By pointing out the contradiction between democracy and the market, I am not saying that market logic should be rejected. Under communism, total rejection of the ‘one dollar, one vote’ principle not only created economic inefficiency but also propagated inequities based on other criteria – political power, personal connections or ideological credentials. It should also be noted that money can be a greater leveller. It can work as a powerful solvent of undesirable prejudices against people of particular races, social castes or occupational groups. It is much easier to make people treat members of discriminated groups better if the latter have money (that is, when they are potential customers or investors). The fact that even the openly racist apartheid regime in South Africa gave the Japanese ‘honorary white’ status is a powerful testimony to the ‘liberating’ power of the market.
But, however positive market logic may be in some respects, we should not, and cannot, run society solely on the principle of ‘one dollar, one vote’. Leaving everything to the market means that the rich may be able to realize even the most frivolous element of their desires, while the poor may not be able even to survive – thus the world spends twenty times more research money on slimming drugs than on malaria, which claims more than a million lives and debilitates millions more in developing countries every year.Moreover, there are certain things that should simply not be bought and sold – even for the sake of having healthy markets. Judicial decisions, public offices, academic degrees and qualifications for certain professions (lawyers, medical doctors, teachers, driving instructors) are such examples. If these things can be bought, there will be serious problems not just with the legitimacy of the society in question but also with economic efficiency: sub-standard medical doctors or unqualified teachers can lower the quality of the labour forces; venal judicial decisions will undermine the efficacy of the contract law.
Democracy and markets are both fundamental building blocks for a decent society. But they clash at a fundamental level. We need to balance them. When we add the fact that free markets are not good at promoting economic development (as I have shown throughout the book), it is difficult to say that there is a virtuous circle linking democracy, the free market and economic development, contrary to what the Bad Samaritans argue.
Free market policies promoted by the Bad Samaritans have brought more areas of our life under the ‘one dollar, one vote’ rule of market. In so far as there is a natural tension between free markets and democracy, this means that democracy is constrained by such policies, even if that was not the intention. But there is more. The Bad Samaritans have recommended policies that actively seek to undermine democracy in developing countries (although they would never put them in those terms).
The argument starts reasonably enough. Neo-liberal economists worry that politics opens the door for perversion of market rationality: inefficient firms or farmers may lobby the parliamentarians to get tariffs and subsidies, imposing costs on the rest of society that has to buy expensive domestic products; populist politicians may put pressure on the central bank to ‘print money’ in time for election campaign, which causes inflation and hurts people in the longer run. So far, so good.
The neo-liberals’ solution to this problem is to ‘depoliticize’ the economy. They argue that the very scope of government activity should be reduced – through privatization and liberalization – to a minimal state. In those few areas where it is still allowed to operate, the room for policy discretion should be minimized. It is argued that such restraints are particularly needed in developing nations where the leaders are less competent and more corrupt. Such restraints can be provided by rigid rules that constrain government choices – for example, a law requiring a balanced budget – or by the establishment of politically independent policy agencies – an independent central bank, independent regulatory agencies and even an independent tax office (known as ARA, or autonomous revenue authority, and tried in Uganda and Peru[26]). For developing countries, it is seen as particularly important to sign up to international agreements – for example, the WTO agreements, bilateral/regional free trade agreements or investment agreements – because their leaders are less responsible and thus more likely to stray from the righteous path of neo-liberal policy.
The first problem with this argument for de-politicization is the assumption that we can clearly know where economics should end and politics should begin. But that is not possible because markets – the domain of economics – are political constructs themselves. Markets are political constructs in so far as all property rights and other rights that underpin them have political origins. The political origins of economic rights can be seen in the fact that many of them that are seen as natural today were hotly contested politically in the past – examples include the right to own ideas (not accepted by many before the introduction of intellectual property rights in the 19th century) and the right not to have to work when young (denied to many poor children).[27] When these rights were still politically contested, there were plenty of ‘economic’ arguments as to why honouring them was incompatible with the free market.[28] Given this, when neo-liberals propose de-politicizing the economy, they are presuming that the particular demarcation between economics and politics that they want to draw is the correct one. This is unwarranted.
