Layoffs and salary cuts are individual firm responses to a crisis that may make sense from a micro perspective- it is about saving money – but they will have dire consequences on the macro level.
I lived through this in Greece. Ten years ago, every firm was expecting the worst to come from the memorandum. They started making people redundant, pulling out from planned investment and cutting salaries. Unemployment went up, demand collapsed, public revenue went down, more austerity measures were needed and the downward spiral deepened. The country ended up losing one third of its economy in just four years.
Will it now be Greece on steroids everywhere?
The side effects of myriads of micro adaptations appear on the macro level. This is a key problem for economics and is particularly challenging for Austrian economics. Entrepreneurs creatively respond to a crisis by adopting a cautious and defensive approach long before some of them could spot new opportunities for investment and take positive action to exploit them. But if they all choose to first play ‘defense’, they shape the macro-environment in patterns that keeps telling most of them “keep on protecting yourself”, “there are more risks than opportunities out there”. Both supply and demand are on a continuous downward spiral. While some discerning entrepreneurs will spot some opportunities even in the direst of the circumstances, their plans need time to materialise and some may never come to fruition. In the meantime, most economic actors are not well positioned to start what they know to do well, and many have already lost their money in activities that went downhill.
On the other hand, the side effects of a large top down intervention such as the global lock down confirms the Austrian critique that central planning is also a risky endeavour. In an effort to control a complex reality, radical top-down interventions can divert investment to the specific activities they prop up, which appear sustainable for as long as this diversion lasts. Restrictive measures can also backfire, such as Greece’s shock austerity that was intended to balance the budget in Greece, or can prolong a precarious environment, such as the debt-fuelled bailouts elsewhere to save the banking system.
The problem is that policymakers do not have the tools to gain a full grasp of any potential unintended or undesired consequences from their actions. When they focus on one range of analysis, such as preventing a spike of deaths during the epidemic, the measures they take can generate a cascade of negative side effects in areas off their alarmed radar which they may have no idea how to arrest or fix.
I don’t see this micro-macro antithesis as an automatic validation of post Keynesianism in the sense that capitalism is always inherently unstable. It is unstable in periods of crisis when the micro and the macro can become a contradiction.
Exogenous shocks periodically happen. But it is worth studying what post Keynesians state: a crisis can emerge endogenously as in the financial markets.
The way out may be to think in terms of resilience rather than stability. I am inspired by Hilton Root’s forthcoming book Network Origins of the Global Economy. Resilience is the capacity of a system to accommodate turbulences and absorb shocks in recurrent episodes of instability. The system is unstable but can withstand the stresses.
Are multiple adjustments by adaptive agents able to bring about resilience in a system? Or do we need a central node to gain control and bring about order? Is a centrally-induced order a structure of relations that can be resilient over time, given that it depends on the health of the central node and knowing that the capacity of governments to understand and predict is limited?
Is civil disobedience justified when it invokes a moral objection to target a law that has been enacted through a legitimate process? The reason societies seek to establish a legitimate process in law making is because they want to set up common rules and norms which people who disagree with them will still have to abide by. However, history shows us many instances in which, even in a democratic system, civil disobedience both triggered and animated a debate on legitimately enacted rules and, often, led to their revision as well as the reform of the procedural rules that allowed their enactment in the first place.
Rawls’ position on civil disobedience struggles with this question. His position is that, once society has set up principles of justice in an institutional setting, acts of civil disobedience are just insofar as they appeal to the sense of justice of the majority and should be willing to bear the consequences of their actions. We may read the Rawlsian perspective as follows: these acts are still of value because they re-launch a process of public reasoning regarding the law itself.
However, the implications from this statement are broader and baffling. First, we don’t know how far this revision can go. Will it be allowed to cast doubt on the basic principles of justice which society previously agreed to observe? Can it challenge the procedural source of legitimacy for the contested norms?
Second, civic disobedience cannot be reduced to appeals to a sense of justice demanding the revision of law through the same process. Instead, the rationale behind civil disobedience reminds us that there will always be competing conceptions of justice that go as far as challenging the source of legitimacy – what some have come to accept as the just process may no longer seen as just by others. A society’s prior decision at a single historical moment that this is a just process for law making does not end the debate over different perceptions of justice concerning both norms and processes.
Moreover, acts of civil disobedience appear in moments in which different
moral norms clash and judgment should be passed regarding which one takes precedence
over the other. Episodes in the US history, particularly regarding the civil
rights of African Americans, epitomize the important role of acts of disobedience
in invoking a higher moral ground against norms approved by the majority through
the institutions of a democratic system. We have learnt from history that these
moments spawned animosities and brought about new episodes of conflict. They
were emotionally disturbing episodes.
This implies that social contract theories tend to adopt an a-historical approach to norm-building and a, strangely- a-social view of public reasoning. Norm-building is seen as cleansed of emotions and often dismissive of the idea that there will be unintended and unforeseen consequences. A reduced historical and social conception of justice is what acts of civil disobedience reminds us of. The process of defining justice as norms and as process remains an open turf for never-ending, reflective social interactions that no constitutional moment can capture, crystallise and entrench indefinitely.
These three elements – the historicity and sociability of norms,
normative contradiction, and the emotional dimension in the conflict over norms
– is manifested in Sophocles’ masterpiece, Antigone. Sophocles’ theatrical play
on civil disobedience was written around 441 BC, about 2,400 years before Rawls’s
work. It conveys a nuanced message on norms, normative debates, public deliberation
and reasoning, and sees the social nature of all as a human tragedy.
The play is set in the aftermath of a civil war in Thebes and the final battle which Thebes survives the attack of seven exiled Theban generals. One of the generals, Polynices, son of King Oedipus, fights his own brother, Eteocles, a defender of the city. In that fight, the two brothers kill each other.
Creon, the legitimate King of Thebes and uncle of the two
brothers, issues a public order for Eteocles to be buried with honours and for
Polynices to be left outside the walls to rot unburied as punishment for his betrayal.
Creon also orders that whoever tries to bury Polynices’s body shall be arrested
Polynices’s sister, Antigone, defies Creon’s order and secretly buries her brother in accordance with the religious tradition that demands that the dead must be buried. Soon after, Antigone gets arrested and is brought by guards before Creon and the city. She chooses not to apologize for her actions or claim ignorance of law. Instead, she confronts Creon by invoking that the law of the gods is superior to the law of men.
Creon sentences her to death, publicly stating that everyone
should be treated equally before the law. He would make no exception for her
niece. Creon presents himself as a just leader who firmly adheres to ‘equality
before the law’ even if that means he would sentence to death one of closest
family members. The law, he stresses, is above everyone.
Antigone’s public act with an emotional appeal to the law of gods initially fails to trigger sympathy from the people of Thebes and Creon insists on his sentence. Antigone is taken off stage to be buried alive in a cave.
Creon’s own son and Antigone’s fiancé, Haemon, rushes to defend Antigone but he too fails to convince his father to change his decision. Even against his son, Creon reiterates his conviction that the law takes precedence over personal relations. But gradually the people of Thebes, the chorus of the play, changes its stance and starts showing more sympathy to Antigone’s drama.
In the next scene, a respected prophet named Tiresias makes a public interference. He tells Creon and the city that their neglect of the moral law will displease the gods and will bring more sorrow and pain to Creon’s family and the city of Thebes. The leader of the chorus changes his mind and asks Creon to reconsider his decision and set Antigone free. We are witnessing here that public is changing its views following a morally charged debate triggered by an act of civil disobedience. Antigone disobeyed the law guided by her love for her brother, but she was also honouring the law of the gods. Creon decides to spare Antigone. Emotions and fears have a drastic effect on public perceptions political decision making.
But Creon’s decision came too late. Antigone committed suicide. So did Haemon and, following the news of his death, her mother and Creon’s wife, Eurydice. The play ends with Creon devastated, isolated, discredited and vulnerable, and the city of Thebes descending back into chaos.
Rather than a clear clash between a hero and a villain, the two protagonists are tragic figures and so is the city itself. Creon wants to demonstrate that he is a prudent ruler who obeys the law that he rightfully sets. But he has to listen to the people he commands. His confrontation with Antigone is his own public act in which he defends his decision. The chorus, representing the people, initially sides with Creon but turns against him after observing a human drama unfolding and after hearing the menacing words of a prophet about the incoming doom. Perceptions of justice are drastically reshaped through an interplay of feelings, reasons and fears. Deliberation is emotionally charged.
Unlike Rawls, Sophocles’ theatrical play presents us with a
richer blend of public reasoning, emotions, emotive responses, and unforeseen
and unintended consequences in a debate over clashing norms and perceptions of
justice. Creon – the personification of equal rules for everyone including his
own relatives – is the legitimate political authority but his decision creates
a personal and civic catastrophe. Thebes descends into a spiral of death and
civil unrest. A just act of disobedience triggers a spiral of turmoil and
tragedy. Emotions and personal affections guide decisions that produce
unforeseen dramatic developments for the protagonists and the city as a whole.
The Greek drama is purposefully presented as a morally
inconclusive story. Antigone had no initial intentions to make her actions a
public statement and did not wish to bring down the entire political system. But
after her arrest she did make a dramatic public defence of her stance invoking
the moral law. Creon was surprised and angered, torn between his adherence to
the rule of law and his duty towards his family. The Theban public watches all
this astounded, emotional and anxious. This is far from a society that can be equilibrated
into an orderly state. It cannot even rest secure about its own convictions.
Sophocles grasped much of what political theory tends to shy away from: the complexity and ambiguity surrounding normative thinking in human societies that tends to bring about tragic or fatal results for every system of norms shaken by its own contradictions. In short, Sophocles lyrically presents us the tragic irony of norms creation. Rather than taking a nomothetic stance, his play helps us reflect on the tragedy of human interactions from a nearly anthropological viewpoint.
Sophocles allows the audience to pass their own judgment through both logical and emotional engagement. The audience is baffled by the merits of each of the opposing viewpoints – Creon’s defence of formal equality before the law and Antigone’s defence of a higher moral ground. But it is also touched and distraught by how tragic the protagonists are, trapped in the consequences of their own moral standing and reasoning. In Sophocles’ play, society is watching and reflecting on behaviors and norms through pathos, ethos and logos. After each performance, the verdict is a flow of tears rather than a canonical judgment.
In my first post, I would like to share with you part of my work as a scholar of politics.
I study clientelism, which is, in my view, a fundamental but understudied and highly underrated phenomenon in politics. In my book, Clientelism and Economic Policy: Greece and the Crisis (2016), I define clientelism as ‘the distribution of resources by political power through an agreement in which politicians – the patrons – make this allocation dependent on the political support of the beneficiaries – their clients’ (page 12). Clientelism emerges at the intersection of political power with social and economic activity.
Why is this phenomenon important? As Harold Laswell put it, politics is the art and science of ‘who gets what’ in society (1936). This famous phrase epitomizes the nature of politics as a competitive process for power and resources. Because these resources are often excludable and rivalrous, multiple social actors and groups are expected to compete with one another for access to political power and the resources it distributes. In addition, as political power decides how scarce resources are to be allocated, there is competition among political actors who wish to gain power and take control of the distribution mechanism. Either way, participation in political competition is costly and occurs in anticipation of higher benefits for each of the participants. Clientelist exchange occurs when political actors competing to gain political power interact with socioeconomic actors striving to persuade political power to meet their demands and claims.
A ‘political market’ for the allocation of economic resources emerges and has distinct characteristics. On the one hand, it generates informal ‘prices’, for the goods and services provided by the government: there is demand by economic actors for preferential treatment and there is supply by political agents of resources, opportunities and benefits. On the other hand, the terms under which clientelist exchange takes place differ substantially from ordinary market transactions, primarily in terms of bargaining power, the enforcement mechanism, externalities, and selection process.
Power asymmetry characterizes the relations between patrons and clients. Clientelism works as an oligopoly. Few patrons occupy the supply side while myriads of candidate clients inhabit the demand side. Depending on what resources each side trades or possesses for future trade, as well as how long one has been – or expects to be – in a position to trade, power asymmetry can tilt in favor of the patron or the client, as in the case of big donors.
Another distinctive element of clientelism is the fact that, while clientelist exchanges is not legally binding or enforceable before courts, honoring the agreement depends on expectations of reciprocation from each party and, quite often, on fears and threats of retaliation in case one party fails to meet the terms of the agreement. On the part of the political agents involved in clientelist exchange, it is a matter of building trust and reputation over time, which, in the absence of formal sanctions, reduces the perceived risk of breaking the terms of the agreement.
