Amartya Sen has published a new essay on Euro crisis in The New Republic, titled What Happened to Europe? Democracy and the decisions of bankers. A version of this essay was given as a lecture at the Bank for International Settlements in June 2012.
Here are excerpts:
The founders of European unity whose ideas led the European movement wanted a “united democratic Europe.” The Europe that emerged from World War II had learned certain things from bitter experience that it was not going to forget. Perhaps the foremost idea was the importance of democracy, giving each person not only a vote but also a voice. If democracy in the form of regular elections is firmly instituted in the constitutions of most European countries, the commitment to have preparatory public discussion before making large policy decisions is no less ingrained in contemporary European values. Walter Bagehot defined democracy as “government by discussion”—following a line of political analysis that John Stuart Mill had done much to clarify and to champion—and the visionary leaders initiating the quest for European unity never wavered in this dedication.
Some of the policies that were chosen by the financial leaders and economic powers of Europe were certainly mistimed, if not downright mistaken; but even if the policy decisions taken by the financial experts were exactly correct and rightly timed, an important question of democratic process would have remained. The decimation of something as fundamental as the public services that are essential pillars of the European welfare state could not be appropriately left to the unilateral judgments of central bankers and financial experts (not to mention the error-prone rating agencies), without public reasoning and the informed consent of the people of the countries involved. It is true, of course, that financial institutions are extremely important for the success and failure of economies, but if their views are to have democratic legitimacy, and not amount to technocratic rule, then they must be subject to a process of evolving public discussion and persuasion, involving arguments, counter-arguments, and counter-counter-arguments. [...]
Public reasoning is not only crucial for democratic legitimacy, it is essential for a better public epistemology that would allow the consideration of divergent perspectives. It is also required for more effective practical reasoning. It can bring out what particular demands and protests can be restrained in interactive public reasoning, in line with scrutinized priorities between a cluster of quite distinct demands. This involves a process of “give and take” which many political analysts, from Adam Smith and the Marquis de Condorcet in the eighteenth century to Frank Knight and James Buchanan in our time, have made us appreciate better.