venerdì 20 febbraio 2015

The Troika and financial assistance in the euro area: successes and failures.


Pubblico alcuni stralci delle conclusioni di uno studio commissionato dal parlamento europeo sulle politiche imposte dalla "Troika". Tenendo conto che non può essere troppo diretto e quindi scritto in "politichese", di fatto è una denuncia del fallimento delle politiche di austerità e di cosiddette riforme strutturali. Quello che non capisco, o forse capisco per altri motivi, è come possibile che se, anche ad una persona con una preparazione di base di  "macroeconomia", tali politiche sembravano in maniera chiara controproducenti, persone più preparate di me del FMI abbiano potuto proporle con tanta prosopopea, c'è da riflettere, non sono un "complottista", ma anche la tesi che non potevano immaginarselo  non mi convince.
This study provides a systematic evaluation of financial assistance for Greece, Ireland, Portugal and Cyprus.

 Yet programmes were based on far too optimistic assumptions about adjustment and recovery in Greece and Portugal.

 Although fiscal targets were broadly respected, debt-to-GDP ratios ballooned in excess of expectations due to sharp GDP contraction. The GDP deterioration was due to four factors: larger-than-expected fiscal multipliers, a poorer external environment, including an open discussion about euro area break-up, an underestimation of the initial challenge and the weakness of administrative systems and of political ownership. 
The Greek programme is the least successful one.
The Greek programme cannot be judged as successful at this stage. Not only was the first programme discontinued and replaced by a second programme after a haircut on privately-held government debt, but there is widespread doubt that the country will be able to regain market access without some form of write-down of its publicly-held debt. 
However, debt-to-GDPlevels increased more than originally foreseen. This was mostly due to the larger-than-expected fall in economic output. A combination of factors is responsible for this substantial error in judgement: (a)the larger-than-expected fiscal multipliers, (b) the unexpected deterioration in the external environment, including an open discussion about euro area break-up undermining investor confidence, (c) an over-optimistic assessment of the initial conditions, (d) an underestimation of the weakness of some administrative systems and a lack of political ownership. 
They implemented reforms but it is difficult to assess whether these reforms are sufficient. Certainly, time is needed to make reforms effective.
In Greece, Ireland and Portugal (..), the fall in domestic demand was bigger than anticipated and, as a result, unemployment increased by much more than anticipated.

Growth prospects are still unsatisfactory and far too weak to address the unemployment challenge. Greece is in the worst situation with unemployment at more than 25 percent and public debt at 175 percent of GDP, but the other three countries, with unemployment at about 15 percent and public debt at about 120 percent of GDP, are also not faring well.
In the case of Greece, it is hard to see how the country could exit from its programme at the end of this year without some form of further debt relief and an accompanying framework to improve the structural drivers of growth.

giovedì 19 febbraio 2015

La guerra di "Troika".

Come nelle migliori tradizioni in questi giorni si sta consumando una ennesima tragedia greca, sulla guerra di«Troika». La situazione è questa: la Grecia ha un debito pubblico in valore assoluto non molto elevato date le dimensioni del paese, poco più di 300 miliardi di euro, ma molto alto in rapporto al PIL, siamo quasi al 180% del rapporto debito/ PIL. Da semplici considerazioni matematiche, per ricondurlo a valori più consoni, ci sono due possibilità, o aumentare il PIL in maniera  sensibile  tenendo sostanzialmente fermo il debito (ovvero saldo zero tra entrate uscite dello Stato) sempre che gli interessi non vadano alle stelle. Oppure diminuirlo con un forte saldo primario (entrate> uscite dello Stato). Purtroppo, come ho più volte detto, nel PIL è compresa la spesa pubblica per cui nel primo caso è difficile far aumentare il PIL, soprattutto in una situazione di crisi, senza un forte intervento, almeno iniziale dello Stato, per  cui anche nel secondo caso si rischia che, come è successo per effetto delle politiche imposte dalla Troika,  diminuendo molto le spese dello Stato diminuisco il PIL, facendo di fatto  aumentare il rapporto debito PIL ( come è anche successo in Italia con il governo Monti). 
Di soluzioni tecniche ne sono state proposte molte, di fatto la situazione è abbastanza insostenibile, una soluzione ovviamente è quella di uscire dall’euro, in questo caso almeno una parte del debito si trasformerebbe in dracme e automaticamente si ridurrebbe, ma  probabilmente non basterebbe perché poi la situazione con i mercati  finanziari peggiorerebbe con aumenti dei tassi e quindi probabile necessità di un default. Credo che questa soluzione non piaccia a nessuno, ergo si arriverà ad un compromesso che prenderà tempo. Il punto in questione, tra i contendenti Grecia e Troika, non è solo il debito ma le politiche che Tzipras ha promesso in campagna elettorale che sono in forte discontinuità con quelle della Troika che, a questo punto, non  può accettare tale cambiamento, insomma entrambi non posso perdere la faccia. Quindi sono pronto a scommettere su un compromesso che salvi la faccia, almeno formalmente ad entrambi, una soluzione transitoria in attesa degli  eventi, chissà un miracolo del QE di Draghi. Tutto ciò, comunque, continua a dimostrare che questa politica europea di così  corto  respiro non può durare, date pure tutte le colpe che volete ai Greci (che sono saliti sul treno dell'euro pensando che fosse un vagone di 1^ prima classe e si sono trovati in un vagone blindato) ma che ha fatto la Germania dopo la prima crisi? Si è preoccupata  di fare rientrare le sue  banche dal credito verso la Grecia scaricandolo sugli altri ( credito verso Grecia  dell’Italia passato da circa 2 miliardi a 40 e forse più), come diremmo a Roma «una sola». Se questo è lo spirito dell’Europa, ovvero cercare di fregare il tuo vicino, «paraculismo» diremmo sempre da noi, nessun spirito di solidarietà, nessuna volontà di costruire un percorso comune, mi domando: i nostri politici italiani quando capiranno che sino ad oggi, ovviamente anche per colpe e miopie tutte nostre, dove è stato ed  è   il vantaggio di rimanere  in questa unione monetaria senza anima?

