In a widely quoted book entitled The End of History, Francis Fukuyama wrote about the intellectual and practical triumph of democracy as a system of government. No further political paradigm shifts would be required. Democracy was the omega end point of the historical process of human sociopolitical evolution. Great reading, perfect for the 1990s when American triumphalism and the Washington Consensus reigned supreme. But Fukuyama seems to have overlooked the tendency of modern democracies with universal suffrage to glacially move towards bankruptcy by promising their voters entitlements that these governments cannot afford. Barry Eichengreen, in his widely acclaimed Golden Fetters, argued that universal suffrage granted during World War I made a return to the gold standard impossible. The newly expanded electorates wouldn’t stand for a submission of national monetary policy to the stateless discipline of gold. Could Eichengreen have gone one further and argued that universal suffrage and national fiscal discipline were incompatible?I don' think the Greek debt crisis portends the collapse of democracy throughout the Western world, but I do think that Treadway has a point in saying that democracies tend to create too many entitlements and slowly bankrupt themselves. (And I believe -- unlike Treadway -- that most of these entitlements go to the rich and the big corporations, not to the "little people" who collect social services or retirement monies from the government.)
More questions: Are we headed into a post-Fukuyama world where universal suffrage inevitably leads to universal state bankruptcy? Or will the bond (and currency) vigilantes preserve Fukuyama’s world by forcing fiscal prudence? Will the “advanced” nations take the latest Greek tragedy as a warning and get their fiscal houses in order? Are the markets to be the ultimate saviors – or the terminators – of democracy?
Tuesday, May 18, 2010
Questions Worthy of Asking
Here are some questions posed by Peter T Treadway in Barry Ritholtz's The Big Picture blog site: