Economic Crisis, Spontaneous Orders and the European Project

Bonilla Saus, Javier and Isern, Pedro (2015) Economic Crisis, Spontaneous Orders and the European Project. [Conference Proceedings] (Submitted)

Microsoft Word - Published Version Download (150Kb)

Abstract

Introduction: The cause of the 2008 crisis has not been the inability to deal with extreme greed, but the inability to deal with extreme abundance. In the past, societies have fallen into deep crises mainly due to endemic scarcity, but nowadays they have proven to be incapable of dealing with abundance. Abundance is the distinctive quality of North American and Western European contemporary history. This prosperity is closely related to the validity of freedoms and equalities. However, how are abundance and institutional strength related? In extreme scarcity, the (complete) absence of goods tautologically implies the absence of property rights. After extreme scarcity comes the emergence of trade and division of labour brought about the need to define property rights. Although the positive relationship between prosperity and well-defined property rights is evident, the appearance of abundance has reformulated how we perceive freedom (or to be more precise, how we perceive the validity of individual freedom): oddly enough, once modern societies achieve high levels of prosperity, they seem to agree to tolerate a marginal loss of freedom. This dangerous inverse relationship between prosperity and institutional weakness explains part of the current European crisis. But it mainly explains a central problem emerging economies have encountered since the beginning of the century: in Europe, prosperity has brought about a marginal questioning of rights, but in emerging economies like China, Russia, India, Brazil, Argentina, and Venezuela, it is agreed that economic growth must pay (or must be willing to pay) the price of the violation of some civil and political rights. This is where the validity of the European project is unshakeable. Europe is still the one place in the West where the noble liberal tradition coexists with the noble social democratic tradition in (at times) strained but virtuous harmony. The perception of abundance marginally but systematically weakens property rights because actors assume that there is a diminishing value in defining each marginal unit of income. This dynamic has been conceptualized in the “rent-seeking society” developed by Buchanan, Tullock, and Krueger, among others. Then, the unprecedented level of abundance has had an impact not only on the poor efficiency of distributive policies but also on the poor efficiency of the defense of freedoms.

Actions (login required)