Sunday, 1 July 2012

Politics Vs. Economics?

A modern polity is made up of several autonomous but overlapping components. Two of the most significant are the political and the economic (culture and society are the others). The greatness of democratic politics is its relationship to the general will; its failure is the institutionalisation of hypocrisy. The efficiency of free market economics is in revealing and achieving the will of all, the satisfaction of the most needs of the most individuals possible; its dismal side is the mass production and consumption of the trivial. The challenge is to find a way to reconcile the best of both in an equal partnership.

The Political

Think of the political as a distinct mode of association within the polity as a whole, concerned with the legitimate exercise of power i.e. government. It therefore concerns the relationship between the state and all those whose opinions matter politically, which in a democracy, ideally, means all citizens. Of course, the people who live in a polity relate to each other in different ways (such as in terms of social class or linguistic identity). The term citizen therefore refers to a when not a who. Whenever people are thinking in terms of their relationship to the state or acting upon that relationship, they exercise their rights as citizens to engage in the political.

The political has certain foundational values related to deriving legitimate collective decisions, notably mutual respect and fairness. Its archetypal style of interaction is public deliberation: let the most agreeable arguments win. It takes place in specialised spaces, such as parliaments, political rallies and the opinion pages of newspapers, the modern equivalents of the classical forum. Its over-riding concern is with justice in the widest sense of deciding collectively how political power should be wielded.

Politics thus concerns social choice: how to make legitimate decisions on behalf of the whole of the polity, for example how poverty should be ameliorated. In the democratic ideal of politics - the concern here - every citizen has equal voice and influence in such decisions, and this is formalised as the rule of one person one vote. The consequence of this equality is that citizens are discouraged from 'voting their interests' in elections. An individual vote is literally insignificant (all election voting systems have a much greater counting error than one) and therefore voting is not a rational way to further one's personal interests [Previously]. Rather, we should vote our values (which may include, of course, an ideological rationalisation of our self-interest). The ideal of democracy depends on this since democracy is supposed to help us get to the general will: Not, What nice things do particular people want to award themselves at the expense of others? But, What do the people really believe is right for the country? 

That all sounds very nice. It even more or less works - it's how we vote for taxes even though we don't like paying them. But the downside of being encouraged to vote your values is that all too often you don't vote the values you really hold, but the ones you think you should hold. Economists have some justification for their complaints about the potential for hypocrisy built into democratic politics. Precisely because one cannot vote one's interests there is no cost - to you - of voting foolishly. Thus, people often use their votes to express their views about how they would like the world to be, including the values they would like to live by and would like everyone else to live by too.

One can think of this as a form of therapy - of catharsis - but it is also somewhat dangerous given that one is providing the massively powerful machine of government with a set of instructions to pursue a utopian vision that appears not to be feasible even in the lives of those who claim to value it. It somewhat resembles a failed dieter proposing that everyone's caloric intake should be reduced. For example, American 'family-values' conservatives, as a demographic, actually have far more illegitimate births and divorces than liberal voters, but nonetheless vote for the state to encourage and even enforce their 'family values' programme on the whole country.

To give another prominent example, as citizens, Americans (along with many other nations) routinely vote to maintain the 'War on Drugs', even though as private individuals they continue to consume illegal drugs in vast quantities. The result of that particular hypocrisy is that many fragile countries are over-run with corruption and hyper-violent criminal gangs engaged in drug production and supply, while even within America countless individual lives are destroyed and communities broken by the enforcement of punitive drug laws.

The problem with democracy is that the warm feeling of self-expression accrues directly to oneself, while the consequences of otherworldly foolishness is spread among everyone.

Economists say, Talk is cheap; put up or shut up. e.g all you Christians who claim to believe in the oncoming Rapture: why do you still have life-insurance and pensions? If you Americans are really as religious as you say to everyone who asks, why don't you go to church any more often than the godless Europeans? The economist says, the truth about you can be found in your works not your pious intentions.

