According to the American economist and author Bradford DeLong, there is a great difference between economics and political economy. The latter refers to the methods by which people decide to establish the rules of the game, shaping the decision-making process and the functioning of institutions. DeLong, a specialist in economic history at the University of California and a pioneer in economic dissemination on social networks, says that former US president and founding father, James Madison, said that “He was never an enthusiast of democracy” organize economic life. He said that “Democracies have always been spectacles of turbulence and grievance containment, incompatible with personal security or property rights.”
These words were written in the early 19th century in a work on federalism, when very few politicians were enthusiastic about democracy and before it advanced by leaps and bounds around the world at the expense of monarchies and fiefdoms. Today, in the United States, the opposite is happening, under the current mandate of the President of the United States, Joe Biden, who manifests himself as a fervent defender of democracies in the face of the advance of autarky in recent years. She even thinks Donald Trump is a threat to her.
Today Argentina is engaged in a public debate relevant from this point of view.
We know what Javier Milei’s government intends deregulate the economy through a law and a DNU.
Which in this way seeks to level the conditions of the economy after years of distortions which led to a price increase of 300% in four years when the average increased by 900%. This has made companies providing these services less competitive and more reluctant to invest capital.
The Government believes that, with fewer regulations, investment will resume and activity will be revived. That the sooner lawmakers act in Congress and the less they depend on their legislative technique, the faster results will be seen.
The opposition, however, claims that Milei weakens democracy.
The tension grows.
The history of conflicts between economics and democracy shows infinite intersections which, for DeLong, are summarized in the work of two thinkers who, curiously, were both born in Vienna. One, Friedrich von Hayek; the other, Karl Polanyi.
DeLong tells it in his latest book, where he narrates the issues of capitalism and democracy along what he calls the long twentieth century (from 1870 to today the book in English is titled Towards utopiawith favorable reviews).
Hayek, Milei’s intellectual beacon, greatest exponent of the Austrian School of the 20th century and Nobel Prize winner for Economics, believed that People do not have enough knowledge and skills to create a better society and thinking otherwise is nothing more than a symptom of arrogance.. This centralization sends wrong signals that lead to bad decisions and that the price system for a capitalist economy is simply “a communication tool”.
According to the Austrian School, in the market economy, the only rights that count are those of property and in particular those that serve to produce the required things. He admitted it was a problem that people believed they had other rights.
Polanyi, for example, argued that people identified in land the right to stabilize themselves within a community, to work for an adequate income and to have financial resources to channel their savings. “The market is made for man and not man for the market”He said.
Former Economy Minister and UCR leader Jesús Rodríguez often says this Capitalism and democracy there is “a tension”. “Capitalism is allergic to uncertainty”. But the solution to these frictions does not come through the proposals of Hayek or Milei. Democracy and political parties have discovered that the predictability and rules of the game must be guaranteed by agreements that exceed the time horizons of the rulers.
“You’re not naive enough to think we live in a democracy, are you? This is just the free market. And you’re part of it.”. The phrase, already memorable, appears in movie Wall Street (1987) and Michael Douglas tells Charlie Sheen. The first plays Gordon Gekko, a businessman, the son of a salesman who studied at a public university, who just wants to make money and reads The Art of War, by Sun Tzu. The second is a young Wall Street stockbroker who tries to make his father, Carl Fox, proud.
But who is the naive one? The one who believes we live in a democracy or just a free market? It is the difference between economics and political economy.
Source: Clarin
