The Democracy Sham: How Globalisation Devalues Your Vote

By Brian Gould (Craig Potton 2006) 175pp. $29.95.
Review for New Zealand International Review, March/April 2007. p. 29
 Keywords: Globalisation & Trade;

As an economics student I was struck by Paul Samuelson’s notion that the market place was a ‘democracy’ in which consumers expressed their preferences by their purchases. But it is a democracy of dollars not of people, where the number of votes depends upon how much each have to spend.

In the ideal world, the market ‘democracy’ and the political democracy would be independent of one another. In the real world they are not. It is not just that the political system requires dollars – that is resources – for elections and its administration, leaving opportunities with those with more dollars to influence the political process. The market system requires an input from the political system because efficient markets require good law. So there is a constant tussle between market actors for changes to the law. The proposed changes to the Telecommunications Act are the consequence of lobbying by telecommunications companies who judged their opportunities for progress are unnecessarily limited by the Telecom monopoly. It is almost accidental that consumers will be the beneficiaries: where there is no countervailing corporate power, consumer interest are frequently ignored.

Moreover, the one-dollar-one-vote system seems unjust, especially if there is considerable inequality in the distribution of dollars. Just as the market system continually invades the political system, so the political system invades the market system. Getting that balance right is one of the great challenges that faces us, a challenge which is complicated by the extreme advocates of either system ignoring the weaknesses of their preferred option, idealising it while at the same time misrepresenting the other option.

Over the last 25 years, New Zealand has painfully rebalanced its social regulation from an excessive predominance bureaucratic regulation towards more-market. I was but one of the many advocates, because of the overwhelming evidence was that the political system was not very effective in managing the complexities of the economic system without considerable market regulation. However, I was a cautious liberaliser respectful of the political democracy as well as the market one, and wary of overbalancing in the opposite direction. As it happens, my cautions were ignored, and the market liberalisation were dominated by radical extremists who, if ideologically persuaded of the rightness of their vision, also acted in their own interests.

Although Bryan Gould discusses some aspects of that liberalisation story for both Britain and New Zealand, it is tangential to the central theme of The Democracy Sham. As the subtitle summarises How Globalisation Devalues Your Vote, the internationalisation of an economy – which were only a part of the changes of the 1980s and 1990s and continues to this day – further reduces the power of the political system relative to the market system, for at least two reasons.

First, there is no international political system to offset the power of the international market system. (There are international agencies such as the IMF and the WTO, but unlike some critics, Gould is not paranoiac about them, seeing them as institutionalising the international economy, rather than driving it.)

Second, as the economy opens up, the dollar voting increases and becomes more unequal, as multinationals and the like get involved. (Some of the biggest advocates for reform of Telecom were also overseas owned.) So the disjunction of the voting between the political and market system increases.

It is these increasing inconsistencies which, Gould argues, means that political democracy is becoming increasingly undermined by globalisation. Such a thesis provides a challenge to each of us, but perhaps particularly to me because I have just finished the first draft of a manuscript. The Globalisation of Nations which takes, perhaps, a less antagonistic view of the changes.

Not, I think, that is there a great deal between Gould and myself. Both of us are respectful of the market system’s ability  to generate material output. Neither of us are extremists, so that Gould is as supportive as I am of the weakening of the Telecom monopoly. However, my draft is more sanguine about the role of nation states, arguing that they will have to continue to exist in the foreseeable future, and that they are likely to remain political democracies. They have chosen a strategy of globalisation because they judge the benefits of international engagement exceed the costs.

Gould would argue that the ‘they have chosen’ is misleading, that I was showing too much faith in the one-person-one-vote democracy, and not allowing enough for the way that it can be corrupted by the one-dollar-one-vote democracy. Not that we disagree on a remedy, for we both argue the case for more controls – less engagement – on the external capital account, especially the short term money markets which flood the world. Although he does not address them, Gould would probably support more limits on the private funding of political activity, and greater transparency where it occurs. Amen.

It may seem strange that I am doubting some aspects of a book I am preparing for publication but this is exactly the purpose of Gould’s book. There is, of course, a wealth of detail in his arguments. But its central purpose is to challenge the reader’s complacency that globalisation leaves democracy – as we normally understand it – intact. As will be evident in the final version of my book, in the case of this reader he has succeeded.

Go to top