Long live the technocrats!?

Plato would be proud. His idea that philosophers should govern is coming true in Italy and his very own Greece. Even though economists rather than philosophers are in power, economists are today most closely to being the ancient philosophers Plato had in mind. This isn’t at all a biased statement.

The idea itself has its benefits and its flaws. As a non-elected entity, how does this government serve the people? Is the very foundation of democracy at stake if we allow for legitimately elected governments to be replaced by parachuted technocrats? Even if the people have an utmost confidence in these new ‘rulers’ and consider them much more capable of handling the crisis situation, isn’t this necessary an attack on democracy and free choice of the voters? Not necessary.   

The technocratic governments were given legitimacy once approved by Italian and Greek parliaments. The elected members of parliament in both countries agreed upon that a new technocratic leader should step in instead of the current government and resolve the issues facing both countries. The opposition didn’t acclaim themselves as the saviours, rather they were bold enough to offer a third choice, as long as the current government, incapable of reform, is removed from office.

Picture the current technocratic government as a central bank committee. It has the legitimacy given to them by the parliament and yet it has the independence it needs to run the monetary policy (or in this case the economy) without fulfilling political goals such as debt monetization (no matter how strong the political establishment is advocating this goal currently in the eurozone). If the system allows the technocrat experts to handle a delicate and complex issue such as the monetary system, who is to say they wouldn’t do a good job in handling a much less complex issue such as the budget allocation and distribution.

There is danger to the technocratic government. Even an economist fully aware of all the negative effects of resource wastefulness cannot escape the influence of lobbyists and traps set by lawmakers. Sometimes political sense and deep understanding and knowledge of the political process are needed to avoid negative influence of outsiders. And who is to say the technocrats themselves won’t become prone to corruption and overcome with power at one point during their reign? 

There is a reason why this is unlikely to happen. The parliament is supposed to keep an eye on the technocrats therefore creating an incentive for them to do a good job in office. If Monti or Papademos start behaving badly and misusing their influence they will lose the support of all the parties in parliament needed to keep them in office. Politicians are able get away with this since they do tend to have a majority in parliament that enables them to very often misuse their power and act pompously. A technocrat has too much constrains to do so. However, these constraints might encourage him to do a good job once in office.

Italy 10-year bond yield. Source: Bloomberg

Greece 10-year bond yield. Source: Bloomberg

The markets are still sceptical though, and after an initial positive reaction the uncertainty remains rather high, which is pretty much expected. The situation in these countries is still the same and due to the fact that the new PMs are relatively unknown outside their nations, confidence will increase only after they start fulfilling their programs and ideas on how to save their respectful economies. This is when the markets will react, either positively or negatively, depending on how successful the technocrats turn out to be. Let’s just hope it’s not all in vein and that the euro stays together long enough to give them a chance to succeed. Personally, I am very much interested in how this experiment turns out.

I support the technocratic governments, and despite all the issues such a move might raise for civil liberties and the democratic process, unless such a government turns into an authoritarian regime (which is highly unlikely as technocrats are not capable to uphold such authority), it might well turn out to be better than anything experienced so far, at least in Italy and Greece.