In economic theory, clientelism is linked to the concept of rent seeking. Clientelist exchange is actually a subset of rent seeking. It involves explicit agreements according to which the beneficiary must reciprocate by supporting the agent in the political and administrative authority who has offered them the opportunity to extract a rent.
The conventional approach in economics is to view rent seeking as a distortion of market competition for the externalities it imposes on all other non-participating actors. In the real political economy approach, almost all political decisions distribute benefits and costs. My work focuses on the political implications of clientelism.
The process by which the government distributes clientelist benefits inevitably requires some sort of selection of who would be the beneficiary among a pool of prospective clients. Politicians whose political survival and success depend on getting elected to office have a strong incentive to distribute resources to those who would offer them the most valuable form of political support; not just a single vote, but campaign funding, loyal party membership, activist support or favorable media coverage (Trantidis 2016, 18)
The concept of clientelism is mistakenly reduced to a form of vote-buying. This is a narrow view of a much broader phenomenon. Indeed, clientelism serves politicians as a way to strengthen their chances to win elections but resources for clientelist distribution are scarce and the best way to use these resources is to attract those who could made a campaign contribution. It is difficult to monitor voters’ behavior and it is definitely not economical to use resources indiscriminately to buy individual votes, particularly in advanced economies where voters may be too costly to buy and many may simply refuse to be bought off.
Instead, clientelism works as an indirect way of gaining votes (Trantidis 2016, 19). By allocating benefits strategically to attract the biggest possible campaign contributors, politicians can gain an advantage in campaign resources that would allow them to make a stronger appeal to general voters. In short, clientelism is a strategy for political organization and campaign recruitment that has an indirect effect on voters’ behavior. Resource endowments define the capacity of each party to perform a number of tasks necessary for political survival and growth.
As I explain in the introduction of my 2016 book, the first and typical ‘image’ of clientelism is that of an individual agreement. The second ‘image’ of clientelism is that of a strategy for collective mobilization. Politicians create networks of clients that help them organize a campaign infrastructure with a strong support network.
The second image of clientelism refers to the formation of groups of loyal supporters on a more permanent basis. Clientelism is a way by which politicians and political organizations overcome the famous problem of collective action (Olson, 1965). Collective action does not occur automatically from groups having common concerns or a perception of shared interest. This holds especially if the perceived collective benefit is to be indiscriminately shared by multiple actors in large groups. In that case, there are weak incentives for someone to actively contribute to the collective effort. This logic of collective action applies to political organization too. Political parties need active supporters and campaign resources to be able to compete for votes and, for that purpose, they have to find a way to overcome a free-riding problem. For party leaders, the organization of a coherent and active party basis can be achieved through the distribution of targeted benefits to party members and supporters entering a clientelist network. While it is costly to mobilize political support, available state resources allow political actors to pass this cost on society. In forthcoming posts, I will discuss how this phenomenon could affect the design of public policies.
For the time being, let’s summarize the three key characteristics of clientelism:
Clientelism is a common form of distribution of resources by political power. It stems from the intersection of two competitive processes: a ‘market’ for political support and a ‘market’ for rents and other government granted privileges.
Clientelism is more than vote buying. The practice gives preference to those who can make the highest valued contribution to a politicians’ campaign infrastructure and support network: donors, activists, prominent figures, journalists.
Clientelism generates support networks. It is a way for political agents and organizations to overcome a collective action problem regarding how to mobilize, control and discipline active groups of supporters. This is a valued strategy for political organization that can hardly be eradicated from the political process.
Clientelism is a common, expected and inevitable practice in politics. In the next blogs, I will talk about how this practice should make us reconsider the notions of political participation and representation, rethink how public policies are formulated and reconceptualize democracy as a competitive arena in which authoritarian and democratic governments work to become dominant political forces. Thank you for your attention.
Laswell, Harold. 1936. Politics: Who Gets What, When, How. New York: Whittlesey House.
Olson, Mancur. 1965. The Logic of Collective Action: Public Goods and the Theory of Groups. Cambridge MA: Harvard University Press.
Trantidis, Aris. 2016. Clientelism and Economic Policy: Greece and the Crisis: London and New York: Routledge.