giovedì 12 febbraio 2015

A proposito di democrazia: un articolo di Lorenzo del Savio and Matteo Mameli

Pubblico integralmente un interessante articolo, tratto da Opendemocracy.net, che pone dei seri interrogativi sul processo di evoluzione democratica in Europa.


At the elections to the European Parliament in May 2014, eurosceptic parties gained ground at the expense of pro-European parties. This applies to both the right-wing and left-wing eurosceptic parties. In general, the reaction of the pro-EU elites has been patronising and paternalistic. Some among the pro-EU elites have suggested that the eurosceptic vote was a protest vote not against the institutions of the European Union but against national governments, which have been unsuccessful in dealing efficiently with the economic, financial, and sovereign debt crisis. Some have suggested that the eurosceptic votes came primarily from people belonging to the poorer segments of the population: those hardest hit by the crisis, but also those that, because of the links between poverty and low levels of education, are less able to understand what caused the crisis and what the potential solution might be. The contributions of EU treaties, pacts, policies, constraints, and targets through to high unemployment rates and large cuts in public spending in many member states have been dismissed and downplayed.

The pro-EU elites include pro-EU politicians, policy-makers, intellectuals, academics and commentators. Some members of the pro-EU elites concede that eurosceptic voters have legitimate reasons for being unhappy about the way the European Union and the eurozone work, and for being dissatisfied with EU institutions. But such concessions are often followed by the claim that eurosceptic voters are deluded. They are deluded because they think that the solutions to their problems are going to come from the anti-EU populist parties. The term ‘populism’ is deployed by the pro-EU elites in a derogatory way to refer to any eurosceptic movement. The solutions to people’s problems, by this view, are going to come not from euroscepticism, but from the pro-EU elites themselves – those very same elites that have been in charge of the European Union for some time now.

According to the pro-EU elites, the rising tide of euroscepticism cannot and should not be taken at face value. Euroscepticism is not the expression of a genuine preference or of a genuine judgment on what the pro-EU elites have achieved so far, but rather a pathology that needs to be cured. The way to cure it is ‘more Europe’: greater European political integration, further sharing of sovereignty at the EU-level, and more transfers of power from national governments to EU institutions. This is exactly the opposite of what eurosceptic voters seem to be asking. The pro-EU elites think along the following lines: if only the eurosceptic voters of populist parties could see things clearly, as clearly as we do, they would realise that more political integration, rather than less, is the solution to their problems.

Oligarchic capture
The main argument for additional transfers of sovereignty to EU institutions is that better political integration will enable more efficient coordinated action. Such coordinated action is said to be crucial for Europe’s prosperity and political relevance, and more generally for successful policy-making in a globalised world. Further integration, the argument goes, would create stronger EU institutions. That is to say: EU institutions would be better able to solve those problems that are causing frustration for eurosceptic voters. However, one issue that the pro-EU elites systematically fail to address is the risk of oligarchic capture. Economic oligarchies – individuals or corporate bodies that own or control enormous economic and financial resources – can easily have a disproportionate influence on policy-making. This influence pushes politics in directions that promote the interests of the oligarchies, which are often in conflict with the interests of ordinary people. This influence also applies to electoral-representative political institutions in countries with universal suffrage and free elections.

