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.
I can’t agree that the EU is democratic institution. My main issue is determining what the manifestos of the Council and the Commission are. And more importantly where is the competing alternative manifesto? Where was my vote to chose between competing visions and policies for Europe? As far as I can see the EU, rather than offering clear choices to the people of Europe, is a rolling committee system, an effective technocracy.
The fact that turn out in Euro elections has dropped in every ongoing vote suggests I’m not the only one thinking this.
The EU is not “an institution”. It is a complex mix of national, intergovernmental and supranational institutions. In their sum these are democratically legitimate. (That does not mean that there are not issues. Democratic is not simply a yes/no issue. Tzhink of the House of lords in the UK or the role of money in US democracy) The Council and the Commission do not have manifestos, nor should they. The Council is where the representatives of Member State governments meet to thrash out differences. The Commission is similar to a government bureacracy. Think “Whitehall”: are you upset that Whitehall has no manifesto and you cannot vote out top civil servants?
You are right that this complex machinery is hard for voters to follow, there is no systematic media coverage and so voters’ engagement is low.
Tony Holmes says
You are correct that in formal terms the EU is democratic, arguably more democratic than the UK. But in practice it doesn’t feel as if it works like a democracy. I’m more interested in politics than the average person, but I haven’t got a clue who my MEP is, and when the European elections come round, the limited debate which takes place tends to be about issues under the control of national governments, and the eternal “in/out” debate, along with a bit of general whingeing about Brussels bureaucrats. After 40 years of European elections, there doesn’t seem to be any sign of any European-wide “progressive” coalition, which makes one feel that you are relying on electoral accidents to get a majority for reform.
The main problem,however, as innumerable commentators have pointed out, is that there is no European ‘demos’, i.e. no real sense of fellow-feeling among the population of Europe. As Simon Wren-Lewis pointed out in his recent response to Dani Rodrik, the real-hardliners in the negotations with Greece have not been the technocrats, but the elected Finance Ministers. It’s a poor analogy, but would Merkel and Schauble have taken the same approach if one of the German Lander had got into serious financial trouble ? Would, say, the Finns tolerate a 25% collapse in GDP in one region of their country ?
Finally, I think a Gove / Johnson / Farage administration is very unlikely, at least in the short-term. The Conservative Party currently has a majority of 12, and the majority of the parliamentary party favours Remain. Are they really going to elect a divisive figure (as Gove and Johnson have become in this campaign), and risk either a split in the party, or at the very least having to put up with constant parliamentary rebellions from their “One Nation” wing ?
Thanks for your comment.
In fact I think your analogy is correct, or at least forces one to think through the issues. And the answer is clearly “no”. Regions of countries or federal states would not be allowed to go down the pan in the way that Greece has. At the same time, the fiscal policies of sub-national entities are much more tightly circumscribed than those of EU member states (even on paper, never mind in reality). The question is, what conclusion does one draw from this. In principle both greater renationalisation and greate federalisation/centralisation can work, and both are options for the EU. For the currency union, however, only greater integration is an option, if the euro is to be retained.
As to the travails of the Conservative Party: I am not sure and I am happy to sit back and watch. But clearly there is no way round the fact that the Bexit wing needs to be represented prominently in government.
Remaining in the EU should be a rational process of evaluating the benefits of doing so and fairly comparing that result with the risks and costs of remaining and the risks and rewards of leaving.
Most arguments focus on the latter. My feeling is that there are real risks and difficulties that automatically flow from leaving, that can be summarised as requiring a comprehensive rebuilding of the UK economy and trading relations in a relatively short time period.
A comparison might be the situation faced by New Zealand when Britain entered the then ECC in 1973. New Zealand had modelled its economy on being “Britain’s Farm and Britain’s market”. A significant reorganisation of the economy was called for and took place. The difficulties were real but NZ benefitted from the change, at least a little. Change is possible.
At the time many New Zealanders appeared unable to comprehend an existence without Britain, and I see the same characteristic in many favouring remain in the UK. I am more optimistic than such people.
At the same time the risks of remaining in the EU are largely ignored. Some Remainers speak as though the EU had few problems and these easily managed. They are clearly easily ignored. Yet the performance of the EU has been poor in world terms. If one were to drop Germany and Greece from the group’s statistics, on the basis that the first and last are aberrant by definition, the results of the modified group is worse than poor.
The appetite of the EU has outgrown it’s constitution. It is politically weak because there is no connection between its people and its government. They cannot vote them out. Voting the bastards out is the key reason most people vote.
This lack of democracy is the reason why the EU cannot reform itself. And that explains everything.
In the French Presidential election the big question is “Will France rescue the EU?”, and as normal the big issue is being ignored. France’s mate Germany is blinded by greed and so cannot help. France is on its own. Can they do it? Do they want to?
With respect and apology, many EU supporters are like you, more puzzled than angry. Yet the EU is collapsing from neglect, as you look on and if people like yourself don’t act soon it will be significantly damaged.
Crisis is a gift to action. Remaining is not an option. The only choices involve change.
It’s hard to understand your argument other than that you’re afraid. It seems the same argument as the Climate Change predicted catastrophe – well there might be a heat catastrophe so large that it shatters human civilisation – in a century or so.
Why are the elites frightened? Do they think their carefully constructed lives may bomb into similar poverty to that which very many Greeks have suffered over the past 7 or 8 years?
Some of us think that our lives might stop going downhill if we BREXIT. Whereas if we don’t, then we’ll continue into the pit of despair.
Yes, it really was an emotional vote.
Oh, and are you so lacking in sense that you think you can get CHANGE if you REMAIN?
celt darnell says
The democracy deficit lay in the fact that only around 20% of the British public for the last two or three decades supported further political integration with Europe, according to all credible polling.
Yet despite the fact that 80% of the population opposed political integration with Europe, it was shoved down our throats all the same. It is hard to see how such a process can be described as “democratic.”
Had any of the treaties from Maastricht to Lisbon been put to the British people in a referendum they’d have been voted down by large majorities. (Which is why we were denied referenda on them).
Even if one wishes to object to direct democracy (although, given these treaties represented massive constitutional change, surely more than a simple majority vote in Parliament was required) the British people were given no say on them via indirect or representative democratic means either. None of these treaties appeared in any party political manifesto at any time. Not one of them.
This is now academic as we voted to leave, but if you really want to understand why we did, acknowledge that we, the people, never gave our consent to be part of a politically unified Europe in the first place.
That was the democratic deficit.
Which came first, the problem or the souoitln? Luckily it doesn’t matter.