Joe Beaglehole: Let the people decide on economy

Opinion

In an act of striking political naivete and breathtaking historical revision, writer Christopher Worthington marshals the European debt crisis as evidence that we ought remove decisions about public debt from the hands of the government, instead vesting this authority in an independent body.

Governments and the people that elect them lack "credibility" argues Worthington. Better to leave it to politically insulated experts to decide our fate.

Not only is Worthington's reading of the European debt crisis incorrect, but he unwittingly parrots the insidious argument, as old as Plato, that experts - in this case economists - know what is best for people.

Greece's problem, according to Worthington, is "that borrowers won't lend to people who can't repay" and that the Greek government and people lack "credibility".

Instead we might review the facts. Before the financial crisis, Greece did not have a high debt to GDP ratio and the so-called 'Pigs' (Portugal, Ireland, Greece and Spain) were championed by the IMF. As Nobel Prize winning economists Paul Krugman has shown, Greece's fiscal woes are not rooted in its capacity to pay debt, but rather in the structure of the European Union.

Membership in the euro zone encouraged overzealous investment during good times. Wages and prices in the Pigs rose faster than in the rest of Europe. In the wake of the financial crisis, however, this same Union prevents Greece from using monetary policy to rebalance its economy. Instead, it must choose between leaving the euro zone or enduring massive deflation and austerity.

It is baffling why Worthington considers this saga indicative of the New Zealand public's need to cede fiscal authority to an independent body. The lesson to draw from Greece and the Pigs concerns the significance of maintaining national control over monetary policy and not the government's capacity to manage debt. (New Zealanders should note the importance of flexibility and independence in a deeply uncertain financial world.)

It is worthwhile, however, to reflect briefly on just what Worthington's proposal might mean for our democracy, if only to reveal its dangerous logic. Criticism of the democratic process and its failure to act decisively, has a history that extends throughout the canon of political thought.

When forced to chose between Christ and Barabbas, famously argued Nazi philosopher Carl Schmitt, liberals propose a committee of investigation. Philosopher kings, charismatic leaders and technocrats would all make better decisions than the public, argue the enemies of democracy. Worthington's call for an independent body of experts to take on fiscal policy should be understood for what it is: an attack on democracy.

What's more, these ideas are closer to home than many might imagine. When New Zealand moved towards central bank independence in 1989, reserve bank governor Don Brash led austerity measures designed to reduce inflation. The result was massive unemployment and rising social inequality, the effects of which are still felt today. By placing these politically unpopular decisions in the hands of an appointed "expert," elected representatives escaped accountability.

Worthington's argument will no doubt resonate with the popular disdain for politicians and government in general, which was so effectively channelled by the New Zealand right wing towards the end of Helen Clark's government. It might also appeal to financial elites that find the uncertainty of government fulfilling the wishes of citizens inconvenient.

However, New Zealanders should remember that balancing tax and spending is not a task we can afford to cede to appointed experts because it is essentially political; that is to say, it requires decisions grounded in fundamental values like equality and personal responsibility.

Political decisions rightfully belong in the hands of voters. Worthington may well bemoan our government's failure to deal with long-term liabilities like superannuation, but the solution is not less democracy: it's more. Rather than giving away our decision making powers to economists, I encourage him to knock on some doors this November.

Joe Beaglehole is a New Zealand Fulbright Scholar at New York University.