Arguably, the oligarchic influence on EU policy-makers is one of the factors responsible for the rise of euroscepticism. It is a widespread view among ordinary European citizens that EU policy-makers are not responsive to their interests, and that such policy-makers are more concerned with protecting the interests of a privileged minority. This leads to a feeling of disempowerment, which can find expression in a vote for eurosceptic parties. The official story put forward by the pro-EU elites is that the limited power of EU institutions explains why such institutions have not been more successful in dealing with the crisis. An alternative, and more accurate, account is that the mismanagement of the crisis has been due, at least in part, to the fact that EU policy-makers have been prioritising the protection of oligarchic interests – such as those of financial firms – rather than those of ordinary people. The evidence for this is not difficult to find. Since the start of the crisis in 2008, inequalities in the EU have increased, especially to the benefit of the ultra-rich. In Europe, between 2007 and 2014, the wealth share of the top decile and of the top centile has increased.

While the issue of the oligarchic capture of EU institutions is only rarely broached (INTRODOTTO)  by the pro-EU elites, there has been some discussion of the large technocratic component of EU policy-making. Many decisions in the EU are not in the hands of elected politicians but rather in the hands of unelected officials, such as regulators, bureaucrats, administrators, and experts. Some members of the pro-EU elites see this as an issue. They call it ‘the democratic deficit’ and claim that there is a problem with the democratic legitimacy of EU policy-making, or at least with its perceived legitimacy, due to its technocratic nature.

Technocracy certainly did play a role in the rise of euroscepticism. Knowing that unelected officials decide on policies that affect one’s freedom and wellbeing can strengthen one’s conviction that EU institutions are unresponsive to one’s own needs. Anti-technocratic language is common in eurosceptic movements. Although little discussed, the issue of oligarchic capture is extremely relevant in this context. Technocratic elites can protect and advance their interests more effectively by serving the interests of the economic super-powerful. For this reason, technocratic elites and expert led-institutions are particularly vulnerable to oligarchic capture and can easily become unresponsive to the needs of ordinary citizens, at least if compared to institutions over which ordinary citizens can exercise less indirect forms of control. The so-called revolving doors are just one prominent aspect of this process of capture: many regulators and policy experts work, or did work, or desire to work, and eventually end up working for powerful corporations and financial firms.

The members of the pro-EU elites who talk about the existence of a democratic deficit are fond of saying that greater integration needs to be accompanied by more democratisation. Their proposals focus on how to increase the perceived legitimacy of EU policy-making by reducing its technocratic and bureaucratic components and by strengthening its electoral-representative component. This is what is normally meant by the democratisation of EU institutions. But the issue of capture is never addressed. More generally, the issue of popular control over EU institutions is never properly taken into account. If oligarchs or some other privileged minority are able to capture political institutions, then popular control over such institutions is not possible. Conversely, popular control over political institutions means that political power – the ability to influence and direct political decisions – is more or less equally shared among the people, in the sense that such power is not concentrated in the hands of an oligarchy or of a privileged minority. Minority capture of political institutions and popular control over political institutions are incompatible. Oligarchic capture is the most dangerous and robust form of minority capture.

How not to democratise Europe

Empty European Parliament hemicycle in Strasbourg. Demotix/Serge Mouraret. All rights reserved.
The best way to interpret and articulate the success of eurosceptic parties is in terms of popular control. Before the transfers of sovereignty to EU institutions, popular control in national member states was not necessarily very strong or effective. But such transfers of power have not made popular control stronger. They have made it weaker. The weakening of popular control – the evaporation of democracy – is a general phenomenon with many different causes. One of them is the internationalisation of politics. The eurosceptic vote is best understood as a cry of despair against the weakening of popular control over political decisions, decisions that have a big impact on the freedom and wellbeing of ordinary people. It is a cry of despair that expresses discontent both at the weakening of popular control generated by previous transfers of sovereignty and at the weakening of popular control that, if the past is any guide to the future, can result from further integration. This is, in our view, the democratic core of euroscepticism.

It is not surprising that the despair is greater in people belonging to poorer segments of the population. They are the most disempowered, and the most negatively affected by a system that protects the interests of privileged elites. The anger generated by economic and political exclusion can find public expression in a variety of ways, some less desirable than others. It can find expression in xenophobic and discriminatory views and attitudes, which harm individuals and communities and can lead to dangerous conflicts both within and between countries. Alternatively, it can also find expression in a strong stance against the political power of economic oligarchies and bureaucratic technocracies. The best method for discouraging the negative expressions of despair consists in pursuing and restoring popular control. The dismissal of the demand for popular empowerment is not a solution. What the pro-EU elites disparagingly call populism contains within itself a legitimate request for popular empowerment. Populist sentiments can be exploited by those who, for political gain, want to foment xenophobia. Some politicians are doing just this. But the populist sentiments can also be a tool for democratisation. It all depends on how the social and political landscape is shaped.

