Over the past few weeks, people in Europe have been asked to believe something that would, not so long ago, have been absurd; we have been asked to believe that economics is a question with only one possible answer, and the pursuit of that answer is sometimes more important than the pursuit of democracy.

Once upon a time, politics and economics were inseparable. For much of the 20th century, international relations were defined by the tension between capitalist and communist countries; in Britain, that tension was played out between a capitalist Conservative Party and a socialist Labour Party. But back in 1989, that division began to change.

The link did not crumble with the Berlin Wall; it proved more persistent and faded only gradually. Still in this country we insist on measuring our politicians on a scale from “left” to “right” that no longer means what it once did, and may no longer mean anything.

The evolution has been gradual, but it has, nonetheless, been considerable. And now we are taking the next big step, one that has enormous and potentially disturbing consequences.

Take Greece for example. Just over two weeks ago, the Greek prime minister, George Papandreou, unexpectedly called for a referendum on the country’s latest EU bailout deal. The implications of the deal, he argued, were so great that the people of Greece had to be consulted. There was cowardice in his stance, naturally, but there was bravery too.

The reaction to his announcement was instant and brutal. Merkel and Sarkozy could not contain their disgust; financial commentators called for him to resign. A referendum, if it went the wrong way, would lead almost inevitably to Greece leaving the euro, and that was not an acceptable prospect.

Within a few days the plan had been dropped, and within a week Papandreou had agreed to step down. His government was replaced by a coalition (described, inevitably and laughably, as one of “national unity”). A new, unelected prime minister was named: the former vice-president of the European Central Bank, Lucas Papademos. His job is to ensure that the bailout deal is agreed and followed through before any elections take place.

Business and EU leaders were pleased with the result, but what the Greek people thought of it no-one bothered to ask.

In Italy, too, democracy has been cast aside this month in favour of “stability”. Few outside the country will mourn the departure of Silvio Berlusconi, but while his defeat at the hands of the people or the courts would have been welcome, the prime minister was instead the victim of The Markets, those most influential of contemporary observers. Like Papandreou, Berlusconi has now been replaced by an unelected “technocrat”, the former EU commissioner, Mario Monti.

There has been remarkably little concern raised about these moves within the mainstream media. Perhaps because they are the logical next step in a long and apparently uncontroversial process, whereby alternatives to orthodox capitalism have been pushed aside or wilfully ignored. The views of the IMF and of The Markets are communicated as though they were messages from the gods – economic doctrine on tablets of stone. Papandreou and Berlusconi fell because they stood in the way of the inevitable.

I think we should be worried. What we are seeing is the same kind of financial fundamentalism that dragged us into this mess in the first place – a certainty so complete it is blinding. The idea that these same views and these same people can drag us back out of the mess again is not particularly convincing.

It is interesting that one country not often mentioned today is Iceland. Three years ago the Icelandic economy imploded spectacularly. It was universally seen as the biggest loser in the biggest financial crash since the 1930s. But the Icelandic response to that crash was unusual.

There is no denying that the country has had hard times since 2008, but there is equally no denying that it has turned itself around fast. Today, the nation looks in better shape than countries such as Ireland and Spain, not to mention Greece and Italy. And while it has been supervised in its efforts by the IMF, it has not always chosen to do what it was told.

But what is most interesting about their recovery is that Icelanders did not hand over the reins of government to “technocrats”. Instead they did something like the opposite. Following a general election, the country set about building a new constitution, giving 1,000 members of the public, chosen at random, the job of writing it.

Direct democracy has been at the heart of the new Icelandic politics. According to Birgitta Jónsdóttir, a member of the country’s parliament, involving people in decision making at every level is “the high north of our political compass”.

Writing this week in The Guardian, Ms Jónsdóttir explained: “Having the tools for direct democracy is not enough … We have to find ways to inspire the public to participate in co-creating the reality they want to live in.”

The current situation in Italy and Greece suggests a troubling question: should we protect democracy at the expense of The Markets, or protect The Markets at the expense of democracy? In Europe we are now leaning precariously towards the latter.

But the question is false. If the Icelandic story teaches us anything, it is that there is always more than one way of doing things – there is always choice. And if the markets are damaged by democracy then there is something fundamentally wrong with our economic system.

Even a bad decision made democratically is preferable to one in which all alternatives are forcibly removed.

Malachy Tallack


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