The Economic

Think of the economic as another distinct form of association within the polity. It is concerned with the rational behaviour and interactions of large numbers of individual agents (i.e. people acting and thinking as homo economicus). It has certain foundational values, notably liberty and prudence, the sovereignty of the individual and the security of her interests. Its archetypal style of interaction is transactional and competitive - let the most agreeable price win. It takes place in specialised spaces, the modern equivalents of the classical agora or marketplace. Its overarching concern is with prosperity, understood broadly as the ability of the most people possible to attain what they have reason to value.

Economics is concerned with the production and distribution of the things (whether goods or services) that people consider valuable. Contemporary economics is particularly concerned with the free market mediation of supply and demand, and that is my concern here. In this system, people are able to 'vote' for their individual interests by buying them, and also demonstrate how much they care by how much they are willing to spend. In this happy scenario, in competitive markets the true demand for a good is revealed by how much how many people are prepared to spend on it. What we have is a direct measure of the will of all, and some good reasons for assuming its reliability, since, unlike in politics, people are spending their own money. (The 'magic' of free markets is that producers will then automatically and without political co-ordination respond to these price signals and provide the goods and services that people want in proportion to the strengths of their desires.)

Unfortunately while the supply and demand curve may seem to be revealing the true interests of the whole polity, in fact the will of all is only the aggregation of all the private interests of each individual person. All sorts of problems arise, from lower purchasing power reducing the 'voice' of the poor, to market failures in the supply of public goods that it is in no-one's interests to pay for themselves. But perhaps most sad is the mass triviality produced when people drop values and 'vote' their interests with their wallets. Absent utopian dreams, absent the ideals we try to convince ourselves to live by, it seems that what people really want is a microwaved ready-meal on the sofa in front of the TV. That hardly reflects the economic ideal - rational individuals using their opportunities and resources to better their condition.

Lacking true prudence we are left with the hedonic consumption frame of mind - buying stuff as therapy, an attempt to engineer happy feelings in oneself. Take charitable spending. People are generally in favour of making the world a better place, but they see no particular reason why that goal should be connected to their actions. That's why most 'charitable donations' are given to shamefully irrelevant organisations (universities, churches, art museums, etc) or to shamefully incompetent ones. Britons for example overwhelmingly vote with their wallets by giving more to a single donkey sanctuary than to all the main organisations supporting victims of domestic violence put together. Why be surprised? Private charity is just another form of personal consumption - it's all about how good it makes you feel, not any actual good it might do for others.

Political Economy: a problematic relationship

The logics of the political and the economic are quite different, and they are often in tension if not conflict. It has seemed to many that we should just choose one or the other. Yet the manifest failings of each form of association suggests that such a programme is doomed.

The political needs the realism and individualism of the economic to keep hypocrisy somewhat at bay. A purely political society is characterised by a hyper-moralised politics and the absence of individual liberty, because actions that contradict the general will are understood as subversive. Look to the theocracies or communist party states of the world to see what that produces: a super hypocritical police state that is democratic in name only (i.e. totalitarianism)

Similarly the economic requires the balancing force of the political orientation to justice and idealism. Otherwise nothing is to be trusted and everything is for sale. You can buy people - actual people - laws, political offices, whole countries. Several of the most impoverished and dangerous countries in the world are blessed with such individual liberty, from Guinea-Bissau the cocaine hub to the diamond lands of the Congo and the druglands of northern Mexico. 

Obviously what every society should be aiming for is to combine the best of both forms of association in an equal partnership i.e. Just Politics + Efficient Economy. But what actually tends to happen even in the more successful polities is that the political submits to the dominion of the worst aspects of the economic, and vice versa.