The strengthening of popular control, and the opposition to those processes that are eroding popular control in countries where, at least to some extent, this control did exist, should be the aim of those who value and strive (LOTTANO)  for the democratisation of society, in Europe and elsewhere. But even the most ambitious proposals for reforming EU institutions, such as those put forward by those members of the pro-EU elites who talk about the democratic deficit, fail to deal with the related issues of popular empowerment and oligarchic capture. More Europe and further integration, even if accompanied by a strengthening of the electoral-representative component of the EU, is not necessarily equivalent to more popular control. In fact, it can easily lead to the further weakening of popular control.

There seems to be a general lack of appreciation of these matters by the pro-EU elites. Some talk about the need to start sharing sovereignty in areas that at the moment are still, at least in principle, under the remit of national governments, such as various aspects of fiscal and economic policy. The argument is that without bringing such areas ‘under common union discipline’ it will not be possible to produce effective and successful policies, such as those needed to prevent the collapse of the common currency system.

Mario Draghi, current President of the European Central Bank (ECB) and former Vice Chairman for Europe of Goldman Sachs International – one of the most powerful oligarchic organisations in the world – is among the most prominent advocates of this line of argument. Since he took office, the sharing of sovereignty has been a recurring theme of his official speeches. By asking for additional transfers of sovereignty from national institutions to EU institutions, Draghi is asking for enhanced decision-making powers for people in positions like his. The ECB lacks powers that comparable institutions, like the United States Federal Reserve, have. Draghi’s frustration, whether justified or not, is not surprising. But it is important to note that, whenever Draghi speaks about the need for further integration, he does not discuss how this further integration can be made to be compatible with democracy.

In a recent speech, Draghi stated that “in an era in which nation states are closely interlinked, sharing sovereignty means gaining sovereignty”. But he illustrated this by reference to the fact that, thanks to Lithuania becoming a member of the eurozone, the Chairman of the Board of the Bank of Lithuania would become a member of the ECB Governing Council. The ECB President and all members of the ECB Governing Council are unelected officials. The same is true of the Chairman of the Bank of Lithuania. These are technocratic institutions, whose decisions are not directly under the control of political institutions, exactly like many other central banks around the world. The political independence of central banks, and their supposedly non-political remit, is the established view among the governing elites. This might explain why Draghi does not feel the need to mention democracy when he speaks about the transfer of sovereignty. It explains it, but it does not justify it.

Unlike Draghi, some members of the pro-EU elites talk explicitly of the need to improve the democratic legitimacy of EU policy-making. They claim that this can be achieved by narrowing the scope of technocratic decision-making and by strengthening the electoral-representative components of the EU. For example, Karl Lamers (the foreign policy spokesperson of the German CDU) and Wolfgang Schäuble (the German finance minister) recently declared that they “favour a ‘eurozone parliament’ comprising the MEPs of eurozone countries to strengthen the democratic legitimacy of decisions affecting the single currency bloc”. They argue that, on many issues, EU-level action is needed. In particular, they think that there is a need for a European Budget Commissioner with the power to interfere with, and in some cases determine, the economic and fiscal policies of individual member states. Their suggestion is that, in order for the transfer of authority from national governments to this new Commissioner to have democratic legitimacy, the executive powers of the Commissioner could be counterbalanced by a eurozone parliament with more powers than the EU parliament currently has. Strengthening the electoral-representative component of the EU would be a way to legitimate the strengthening of the powers of the EU executive organs.

A similar suggestion of strengthening both executive powers and parliamentary powers, at least for the eurozone, was put forward by the Glienicker Gruppe in October 2013: “We finally need a European executive that can negotiate reform packages with crisis countries, decide on bank closures and ensure the provision of public goods. The Euro Union needs an economic government capable of acting…The Euro-government must be chosen and scrutinised by a Euro-Parliament”. In the management of the eurozone crisis, reform packages have been imposed on some countries – such as Greece and Ireland – by the so-called Troika, that is, by representatives of the International Monetary Fund, the European Central Bank, and the European Commission. The Glienicker Gruppe suggests that interferences and impositions of this sort are necessary for the eurozone to work properly and in order to avoid a collapse of the common currency. But they also think that, unlike what has happened with the Troika, democratic oversight is required for these interferences and impositions to be legitimate. They assume, without argument, that an enhanced version of the EU parliament, initially restricted to the eurozone, would suffice for proper democratic control over decisions of this sort.

A manifesto for Europe?

Social democratic proposals that combine institutional reforms with EU-level fiscal redistribution also lack attention to what effective popular control requires. The Manifesto for Europe of Thomas Piketty, Pierre Rosanvallon, and colleagues illustrates this. This French group argue that a strengthened EU executive is needed in order to tackle the problems of the eurozone, and that this strengthening can only happen if the budget capacity of the EU executive is increased. To accomplish this, they suggest establishing an EU corporate income tax (CIT). This would provide a bigger supranational budget, which could be used to fund investment programs and stimulus packages in areas and member states that find themselves in trouble. They then claim that “to approve the tax base for the CIT, and more generally to discuss and adopt the fiscal, financial and political decisions on what is to be shared in the future in a democratic and sovereign fashion, we must establish a parliamentary chamber for the eurozone”.

