The ongoing irresolution of the fiscal challenge by President Obama and the U.S. Congress suggests to any sober minded person that politics as usual in our adversarial democracy, where different constituencies of the body politic are passionately mobilized against each other, cannot solve the problem.
To do so, we need to return to the ideas of the American Founding Fathers. They sought to design institutions that could forge consensus, unity of purpose and the capacity for addressing long-term problems out of the cacophony of voices and contending interests that democracy by its nature generates.
FAIR BUT SHORT-TERM FIXES
Let's start with where we are now. The half-portion of the cliff deal so far has been Obama's tax hikes on the rich, leaving the Bush-era lower rates for the rest that will lock in an insufficient revenue stream to cover future costs -- even though the whole idea was to start cutting down the long term debt load. Sorting out those cuts and the related "debt ceiling" issue are the looming crisis ahead.
Obama's tax cuts didn't dent America's long-term structural challenge any more than Governor Jerry Brown's tax increases on the rich in California addressed the fundamental dynamics of the state's dysfunction. In fact, by perching the state's budget on a tiny tax base, the Governor has planted the seeds of the next crisis. The top 1 percent will now pay nearly 50 percent of all income taxes, the main source of state revenues. If the Dow dives, revenues will plummet. (To his credit, we must add, Governor Brown has also stated in no uncertain terms that "fiscal responsibility is not the enemy, but the predicate, of democratic governance" and vowed to hold the line on overspending as new revenues come in.)
Yet, in a society edging toward plutocracy, both Obama's and Brown's tax measures are nonetheless the necessary precondition for real reform of those entitlements that propel the burgeoning fiscal crisis at both the federal and state level and suck up resources for investment in the future.
Nationally, the top 1 percent hold 40 percent of all wealth; the bottom 80 percent hold 7 percent. In California, while the top one percent earned 8 pe cent of all income when Brown was governor in the 1970s, today they account for 22 percent.
Rightly so, most Americans are in no mood to make any sacrifice to adjust their promised social benefits on behalf of investment in the future if the plutocrats are left off the hook. At the same time, soaking the rich alone is not going to renew the clogged meridians of mobility and opportunity for most Americans. In the end, a society only works if everyone who shares the benefits also bears the costs.
The tough choices ahead will not only pit the future against the top, but also against the vested interests of the aging middle class.
The central structural challenge across the West is that the actuarial demands of the maturing welfare state and, in the U.S., baby boomers headed toward retirement and infirmity will swamp public finances, leaving little to spare for investment in education, R & D and infrastructure.
In 1975, Medicare, Medicaid and Social Security comprised 25 percent of the federal budget. Yet in the years ahead the number of seniors entitled to these benefits will almost double what it was when Ronald Reagan was president. By 2025, these costs are expected to eat 40 percent of federal spending.
Inevitably, America will also have to shed a good chunk of defense spending and shrink its global military presence.
Further, these mounting costs don't exist in a vacuum, but in an ever more competitive global environment. Germany's chancellor, Angela Merkel, has put the issue squarely for Europe, but it applies to the U.S. as well. Today, she says, Europe accounts for 7 percent of the world's population, 25 percent of global production and 50 percent of social spending. Clearly, as the rise of the rest from China to Turkey to Brazil erode the West's share of global product, it will be ever tougher to maintain the welfare state unless sustainable adjustments are made that tame the rising cost of benefits, but also entail investment and productivity improvements.
VETOCRACY AND DIET-COKE DEMOCRACY
How will our wildly contentious system of governance ever be able to face the facts and make the tough decisions? We can't even effectively regulate Wall Street after a crash that sent us into near depression or ban assault weapons after a massacre of school children.
Unless democracy in the U.S. or, indeed, across the West can find a way to forge consensus, unity of purpose and the determination to resolve long-term challenges, it will end up on the wrong side of history.
