Government of the technocrats, by the technocrats, for the technocrats

Democracy must not be regarded as merely an optional extra when solving economic problems.

Greece and Italy now have new Prime Ministers. Neither of them have had to endure the indignity of actually standing for election. New Italian PM, Mario Monti, is a former European commissioner and an economist. Lucas Papademos, the new Greek Prime Minister, is a former Governor of the Bank of Greece (there is a great irony in a central banker being imposed as Prime Minister following a debt crisis fuelled by poor central bank decisions and a collapse of the banking system).

The European debt crisis has been almost as damaging for democracy as it has been for the economies of the Eurozone. In Greece and Italy, democratic legitimacy is clearly regarded as an unaffordable luxury.

If democratically elected leaders do not satisfy the markets, the IMF and the European Commission, they are now, in effect, summarily dismissed, without any reference to the wishes of the people. The unsubtle message coming out of Greece and Brussels is that international bodies believe that democratic governments have failed to tackle the economic crisis and should be replaced with more reliable (and controllable) technocratic governments.

Rule by technocrats has replaced rule by the people - with unelected, economically orthodox international bodies like the European Commission and the IMF working with unelected technocrats now heading up national governments to implement tough austerity measures that have never received public backing. The democratic deficit at the heart of Europe has become a democratic chasm.

The events of the past week are immensely important. For the first time in a generation, European countries are now headed by individuals who have had no popular endorsement at the ballot box. It is difficult to see why the people of Greece and Italy should see their new governments as representing their wishes when they have been imposed from above.

If people no longer see their Governments as being democratically legitimate and no longer see the ballot box as a legitimate way to express their grievance, they may be more likely to consider other ways to express that grievance. This is particularly dangerous at a time of painful austerity and falling living standards. Technocracy will have no answers for growing popular discontent.

The growing power of international bodies has steadily diminished democracy. Rule by place men has gradually replaced rule by democratically elected individuals who have been elected and can be removed. To an extent, the imposition of technocrats on Italy and Greece is the apotheosis of the technocratic concept that runs through bodies such as the IMF and European Commission

Indeed, Tony Benn famously warned of this threat in a mighty speech during the Maastricht debate, pointing out that, to a democrat, a good King is never better than a bad Parliament. He said:

We are discussing whether the... people are to be allowed to elect those who make the laws under the which they are governed... Secondly, we say to my favourite friends, the Chartists and suffragettes, "All your struggles to get control of the ballot box were a waste of time. We shall be run in future by a few white persons, as in 1832."

Government of the technocrats, by the technocrats, and for the technocrats is hugely undesirable and, by its very nature, bad for democratic legitimacy. It is not a long-term solution and should not have been considered as a short-term one. Democracy must not be regarded as merely an optional extra when solving economic problems.

If politicians do not bring their people with them, they risk creating extreme alienation and discontent. If politicians do not trust the people, why should the people trust their politicians? When they are working to solve the economic crisis engulfing Europe, the continent's leaders must be very careful that they don't create a new crisis of political legitimacy, which will have even more serious long-term consequences.

David Skelton is Deputy Director on Policy Exchange, an independent think tank. You can follow him on Twitter @djskelton

David Skelton is the director of Renewal, a new campaign group aiming to broaden the appeal of the Conservative Party to working class and ethnic minority voters. @djskelton

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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.