Will the Eurozone crisis finally get EU leaders to address its democratic deficit?

The FT has this as lead story this morning:

The European Union would gain far-reaching powers to rewrite national budgets for eurozone countries that breach debt and deficit rules under proposals likely to be discussed at a summit this week, according to a draft report seen by the Financial Times. The proposals are part of an ambitious plan to turn the eurozone into a closer fiscal union, giving Brussels more powers to serve like a finance ministry for all 17 members of the currency union.

Some thoughts:

First, it’s welcome that we’re finally seeing evidence of some seriousness of thinking in Europe about what it will take to get through this crisis, rather than the crappy one-step-at-a-time incrementalism that’s characterised everyone’s response so far.

Second, this probably is a necessary component of a solution that will actually work, if the plan is to keep the Euro going.

Third, if this did happen, note the distinction that would then exist between the EU and US approaches: in America, the consequence of fiscal irresponsibility isn’t to pass the back up the chain (to the federal government), but rather to throw it down the chain (hence how many cities and municipalities are facing bankruptcy).

Fourth, Commission staff must be almost fainting with excitement at the idea of so much power shifting to Brussels.

Fifth, if EU leaders did decide they were willing to contemplate this major shift, then they would have to get serious, at last, about Europe’s democratic deficit. For all that NGOs love to paint the IMF as anti-democratic, actually countries do face a choice about whether to seek an IMF bailout (with conditions attached, yes) or not. Under this proposal, if I understand it correctly, EU states who’ve messed up their finances would not: they would have no option but to shape their budgets according to the wishes of a bunch of unelected bureaucrats in Brussels. Hard to see that working out as a politically sustainable arrangement.

Sixth, if EU leaders were to get serious about Europe’s democratic deficit, then we’d be straight back to the whole circus that was the attempt to agree a European Constitution last decade. Open question: is the Eurozone crisis serious enough that the French and other European electorates would be better disposed to such an agenda now than they were in 2005?

Seventh:  against this backdrop, it becomes obvious why the UK government’s strategy of separating the governance of the Eurozone from the governance of the EU as a whole makes zero sense.

Communicating with the public on aid and development spending: we need a better story

The comprehensive Data report released today by the One campaign reveals that the flow of aid from Europe to developing countries fell by €700 million in 2011, the first such drop in almost a decade. The crisis in the Eurozone and the squeeze created by austerity measures are taking the blame for this, with Greece and Spain having – understandably – made the largest cuts in their development budgets.

So far, much of the commentary has concentrated on what this means for the EU in terms of its pledge to contribute 0.7% of national income towards achievement of the Millennium Development Goals by 2015.  Although the UK, Ireland and the Netherlands are on track to meet this target, many other European countries will have to stump up billions more in order to do so.  This is a tall order at a time when cuts in public spending are being made across the board.

However, new research from IPPR and the Overseas Development Institute (ODI), also published today, suggests that this debate is missing the point somewhat.  Instead of focusing on ‘getting to 0.7%’, more attention needs to be paid to addressing declining levels of popular support for aid.

In February and March of this year, IPPR and ODI held a series of deliberative workshops around the UK: in London, Newcastle, Edinburgh and Evesham.  These sessions gave us a chance to have in-depth conversations with diverse groups of UK voters, both to hear their views on various aspects of the aid and development debate and to better understand the values and attitudes that underpin them.  The messages we took from these were mixed.

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Don’t blame the economists

What is it about economists that make people so cross? Some of my best friends are economists and they are perfectly nice, reasonable people – some of them even have a sense of humour and everything. But apparently I am being sadly misled. They are fundamentalists. In the more hysterical versions of the argument they are even the devil, offering us Faustian bargains that are bound to turn out badly.

Well I’m sorry but this is absolutely ridiculous. There is a good defence of economists here, and an excellent, considered, piece on the state of economic thinking – and how far it is from this caricature – here. I’m not going to rehash those arguments – read the blogs. But what I find really strange about this argument is how economists – academics, on the whole, who have little real power though some of them have a great deal of influence – are blamed for the actions of politicians.

Paul Vallely asks ‘how are we to decide what is apt for the market to determine and what must be decided by other values’? Actually, it’s no mystery – it’s called politics. He asks if it’s ok to outsource torture, for example.  An economist might have a view on that (I struggle to imagine what it would be), but as we saw from the big arguments about rendition, it’s actually a political decision. To blame economists for foreign policy choices made on the basis of Middle East politics and the global balance of power seems pretty extraordinary to me. Which areas of life we commercialise and which we don’t are political decisions – look at the very different decisions taken by governments about the role of markets in health care.

Economists can tell the people who actually make the policy what they think the consequences of different choices might be, or what might be a good way to achieve a particular objective. And as even economists’ harshest critics point out, they will often disagree quite strongly with each other over their analysis of both those questions. Then it’s politicians who decide – on the basis of ideology, political expediency and sometimes even common sense, which pieces of this sometimes conflicting advice they will take.

Sometimes, as with the financial crisis, those political choices – about how to regulate the financial sector, for example – turn out to be pretty disastrous. And yes, economists, some of them with their own financial interests in mind, were pushing governments to make these bad choices.  But others were warning loud and clear that it was all going to end in tears.  In the end, governments made the bad choices and we are all living with the consequences.

But I am mystified as to why these bad political choices are used as evidence to condemn a whole academic discipline. We don’t look at the atom bomb – the development of which was a product of political choices about defence spending – and blame ‘physics’ for evermore.  Reading a bad book doesn’t make people write articles condemning the whole of literature.  Yes, some economists are prone to arrogance and to making vastly overstated claims about the certainty of the conclusions. And in the world of policy influence economists hold a special place which is quite annoying to other disciplines who feel they have something useful to say. And some of them misuse that power. But don’t forget who makes the actual decisions here, and who should be ultimately responsible if they are decisions that you don’t like.

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