Today our industrial democracy, which once invested in the future and financed the safety net, has given way to a consumer democracy in which all the feedback signals -- the media, the market and politics -- steer behavior toward immediate gratification. We've become a Diet-Coke culture in which people seem to want consumption without savings and government without taxes, just as we want sweetness without calories.
The formal mechanism of accountability -- one person, one vote elections -- has also been captured by the ' vetocracy' of special interests, from the gun lobby to the financial lobby to teacher's unions in various states. Over the years they've accreted to the system like barnacles and have the organized clout to protect their spoils and block any threat to the status quo.
Wary of such an outcome, the American Founding Fathers understood that deliberative institutions and practices were necessary to "enlarge the public view." Otherwise, as they rightly feared if today's dysfunction is any measure, the republic would succumb to the tyranny of the voting public's short-term mentality and the vetocracy of organized special interests, which they called "factions."
As we point out in our book, Intelligent Governance for the 21st Century, the Federalist Papers make it clear that the Founding Fathers eschewed the kind of direct rule by citizens practiced in ancient Greece in favor of a mixed constitutional system that combined knowledgeable democracy with accountable meritocracy. They understood that the institutional capacity for sober deliberation beyond the political fray to sort out the trade-offs among contesting interests for the common good is as essential a feature of good governance as one person, one vote elections.
Thus, in their original design, a government rooted in popular sovereignty would delegate authority to an unelected Supreme Court, an indirectly elected Senate (elected then by state legislatures), a selected electoral college to "enlarge the views" of the public in choosing a president and, later, a central bank governed by appointed experts insulated from politics. All were meant to check and balance the immediate passions, factions and constituent interests of the elected House of Representatives.
To correct the present dysfunction, we need not only to revisit the political philosophy of the Founders and place it in the framework of the 21st Century; we also need to engage in the actual institutional design of what a mixed liberal democratic constitutionalism might look like.
ENLARGING THE PUBLIC VIEW
While the world's leading democracy stews in its own gridlock, others are charting innovative paths. Most notable has been the experiment with an unelected technocratic government in Italy. Last year, economist and former European Commissioner Mario Monti was appointed as prime minister by Italy's president to stabilize that country's finances in the eurozone crisis. Having done so successfully in his temporary depoliticized government, Monti has stepped down and declared he will now stand as an elected prime minister -- but only if a centrist coalition that supports his long-term reform agenda can win a majority that allows him to put in place a government of "merit and competence." (In his campaign, Monti pointed out that his unelected government was able to accomplish what Washington has not).
In California, we established an independent, non-partisan group of eminent citizens called the Think Long Committee to hash out long-term reforms to the state's tax code and initiative process outside the political arena and present them to the public for a vote. That group includes labor leaders and advocates for the poor as well as former governors and assembly speakers along with the likes of Google's Eric Schmidt, former Secretary of State George Shultz and the former chief justice of California's Supreme Court.
Among its proposals is the establishment of what journalist Joe Matthews calls "a 3 ½ branch of government" -- a non-partisan body of citizens with experience and expertise appointed by the governor and legislature that would stand between elected officials and the unique direct democracy of California's initiative process. This council would propose long-term solutions to what ails the Golden State. Its deliberated proposals would be submitted as ballot measures for consent by the voters.
Unlike California, where the constitution is regularly amended, the U.S. Constitution is difficult to change -- despite Thomas Jefferson's own view that it should be revamped every generation because "the living, not the dead" should make the rules by which they are governed.
But here too, there is room for innovation. Noting that the bipartisan Congressional "super committee" set up to address the long-term deficit failed because it was made up of elected members of Congress, MIT professor and Nobel laureate Peter Diamond has suggested another approach.
His idea draws on the successful experience of the military base-closing commissions after the wind down of the Cold War. These commissions -- appointed by Congress but made up of independent citizens and experts not beholden to electoral constituencies -- were tasked with shutting down or shrinking military installations, which are prized assets of elected officials everywhere. The commission's recommendations could not be amended, but only voted up or down. This removed the political risk to elected officials who would otherwise lack the resolve to take on their constituents' interests -- and risk their political future -- for the good of the country as a whole. Each recommendation resulted in a base closure.
