Politics returns to economics

Last month I wrote about how, as soon as things get difficult, all talk of public policy being decided by unelected groups of experts goes out of the window. Political independence is fine when the economy is growing and everything is running smoothly. But as soon as there is a crisis, the public demands action and the politicians take control.

The Guardian’s Julian Glover agrees. “The age of depoliticised power will come to a thudding end,” he says.

Next year will see the apex and decline of democracy’s fashionable deference to independent expertise. Politics will take control to overcome crisis. The depoliticisation of power was a luxury for the good times, when decisions were devolved to selected groups and reviews.

The keystone of this thinking has already been busted – Gordon Brown’s rules on debt and spending, and the independent Bank of England, now frustrating politicians, who find they have the right to hector, but not decide. The need for decisiveness – to spend or to cut – means the lumbering luxury of state independence will go.

There are signs that this trend might be spreading to that bastion of depoliticised technocracy, the European Commission. Remember all those rules against state intervention? It seems they too have been swept away as governments around Europe respond to the financial crisis. The commission has rushed through its approval of the UK’s £500 billion bank bailout along with several similar schemes from other European countries. The commission has been so busy approving emergency bank bailouts that it has not had time to make its final ruling on whether the nationalisation of Northern Rock complied with EU rules. Its fifty staff who deal with the approval of government intervention in banks have been so overwhelmed with urgent cases that they don’t expect to get around to Northern Rock until well into next year.

Like the idea of political independence, the EU rules on state intervention were a product of the good times when the economy was growing and both private and public sectors looked, at least on the surface, as if they were delivering the goods. Now that Europe is facing its worst financial crisis since the Second World War, these rules that we were told were hard and fast are shown up to be little more than gentlemen’s agreements. The situation is now so dire that, were the Commission to rigidly enforce its rules on state intervention, the member governments would, en mass, just tell it to get lost.

Next to go will be the EU rules on government deficits and there are even calls for the rules for joining the Euro to be relaxed.  To use a very British analogy, there is no point in the Club Committee trying to enforce rules that the club members no longer want to keep.

Like the Bank of England’s independent experts and Gordon Browns spending rules, the EU’s economic agreements and the technocrats who enforce them are being swept away as politicians, often reluctantly but under pressure from their electorates, reassert their control of economic decision making.

Supra-national rules and panels of experts are being swept away by the tsunami that is the global financial crisis. Whether the decisions the politicians make will turn out to be the right ones remains to be seen but they will probably fare no worse than the so-called experts.

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