Though the details are different, their suggestion is similar to that of the Glienicker Gruppe: a strong executive is needed, with the power to use and move resources within the eurozone, and we can give legitimacy to this stronger executive by strengthening the parliamentary components of EU policy-making. Taking up an idea of Joschka Fisher, they propose the creation of a eurozone parliament comprising a selection of members of the national parliaments of the eurozone countries, because, as they put it, “it is impossible to completely deprive national parliaments of their power to set taxes.” They suggest that having national MPs rather than MEPs as members of this additional parliamentary chamber would be a way to preserve the power of national parliaments to set taxes, rather than simply, and more plausibly, a way of making the transfer of sovereignty look less problematic.

In their view, this eurochamber would endow the EU government with a political mandate that would “finally overcome today’s inertia” and “the political impotence of our continent”. According to them, only a deeper political integration can amend and resolve the structural flaws of the euro, which is currently a currency without a state. Much sovereignty has already been transferred from member states to EU institutions, either explicitly or implicitly, via various treaties and the introduction of the common currency. Piketty and colleagues, along with many other members of the pro-EU elites, think that this transfer is currently incomplete and that this incompleteness makes the EU and the eurozone in particular dramatically inefficient. But it is a peculiar idea that Europeans need a eurozone parliament in order to gain a eurozone government so that a flawed currency can be saved. Even if it is assumed that past mistakes cannot be reversed and that it is necessary to push forward with further integration, the issue of if and how a strengthened parliamentary component could result in a strengthening of popular control over European political decision-making ought to be explicitly discussed. This is the most important issue for any attempt to democratically reform the eurozone. But Piketty’s Manifesto for Europe does not even mention it.

Among the most prominent advocates of the idea that the electoral-representative component of EU policy-making needs to be extended is Jürgen Habermas. The German philosopher has for a long time been extremely critical of technocratic forms of government, and has argued that only a EU parliament with more powers can give legitimacy to EU-level politics. While the details are different, and while Habermas’ discussion goes much more in depth, the main idea is the same as the one present in the proposals just discussed, which may well have Habermas’ writings as one of their sources. Here is the argument again: Europe can be economically and politically successful in a globalised world only if full integration is achieved, that is, only if sovereignty is exercised collectively and not by individual member states; the collective exercise of sovereignty requires stronger EU-level executive powers, including the power to make decisions affecting the fiscal and economic policies of member states and the power to redistribute resources from some member states to others; stronger EU-level executive powers can only be democratically legitimate if they are the powers of, or at least controlled by, a stronger EU parliament; in particular, EU-level fiscal transfers can be democratically legitimate only if they are authorised by a EU parliament with powers that the current EU parliament does not have.

Habermas is concerned about the need to widen the legitimacy basis of European institutions. According to him, technocratic policy-making lacks democratic legitimacy and is vulnerable to the pressures generated by the financial markets. While he does not explicitly talk about political decision-making being captured by economic oligarchies, his critique of technocracy and his dislike of ‘marktkonform’ democracy demonstrate some sensitivity to these problems. But Habermas does not address the issue of if and how a EU parliament with more powers than the current one would strengthen, or at least not diminish, popular control over EU-level policy-making.

The popular control question
Is popular control enhanced when the scope and reach of the decisions taken by elected representatives are augmented? Let us call this question ‘the popular control question’. The ‘European constitutional moment’ requires addressing it in depth. But the popular control question is normally left unmentioned and unanswered, as if the answer were obvious. The assumption is that EU-elected representatives with more powers would obviously be more responsive to – and would be better able to find good solutions for – the problems of European citizens, including those who voted for eurosceptic parties. The answer of the pro-EU elites to people’s requests for accountability and stronger popular control is a more powerful EU parliamentary assembly, which would be in charge of controlling, constraining, and directing a EU government that would have more powers than the European Commission currently has.

The answer to the popular control question is not as obvious as the pro-EU elites make it out to be. Oligarchic capture does not just affect regulatory bodies and unelected officials. It also affects elected representatives. Augmenting the powers of elected officials that are vulnerable to oligarchic capture means augmenting the power of economic oligarchies. It means weakening popular control. Elected national parliaments and executives are highly imperfect tools for achieving popular control over decisions that affect people’s freedom and wellbeing. Supranational parliaments and executives are even more inefficient in this respect.

The fact that elected parliaments and executives are inefficient tools for popular control over political decision-making is shown by the dramatic increase in economic inequalities in countries with universal suffrage and free elections, such as in the United States and in western Europe, over the last 35 years. These inequalities have primarily benefited the richest one percent, and in some cases only a small fraction of it. They have benefited the economic oligarchies. If elected bodies and officials were trying to be an instrument for the exercise of popular control, then they were not particularly successful at this. However, most of the time national governments were not even trying to be instruments for the exercise of popular control. In general, the increase in inequalities over the last three decades has not been challenged by elected bodies and officials. On the contrary, in many cases, elected officials pushed through legislation designed to enable or bring forward this increase in inequalities.

Elected officials have often worked to protect and advance the interests of a privileged super-wealthy minority, rather than those of ordinary people. Since the beginning of the financial crisis in 2008, this phenomenon has accelerated. The bank bailouts and the austerity policies that followed them, including the spending cuts that have negatively affected the poorest segments of the population as well as what was once the middle class, are the most striking example of this.

The three decades following the Second World War are sometimes referred to as ‘les trente glorieuses’. Those years were glorious for most of western Europe and for the United States in that they were years of sustained economic growth and relatively low levels of inequality. Workers’ rights were strengthened, there were significant increases in wages (in real terms), and the welfare state was expanded. Was all this due to the fact that elected parliaments and executives in that period were efficient instruments of popular control? Piketty’s analysis in his book on capital and long-term inequality trends suggests that the glory of the glorious thirty was probably the result of the weaknesses of economic oligarchies, weaknesses due to the enormous destruction of wealth caused by the two world wars.

If in that period elected parliaments and executives were to some extent instruments of popular control, this was only due to the temporary weakness of the oligarchies, which allowed ordinary citizens – via trade unions and popular parties – to have an influence on policy-making. In the 1970s and 1980s, when the oligarchies had regained strength, there began an attack on the welfare state, on workers’ rights, and more generally on all those mechanisms and arrangements that were constraining oligarchic power and profit. This attack was launched with the cooperation of elected executives and parliaments, which were recaptured by the oligarchies. As a result, inequalities started to rise again.

Given his own data, Piketty should therefore have known that elected bodies are not in general a particularly efficient way of looking after and being responsive to the interests of ordinary people, though of course they can function better in this respect when the opponents of popular control are weak. It is after all under the pressure of economic oligarchies, and not under the pressure of ordinary citizens, that, since the origins of the European Union and increasingly in the last few decades, the elected governments of European countries have willingly transferred sovereignty from national institutions to EU institutions. This by itself suggests that such transfers were not and are not aimed at benefiting ordinary people and at giving them more control over political decision-making. In the last few decades, within mainstream parties (both right-wing and left-wing) there has been virtually no opposition to such transfers of sovereignty.

Supranational vulnerability
Elected bodies have often been useful tools of oligarchic domination. The claim that universal suffrage and the free election of representatives are an efficient instrument for the exercise of popular control – that they are enough for democracy – serves the interests of the oligarchies, and of the intellectual and political elites that the oligarchies manage to capture. The mechanisms by which oligarchies capture elected officials are varied. Straightforward corruption is one of them of course, but it is the least interesting one. Nowadays, the lobbying activities of oligarchic groups have become increasingly aggressive and sophisticated.

There are revolving doors not just between big businesses and regulatory agencies but also between big businesses and elected offices. Due to the resources needed for an electoral campaign, individuals who pursue political projects that would damage the economic oligarchies are unlikely to be elected. Apart from the lack of financial means, members of the poorer segments of the population are unlikely to run for office due to a variety of other barriers, such as the fact that they do not have easy access to high levels of education, the fact that they do not have connections with people of power, the fact that the providers of news and entertainment content are under the control of oligarchic groups, and so on. Most of the time, ordinary people lack not only the right kind of financial capital but also the right kind of social capital to be elected.

These problems are exacerbated at the supranational level. It is for this reason that, in general, the transfer of sovereignty to international loci of political decision-making contributes to the weakening of popular control. International loci are in general physically, psychologically, and linguistically more distant from ordinary people than national ones are. This distance means more room for oligarchic capture. International loci of political decision-making are usually designed in such a way as to make it extremely difficult for ordinary citizens to understand how decisions are taken and to be able to influence and contest such decisions in an effective manner. This enhances the effectiveness of the mechanisms of oligarchic capture.

Political parties once worked as channels connecting ordinary people with elected representatives, thereby contributing in some way to popular control over political decision-making. Nowadays, this function of parties has been almost completely lost at the national level, and it is completely non-existent at the supranational level. The European analogue of national parties – that is, EU parliamentary groups – are heterogeneous assemblages with virtually no meaning for voters. For the great majority of ordinary European citizens, linguistic barriers and cultural differences impair the opportunity for political participation at a supranational level. Even more importantly, they constitute obstacles to political organisation, to the possibility of joining forces with people in other countries in order to challenge the power of the economic oligarchies. The continental scale best suits the needs and the abilities of corporate lobbying agencies.