Diamond now proposes a similar set of "narrowly-targeted commissions" to make the tough choices elected politicians are incapable of making, whether that involves redesigning Social Security, cutting Medicare costs, slimming down the defense budget or figuring which tax expenditures to forego.
The commission proposals would then be subject to an up or down vote in the Congress with no amendments, just like the base-closing recommendations.
EQUAL TO THE FOUNDER'S SPIRIT
Surely, there are many other possible arrangements that introduce depoliticized institutions, temporary governments or commissions that bolster democracy's capacity to "enlarge the public view," forge consensus, unity of purpose and the long-term implementation of sustainable policies.
Its time to update the genius of America's Founding Fathers to fit our present circumstances. If we can't manage to be equal to their spirit, the democracy they so carefully crafted is bound to falter.
Nicolas Berggruen and Nathan Gardels are co-authors of Intelligent Governance for the 21st Century: A Middle Way Between West and East (PolityPress/Wiley, 2013).
BERLIN -- The future of the European Union has never been more in doubt than at the very moment when it is receiving the Nobel Peace Prize for its historical accomplishments.
On December 10, the heads of Europe's collective institutions -- the Commission, the Council and the Parliament -- will collect their prize in Oslo, Norway. But unless these institutions can increase their democratic legitimacy and transform into a real federal union with common fiscal and economic policies to complement the single currency, Europe will remain at the mercy of global financial markets and the fiscal dictates of its strongest state, Germany.
Moving beyond this state of affairs was the focus of a recent "town hall" gathering in Berlin sponsored by the Berggruen Institute on Governance.
The meeting brought together current power brokers -- such as the contending voices of German Finance Minister Wolfgang Schaeuble and French Finance Minister Pierre Moscovici, who rarely appear before the public together -- as well as Europe's top former leaders, key thinkers and young students of government.
The peace-building project of the European Union was born out of the ashes of World War II and the anguish of the Cold War. Yet, as George Soros points out, its current inability to resolve the eurocrisis by forging a greater union is dividing Europe once again, this time between creditors and debtors. Former Greek premier George Papandreou warns that this division is fomenting a new politics of fear that is giving rise to the same kind of xenophobic movements that fueled the extreme politics of Europe in the 20th century.
To avoid a repeat of the last calamitous century, Europe first of all needs a growth strategy both to escape the "debt trap" it is in -- and which austerity alone will only deepen -- and to create breathing space for the tough structural reforms that can make Europe as a whole competitive again in a globalized world. To sustain reform, it needs a clear path to legitimacy for the institutions that must govern a federal Europe.
The proof that Europe can escape its crisis through a combination of growth, fiscal discipline and structural reform comes from the a country many want to keep out of the union: Turkey.
Prime Minister Recep Tayyip Erdogan rightfully boasts of Turkey's accomplishments, which resulted from difficult reforms carried out after an economic crisis in 2001 -- ranging from quickly cleaning up the banks to liberalizing markets to trimming social benefits. As a result, Turkey today is the fastest growing major economy in the world alongside China, with diminished deficit and debt levels that meet eurozone criteria many members states themselves cannot meet. Turkey has even offered a 5 billion euro credit through the IMF for financial aid to Europe.
Germany itself also provides some lessons for the rest of Europe. The obvious reason Germany rules today -- as Tony Blair noted in Berlin -- is because it is the most globally competitive country in the European Union. That is the result of a series of reforms that were implemented starting in 2003 under the leadership of then-chancellor Gerhard Schroeder, who explained his strategy in his Berlin speech.
Aimed a bolstering Germany's industrial base and its collateral small and medium enterprises which are the foundation of its middle class society, Schroeder's reforms introduced more labor flexibility and trimmed benefits to make them sustainably affordable while investing in training, maintaining skills and research and development.
