Monday, November 14, 2011

Do markets threaten democracy?

Yesterday I had a close encounter with BBC Radio 4.

On receiving an email yesterday afternoon asking whether I might be able to ‘help’ with a programme going out today, I called them back. A friendly woman replied. It turned out that they had spotted one of my earlier Telegraph Blog pieces and wanted to explore some questions on the eurozone.

The first of which was: Are the markets controlling governments and threatening democracy?

I said that that seemed a very odd way to put things. The whole point about the crisis engulfing the eurozone and European Union was that it was essentially a political, not economic event. Europe’s politicians had borrowed too much money and had set up policy arrangements of such complexity that they were unable to weather difficult times and now no longer looked credible. ‘Markets’ were not some mysterious, zombie-like formation attacking us from outer space, or a cruel scalpel in the hands of a cabal of cunning bankers. Markets were the savings of people in the UK, China and everywhere else around the world looking for a sensible investment.

In short, global funds were asking the EU a simple question: “Are you a safe investment?” Since the answers coming back were increasingly ambiguous if not downright weird, the world’s fund managers were deciding either not to invest in the EU space, or to charge the eurozone space higher rates of interest for borrowing money.

In other words, it was highly desirable for the markets to ‘control’ governments – and anyone else – in this way. Markets represented honest business dealing. What if things were the other way round and governments controlled markets? That was not a recipe for success, as the USSR had showed us over 70 years. more