many real business people as opposed to commentators actually worried. The second is only a worry if the state taxes supposed to be removed aren't. Which really you could have said about the GST in 1998.

He then suggests we are attacking banks, but it is only because we "villify" them over their interest rate hikes. A better response than to suggest that democracy is a problem might just be to defend the banks like I did.

The perfectly rational response in the US of limitting the economic activities of banks and questioning awarding bonuses to loss making execs is regarded as populist rather than, as I see it, merely rational. If the move against the banks was as merely populist as suggested, and so easy to pull off, wouldn't Obama have done it BEFORE the Senate by-election, not after?

The real giveaway is the para;

A couple of decades ago politicians realised that they had to be careful when putting the business community offside to please voters. It is still early days, but the signs are there that the lessons of the past have been forgotten.

That is just bull dust. Government learnt it had to make sure it did not suppress economic activity. Getting people "offside" ain't the issue.

Karen Maley got more philosophical on the topic of the illusion of leadership. Kevin Rudd and Barack Obama are both supposedly "long on rhetoric, and short on tough policy initiatives".

Geez I don't know. Was reaching into the fiscal bag and driving up a deficit that you as Goverment have to deal with an EASY option? Was any of the decisions, be it to intervene and save a bank, or to not and let one go down anything other than "tough".

In case anyone missed it Obama inherited a Federal budget deficit of extraordinary proportiions because Bush was trying to "defund the left" by leaving nothing left to be spent. So is Obama prioposing to increase some taxes to correct the budget defioit anything other than a tough decision? It sure isn't rhetoric.

The argument in Australia comes down to this;

The big gains in productivity growth that we witnessed in the 1990s were a direct result of the huge economic reforms undertaken by the Hawke/Keating government. Initiatives such as pulling down the tariff barriers, floating the dollar, deregulating the financial system and privatizing inefficient government monopolies lay the ground-work for huge improvements in productivity. In contrast, the Rudd government’s commitment to lift spending on infrastructure and education involves a good deal of rhetoric. And very few tough decisions.

Firstly micro-economic reform is a bit like creating growth by lowering interest rates. You get to a point where you can't go any further - you can't have a negative interest rate.

I think the one reform we could pursue would be to start breaking up some of the inefficient private sector monopolies and oligopolies, but the BCA that used to be the champion of micro-economic reform is now the oligopolists club where "free market" means the right to maintain market power.

Hmm, now if you can't get magic efficiency benefits by creating more market where can you. Oh how about improving human capital (by education) and social capital (infrastructure).

It remains a fact that the Howard Government's biggest reforms in transport infrastructure was to take on the unions to improve crane rates at container terminals. We became more efficient at processing imports. But not a cent was spent on building infrastructure to service exports.

Give me Rudd's "rhetoric" over that kind of action any day!

Meanwhile can we get over the obsession with "leadership", "tough decisions" and the dislike of "populism". The reactionaries mightn't have noticed but democracy works, but only while you believe in it!