Thursday, October 09, 2008

Europe view column #102: Moral Authority


Moral authority, needed and absent
Oct 9th 2008

Aiming low is no longer enough

WHEN communism collapsed, the West had all the cards. The one-party state and the planned economy hadn’t worked. Welfare capitalism, free media, the rule of law and contestable elections were winners both in theory and in practice. Memories of cold-war compromises and blunders, real or imagined, were either fading or appeared forgivable.

Even better, Western economies were mostly in good shape: West Germany could afford to take on the colossal bill for rebuilding the former Soviet-occupied zone in the east. Raising capital for the European Bank for Reconstruction and Development was a doddle. Things got even better: as liquidity swirled round the world’s capital markets, investment poured into the ex-communist economies. Russia received bail-out after bail-out, most spectacularly before the financial crash in 1998. In return the West laid down conditions: convertible currency, free trade, balanced budgets, privatisation.

How different that looks now. First, the West has shredded its moral authority as the arbiter of the international order. Admittedly, taken case by case, each decision looks defensible. NATO expansion reflected the wishes of countries that even then felt menaced by Russia. Bombing Serbia was necessary to stop genocide in Kosovo. Invading Afghanistan toppled the Taliban. Attacking Iraq was, on the evidence presented at the time, arguably better than doing nothing. And so on.

But the cumulative effect is terrible, chiefly because it looks so selective. When the West worries about oil, weapons of mass destruction, or terrorism, it finds a high-sounding excuse to do what it wants. When it can’t be bothered to intervene (Darfur, Zimbabwe, Burma) or has useful but nasty allies (Saudi Arabia, Uzbekistan) it pleads realpolitik. That characterisation is unfair, but many people, particularly in Russia, find it all too convincing.

All that was bad enough. But the financial crisis adds a new and corrosive element. The West has no money to play geopolitics with, as Iceland’s meltdown and panicky approach to Russia shows. Worse, Western leaders’ management of economics is discredited at home and abroad. Jobs and savings are buffeted by the aftershocks of a collapse in a model that was supposedly what everyone in the ex-communist world was meant to follow. Who and what are we meant to believe in now?

In particular, many will be wondering whether their integration into the international economy was a good idea. Selling banks to foreign owners once looked like a panacea: stoking confidence and removing the temptation for politicians to meddle. Now it looks like a curse. You can ask your own taxpayers to bail out the nation’s savings (if they can afford it). You can even print more money if you need, stealing a little bit from everyone. When your country’s financial system is owned by foreigners, those choices narrow.

Don’t forget, though, that free markets, like open politics, have done a good job in eastern Europe, lifting millions of people out of the poverty caused by communism (the statistics don’t show this as clearly as they might, because they hugely overestimate the value of what planned economies produced). And autarkic models of development have huge flaws too. Russia may have a huge cash pile, but its record on modernisation of infrastructure and public services, let alone on corruption, is hardly an advertisement for putinomics.

The best response from the ex-communist world to the crisis now is not to turn the clock back, but to rekindle enthusiasm for making economic and politics better: cleaner, clearer and crunchier. The lazy attitude of the past few years has been to match the lowest standards in the West, rather than strive to beat the best. That will no longer do.


Liz said...

This approach, with which I totally agree, deserves to be disseminated and discussed more widely here in Poland. It seems to me that it has not only been a case of "matching the lowest standards" but also of abrogating responsibility and allowing these standards to be imposed willy-nilly. Is there any chance of your writing a Poland-directed and more specific article for the Polish press (Gazeta Wyborcza?). In the past most of your pieces have sparked some interest. Perhaps there are some economists and politicians who have not become so soured that they cannot rise to the challenge. This country is going to need to think things out for itself pretty fast anyway.

Liz said...

Sorry. I meant "abdicating responsibility"

Edward Lucas said...

Hi Liz, thanks for your comments. I am shortly to start a column in a Polish weekly so maybe I will make this the subject of my opening salvo best