News Brendan Keenan

Sunday 23 October 2016

Government by the people can bring its own dangers

Published 14/04/2016 | 02:30

IT sounds like the worst kind of upper-class snobbery and condescension: British prime minister Stanley Baldwin's comment that the challenge was not so much making the world safe for democracy, but the more difficult one of making democracy safe for the world.

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Baldwin's motives are indeed suspect. Like many of his political persuasion in the 1920s, he did not like the vote being extended to working-class men, or to women below the age of 30. A different era, and of no relevance to us, one might say.

Or is it? Looking around today, any remaining Baldwinites could be tempted to respond, "Told you so." There is the eruption of the most unlikely of US presidential candidates in Donald Trump; the possibility of Brexit after the referendum in the UK; and the actual result of the Dutch referendum rejecting an EU trade deal with Ukraine, with unknown consequences for Ukraine'e chances of becoming a "normal" European democracy.

There are, of course, many who think President Trump, Brexit and staying well clear of Ukrainian affairs are very good ideas, and they are entitled to their views. That, after all, is democracy. But the word "safe" could not easily be applied to any of these outcomes. It is certainly possible to think that democracy has become riskier since Mr Baldwin's time - even since quite recent times.

The Crash itself was a failure of governance on a monumental scale across the developed world. One theory is that governments have lost much of their power, faced with globalisation, free movement of capital and impenetrable financial sophistication.

There is a good deal of truth in this but the blocking of hundreds of billions of dollars in tax-driven mergers by the Obama administration suggests powers are there if the will to use them exists. On the other hand, Mr Obama is not seeking re-election and does not have to persuade Congress on those particular measures.

Governments, regulators and central banks had powers they did not use during the Bubble. Irish failures were particularly egregious, although it is naive to expect that too much could have been done against a background of international inaction. But the pursuit of electoral popularity was also a major reason why so little was done.

One of Mr Baldwin's ministers, a man called Walter Elliot, put it rather better than his master. "Democracy, if it is to mean anything, must mean understanding by the people as well as rule by the people."

The question is whether this essential partnership - a willingness by the rulers to do what they think is right and a willingness by the ruled to give them a fair hearing - is breaking down. Some slightly Baldwinite academic theories hold that it can work successfully only until the voters realise what power they possess - and use them to their own advantage. Perhaps they now have.

A more common, and more convincing argument is that, far from masking selfish demands, voters in the developed world are merely trying to preserve their position. Academic thought is turning more to the costs of globalisation, financial deregulation and technology on the living standards of people in the richer countries.

The statistic that US median earnings have stagnated in real terms for decades has become so well-known it is almost a cliché. But it must have something to do with the popularity of Trump's Chinese tariff promises and Mr Sanders' more coherent, but still radical, plans for regulation and redistribution.

Wages have been falling as a share of economic output across the advanced economies, to the benefit of capital and profits. This was the subject of last week's blog from the trade union-sponsored Nevin Institute, with the eye-catching theme that they have been falling faster in Ireland than almost anywhere else.

As is often the case, Ireland is an extreme example, and a bad one. Profits and capital have been swelling faster than anywhere but, as author Tom Healy points out, they are not Irish capital or profits - a qualification which may well get dropped when arguments for wage increases kick in.

The big losses, of course, are not falling wage shares but the effects of the banking, household, property and exchequer financial crashes. In more rural parts of the country, these have been exacerbated by the particularly severe construction collapse and the decline of the foreign manufacturing industries which were established in such areas.

It would take many years of globalisation and technology to deliver that combination of blows and it will take many years to recoup it. The challenge for Irish democracy is that people do not want to wait that long. More importantly, they do not see why they should.

This is where Mr Elliott's ambitious plea for "understanding" comes in. It is a lot to ask, but one might at least hope for some more serious thought than has been evident. The noticeable failure of the trade union movement to examine its role in the bubbles (1970s and 2000s), or even admit that it had any role does not bode well for the 2030s - maybe not even the 2020s.

Not that rule by the people as applied by their representatives, is encouraging either. Abroad, there is not a single issue on which Europe's leaders appear to have a grip. More widely, world leaders have been unable to develop any plausible vision of a society which could moderate the losses from globalisation and technology without losing too many of the enormous gains they have delivered.

They can hardly complain if they find themselves replaced by those with implausible visions - of whom there are plenty, at home and abroad. If democracy is to avoid that fate, mainstream politicians will have to up their game: doing a better job of combining consensus with desirable competition, forging a compromise between the benefits of free trade and financial markets and their costs, and recognising that old definitions of insiders and outsiders, winners and losers, are out of date.

For Ireland, meeting these requirements in the immediate future, will be particularly difficult, especially in the light of what appears to be an end to the two-and-a-half party system.

The structural issues to be tackled include household and corporate debt, the high proportion of people not part of the economic system, poor public services, threats to the multi-national presence, inadequate investment and weak public finances.

Even Plato's wisest and most benign ideal dictator would struggle with that lot. As a new political order takes shape, the first challenge for democrats, whether rulers or ruled, is to recognise the magnitude of the task.

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