Financial Times
Editorial
September 16, 2011
One lesson from Europe’s debt crisis is that the movements of financial markets often outpace the capacity of democracies and their international institutions to control them. Another lesson is that “managed democracies” can sometimes seem more nimble on their feet. In a “managed democracy” the ruling elite holds ritual elections, which it always wins, and derives formal legitimacy from the people even though it governs with little reference to them. The supreme example is Russia under Vladimir Putin’s rule since 2000.
Decision-making procedures in democracies can be slow, but they reflect a need for popular consent. European societies would not wish to swap their systems of government for that of Mr Putin’s Russia. Still, the contrast was striking this week when the Kremlin swept into the debt crisis with a surprise offer of a €2.5bn loan for Cyprus. This would be no altruistic gesture. Russian companies and individuals have billions of euros invested in Cypriot banks and real estate. But a loan would spare Cyprus from asking for a bed next to Greece, Ireland and Portugal in Europe’s financial intensive care unit.
While the Russians swung into action, European Union policymakers were bickering about the latest unhelpful proposal for tackling the crisis: flying the flags of states with high budget deficits at half-mast. The origins of this bizarre idea lie in the northern European, Protestant notion that debts are sinful and demand public humiliation. Treating economics as a morality play is one reason the European crisis is not over.
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