Democracy & Markets

I recommend this missive from economist Dani Rodrik. Here are some of the good bits:

Well-functioning markets are always embedded within broader mechanisms of collective governance. That is why the world’s wealthier economies, those with the most productive market systems, also have large public sectors.

Once we recognize that markets require rules, we must next ask who writes those rules. Economists who denigrate the value of democracy sometimes talk as if the alternative to democratic governance is decision-making by high-minded Platonic philosopher-kings – ideally economists!

But this scenario is neither relevant nor desirable. For one thing, the lower the political system’s transparency, representativeness, and accountability, the more likely it is that special interests will hijack the rules. Of course, democracies can be captured too. But they are still our best safeguard against arbitrary rule.

Worse still, as Jack & I point out here, the economists neglect how their own models of technocratic rule (the modern day form Platonic guardians would take) in fact highlight the inevitability of distributive politics and the ubiquitous opportunity for corruption. If politics is unavoidable, democratic politics is indeed what we need.

Bye, Bye Euro? A Problem of Political Economy

"Alas, it may now be too late for the eurozone. Ireland and the southern European countries must reduce their debt burden and sharply enhance their economies’ competitiveness. It is hard to see how they can achieve both aims while remaining in the eurozone." ~ Dani Rodrik

And the problem, on his account, is not one of venal, short sighted politicians (personal responsibility!) or of simply unfettering economic markets but of constructing effective centralized political institutions.