Economics / Politics

Does the economic crisis threathen democracy?

Greece, the birthplace of democracy and the epicentre of the debt crisis in the eurozone (Wikimedia Commons)

While preparing the first radio broadcast of Au Café de l’Europe, on Thursday 4th October, on the topic “Democracy in Europe”, I dealt with the following topic: is democracy at risk due to the current economic woes? Indeed, it seems that the current troubles have led in many Member States to the growth of extreme parties and xenophobic and anti-European feelings. 

Starting from the definition of democracy given by Abraham Lincoln – power of the people, by the people and for the people -, I tried to examine the effects of the economic crisis both on those who hold power and on the decision-making processes in democracies, before assessing whether decisions taken to tackle the crisis where really “for the people”.

I/ The power of the people

In a democracy, the legitimacy of decisions relies on the (supposed or real) people’s will. However, during the last couple of years, some observers have expressed doubts as for the real power detained by citizens and their elected representatives. Setting aside some typical phrases such as “Goldman Sachs rules the world”, what credit can be granted to these claims?

First of all, let us focus on rating agencies. They were incapable (or refused) to see the crisis looming and therefore, they have some responsibility in the bursting of the 2008 crisis. Since that, they took the opposite extreme stance, downgrading banks’ and sovereign States’ rating at an accelerated path, without always justifying their decisions enough. Moreover, suspicions of conflicts of interests are recurrent and we have an oligopoly with 3 main actors. However, even if their decisions regularly make the headlines, generating more or less sharp political comments and reactions, we can question their real power, as markets often seem to anticipate or to ignore their decisions. So, the real influence of rating agencies on national politics should be put into perspective.

Regarding financial markets and banks, the debate is similar to the one on rating agencies: markets and banks, in particular by using speculation, would force political decision-makers to adopt policies unfavourable to the voters. On the other hand, we can ask ourselves whether this pressure exercised by markets on some States is not positive in the long run, forcing the governments to act in the long-term interests of the citizens… We will discuss this point later, in the last part of this article, dedicated to the political choices to tackle the crisis.

Another limitation to the power of elects is law. The Treaty on Stability, Coordination and Governance (TSCG) caused a heated discussion, though its content is widely similar to the one in European legislative acts (in particular, the Six-Pack). One of the main chapters of the TSCG deals with ensuring a stronger fiscal responsibility by introducing, rather at constitutional level, a “golden rule” limiting the structural deficit to 0.5% of GDP, except in extraordinary situations (e.g. an economic crisis leading to a recession). Furthermore, States whose debt is above 60% of GDP will have to commit themselves to reduce their debt to this level in the mid-term. Some say it is an infringement of national fiscal sovereignty. I do not agree with them, as the Parliament will continue to vote each year the budget, choosing the projects it wants to finance with the resources (tax) it manages. Of course, within a few years, the legislator will not have the possibility to vote budgets with a too high deficit, but I believe this benefits the citizens, as they will not need to support the high costs of debt (in France, it is the first budgetary item!). Furthermore, Parliament’s sovereignty was already restricted before, in France. So, for example, the French Constitution sets precisely the procedure of adoption of the Finance Act and the Financing of the Social Security Act. In addition, the Constitutional Council has already censured dispositions of the Finance Act on grounds that they were too complicated. It is important to point out that under the regime of the 5th Republic (since 1958) we do not have a true parliamentary regime with an almighty legislator, in France.

As for the idea of a referendum on the TSCG, it seems to me inappropriate as it is the Parliament’s role to determine the politic of the State and to assess the long-term effects of its choices. In addition, lies about the content of the TSCG, relayed and mediatised by some elects, make that the citizens are currently not placed in a sound situation in which they could make up their mind in an independent manner.

Last but not least, a frequent criticism to the current decision-making process, which marginalises a bit the citizens, is the lack of transparency. Since the beginning of the crisis, decisions have been often adopted in a situation of urgency, during numerous European Councils “of the last chance”. Parliaments are frequently reduced to the role of a “registering office” of the compromises negotiated between 27 leaders. Of course, there can be some justifications: the urgency to act, the difficulty to reach an agreement when there are many more actors or the necessity to keep some “secret” in order to ensure the efficiency of the measures. But on the other hand, the control exercised by citizens and elects on the intergovernmental decisions is made harder to realise. So, here, everyone has to build up his / her own mind about whether the “advantages” of a lack of transparency get the upper hand over the inconveniences. The recent decision of the German Federal Constitutional Court, in September, indicates that in the future, Parliaments have to be better involved in the European decision-making process, in order to increase the democratic legitimacy of the leaders’ decisions.

