Constitutional economics & the European crisis
Political parties, we should remember are tiny private organizations that aspire to gain power and take on the mantle of "government". The electoral process and the formation of "government" is something like a parlour game with almost no serious credentials in terms of making any attempt to reflect the will of the people but rather pretend to do this while redirecting the limited expressed will of the people to secure their ability to take command of governance, including control of macro-economic policy. Although the term government appears to convey some degree of representation of the people supported by institutions of state and the civil service, what in fact passes for government is a group of individuals with a primary an overbearing interest in supporting the wishes and maintenance of the power of private organizations called political parties.
The insignificant size of political parties and their heavy reliance upon the financial support of other private organizations causes them to lack an intellectual critical mass sufficient to keep lobby interests at a distance. Their lack of effective management of the economy relates, not only to their particular economic philosophies but also to the fact that the mainstream economic theories applied, KM approaches, do not represent a comprehensive model of how the economy works and, as a result, the solutions are as bad as the problems to be solved.
The same situation can be observed within the Euro zone where Member States are realizing that the Euro system applied across very different economies has worked, since its initiation, largely in favour of Germany and was always unsustainable on the periphery. But the political agenda behind the Euro, as opposed to the initial step of forming an open Common Market, is causing Brussels to wish to batten down the options available to Member States. This panic on the part of disorientated politicians with very poor democratic credentials is what strengthens the relative power of the European Commission, and decisions by unelected officials and judges, over Member States. In the current crisis this is likely to end up with impositions that will restrict the degrees of freedom of the Bank of England to act in support of government policy objectives, even although Britain is not a member of the Euro zone.
Unfortunately, the British government, that is the Conservative-Liberal Democratic ministers, running Britain is using the same faulty economic theory to justify Britain's interests whereas Europeans apply the same theory to justify undemocratic and imposed solutions. The involvement of increasing numbers of "experts" and "technocrats" all applying the same incomplete economic theory does not change matters but decisions can be attributed to experts rather than to politicians and parties. Since both sets of politicians on either side of this game have weak democratic credentials, all of them working for the maintenance of power or their associated private factions, and all of them applying faulty economic theory, we have a recipe for disaster.
The people need to demand constitutional reform so that economic policy incorporates stronger constitutional components designed to identify economic policies that support the specific objectives of the constituents while preventing anyone achieving their objectives at the expense of others. At the moment the track record shows that politicians are quite prepared to save the banks who have ruined the economy by reducing the prospects of the electorate in the meantime. The current behaviour of politicians both in Britain and in Europe reflect their inability to weigh their decisions through improved constitutional consideration and especially with reference to equity of treatment of constituents both in terms of opportunities and obligations. This disgraceful elitism of top down imposed actions and the associated massive loss in wealth, on the part of those who did not cause the crisis, has been the stuff of revolutions in the past. At the moment the financial community continues, with the willing assistance of political parties, to fool most of the people most of the time. The veneer of sophistication that "finance" has enjoyed for too long needs to be removed.
The only rational escape route, which does not build up yet further debt in the future, is a real incomes approach where the imperatives of performance and growth remain in the forefront of all decision-making and nominal financial values and "credit" should become secondary issues.
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