When governments outsource political decision-making to the economic sphere, we get a politics of the trivial. This outsourcing not only concerns the 'neo-liberal' delegation of governmental responsibilities to private market actors, such as giving credit rating agencies a huge role in regulating financial markets. It also concerns taking on the logic of the economic more deeply. The task of politics in general and government in particular is reconceived from deliberating the general will to fulfilling the will of all (i.e. from social choice to welfare economics). And what is the will of all? Whatever the economy reveals that people care enough about to buy. Governments thus come to believe the enlightened thing to do is to prioritise the economy, by which it understands growth in GDP (the volume of monetary transactions), a most superficial understanding of the health of the economic domain, the prosperity of the people, and the will of all.

At the same time, we find the prudential logic of the economic sphere corrupted by the idealism of the political to produce an economics of hypocrisy, in which we try to achieve goals we don't really believe in by buying things that won't achieve it. In this case, individuals attempt to use economic tools to further idealist pretensions: buying Fair Trade coffee to end poverty and injustice; or saving the world from global warming by paying people in poor countries to pump water by hand rather than with an engine.

One should note that such economic behaviour is not really in keeping with the economic ethos, specifically instrumental rationality: choosing the most efficacious means to achieve one's goals. Addressing this kind of issue effectively requires political action, not aggregations of individual consumer purchases. Trying to further one's values through such an ineffective purely economic consumption strategy is actually a form of economic stupidity. 

Of course this kind of behaviour may not really be motivated by the ideals people claim. But then we are back to the problem of hypocrisy. The economic is the domain in which people should be free to be true to themselves in expressing their interests as they are, not as how they think others think they should be. There is therefore something hypocritical about wanting to buy a Prius (or a pick up truck) just because you think that is the 'politically correct' car to buy. (Or for that matter, a company promising to serve people and planet as well as profit.) It is an affront to prudence in the larger sense, since you are allowing your goals themselves to be determined by others. 

This kind of sub-optimal muddle is the human predicament all the way down. But there can be more positive relationships between the economic and the political. They can work with each other. And they have to. There are problems, like global warming, for which we need the best of both.

A better relationship

The first requirement is mutual respect, recognising the need both for the general will and the will of all. Neither should submit to the other, nor seek to dominate the other.

The Invisible Hand can't make a civilised society by itself. If we want to achieve important or difficult things we cannot do them alone but must find ways to co-ordinate our actions and plans. Sure we all think donkeys are cute, but if we think through the consequences of each individual independently choosing to put donkeys just slightly ahead of human-centred charities, we would surely agree that the people should get much more. We need politics to think together like that. We need politics to identify and commit to the ideals we want our society to steer by, whether that is ending discrimination against women, protecting the poor from destitution, or guaranteeing freedom of religion.

On the other hand democratic politics alone does not guarantee that we can achieve justice rather than mere sanctimonious moralising. Our political debates must be grounded in the real interests of the people concerned, otherwise our grand laws and constitutions will be only gestures towards some ideal theory of justice up in the sky. They won't be realistic in their goals, and they won't motivate us to fulfil them because they won't seem relevant to our real lives.

Global warming is a case in point. It is characterised now by the politics of the trivial and the economics of hypocrisy. While governments cower from confronting the problem because it clashes with their obsession with making the GDP number go up every year, individuals go about pretending that they can do something about it by their personal consumption choices. Disgusted, frantic observers argue that only a political solution can save us from ourselves, going so far as to suggest creating a global government to enforce global carbon rationing. Such a carbon dieting plan for everybody would have the advantage of fairness, a political virtue, but is completely unviable as a solution.

Another approach would be to find a way to partner the strengths of both domains. I've discussed this previously, but, in brief, the aim should be to have a grown up political conversation about the world we want to live in  and that we want to bequeath to future generations (the general will) that is informed and grounded by our real world constraints and interests (the will of all). The idea is that instead of signing treaties we have no hope of adhering to but which express our highest ideals, we can set feasible goals that make sense in terms of what we as individuals care about, and which include mechanisms for their achievement (like carbon taxes) that rational agents can work with.