The importance of financial and social capital for being elected to a more powerful EU parliamentary assembly would be greater than it already is, and so would be the impact of the revolving doors. When the members of elected bodies are, even before being elected, members of a privileged elite (they go to different schools, apply for different jobs, live in different areas, and so on) with no first-hand knowledge of the needs and interests of ordinary citizens, it is not surprising that they are unresponsive to such needs and interests. If, once they get elected, they end up spending large amounts of time talking and dining with lobbyists, it is not surprising that they become even less responsive to such needs and interests.

Electoral-representative democracy is vulnerable to oligarchic capture, and this vulnerability is magnified at the supranational level. Some of the movements that the pro-EU elites label as populist, such as the Italian Five Star Movement and the Spanish Podemos, recognise that electoral-representative democracy has become an instrument of oligarchic domination rather than one of popular control. They also understand that this applies at the national level and even more so at the European level. Many of the claims and actions of such movements can be best understood as flowing from a radical anti-representative stance, an ideal of anti-representative democracy. According to this stance, the electoral-representative structures common to contemporary democratic regimes are incompatible with true democracy, if true democracy is conceived of as strong and equally shared popular control over political decision-making. Electoral-representative structures are increasingly becoming, and to some extent have always been, instruments of oligarchic domination. These structures are often used to remove political power from ordinary people, and the transfer of these structures to the supranational level is a further step in this direction.

Schumpeterian democracy

The pro-EU elites do not seem to think that strong and equally shared popular control over political decision-making is required for democratic government. Many of them would probably never admit it publicly, but their conception of democracy is thoroughly Schumpeterian. Joseph Schumpeter argued that strong popular control over political decision-making is undesirable because most people do not have the cognitive and motivational skills required. On his view, the people are not fit for government, but this does not mean that we need to give up democracy. For Schumpeter, democracy should consist in the people being allowed to choose which among the competing elites should rule. Even if ordinary people, given their cognitive and motivational limitations, are not particularly good at choosing among elites, they should still be allowed to make this decision. The reason for this is that, by being allowed to select a ruling elite, the people will be more likely to accept being governed by the winning elite. As a result, the system will be more stable and efficient.

Schumpeter was wrong in believing that democracy is compatible with the weak and wayward influence that, in his account, the people can and ought to have on political decision-making. But he was right in thinking that electoral-representative democracies often work in the way he described. Those among the pro-EU elites who talk about democratising the EU and about conferring more democratic legitimacy to EU institutions, and who think that this can be done by strengthening the electoral-representative dimension of the EU, are thinking along Schumpeterian lines: let the people decide through free elections which elite is going to rule, and that will be enough to guarantee democratic legitimacy. They do not see the fact that the competing elites often pursue nearly identical political projects as a problem. And they do not see the fact that the competing elites are unresponsive to the needs and interests of ordinary people as a problem either.

The appointment of Jean-Claude Juncker as President of the European Commission indicates that the pro-EU elites are more Schumpeterian than Schumpeter himself, as Schumpeter never suggested that it does not matter if the people know which elites they are selecting. Juncker was the ‘Spitzenkandidat’ of the EU parliamentary group EPP (the European People’s Party), which won a small majority in the May 2014 European elections. Those who argued for appointing Juncker as President claimed that his appointment was democratically legitimated by the fact that he was the candidate of the parliamentary group with the largest number of MEPs. Habermas and other prominent intellectuals wrote in support of Juncker’s appointment suggesting that European citizens have the right to choose who leads the European Commission and that the election results showed that Juncker was the people’s choice. But most of those who voted for the national parties that are members of EPP did not even know what EPP was or who Juncker was.

Habermas and other advocates of electoral-representative democracy often claim that for electoral-representative institutions to work properly the public sphere, the media, civil society, or some equivalent body need to have certain features, features that they do not currently have but that they could have, at least in an ideal world. But if in our non-ideal world electoral-representative democracy is increasingly becoming a tool of oligarchic domination, rather than clinging to it we should try to replace it or at least supplement it with better forms of popular control. That is, we should try to replace it or supplement it with non-representative forms of democracy.

Anti-representative tools that would enhance popular control include: 1) Frequent referendums – abrogative, confirmative, and propositive – by which citizens can directly decide on matters of policy. These should be accompanied by mechanisms allowing sufficiently large groups of citizens, rather than elected bodies, to decide if and when to hold a referendum on a specific issue. 2) The abolishment of the free mandate for elected officials and the introduction of robust and easily accessible mechanisms for the recall of such officials. This would reduce the power of lobbies and corporations by making it more difficult for elected officials to ignore the interests of ordinary citizens. 3) The appointment to some political offices by sortition (by lot) rather than by election, as it happened in Athenian democracy. This would make it possible for ordinary people without connection with the ruling elites (including the unemployed and members of the poorer segments of society) to have direct access to political institutions.  Aristotle classified elections as a non-democratic system of appointment and classified lotteries as the democratic system of appointment. His view on this was widespread in antiquity. 4) The introduction of additional mechanisms of popular contestation. These would politically empower citizens by allowing them to block, revert, and modify the decisions of elected bodies. These mechanisms would need to be robust and user-friendly, much more robust and user-friendly than the existing ones.

