Satyajit Das: Political repression is generating a dangerously high democracy deficit

Das Capital: To avoid scrutiny, leaders have moved important decisions into opaque European Union forums

In attempting to deal with the effects of the economic crisis, politicians and policy makers are increasingly resorting to political repression, in addition to financial repression. A democracy deficit is now as much of a problem as budget and trade deficits.

Elected politicians and policy makers refuse to acknowledge that high living standards and state-provided entitlements (used to secure election victories) based on borrowings are unsustainable. They have repeatedly misled their citizens about the gravity and extent of the financial problems. They have not been honest about the costs of the crisis that must be borne by ordinary people. The Orwellian approach of the political elite was summed up by Jean-Claude Juncker, who was then president of the Eurogroup, in April 2011: “When it becomes serious, you have to lie.”

European governments have deliberately moved key decisions outside electoral and parliamentary processes. The German constitutional court ruled that several decisions by Chancellor Angela Merkel’s government in relation to the bailouts were unconstitutional. Future actions will need to be approved by the Bundestag, the German parliament. To avoid scrutiny of their decision making, German leaders have moved important decisions into opaque European Union forums.

Smaller countries can find themselves arbitrarily included or excluded from crucial decisions. Finland was extended special terms securing part of their commitments to the European bailout package. They had asked unsuccessfully, it was rumoured, for security over some Greek islands.

European policymakers appear to believe that the answer is to suspend democracy and sovereignty and to use trusted technocrats to implement centrally determined policies.

The Greek Prime Minister, George Papandreou, led a short-lived and ill-fated attempt to stage a plebiscite on austerity policies. It was dismissed by larger euro-zone states and the European Union as “disruptive”. Subsequently, the European Union orchestrated the replacement of the Greek and Italian prime ministers.

The crisis has undermined the relationship between voters and elected politicians and policymakers in many countries. There has been a significant decline in the electoral support of major parties. Smaller parties, such as the UK Independence Party, France’s resurgent far-right National Front, Beppo Grillo’s Five Star party in Italy, Germany’s AFD, Greece’s Golden Dawn party and Finland’s True Finns, have all gained electoral support.

Beppe Grillo, a populist comic, emerged as a political force in Italy when he won a significant share of the vote in the country’s March 2013 election. The party of the Prime Minister, Mario Monti, who had previously been a European Union official, performed poorly. The joke was that the Italian election was contested by a former communist, a philanderer, a comedian and an economist (Mario Monti was nicknamed “Rigor Montis” by Beppe Grillo). The punch line was that it was the economist who finished last.

A German newspaper headline neatly summed up the situation: “Germany loses Italian Election”. Fearing the re-emergence of Italy’s financial problems, Germany and the rest of the European Union urged Italy to continue its austerity program, even though more than 50 per cent of the voters had rejected it.

As occurred in Greece after its 2011 elections, the major political parties, with the support of the European Union and Germany, sought to sideline the result by entering into a coalition. That way they hoped to neutralise the influence of the Five Star movement.

The playwright Bertolt Brecht would have recognised the pattern. Watching the suppression of workers’ protests in East Berlin in 1953, he observed: “The people having lost the confidence of the government, the government finds it necessary to dissolve the people and appoint a new one”.

Ordinary citizens everywhere are increasingly aware that they will have to bear the costs of the financial crisis. Most fear poor employment and income prospects, loss of savings and a general decline of living standards. As the former US President Franklin Roosevelt pointed out: “People who are hungry and out of a job are the stuff of which dictatorships are made.”

A widening gap between the views and concerns of the people and those of the political and bureaucratic classes threatens the fragile compact at the heart of free societies. The risk of economic, social, political and international breakdowns is very real.

In March 1933, John Maynard Keynes warned: “We have reached a critical point… . We can … see clearly the gulf to which our present path is leading [if governments do not take action]. We must expect the progressive breakdown of the existing structure of contract and instruments of indebtedness, accompanied by the utter discredit of orthodox leadership in finance and government, with what ultimate outcome we cannot predict.” Once fractured, trust will not be easy to re‑establish.

Satyajit Das is a former banker and author of ‘Extreme Money’ and ‘Traders, Guns & Money’