Even if Europe's individual nation states can shrink imbalances by following Turkey and Germany in getting their act together, the only ultimate way to save the euro, and thus Europe itself, is to build the complementary governing institutions at the European level. For those institutions to become effective, they must be empowered and legitimated by European citizens themselves. To this end, Tony Blair has suggested a bold move: the direct election of a European president.
Symbolically, the Oslo ceremonies are an historical turning point for Europe. By recognizing the European Union's peacemaking past, the Nobel Prize challenges Europe to escape once and for all the destructive pull of narrow national interests and passions.
This blog is part of a series on "Europe: Beyond the Crisis," produced by The Huffington Post and the Nicolas Berggruen Institute, tied to the Berggruen Institute on Governance's "town hall" meeting in Berlin last month. For more information on the Berggruen Institute, visit berggruen.org.
BERLIN -- The European Union used to be what psychologists call a "fantastic object," a desirable goal that fires people's imagination. I saw it as the embodiment of an open society -- an association of nations which gave up part of their sovereignty for the common good and formed a union in which no nation would have a dominant position.
The euro crisis is now threatening to turn the European Union into something fundamentally different. The member countries are divided into two classes -- creditors and debtors -- with the creditors in charge. Germany, as the largest and most creditworthy country, occupies a dominant position. As a result of current policies, debtor countries pay substantial risk premiums for financing their debt and this is reflected in their cost of financing in general. This has pushed the debtor countries into depression and put them at a substantial competitive disadvantage that threatens to become permanent.
This is the result not of a deliberate plan but of a series of policy mistakes. Germany did not seek to occupy a dominant position and is reluctant to accept the obligations and liabilities that it entails. I have called this the tragedy of the European Union.
Now, some recent developments give grounds for hope. The authorities are taking steps to correct their mistakes. I have in mind the June summit's decision to form a banking union, and the EU Central Bank's plan for unlimited intervention in government bond markets. Financial markets have been reassured that the euro is here to stay. This could be a turning point if it were reinforced by additional positive steps. Unfortunately, it has merely reinforced German resistance to further concessions.
A distinguishing feature of the tragedy I am talking about is that it feeds on hope. Germany is willing to do the minimum but nothing more to hold the euro together. That is how the eurozone becomes permanently divided between creditors and debtors.
This is such a dismal prospect that it must not be allowed to become reality. There must be a way to avoid it -- after all, history is not predetermined. When the European Union was only an idea, a fantastic object, it was conceived as an instrument of solidarity. Today, Europe hangs together out of grim necessity. That is not conducive to a harmonious partnership. The only way to reverse this seemingly inexorable fate is to recapture the spirit of solidarity.
Since I am a fervent believer in the European Union as the embodiment of an open society, I have set up an Open Society Initiative for Europe -- OSIFE for short -- and I have been looking for ways to achieve this goal.
I realized that the best place to start would be where current policies have created the greatest human suffering. Clearly, that place is Greece. Within Greece, the fate of the many migrants and asylum seekers stuck there particularly resonated with me. Clearly, their plight cannot be separated from that of the Greeks themselves. An initiative confined to migrants would reinforce the hostility they face from some in the majority.
The problem seemed intractable, and I couldn't figure out how to approach it. But I was in Stockholm recently to commemorate the centenary of Raoul Wallenberg's birth. This reawakened my memories of the Second World War -- the calamity that eventually gave birth to the European Union.
Wallenberg was a heroic figure who saved the lives of many Jews by establishing Swedish protected houses in Budapest. During the German occupation of Hungary, my father was also a heroic figure. He helped to save his family and friends and others. He taught me to confront harsh reality rather than to passively submit to it.
