Update: Steve Keen replies to my critique here.
140 characters are not a good basis for a debate about complex issues. Let me extricate myself from a potentially useful but frustrating twitter “debate” and write a short response to Prof. Steve Keen’s call to support Brexit.
I follow Steve Keen’s economic work at a distance but with interest and sympathy. Although I have not sought to make a career out of economic theorising, I broadly share many of his views on endogenous money and the central role of instability, uncertainty and bank debt in understanding economic developments. I was therefore surprised and disappointed to read his justification for supporting Brexit. Even if he did not formulate it as such, his statement is bound to be taken as a recommendation by his numerous followers and supporters. Yet his reasoning in the article is poor and – this is the most charitable explanation I can find – politically extremely naive.
There would be some additional points to make, but let me just address Keen’s two main arguments.
EU is not undemocratic
The first is the “utterly undemocratic nature of the key institutions of the EU”. This is an oft-repeated trope, but it is wrong. Just as there is an extensive academic literature on money, so there is on EU governance. I will hazard a guess that Steve Keen has spent rather more time reading Minsky and Godley than authors like Majone, Scharpf, Moravcsik or Hix. He need not apologise for that. But then he should not blunder into a complex debate, writing “The European Parliament is a weak, diversionary figurehead, while the real power resides within the unelected bureaucracy of the EU and the key political appointees of the Europe’s governments—and particularly its Finance Ministers.”
The EP is a democratic institution with real power. A larger power resource lies, not with the unelected EU bureaucracy – the Commission -, but the Council of ministers. But these are the representatives for the different policy areas of the 28 democratically elected national governments. I find it rather odd to call a finance minister like George Osbourne, whether one appreciates his policies or not, a “political appointee”. It is true that he is not directly elected. But then British finance and all other ministers never have been, and neither have their counterparts in other EU countries. Yet no-one complains that national parliamentary (or presidential) systems are “utterly undemocratic” as a consequence for the simple reason that ministers, however precisely they come to be selected, require the support of a parliamentary majority.
Moreover, the same basic system of appointment on the basis of an underlying electoral mandate applies to the EU Commission, the much-feared “unelected bureaucracy of the EU”. Britain’s Commissioner is appointed by the government of the day on the base of the mandate it has from British voters, as are his colleagues from 27 other countries. The Commission President was the pre-announced lead candidate of the European party (group in the EP) that received the most votes at the European election. Why is this undemocratic? The officials below them that staff the Commission are, of course, appointed, exactly as they are in any national government bureaucracy.
The European Union is a complex system with interlocking elements. It seeks to balance the one-person-one-vote with the one-country-one-vote principle. It is certainly not unimproveable in governance terms (but then neither are national systems). But it needs to be analysed in its entirety and cannot simply be dismissed as utterly undemocratic on the basis of a few (inaccurate) throw-away remarks about individual institutions.
Brexit is a non sequitor
His second argument is more plausible, but with a little thought only superficially so. It is that the economic rules enshrined in the Maastricht Treaty (and by extension subsequent treaties) are inimical to good economic outcomes. I think as a statement of fact that this is broadly correct; indeed I have argued so myself for more years than I care to remember. (Prof. Keen talks here too loosely, in my view, about a fetish for fiscal surpluses – but the EMU (or EU) countries have extremely seldom produced such surpluses. We could have a long debate about exactly what is wrong with them and what an optimal set-up for a multi-country economic area should look like. I am convinced we would be in broad agreement.) However, the simple but fundamental fact is that the referendum is not about choosing between the Maastricht fiscal rules and some more or less optimal replacement. It is about whether to end, more or less permanently, Britain’s membership of the EU club. Simply put, the Brexit recommendation does not follow at all logically from the fact (accepting it for now as 100% correct) that the economic policy regime is badly flawed. Steve Keen jumps straight from this diagnosis to “think that it’s time to call time on the EU experiment”.
But what is the pathway from voting successfully for Brexit to enlightened fiscal policies in Europe? We would like to be told. Does Prof Keen fancy his chances or those of any other progressive, post-Keynesian economist, as influential policy adviser to a Farage/Gove/Johnson-dominated administration? I presume not. Will the Brexiteers exhuming Thatcherite guru Patrick Minford as their Chief economist have a progressive impact on UK fiscal and economic policy? Will the remaining 27 countries, awe-struck by development across the Channel, throw the ancien regime overboard and convert to sectoral balances, functional finance and MMT? Why would they?
It seems that we are to take “calling time” on the EU not as a whimsical phrase but as a sort of radical policy recommendation. Brexit leads to Grexit, and/or Frexit and Italexit and implosion. And out of the ashes will arise … well what exactly? After all, this is exactly Nigel Farage’s vision too. It is Marine Le Pen’s vision. What reason is there for thinking that the massive political and economic crisis inevitably following EU break-up will usher in a progressive nirvana and not a nightmare of economic and political nationalism, xenophobia, inefficiency, inequality and neoliberalism? Or maybe even worse.
The stakes are too high for progressive economists to indulge in childish musings about knocking over the bricks and rebuilding the castle. Perhaps Steve Keen will clarify his position. In the meantime I contend that the place of progressive UK (based) economists is to argue for Remain for change.