A New Troika: Inequality, Sovereign Decline and Democratic Deficits

Serge Halimi_small
Serge Halimi: Considered Outrage

Serge Halimi is the editor of Le Monde Diplomatique, a kind of internationalised politico-philosophical publication from LeMonde featuring articles on international affairs and globalisation.  He is unrepentantly left wing, and in his May column, he unloads both barrels into what he perceives as a global elitist hegemony, The Tyranny of the One Per Cent.  His analysis is unusual in one respect, however.  It is an attack on a system, rather than its people; it is not lamenting greed (a kind of anti-Gordon Gekko) and is not so much bitter as it is critical.  Throughout the piece he constructs a compelling argument in the French Republican tradition – that eighteenth Century revolutionary philosophy that has – perhaps unintentionally – led us all to where we are today.  

As the troika of the European Central Bank, the IMF and the European Commission march around Europe, Halimi argues that another troika  is emerging: social inequality, the disintegration of political democracy, and the decline of national sovereignty.  He quotes Fukuyama, from The Origins of Political Order (which we’ve discussed here before).  The inequality issue, to paraphrase, is only a problem in the American model when equality of opportunity becomes weak, where people feel that they don’t have the same chances of being successful as others from ‘better’ backgrounds – connections, wealth, education.  In essence, the neoliberal approach doesn’t mind inequality of outcomes.  But neoliberalism requires equality of opportunity in order to be effective.

‘The myth of social mobility,’ Halimi says, ‘is being replaced by a fear of losing status.’  What an interesting way to put it.  I’m not sure the conjunction quite works, however.  The ‘myth of social mobility” suggests that it never existed in the first place.  In addition, a fear of losing status, or perhaps an ambition for status, seems to have always been a part of humanity, from the earliest folklore to the present day.  There is a more tangible, visceral representation of the new dispensation.  Halimi notes that there is a squeeze on middle class consumption – that those industries dependent on the middle classes are under attack as global demand polarizes to either bargain or luxury goods.  Ten thousand dollar watches do well, as do ten dollar watches.  Hundred dollar, or five hundred dollar watches?  Not so much.

The conventional Marxist attack on capitalism is that it is inherently flawed, that by its design it will consume itself, as we discussed on this blog before.  In essence, the argument is that the incentive structure of capitalism drives capital away from the many and into the hands of the few; it reduces the available capital of the masses to a point of subsistence – where they are permitted only enough capital to survive.  The problem however is that at this point, demand for the products of the capitalist elite evaporates, whereupon the system falls.  This, in essence, is what Halimi is revealing in his piece.

This is not new.  ‘An aristocracy,’ he says, ‘that gambled its money away on wine, women and song has been replaced by a business-school educated elite whose members marry one another and spend their money wisely on Mandarin lessons and Economist subscriptions to their children.’  In essence, the rule of kings that sourced legitimacy from God (through the Church) has been replaced by the new rulers who source their legitimacy from intelligence.

Halimi quotes Samuel Huntingdon’s 1975 report The Crisis of Democracy, in what I think is a fascinating quote – ‘the effective operation of a democratic political system usually requires some measure of apathy and non-involvement on the part of some individuals and groups.’  It is perhaps unusual to see such cynical realism in an academic, though Mr Huntingdon’s track record in corporate realism (including his work on corruption in the 1960’s) was telling.  The idealism of the Philosophes is lost; yet does this utopianism not bring with it a better system for government, imperfect as it may be?

The numbers in the piece are staggering: China’s parliament contains eighty-three billionaires; the ten wealthiest Italians have as much wealth as the poorest three million.  There is an issue of course in confusing wealth and income, which economists no doubt have proper words for.  In essence, the problem is that wealthy people tend to have no income, as such, in that they don’t get paid by people for doing work.  Therefore the comparison suffers.  Similarly, calls for a wealth tax ignore the fact that wealth is a (relatively) static thing – if you tax it on a non-static basis, then it will be destroyed.  So – for example, you could tax my wealth of €100m (I wish) at 10% – but that only serves to impact the balance sheet, and does not impact on the current account.  Should we tax wealth at 10% every year, then my €100m fortune would be gone in ten years.  On the other hand, income tax is a tax on work, on labour, on effort.  Therefore it could be argued, and perhaps should be argued, that if any wealth tax is to be applied, it should be applied on the performance of capital, or the net increase in wealth, year on year.  But I digress –

Much of this wealth is offshore, in a web of holding companies and instruments that are effectively above the state structure.  The wealth is often owned by companies whose executives are missioned to drive shareholder value, by accumulating ever larger piles of cash, and then devising schemes to return that cash to the shareholders themselves.  This creates enormous power structures over and across the sovereign state infrastructure.

It paints a picture that is bleak and challenging.  We are all a part of this system, and we work within this system, and we are psychologically tied to this system.  Yet the system is destroying itself in front of our eyes.  We need to understand it more deeply so that we can change it; executives of large corporations and of financial institutions need to understand it better so that the Global system can be reset.  We must address inequality not merely because it is somehow immoral for people in wealthy countries to be poor, but because it is a recipe for disaster. We must arrest sovereign decline not because the pre-eminence of the nation state needs to be protected – it is in many ways an anachronism – but because sovereignty needs to reside in a place that is socially conscious and human-friendly.  And we must address democratic deficits not only because democracy is suffering, but because those who are disenfranchised are likely to have better ideas about how to fix the problem than those who lead, and therefore benefit from our globalized political system.

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