That is what gave me the idea. We could set up solidarity houses in Greece which could serve as community centers for the local population where migrants could also find food and shelter. There are already many efforts under way, and civil society is already heavily engaged, but the scale of the problem is overwhelming. I am talking about reinforcing existing efforts.
The asylum policy of the European Union has broken down. Refugees have to apply in the country where they enter the EU, but the Greek government cannot process the cases, and some 60,000 refugees who sought to register have been put into detention camps where conditions are inhumane. Migrants who avoid registering and live in the streets are attacked by the hooligans of the Golden Dawn.
Norway has expressed an interest in the fate of refugees in Greece and within the European Union. Sweden has made migration and asylum policy a priority. So Norway and Sweden are the primary candidates for supporting solidarity houses. Hopefully they would be joined by Germany and other member countries.
Currently, the Golden Dawn is providing social services to Greeks while attacking the migrants. The initiative I propose would offer a positive alternative. It would be based on solidarity -- solidarity of Europeans with Greeks and Greeks with migrants. This would be a powerful demonstration of the spirit of solidarity that ought to infuse the European Union.
George Soros is an American financier and philanthropist. The following remarks have been adapted from a talk he gave at the Berggruen Institute for Governance "town hall" meeting in Berlin last month.
This blog is part of a series on "Europe: Beyond the Crisis," produced by The Huffington Post and the Berggruen Institute. For more information on the Berggruen Institute on Governance, visit berggruen.org.
BERLIN -- To those who were surprised that the European Union received the Nobel Peace Prize, I say: "Think twice." This was not only a deserved award for Europe's contribution to bringing peace and stabilizing democracies in the recent past -- the Nobel Committee was also sending a clear warning to contemporary leaders. I could almost hear them saying: "On this difficult odyssey, don't abandon ship. In today's world, the EU is too valuable to squander."
It was an indirect but powerful rebuttal to the dangerous nationalist and populist rhetoric some politicians have adopted when describing the recent financial crisis.
This message couldn't have come at a better time.
Like ghosts from the past, we see political violence, xenophobia, migrants being scapegoated and extreme nationalism creeping into our public debates -- even into our parliaments. This is a Europe diverging from its founding principles. Principles that rendered nationalistic hatreds an anathema.
But it is these politics of fear that seem to have incapacitated Europe. A Europe seemingly incapable of ending this crisis, a fractious Europe. This has undermined a sense of trust between us and in our European institutions. This climate does not inspire confidence either in our citizens or the markets. Nor will our retreat into a renationalization of Europe be the solution.
My recent experience in dealing with the financial crisis in Greece and in Europe has confirmed my belief that this is a political crisis more than a financial one.
I am convinced that, with the political will, we could have avoided much pain, squelched market fears and stabilized the euro, while at the same time reformed ailing, unsustainable economies such as ours in Greece.
Despite media hype to the contrary, it is the Greek people who first and foremost have wanted this change.
Instead, we allowed fear and mistrust to overcome us. And fear begets more fear and uncertainty.
Instead of understanding, we have name-calling.
Instead of collective, transparent action by our institutions, we have moved into a mode where the community method is undermined by makeshift intergovernmental decision-making, with the balance of power tipping dangerously towards the very large member states.
Instead of real, necessary reform and fiscal responsibility, we are implementing an overdose of austerity -- dealing more with symptoms and less with the root causes of the economic woes of Europe.
Instead of rewarding superhuman efforts, we are condemned for our shortcomings.
More than anything else, it has been this political climate that has undermined our common efforts to deal with today's financial crisis.
Whether it is banks or governments, we have adopted a passive, almost defeatist, attitude, which we cloak in the language of "caution and responsibility."
It is our responsibility to break this cycle of fear and mistrust now. We are vastly underestimating our own capacities as a union. Our capacity to calm markets or create jobs. We again need to believe in the great capacity of our peoples north and south, west and east. We must rekindle the spirit that united us in 1989 when the Berlin Wall fell. We know the difficulties we then faced. But we did not cower. We decided to invest in the potential Europe and our peoples had. And there is so much hidden or untapped potential in our youth, our experience, our diversity and our cultures.
