Wednesday, May 23, 2012

qotd: Amartya Sen on government austerity

The New York Times
May 22,2012
The Crisis of European Democracy
By Amartya Sen

The worthy but narrow intentions of the European Union's policy makers have been inadequate for a sound European economy and have produced instead a world of misery, chaos and confusion.

There are two reasons for this.

First, intentions can be respectable without being clearheaded, and the foundations of the current austerity policy, combined with the rigidities of Europe's monetary union (in the absence of fiscal union), have hardly been a model of cogency and sagacity. Second, an intention that is fine on its own can conflict with a more urgent priority — in this case, the preservation of a democratic Europe that is concerned about societal well-being. These are values for which Europe has fought, over many decades.

The cause of reform, no matter how urgent, is not well served by the unilateral imposition of sudden and savage cuts in public services. Such indiscriminate cutting slashes demand — a counterproductive strategy, given huge unemployment and idle productive enterprises that have been decimated by the lack of market demand.

There is, in fact, plenty of historical evidence that the most effective way to cut deficits is to combine deficit reduction with rapid economic growth, which generates more revenue.

There are surely lessons here from John Maynard Keynes, who understood that the state and the market are interdependent. But Keynes had little to say about social justice, including the political commitments with which Europe emerged after World War II. These led to the birth of the modern welfare state and national health services — not to support a market economy but to protect human well-being.

Though these social issues did not engage Keynes deeply, there is an old tradition in economics of combining efficient markets with the provision of public services that the market may not be able to deliver. As Adam Smith (often seen simplistically as the first guru of free-market economics) wrote in "The Wealth of Nations," there are "two distinct objects" of an economy: "first, to provide a plentiful revenue or subsistence for the people, or, more properly, to enable them to provide such a revenue or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue sufficient for the public services."

Participatory public discussion — the "government by discussion" expounded by democratic theorists like John Stuart Mill and Walter Bagehot — could have identified appropriate reforms over a reasonable span of time, without threatening the foundations of Europe's system of social justice.

Europe cannot revive itself without addressing two areas of political legitimacy. First, Europe cannot hand itself over to the unilateral views — or good intentions — of experts without public reasoning and informed consent of its citizens.

Second, both democracy and the chance of creating good policy are undermined when ineffective and blatantly unjust policies are dictated by leaders. The obvious failure of the austerity mandates imposed so far has undermined not only public participation — a value in itself — but also the possibility of arriving at a sensible, and sensibly timed, solution.

This is a surely a far cry from the "united democratic Europe" that the pioneers of European unity sought.

(Amartya Sen is a Nobel laureate and a professor of economics and philosophy at Harvard.)

Comment:  Although Amartya Sen warns of the threat of unilateral austerity programs to the united democratic Europe, his words can also apply to the current political efforts in the United States to reduce the role of government through austerity measures. The current attack on Medicare exemplifies the fact that the austerity agenda does not spare our government health programs.

Perhaps the most important warning we should extract is implied by Professor Sen's concern about the undermining of public participation. We should take heed of the fact that a united democratic nation requires not only public involvement but also public awareness of the proposed policies and their ramifications. As he writes, political legitimacy of nations requires "public reasoning and informed consent of its citizens."

The public has to understand that the rhetoric of unilaterally "reducing taxes" equates with imposing government austerity. They then have to understand what government austerity truly means. It does not mean, "cut my taxes, but leave my Medicare alone."

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