Beware elite technocrats and their open disdain for democracy

Bookmark and Share Economics & Deregulation | Chris Berg
The Age 24th March, 2013

The draft of the proposed European Union constitution in 2003 included this quote, from ancient Greek historian Thucydides: ''Our constitution ... is called a democracy because power is in the hands not of a minority but of the greatest number.''

That quote didn't make the final version of the constitution (which was rejected in 2005). A good thing too. It would have been cruelly ironic. The European Union is the exact opposite of Thucydides' ideal.

Modern Europe shows just what happens when societies grant extraordinary power to elites and technocratic experts. Europe's slow-burn sovereign debt crisis is exposing a massive chasm between the elite who run the European Union's political and economic institutions, and the European citizens who have to live with their decisions.

Last weekend, citizens of Cyprus learnt all their bank accounts were going to be subject to a one-time tax of at least 6.7 per cent in return for an economic bailout.

The deal was presented as a fait accompli, negotiated between a new Cyprus president (he'd only been in the job a few weeks) and a bevy of banking officials and European bureaucrats. Approval by the Cypriot Parliament was to be a mere formality. It had all been decided.

But the bailout deal fell apart last week in the face of a massive popular backlash. People in Cyprus are like people all over the world. They don't like it when the government steals their money without warning. One of the chants heard outside the Parliament was: ''They're drinking our blood.''

It has long been understood that the European Union has a democratic deficit. But that deficit is cripplingly obvious now that the continent is deep in economic crisis.

Indeed, much of the original idea for the European Union itself was fundamentally anti-democratic. After World War II, European statesmen worried that voters were too easily manipulated. This was a reasonable feeling at the time; Adolf Hitler did very well at the ballot box.

So the structure of European governance was explicitly designed to be full of unelected positions, as far removed from actual voters as possible. But operating out of sterile tower blocks in Brussels, Eurocrats have developed an active disdain for democracy.

As the president of the European Commission, Jose Manuel Barroso, has said: ''Decisions taken by the most democratic institutions in the world are very often wrong.''

Of course, nobody has suggested otherwise - but so what? The choice isn't between making the right decisions or wrong decisions. It's whether the citizens run the government or a cadre of elites do.

Anyway, the most tragic mistake made by Europe in recent decades wasn't a national one. It was the euro currency - narrowly pushed through a series of referendums in 1992.

The euro has trapped 17 countries together in a spiral of doom. Some will survive the landing. Rich and prosperous states such as Germany will be fine. Others, such as Cyprus, Italy and Greece, have learnt that by joining the eurozone they've handed over their sovereignty to Brussels and their economic policy to Frankfurt.

And when the global financial crisis hit, these latter countries discovered that European authorities held extraordinary power over them.

In 2011, Greek prime minister George Papandreou proposed a referendum on a bailout package his country had been offered. He was quickly forced to step down and replaced by a former president of the European Central Bank; in other words, a European bureaucrat from central casting. According to British politician Daniel Hannan, this was nothing less than a coup d'etat. Recall that Greece is the cradle of democracy.

Of course, it was always obviously absurd that such economically disparate countries would be able to share a currency. The euro was condemned from left to right. Both Milton Friedman and Paul Krugman were vehemently opposed. But whether it would work wasn't the point. There has always been a belief in Brussels that European integration is the most important political goal imaginable. European integration is an ideological project pretending to be an inevitability. Few can be more ideological than technocrats.

You can understand why people think handing power over to experts and political elites sounds appealing. We tend to talk about public policy as if it is merely a question of matching a problem to its best solution - the only challenge is finding that solution.

You hear such sentiments in the business community all the time. If only we could get politicians out of the way and just get things done.

That's the theory behind all these supposedly independent government agencies we have in Australia.

But if you want to see what happens when you hand too much political power to experts, have a look at Europe. It's not pretty.