But this not simply an issue of political will. We must combine this will with an understanding of our real weaknesses. Over the decades we have become more and more interdependent in Europe. This was not by chance, this was by design -- from the days of Monnet and Schuman. It is this interdependence that has made the wars of the past unthinkable.
But if interdependence is important to keep the peace, it is not enough to make us effective, adaptive, powerful on the global scene. Neither does interdependence guarantee the democratic empowerment of our citizens and the liberation of our peoples' potential.
In fact, this interdependence today is seen by many as a straight jacket, hindering us rather than giving us the capacity to deal with new global challenges.
The debate about the breakup of the euro, or even euro-exits, is a case in point.
Our citizens, therefore, wonder whether this European structure is still useful or if we should go our own separate, independent ways. As in The Odyssey, the sirens are beckoning that we change course. However sweet their song, we know their purpose is that we crash on the shallow rocks. If we are to avoid these rocks, we need to radically rethink our governance structures and policy responses so that we capitalize on our strengths and neutralize our weaknesses.
Three fundamental principles must underpin a more progressive Europe.
First, we must strengthen Europe's institutional capacity. Priority today must be in the financial-economic sphere. The eurozone is the world's largest economy, the euro is the world's second reserve currency and on aggregate we have strong economic fundamentals; but we are not able to leverage our strengths due to weak or missing institutions. Despite significant progress such as:
- More robust fiscal monitoring;
- The European Stability Mechanism;
- The Six-Pack to strengthen governance and oversight; and
- A broader mandate for the European Central Bank, with the recent introduction of Outright
Monetary Transactions, we must go one step further.
We have already pooled our risks, now we must pool our strengths. Eurobonds and a federal banking union are vital tools to safeguard the EU from similar crises and set our economy on a more stable footing.
Second, we need to liberate and reenergize Europe's human capacity. High unemployment needs to be offset by investment in our human capital, education, research, green growth and the necessary infrastructure for green energy and a knowledge society. In our race towards competitiveness, we are emulating models that have little to do with our traditions. In many emerging markets, a lack of collective bargaining and democratic accountability, low wages, substandard working conditions and denigration of the environment combined with tax havens (which have robbed countries of huge revenues -- up to 11 billion euros per year in Greece alone) may offer a temporary comparative advantage. But in seeking growth, we cannot race to the bottom. We must base our competitiveness on quality, not inequality.
Third, we must strengthen our democratic capacity. We need innovative democratic institutions that will empower our citizens and strengthen the legitimacy of our decisions.
The EU's complex decision-making process has been an outcome of a delicate historical balance between member states. Today, however, people feel they are sidelined by these decisions. In trying to confront its fiscal deficit, Europe has run up a democratic deficit.
As we take the next steps towards European integration, we must give ownership of this process to the people. Policies imposed on citizens without their active consent are doomed to fail. Already, a frustrated, educated but unemployed younger generation is losing faith in our European institutions and values.
This vacuum has created fertile ground for populism and extremism. When our citizens feel disempowered, they will turn to saviors or target scapegoats as they do not participate through dialogue and responsible deliberation to understand and solve common problems.
Europe can regain the confidence of the markets, but first we must regain the confidence of our citizens. That is why I called for a referendum in Greece, so that people could debate and decide on their own future.
There is nothing wrong with European countries ceding sovereignty in the interest of creating a stronger Europe. (Indeed, they already have.) But as we do so, we need to rethink how our representatives in the Union are elected and how decisions are made. An EU president, elected by a European Parliament (or even a directly elected president), European-wide referenda, forms of more direct citizen participation and the use of social media are ideas already ripe to explore.
This new Europe, as I see it, will not be the product of one grandiose decision, dictated by an elite minority of powerful nations or some anonymous bureaucrats in Brussels. Small, incremental but complementary steps -- made by each of us individually and all of us together -- will build the values and the foundations for the Europe that we want.