More importantly for our concern in this chapter, in pushing for the depoliticization of the economy, the Bad Samaritans are undermining democracy. Depoliticization of policy decisions in a democratic polity means – let’s not mince our words – weakening democracy. If all the really important decisions are taken away from democratically elected governments and put in the hands of un-elected technocrats in the ‘politically independent’ agencies, what is the point of having democracy? In other words, democracy is acceptable to neo-liberals only in so far as it does not contradict the free market; this is why some of them saw no contradiction between supporting the Pinochet dictatorship and praising democracy. To put it bluntly, they want democracy only if it is largely powerless – or as Ken Livingstone, the current left-wing mayor of London said in a 1987 book title, If Voting Changed Anything They’d Abolish It.[29]
Thus seen, like the old liberals, neo-liberals believe deep down that giving political power to those who ‘do not have a stake’ in the existing economic system will inevitably result in an ‘irrational’ modification of the status quo in terms of distribution of property (and other economic) rights. However, unlike their intellectual predecessors, neo-liberals live in an era when they cannot openly oppose democracy, so they try to do it by discrediting politics in general.[30] By discrediting politics in general, they gain legitimacy for their actions that take away decision powers from the democratically elected representatives. In doing so, neo-liberals have succeeded in diminishing the scope of democratic control without ever openly criticizing democracy itself. The consequence has been particularly damaging in developing countries, where the Bad Samaritans have been able to push through ‘anti-democratic’ actions well beyond what would be acceptable in rich countries (such as political independence for the tax office).*
27
More recent examples include the right to a clean environment, the right to equal treatments across sexes or ethnicities, and consumer rights. Being more recent, the debates surrounding these rights are more controversial and, therefore, their ‘political’ nature easier to see. But, as these rights are becoming more widely accepted, they look increasingly less political – especially witness the way in which environmental rights, which were only supported by the radical fringe a few decades ago, have become so widely accepted in the last decade or so that they do not look like a political issue any more.
28
For example, when a law regulating child labour was proposed in the British Parliament in 1819, some members of the House of Lords objected to the law on the grounds that ‘labour ought to be free’, despite the fact that it was an extremely mild law by the standards of our time – the proposed law was supposed to apply only to cotton factories that were considered most hazardous, while banning only the employment of children under the age of nine. See M. Blaug (1958), ‘The Classical Economists and the Factory Acts: A Re-examination’,
29
Daron Acemoglu, the MIT economist, and James Robinson, the Harvard political scientist, put the same point in more academic language. They predict that democracy will become more widespread with globalization, as it will make democracy more innocuous. In their view, globalization is likely to make ‘the elites and conservative parties to become more powerful and democracy to become less redistributive in the future, especially if new forms of representation for the majority – in both the political sphere and the workplace – do not emerge. Thus, democracy will become more consolidated: however, for those who expect democracy to transform society in the same way as British democracy did in the first half of the twentieth century, it may be a disappointing form of democracy’. J. Robinson & D. Acemoglu (2006),
30
A telling example in this regard is an opinion poll before the 2000 US presidential election which revealed that the most important reason cited by the respondents against either of the candidates was that he was ‘too political’. So many people rejecting someone who is seeking the biggest political office in the world on the ground that he is ‘too political’ is a testimony to the extent which the neo-liberals have succeeded in demonizing politics.
*
All this is, of course, not to deny that a certain degree of de-politicization of the resource allocation process may be necessary. For one thing, unless the resource allocation process is at least, to a degree, accepted as ‘objective’ by the members of the society, the political legitimacy of the economic system itself may be threatened. Moreover, high costs would be incurred in search and bargaining activities if every allocative decision is regarded as potentially contestable, as was the case in the ex-communist countries. However, this is not the same as arguing, as the neo-liberals do, that no market under any circumstance should be subject to political modifications, because, in the final analysis, there is no market that can be really free from politics.