Extracted from the ABC blog by Gareth Hutchens.
One of the joys of researching the history of a word is learning about the culture it came from. A fascinating element of Athenian democracy was the way in which policies were adopted by its citizens. Members of the boule [the city-state’s leaders who were chosen by lottery every year to serve a single-year term], would propose policies, but those policies could only be adopted if a majority of the citizens voted in support of them. The Assembly would meet three or four times a month to discuss the boule’s latest policy proposals, such as declaring war, for electing military generals and magistrates, everything from raising taxes to building the Parthenon. That made their political culture very different from today’s ‘representative’ democracy. In Australia it’s not power to the people, it’s power to a chosen set of leaders who the people have to put up with once they are in the corrupting position of being in power.
In our ‘representative’ democracy, voters are rarely given the opportunity to vote on single policies; economic policy settings are controlled by a small group of elites drawn from the political class and the bureaucracy [whose career prospects depend upon the whim of their minister] and ‘independent’ bodies such as the Reserve Bank. Since the 1980’s, policy settings have been built around a particular view of the world that has focused on the supply-side of the economy where budget surpluses are an inherently good thing. It hasn’t prioritised genuine ‘full employment,’ settling instead for a level of unemployment that suppresses wage growth and pacifies workers. It hasn’t considered eradicating poverty, even though it’s within the government’s power to so by increasing social security payments [as it did for a few months last year, during the pandemic, before sending those households back into poverty]. It’s accepted, even promoted, a large increase in wealth inequality, and it’s overseen a situation in which Australian house prices have become some of the most expensive in the world, ensuring that whole generations of citizens never own their own home. The public has had little control over that policy platform.
Political parties take a suite of policies to an election, and if they win, they claim to have a ‘mandate’ to implement every one of their policies. They also say they have a mandate to ‘govern’, which means they feel comfortable legislating new laws that weren’t proposed before the election. And there’s no mechanism for citizens to remove an individual politician from power other than waiting for the next election. Even then, if you’re not a member of that politician’s electorate you have no power over them at all. It’s a far cry from the original demokratia [from demos, ‘the people,’ and kratos, ‘power’).
To make matters worse we have fallen into the quagmire called ‘pre-selection’ the process by which a candidate is selected to contest an election for political office. It is a fundamental function of political parties. The preselection process may involve the party’s executive, or a specific committee, selecting a candidate by some [usually opaque] contested process. The selected candidate is commonly referred to as the party’s endorsed candidate.
Given that the political process has evolved into a two party system, and, further that endorsed candidates [because they can draw on the financial and physical resources of the party] have a disproportionately increased chance of being elected, the concept of actually choosing who you want to represent you is a mockery of the democratic process.
What if things were different?
But what if Australians had the opportunity to vote on individual policies, like the Athenians? What level of unemployment would we vote for? What if we could vote on the level of the minimum wage, or who should be appointed to the Administrative Appeals Tribunal? Would we vote for corporate and personal income tax rates to be higher or lower? What if we had the opportunity to vote on the maximum number of residential properties someone could own? The possibilities are endless. And when you think about it, you realise how little control Australian voters have over major policy settings.
Over the past year, an important debate has been taking place about the suitability or otherwise of our economic institutions. Is the Reserve Bank’s inflation targeting regime still fit for purpose? Should we create an economic stability board that has the power to stimulate or suppress demand by manipulating tax rates? Should we introduce a universal basic income or a federally-funded job guarantee? Unfortunately, voters won’t get the chance to vote on any substantive policy changes, not at the individual policy level.
Not unless Australia becomes more democratic.
Were you born in the past 40 years? Chances are you were, more than half of Australia’s population was. If so, you’ve grown up in a world in which huge economic trends have been grinding away, influencing politics dramatically, which may make it difficult to escape this recession with the usual monetary and fiscal policies. Since the 1980s, politicians in advanced economies have pursued a policy framework that has failed large segments of their populations. Over the past 40 years the average rate of economic growth has been slowing, investment to GDP ratios has fallen, business productivity has declined, and inflation has slowed noticeably, while the average real interest rate has dropped from 6 per cent to less than zero.
At the same time, household debt and government debt has exploded.
It has underwritten a huge transfer of wealth up the income distribution to the top 1 per cent. The global financial crisis then amplified these trends. And this year, a fascinating new paper called Indebted Demand suggested two culprits were to blame for the phenomenon. It said rising income inequality, and the liberalisation of the financial sector — both of which originated in the 1980s — had pulled advanced economies into their current low-growth, low-interest rate, high-debt environment. In a nutshell, the paper suggested the bottom 90 per cent of households had become so indebted in the past 40 years it has weighed on aggregate demand. At the same time, there has been a huge accumulation of income and wealth among the top 1 per cent, and since the super-rich have a greater propensity to save, interest rates have been falling. The paper also warned popular expansionary policies — such as deficit spending and accommodative monetary policy — may make this current recession worse in the long run. Why? Because when an economy is already stuck in a low-growth, low-interest rate, high-debt trap, traditional methods of dealing with recessions will probably exacerbate the problem.
The paper argued debt-financed deficit spending may lift interest rates in the short-run, but demand will eventually be weighed down again when governments inevitably raise taxes or cut spending to service their even larger debt burdens. Same with monetary policy. Looser monetary policy may boost demand in the short run, but when the stimulus fades and the larger accumulated debts need to be serviced, demand will be dragged down again. Temporarily, deficit spending raises demand, bringing output closer to potential. Eventually, however, as the public debt burden rises, along with the associated taxes required to service it, demand falls again, and the economy finds itself back in the debt trap. To policymakers of the conventional view, running large deficits, will pull the economy back into the trap after every round of deficit spending. However, the paper also suggested conventional debt-financed deficit spending could still work in specific circumstances — if it didn’t add to the debt burden of the bottom 90 per cent. Therefore, deficit spending must be financed ‘in a progressive way’.
This requires taxing savers [the super-rich], raising top marginal income tax rates, better enforcement of estate taxes, or introduction of wealth taxes. The paper also argued unconventional policies may be required to pull advanced economies out of secular stagnation. Redistributive policies and structural changes to reduce income inequality are effective in sustainably generating more demand, and thus can prevent debt traps and lead economies out of them. Anyone under 40, has spent all of their life in a world of falling inflation, falling interest rates, growing debt, rising house prices, increasing globalisation, and increasing labour-saving technical progress. So their view of the world should be very different from the people currently making policy. So why aren’t young people agitating for more say in substantive policy change? Because little will change until Australia becomes more democratic.
Under Switzerland’s system of direct democracy, which gives voters a direct say several times each year on a variety of issues, proposals need a majority both of votes cast and of cantons to pass. The people play a large part in the federal political decision-making process. All Swiss citizens aged 18 and over have the right to vote in elections and referendums. The electorate is called on approximately four times a year to exercise this right, and vote on an average of 15 federal proposals. As well as the right to vote in elections and referendums, Swiss citizens may voice their demands by means of three instruments which form the core of direct democracy: popular initiative, optional referendum and mandatory referendum. The popular initiative gives citizens the right to propose an amendment or addition to the Constitution. It acts to drive or launch a political debate on a specific issue. For such an initiative to come about, the signatures of 100,000 voters who support the proposal must be collected within 18 months. The authorities sometimes respond to an initiative with a direct counter-proposal in the hope that a majority of the people and the cantons support that instead.
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