There are also electoral-representative ways to increase popular control. One is the creation of political offices restricted to particular segments of the population (for example, the unemployed, those with low income, and so on). The restriction must be both in terms of who can get elected to the office and in terms of who can vote for it. This would be similar to the Tribune of the Plebs, which played an important role in the mixed constitution of the Roman Republic, where it worked as a mechanism to counterbalance the political power of the super-wealthy.

All of these mechanisms are designed to reduce the risk of minority capture and to counterbalance the political power of economic oligarchies and of the bureaucratic, technocratic, political, and intellectual elites that often advance their interests by serving the interests of economic oligarchies. All of these mechanisms could and should be implemented at a national level. But it is all the more important to use them at a European level, where the opportunities for exercising popular control are even weaker than they are at national level.

People-led integration
There is an urgent need to democratise European politics. The need is even more urgent if it is true, as the pro-EU elites keep repeating, that history and globalisation will inevitably push EU nations towards further integration. This further integration, if it has to happen, must happen democratically. It must be an integration by the European people and for the European people, rather than an integration by the European elites and for the European elites. Further integration might be desirable if, when, and to the extent that it is accompanied by the enhancement of popular control at a local, national, and supranational level. It is not desirable if it is used to weaken popular control. After all, integration, including monetary integration, is not an intrinsic good. It might be true that, in a super-connected globalised world, protecting and advancing the interests of ordinary people requires certain forms of integration. But only a people-led integration has some chance of serving these interests. Current processes of oligarchy-led integration need to be challenged, opposed, revised, and in some cases reversed.

A European integration by the European people and for the European people would probably be an integration that abandons or radically modifies the common currency system. That is, it would be an integration without the euro. The common currency system, including the various mechanisms that have been introduced to discipline the monetary union, has harmed the interests of ordinary citizens and protected the interests of financial capital. In particular, politicians in Germany – the largest and strongest economy in the eurozone – have used the common currency system and its constraints to bring about deflationary wage cuts. Unemployment is currently low in Germany, but millions of German workers only have access to jobs in what Gerhard Schröder once proudly called the ‘low wage sector’. The long-standing competitiveness gaps between Germany and the so-called peripheral countries of the eurozone (Greece, Spain, Portugal, Ireland, and Italy) have been exacerbated by these German policies and by other political decisions related to the creation of the monetary union. These asymmetries in competitiveness have contributed to high unemployment and high debt-to-GDP ratios in peripheral countries.

Nowadays, these countries, unable to use currency depreciation to protect their economies and their welfare systems, are forced to pursue the same policies of internal devaluation that Germany has been pursuing, and they are forced to implement them even more aggressively and violently than Germany has. Workers are being severely ‘squeezed’ and, through a variety of spending cuts, welfare and social security provisions are being dismantled. A complete account of the events would also mention other factors, including the way in which the mechanisms put in place to address the financial crisis have provided protection to banks (especially those of Germany and of other core countries) but have not provided protection to peripheral countries, nor to the small companies of peripheral countries, nor to workers in both core and peripheral countries. All of these factors indicate that the common currency system is constructed so as to discipline labour costs and to protect oligarchic interests. Strengthening the electoral-representative component of the EU in order to preserve the common currency system – as Schäuble, Piketty, and the Glienecker Gruppe recommend – would therefore mean giving more power to oligarchic groups in order to preserve a system, the common currency, that serves oligarchic interests.

Unlike some eurosceptic movements, the pro-EU elites do not appear to be serious about democratisation. The strengthening of the electoral-representative component of the EU along the lines suggested by the pro-EU elites would only make things worse from the viewpoint of someone who is looking to strengthen popular control. No doubt, some among the pro-EU elites advocate such electoral-representative reforms because, like Schumpeter, they do not want reforms that would strengthen popular control. They do not want them either because they paternalistically think that popular control is incompatible with an efficient government that promotes the common good, or simply because they want to retain the freedom to advance their interests by ruling undisturbed, or both.


In order to make progress, it is necessary to develop inclusivist versions of classic ideals of democracy, where democracy is understood as a form of popular control that allows ordinary people to live in freedom and to counteract, as Machiavelli put it, the appetites of the ‘Grandi’. Democratisation requires strengthening popular control. Schumpeterian legitimation is not enough. It is simply a tool for hiding a lack of popular control. The paternalistic or self-serving dismissals of the demand for genuine popular control will have disastrous consequences.