When the economy is incompatible with democracy?

[Lark]

When there are real contradictions between what is required to prevent further and deepening crisis within the economy and the democratic will of the majority in a country what would you consider to be the best outcome?

For instance, the decisions of key firms and actors within the economy causes a crisis, whether it is considered a result of fundamental contradictions in the economy or an incapacity for markets to accurately predict or manage "systemic risk" isnt really important at this point, a choice has to be made as to whether these firms will be rescued at tax payer expense or permitted to fail, in the process immiserating tax payers to a greater extent, at least in theory, than they would be by a tax funded rescue package.

The economy "demands" the public spending to protect the private interests responsible for the crisis but the democratic will is resistant to the idea. Not one aspect of the idea, for instance cutting public services and public spending OTHER than the spending which constitutes a rescue for key firms and actors in the economy (which I consider a seperate idea, possibly deserving of a seperate thread), but the whole/complete idea.

 

[Coriolis]

Democracy is essentially "government by the people". The government acts in accordance with what the people want. Since not everyone will agree, this amounts to the government acting in accordance with what the majority wants. For practical reasons most democracies are representative. People don't vote directly on decisions like the ones you mention, but rather choose representatives who vote, or who in turn choose administrators to run the Fed, the Treasury, etc.

As you point out, the will of the people, however determined and expressed, is not always the most productive course of action. Those in authority can go against popular will, at the risk of being voted out of office later. Barrring the imposition of some kind of authoritarian government, the democratic alternative is to educate the population about the situation, and the best way to address it, so the economically sound position gains popular support. This approach comes with no guarantees, however, and sometimes (far too often) we must learn these lessons the hard way, by making the wrong decision and suffering for it.

 

[Lark]

I meant to post this in another thread.

 

[Coriolis]

Perhaps a mod can move/merge it?

The whole idea of the people in democracies collectively not knowing what is in their own best interests (or being unwilling to implement it) is an interesting topic.

 

[reason]

Democracy is essentially "government by the people". The government acts in accordance with what the people want. Since not everyone will agree, this amounts to the government acting in accordance with what the majority wants. For practical reasons most democracies are representative. People don't vote directly on decisions like the ones you mention, but rather choose representatives who vote, or who in turn choose administrators to run the Fed, the Treasury, etc.

As you point out, the will of the people, however determined and expressed, is not always the most productive course of action. Those in authority can go against popular will, at the risk of being voted out of office later. Barrring the imposition of some kind of authoritarian government, the democratic alternative is to educate the population about the situation, and the best way to address it, so the economically sound position gains popular support. This approach comes with no guarantees, however, and sometimes (far too often) we must learn these lessons the hard way, by making the wrong decision and suffering for it.

This strikes me as incredibly naive understanding of democracy. I'm not saying that to be mean. Even a casual association with the political science literature blows this rosy vision of democracy out of the water. Most jarringly, you completely omit the existence of the concentrated benefits and dispersed costs that give rise to powerful special interest groups.

 

[Coriolis]

Naive? Of course it is. My comment was intentionally theoretical and simplistic, a first cut at looking at how discrepancies like the one Lark raised play out in a democracy. In a way, asking how things are supposed to work. The purpose was to show that, even in a democracy that adheres closely to the theoretical ideal, there is no guarantee or built-in mechanism to ensure that the population will support and demand what is logically the best course of action, on anything.

Add to that the realities of money, special interests, corruption, mis- or disinformation, and plain old human frailties, and the situation becomes exponentially more complex. I was expecting these extra layers to be added as additional members commented, but it seems the OP may have been misplaced.