Our Glorious Leaders

Why vote? Does anyone trust these people that rule our world? They have made a bloody mess of things. The economy is in turmoil, again. But still these people cannot learn from their mistakes. It is pretty well established now that the problem is debt. As you are well aware, the world’s economies have been borrowing large amounts from each other to finance economic growth. Governments have borrowed to fund public spending on new state industry, infrastructure, administration, research and grand events. Banks have borrowed vast amounts from each other to finance their investments and lend on to other companies and entrepreneurs. Although this has contributed to much growth in the short term, quite visibly, it is not sustainable.

Many countries now owe more money than they produce in a whole year. Excessive borrowing and reckless lending in the banking sector thrust us into recession in 2008. Governments had to step in and spend vast amounts in order to rescue them. Countries have since been on debt reduction schemes to lower their account deficits and each and every household in our country has been forced to make cutbacks. I know mine has. But are you one of these people with a huge credit card bill? Are you a bank manager responsible for giving your team lots of money to play with and even more money as an incentive to play recklessly with it? Are you the government minister allowing this all to happen? Are you responsible for our country’s excessive borrowing and public spending? Most people don’t fall into any of these categories, but we have all been footed the bill.

Clearly there are lessons to be learnt for all. We obviously need more regulation in certain industries. Banking is too essential for our way of life, any credible risk of individuals losing their savings and we would have anarchy. First and foremost however, we need less debt. We need to borrow less money. We need to start living within our means. We are in this mess because we consume and spend more than we produce and save. So, let’s start spending less. The answer seems so simple.

However when people get into power, it becomes beneficial for them politically to prioritise short term goals ahead of the long term, so that people may see the evidence of their success in office. For their employees, it becomes very hard to disagree with these people in power on whom their job depends. Let´s look at how governments have really responded to the debt crisis.

We have a base interest rate in the UK set at 0.5%, an all time low. This discourages saving and encourages borrowing and spending. This strategy increases aggregate demand in the economy for goods and services. But the government is sending out the wrong message and punishing the prudent people who want to invest money in their future, or for their children.

Quantitative Easing still seems to be popular amongst leading economists and those in charge of monetary policy set by our central banking systems. For those that don’t know, the government buys treasury or corporate bonds with money made out of thin air. The idea is that the money created and lent to the banks and companies will be used to fund investment and jobs or can be lent on to more people to spend or invest. This strategy means essentially giving people more money. It may send them on a small spending spree and stimulate the economy temporarily, but if everyone has more pounds in their pocket, prices rise, the pound devalues and no-one really gets any richer. It doesn’t solve the problem.

Heavily indebted nations such as Greece have been forced to accept billions of Euros in bailout money on the taxpayers expense in order to prevent a default and a shock to the Euro currency, compiling more debt on their balance sheets and condemning the countries to poverty and emigration. Yet still we continue in the same direction, borrow and spend. The Keynesian philosophy reigns on.

All politicians have a tendency to overpromise, overspend and underdeliver in the long run. Just look at Obama, announcing a $450 billion dollar “jobs package” a couple of weeks ago with another trademark inspiring speech. It sounds great, payroll tax cuts and tax credits for hiring workers etc. and 450billion is a big number. But where is the money coming from? Surely he must know by now that you can’t just spend your way out of economic crisis. Just this week he announced more tax hikes for the rich to cut the deficit – “We must all pay our fair share.” Another great point, but this is just redistributing wealth, not creating it. The rich people are the people that create the jobs.

So why do our leaders seem so incompetent? Why do they continue to spend all our money and then go on to borrow and spend more money that we don’t even have? – Well, they are only human. And everyone thinks that they know best. The more power you give someone, the more likely they will use that power to do what they think is right for everyone. And when you know what is right, and you have the power to tax people, then you have an incentive and the means to spend more in achieving your goals, to realise your vision of what is right. But the very definition of democracy is that the people are right. We know what is best for us. The government should be our agents to administrate the allocation of resources in the way that we choose, not the other way around.

So why vote? Why indeed! Perhaps we should stop expecting people to get it right. Why give our representatives power if they just abuse it at our expense?

It would be nice not to have to vote for people but to vote for things instead. To have more input in the decisions taken by our leaders to make sure they do what is in our interests and not the interests of their public image or election campaign. Our representatives should work for us as much as practically possible and we should have the power, the power to put forth our own ideas for our representatives to take to parliament, the power to veto their decisions, and the power to sack them if, and as soon as, they begin to act out of line with our views.

Switzerland uses a more direct approach to democracy and each and every citizen can play a much more direct role in decision making. The country is a federal republic consisting of 26 sovereign states called cantons. These cantons are further made up of some 3000 municipalities with their own autonomy. Although remaining a representative democracy, the Swiss people can put almost any law to the vote, if they want. The public must secure a set number of signatures (roughly 1-2% of the electorate) within a minimum time after a law has been publicised. This forces those with executive power to create laws more in line with public opinion as they know that every law will be scrutinised. This means that the power to put laws to the referendum is only rarely used, but the very existence of this power keeps the legislators accountable to the people.

Now obviously, it is possible to get to the point where there is too much democracy and citizens get tired of their voting duties. Some of the referendum challenges can also slow down the political system and delay public projects. However, the effort and reduced speed is a small price to pay for a stable and efficient political system. Switzerland is a multi-ethnic, multilingual and multi-confessional country and their method of balancing power among the regions has kept the country united, their government small and their people free.

Switzerland did not gain its direct democratic structure overnight. It took many democratic movements and experiments, originating in the 19^th century when Switzerland was surrounded by monarchies on the European continent that showed little enthusiasm for democracy. The mentality of the Swiss people is such that they understand the role of central government but remain critical of any large centralisation of power. They believe that citizens and communities should act responsibly and take care of their own affairs. They belong to the Council of Europe and the United Nations, which promote free trade and international peace and justice, but do not belong to the European Union. The country maintains an army and a mandatory national service, but they promote neutrality and were not involved in the world wars.

We can learn a lot from Switzerland. Unlike many of the western nations, their governments do not continue to spend their citizens’ money and plunge the country into bankruptcy. With a population of under 8 million, Switzerland has one of the highest GDP per capita in the world, much higher than many other developed western nations. The Swiss Franc is independently managed by the Swiss National Bank and has remained strong with a low inflation rate. Switzerland’s competitive business landscape, low tax rates and history of neutrality have kept Zurich and Geneva as financial hubs of Europe and given the country a reputation for safe ‘offshore’ banking. They also make great chocolate.