Democracy and education will give new capacity to our citizens and that, in the end, will empower Europe and reinforce its legitimacy in our societies and around the world.
We do have a choice. Either we empower Europe and its citizens and become a catalyst for humanizing our global economy, or globalization will dehumanize our societies and undermine the
European project. As a citizen of Europe, I vote for the first choice.
George Papandreou is the former prime minister of Greece. His remarks are adapted from a roundtable discussion at the Berggruen Institute of Governance recent "town hall" meeting in Berlin.
This blog is part of a series on "Europe: Beyond the Crisis," produced by The Huffington Post and the Berggruen Institute. For more information on the Berggruen Institute on Governance, visit berggruen.org.
BERLIN -- Until recently, Turkey was a country that had to borrow from the IMF. But positive developments over the last ten years have led Turkey to become a country that now lends to the IMF, instead.
Our ability to do this is a result of policies of fiscal discipline we have implemented since our own crisis in 2001. In the past, we had debts to the IMF of $20 billion. Now that is down to $1.7 billion. Our central bank has reserves of $115 billion.
The crisis we have gone through was similar to what the EU is experiencing now. Many banks went bankrupt. People's savings disappeared. Companies closed down. The Turkish economy shrank drastically.
That crisis was a very important lesson for us. Since 2002, our government has pursued a strategy of growth along with fiscal discipline -- which is why we've reach the level we are at today.
In order not to go through a crisis like the one in 2001 again, we have also carried out structural reforms -- ranging from timely and decisive banking reform to changes in health care and social services -- that not only strengthened the Turkish economy but also increased the confidence of the Turkish people in their government.
As a result, Turkey has climbed to the rank of the world's 16th largest economy. Last year our economy grew at 8.5 percent -- one of the fastest rates in the world. By comparison, Europe only grew by 1.5 percent last year. Over the last nine months there was no growth at all in Europe taken as a whole, with GDP actually shrinking in some places.
In Europe in general, public borrowing in annual budgets has grown to 4.5 percent of GDP, while in Turkey it has fallen to 1.7 percent.
All of these indicators point to the fact that Turkey would actually fulfill the Maastricht criteria for entry into the eurozone, unlike many present member states. (For example, the Maastricht Treaty stipulates that a country's debt should not be exceed 60 percent of GDP and borrowing in annual budgets no more than 3 percent of GDP.]
The success and resilience of Turkey today is due to the structural reforms we have undertaken since 2002 and because we have stuck to a sensible fiscal and budgetary policy with the proper discipline.
Of course, none of this was easy. The austerity policies were very hard to implement.
In light of the current troubles in Europe, we learned one very important lesson as we implemented these tough reforms: The people need to be able to trust those who govern them and not feel that their interests are being betrayed. Without that trust, we would not have been able to make the very difficult readjustments in our social security system.
For all these reasons, Turkey today is strong and resilient. But there is more to be done to improve our performance and build proactively on this foundation.
We have just finalized our planning for the future and are taking the next steps. By 2023, we want Turkey to be one of the top ten economic areas of the world. In the last ten years we managed to increase the per capita income threefold. Over the next 15 years we want to increase per capita income from $10,5000 to $25,000. That would require a growth rate of 5.2 percent over the next five years.
Recep Tayyip Erdogan is the prime minister of Turkey. His remarks are excerpted from a recent speech to the Berggruen Institute on Governance in Berlin.
This blog is part of a series on "Europe: Beyond the Crisis," produced by The Huffington Post and the Berggruen Institute. For more information on the Berggruen Institute on Governance, visit berggruen.org.
BERLIN -- Traditionally, Great Britain has held a position between the European Union and the United States. This position is also expressed in economic and fiscal policy.