II/ Power by the people

Here, we have to examine how leaders are designated, in order to assess their legitimacy.

National leaders who are members of the European Council are all democratically chosen: either directly elected (e.g. the British Prime Minister, who is an MP of the majority at the House of Commons, or the French President) or coming from the parliamentary majority (like several European PMs). Therefore, critics of the European democracy have to think about the following question: why should decisions adopted by leaders in the European Council be antidemocratic? A possible answer is another question: is it legitimate, for citizens of one Member State, that “foreign” leaders impose decisions on their national leaders? I would like to point out two elements as for this last question: first, a decision can be “imposed” on a Member State only when decisions are taken at a majority rather than unanimously and second, if we think on a European scale, about the common interest of all European citizens, decisions adopted at a (qualified) majority are perfectly legitimate.

Let us then examine the role of the Parliaments. MPs represent the citizens (here too, they are either directly elected or indirectly – e.g. the French Senators). Sometimes, one of the Houses is even not elected at all; this is the case of the House of Lords in the UK. So, we note that the democratic legitimacy of the legislative power is not necessarily higher than the one of the executive power. If the parliamentary procedure is sometimes long and inadequate to urgent decision-making, it allows more open debates on important topics affecting the citizens and it enables to weigh more accurately the pros and the cons of the various policy options. In the current situation, we see that decision-makers often got round national Parliaments and the European Parliament (EP). This was criticised by the Bundesverfassungsgericht (German Constitutional Court) in a decision of June 19th, 2012, in which it reinforces the rights of the German Parliament, forcing the government to better inform the German MPs on the state of discussions and negotiations in Europe, in order to enable them to participate more in the process.

So, it is important to think of new ways to better involve national Parliament in the current negotiations, without excluding the possibility to act quickly and efficiently. A better information (see the German example) or a stronger cooperation between national parliaments of different Member States are some options to study.

Besides, a major role for the EP is also often claimed, as it is the organ that represents all EU citizens. However, can it really pretend to play a bigger role in the current negotiations, while the money in the EFSF (European Financial Stability Fund) and the ESM (European Stability Mechanism) comes mainly from the Member States? On the other hand, a better implication of the EP in the decision-making process would be fully justified if we finally decided to have a significant European budget that could be used as a tool to tackle the crisis.

The way the decisions are currently adopted, as presented above, is the intergovernmental method. Another one, called for by European federalists (to whom I belong) and which is at the basis of the European integration, is the “Community method”. It relies on the involvement of all European institutions in order to better defend the European common interest. Of course, this requires to transfer additional powers to the EU and to give it enough resources to build a credible answer to the crisis.

Would the “Community method” not be more democratic than the current intergovernmental method? Indeed, it would have the advantage of involving all EU institutions representing the European common / general interest and also to involve the EU institution considered most democratic: the EP.

III/ The effects of the economic crisis

While the existence of unemployment or a loss of income cannot be described as “antidemocratic”, we can nonetheless link the topic of this part of our article to the main question we try to answer: is the economic crisis a threat for democracy?

Indeed, one risk is that economic concerns become so important for citizens that they do not care anymore about politics and the general interest. So, one could wonder if increasing inequalities are compatible, over a certain threshold to be determined, with a democratic regime.

Furthermore – and it is a worrying tendency in several Member States –, a persistent economic crisis favours the emergence of populism and nationalism, of xenophobia and withdrawal into oneself. In most situations, growing political parties during these hard times are extremist, freedom-destroying and antidemocratic parties. Can the European crisis lead the European integration project to fail? I do not believe so, but it is the duty of the national elects not to designate the EU as the scapegoat of the current economic troubles and it is the duty of the European leaders to explain their choices to the citizens, so that these understand where Europe goes and do not have the feeling that Europe is built without them or, worse, against them.

IV/ The solutions to tackle the crisis: “for the people”?

An often used line of approach is reforming the Welfare State, with cuts in public expenses and social security benefits.

