Sunday, May 23, 2010

In search of consistency in economic and political thinking

Since my last entry, May 19, the "plot" has thickened even further in daily, 24/24 "The Global Finance, Economics and Politics Show". The US Senate has passed after all a "sweeping" bill reforming financial regulation (I have yet to be convinced how sweeping the bill is, especially in covering all financial activities). A House of Reps bill exists already and now these two have to be reconciled and then voted on, to pass. We shall see.

The unilateral German ban on naked short selling of certain types of sovereign financial instruments has received many comments, all over the world, some quite critical (see eg "Germany Tries to Save the Euro — All by Itself" on on May 21st and "Angela Merkel's mistake: Battling the financial markets", a Washington Post editorial on May 22nd).
One should note that her speech at the German Lower House on either late hours of May 18 or morning of May 19 (I have not been able to exactly confirm when the speech took place or find a full text of her speech) includes mentions, some a tad rough/not detailed enough, to many policy initiatives that either the world (via G20 - but is that a world governance body?) or the EU or the Eurozone or Germany alone should do.

One of the criticisms that she has received is that she is wrong to describe things as a battle of the politicians against the markets. I happen to agree with Mrs Merkel on that account (see my guest article in New Europe on May 16).

Why (do I agree with Angela Merkel on the "battle" issue)? Because while the markets (financial & other) have a role to play in life, that does not include ruling or governing (ie Agorocracy instead of Democracy).

Because while there are many (even too many) "bad" (badly designed, too bureaucratic, too complex, etc) laws and policies produced by elected governments, I am not of the view (as a centrist) that they can be replaced by"the laws of the markets". In other words, while I studied applied decision sciences (at MIT and Northwestern, BS and MS) and have an MBA as well with emphasis on Finance (INSEAD 1990), I'm not a believer in "the markets know best" religion or dogma. The markets are merely a tool, an imperfect one, neither wise or rational in its behavior as a system.

I think that:

Economic globalisation has to be balanced with /checked by the globalisation of Democracy (that means a world parliament of elected reps of the people and world government). Of course this "world" would exclude a portion of the number of countries and people who do not wish such union, in spite of all the humanistic and other rationales for it (see previous posts of mine on globalisation and its pros and cons in this blog).

How about the nation-state?
I think that rationales that focus on national sovereignty, to be consistent, should also advocate full de-globalisation of trade, finance/capital, etc. That full package would make sense, ie be consistent (Note: Maybe even a return to city-states (as in Ancient Greece or Italian Renaissance, eg Athens, Sparta, Florence, Venice, etc)? Nah!).

An a la carte approach to either national sovereignty (see my posts on sovereignty) or globalisation happen to not only be rationally inconsistent; what is more, they undermine or underplay the rights of humans while they are in favor of the freedoms of capital and (in many cases of sovereignty rationales, goods as well).

Humans deserve, by "birthright" the freedom to live and work (almost) anywhere on OUR planet they wish to as along as they abide to Constitution(s) and laws, pay taxes and social security contributions, etc. Being a citizen of the world is not a privilege for the rich, the political refugees and the PhDs (see eg US immigration policies, but these apply more or less (less as in eg PhDs and green card "lottery") in most countries that are nevertheless members of the WTO and thus "value" the freedom of goods and capital).

Now, back to the EU. IMO a full Union or US of Europe is the way forward, and if the EMU/Euro part of the existing treaty needs to be re-opened and negotiated to include some of Mrs Merkel's proposals re stricter fiscal discipline, one might as well go for a full union new Treaty: One that includes Economic and Fiscal, as well as Political and even military union (so that Greece and other members eg can feel safe from external threats and thus spend less on defense (thus make it more feasible to observe fiscal discipline)).

Because I have come to realise that the structural fault of the European integration process is that instead of starting with political integration leading to union, in the 1950s, they started with economic instead (in the form of the "European Economic Community - EEC or "Common Market").
That happened, back in the 50s, because, regrettably, of all countries, France (its Parliament, August 1954) blocked the creation of a European Defence Community (thus killing the the European Political Community project as well) leading instead to EEC (an economic one). The idea was I guess similar to that of the Bush Jr administration in that economic integration promotes Democracy and integration (or common standards in Bush's case) in other areas. It seems that this "model" has not worked too well, in any of its versions, the European or the Bush Jr. one!

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