Sunday, December 7, 2008

Why citizens need to express their opinion (and maintain hope)

Painting by Aafke Steenhuis
Everyone who is in a position to do so, should get involved with thinking and discussing ways to solve the current international financial crisis. “Don’t leave it to the economists!” warned Robert Triffin when I interviewed him more than twenty years ago in Louvain-la-Neuve. “Just as Clemenceau once said that war is much too serious a thing to be left to the generals, I think the economy is far too serious a thing to be left to the economists.”

Talking to friends and people I meet I notice disbelief and distrust that “normal citizens” can contribute to addressing the financial and “real” economic turmoil. Others, who write critically about the crisis in articles and blogs, seem to be absorbed by anger and a feeling of powerlessness and describe as gloomy a picture as possible – without hope.

We will not get a more stable, just and democratic system if citizens around the world keep feeling powerless. We better increase their (our) empowerment by imagining alternatives. The policymakers need democratic guidance; they need our views. Even though they might have some good ideas as to how to solve the crisis, we still need much more democracy in economic policymaking.

To keep things simple, I see three levels at which citizens can contribute. First, at the level of daily conversations with friends and others – stimulate each other to increase your knowledge and express your opinion. Second, at the level of public opinion – contribute to public debates in meetings and in media (including blogs). Third, at the level of discussions among economists – explore strategies that are broader and/or more in-depth than mainstream opinion among colleagues, and dare to be non-confirmist.

Citizens around the world, awake, and don’t feel powerless. Ask around, read, be informed and express your opinion.

Wednesday, December 3, 2008

The credit crisis and the crisis of capitalism

The credit crisis is a sign of deep problems of the capitalist world. But these deep problems are hardly considered by mainstream economists and policymakers trying to solve the crisis. Both groups tend to limit their scope and view. They see the resolution of the credit crisis mainly in terms of improved regulation and, possibly, some minor changes in the global monetary and financial system.

However, this is not the best way to find a long-lasting solution. Even though earlier crises were solved in the same way and even though the capitalist system has proven to be able to adapt itself to new circumstances, a broader approach is needed.

"Capitalism" and "capitalist" societies show different varieties. Capitalism in Germany is different from that in France, and capitalism in the US is different from that in China. The US is often seen as a "pure" or neoliberal capitalist society, but it has many governmental business-supporting institutions and mechanisms. Private companies are grateful for these mechanisms and have no problem in asking for government support, neither yesterday nor today. On the contrary, commercial banks and other companies have asked for massive government support and still continue to do so. And both the US government and European governments have been willing to provide the hundreds of billions of dollars private companies asked for.

The above illustrates two serious problems with the current steering of capitalist economies. First, there is a lack of vision in the policies pursued so far and envisaged tomorrow. Second, there is a lack of ideas and institutional mechanisms to make the economic policymaking more democratic.

The resolution of the credit crisis still lies in the hands of a very limited group of economists and policymakers. The rest of the world is merely bystander – hoping for the best.

"Dreaming" about ways to tackle the democratic deficit in economic policymaking is not a childish hope (see my post of November 27). It is an ideal politicians and citizens around the world should energetically defend. Addressing the democratic deficit in economic policymaking is one of the great challenges of our times. Citizens and politicians should take this challenge much more seriously.

Monday, December 1, 2008

Bill White: "The current financial system is inadequate"

On this blog I have included on various occasions the views of Avinash Persaud and Bill White (see e.g. posts of June 29, May 7, and May 4, 2008). A few days ago, Avinash sent me an e-mail to thank me and others for the support we gave to his work "on the inevitable failure of banking regulation". He referred to a column by Martin Wolf in the Financial Times who had praised, among others, Bill White and Avinash for their excellent writings on the dangers of a credit crisis.

I would like to draw your attention to a speech made by Bill White on the prevention and management of financial crisis. In the speech he addresses the important issue of whether the current international financial architecture is adequate.

"My answer must be that it is not," says Bill White. "Financial crises are generally enormously costly, and we have been faced with them repeatedly over the course of the last few decades. Indeed, we are currently in the midst of a crisis which, being at the heart of the global financial system, could turn out to be the worst of them all."

If you want to read Bill's analysis you can click here.