The Welfare State was mainly developed after the Second World War. The idea of the leaders at that time was that the rise of totalitarianisms between both World Wars was due to the persistent misery following the crisis of 1929. So, the solution to avoid new horrors was to bring prosperity to the European states and all their citizens. This project worked globally well until the beginning of the 1970s. From then on, economic growth slowed down for different reasons, such as higher oil prices. Unfortunately, during years or even decades, European states refused to face the reality and lived beyond their means. Some eventually had the courage to implement difficult reforms, such as Germany at the beginning of the 2000s and the Scandinavian countries in the 1990s; other have always pushed back until they were in a disastrous financial situation forcing them to adapt far-reaching reforms at a quicker (even too quick…) pace than they would have liked to. We think of course of Greece, but also Italy or France… In the short run, these decisions are difficult and are rather logically rejected by a majority of voters. But to me, they seem essential to ensure the durability of the European social model.

Winston Churchill said that democracy was the “worst form of government except all the others that have been tried” and that “the best argument against democracy is a five minute conversation with the average voter”. One way to understand what Churchill means is to be conscious that citizens do not always have the ability of “extracting” themselves from their individual concrete situation to take into account collective interests and long-term optima. Is it not precisely the role of the elected representatives to think on the basis of a broader horizon, free from the constraints of an imperative mandate? (It is nonetheless worth mentioning that a more or less significant part of the elects does not seem to be very perceptive either).

Let us take a very simple example: nobody wants to pay more taxes or to receive less money from the State. In contrary: everyone tries to benefit at the most from public expenditures while contributing the less possible to public income… So, someone has to think of the long term, in order to avoid conflicts between generations, an accumulation of debt and a depletion of resources. It is at the basis of the concept of sustainable development: meeting the needs of the current generation without impeding the future ones to meet their needs. In some countries, considering the absence of responsibility and perspicacity for elects from the whole political spectrum, technical governments took office. If we take the example of Italy, the government led by Mario Monti has started indispensable structural reforms, and nevertheless for years (even decades…).

When we integrate a “requirement for results” in the concept of democracy, do technical governments (in Italy and, previously in Greece) really lack democratic legitimacy? I do not think so, especially as these governments are supported by a majority of MPs who can bring down these governments at any time. In other words, a majority of representatives of the people agree with the decisions taken by “technocrats” as long as they remain in office.

To sum up, while, for some observers, the content of some measures and the decision-making process to adopt them seem to lack democratic legitimacy, these criticisms must be put into perspective, taking into account the complex definition of democracy, as it includes an “output” dimension: take decisions in the interest of the citizens, even if the short-term effects seem negative.

Conclusion: A federal Europe as a democratic solution to the crisis?

Democracy is a complex notion requiring caring about the current opinions of the citizens while at the same time requiring the representatives to adopt decisions in the long-term interest of their voters.

While the worrying emergence of antidemocratic forces in several Member States can be linked to the crisis, I do not believe that democracy at European level works badly, though some progress could be made.

As a European federalist, I am convinced that a deeper economic integration combined with an increased politicisation of Europe can enable a federal Europe to be a democratic solution to the crisis.

Let us precise that a federal Europe would not be centralised in Brussels; it respects diversity and the principle of subsidiarity.

Furthermore, a federal Europe would be democratic. In 1979, the European Parliament (EP) was elected for the first time directly by the European citizens (at universal suffrage). This conferred him an incomparable democratic legitimacy. Over the years, several reforms were adopted, enhancing the Parliament’s powers. Deepening the European integration is strengthening the EP, it is more implicating the citizens in the European construction through various processes such as the European Citizen Initiative (ECI), and it is going towards the (direct or indirect) election of the President of the Commission and / or EU Council by us, the citizens.

And a federal Europe also shows solidarity. Robert Schuman wanted to create a united Europe based on de facto solidarity, which led to the ECSC (European Coal and Steel Community) in 1951 and then to the EEC (European Economic Community) in 1957. Today, solidarity among Member States is still needed in order to tackle the crisis. This “entitlement to solidarity” goes of course with duties. So, we must deepen the European integration to ensure the respect of the commitments taken by Member States benefiting of the European solidarity. In return, an important federal budget (potentially partly financed by Eurobonds) could finance investments in the future and contribute to mitigate the effects of the crisis in some areas. There are also the huge challenges of bringing closer the social and fiscal systems across Europe, in order to strengthen the European economic and political unity.

The task is not easy, but the EU has always come stronger out of the crisis already weathered. So, let us be confident!

Pierre-Antoine KLETHI

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