Great Britain's leadership continues to believe that the economic future of Europe lies in services and finance. Germany's position has always been -- regardless of the party in power -- that national economic success in the long term depends on a competitive industrial base, with medium-size enterprises alongside the service sector pillar.
When I was chancellor, my nickname was "the car chancellor." I was rather honored by that because we always promoted manufacturing and understood the number of jobs associated with the well-paying auto production and the supply chain that feeds it.
All parties in Germany support the policy of keeping well-trained people on the job, even when there is a business cycle downturn, in order to maintain the skill base required to pick up production when the cycle turns again.
This is far better than having workers out in the street supported by state welfare.
As a result, manufacturing in Germany presently accounts for about 24 per cent of GDP -- compared to 16 percent in Great Britain and only 12 percent in France.
If you compare the economic situation in these countries, you will rapidly realize the success of the German approach. When you look at the global division of labor, it is easy to see that Germany's policies have given it a clear competitive advantage. We need to reinforce this advantage rather than watering it down.
There are further differences as well between Germany and the Anglo-Saxon world. These differences are seen most clearly when we compare the American and British approach to transparency and regulation of financial markets to that of continental Europe. In continental Europe, greater transparency and regulation has been high on the agenda, while Wall St. and the city have led the Americans and British to resist further moves. When we tried to get this on the international agenda at the G-8, we were blocked by the U.S. and the UK.. The G-20 agreed to more transparency and regulation, but implementation has been a failure ever since.
The question for us is whether democratic politics will win out over the power of financial markets. Who will win the day is unclear in this battle, but the division between the Anglo-Saxon world and Germany is very clear.
Given recent statements by the British prime minister, it looks like this divide will not be overcome in the short term.
This division with Great Britain extends to the future of the European Union. We can't point fingers of blame because everyone has their reasons.
But we need to be clear about the consequences.
Therefore, in the future we will have a Europe of "two speeds." A core Europe that grows together more quickly politically and a fringe Europe in favor of greater autonomy.
Those like Great Britain who want to stop European integration should not be able to decide on the fate of those who do want to forge ahead. The unwilling should not be able to put a brake on the willing.
I am convinced, however, that the countries which do not wish to be part of a greater European integration will lag behind politically and economically.
Europe is at a crossroads. The wider European Union needs to decide whether to promote growth, speak with a common voice on global issues and play a significant global role in the 21st century -- or to accept that the world will move on without Europe.
Gerhard Schroeder is the former Social Democratic chancellor of Germany. His remarks are adapted from a roundtable discussion at the Berggruen Institute of Governance recent "town hall" meeting in Berlin.
BERLIN -- From crisis can come opportunity. Out of this European crisis can come the opportunity, finally, to achieve a model of European integration that is sustainable. But right now this opportunity is heavily disguised. There is an old joke told about the stranger who asks the Irishman the way to his destination and is told "Well, I wouldn't have started from here."
We might be tempted to say the same about the way to resolve this crisis, and it would be equally futile. So I shall resist the irritating temptation of being the Brit outside the euro trying to tell everyone inside why it was a bad idea. First, because I don't think it is a bad idea. In principle, in the right political and economic context, a single currency along with a single market makes sense for Europe. Second, because in any event, we are where we are.
There is relevance, however, in understanding why this crisis is so acute. It is because monetary union was, in many ways, an idea motivated by politics but expressed in economics. So politics and economics had to be aligned. They weren't. So now, in the midst of crisis, they have to be. Countries whose economies are divergent have to converge. Since this requires a huge degree of integration in decision making, the politics will then have to shift to catch up to the economics. True economic union will imply a large measure of political union. This is the post-crisis challenge.
One odd but telling difference of opinion between Europeans and those from the investment community in the U.S., China and elsewhere is that the Europeans by and large believe the euro will stay. That is because they are focused on the enormous political will to ensure it survives. The outsiders by and large are deeply skeptical. That is because they are focused on the math.
The strategy so far adopted in Europe by political leaders, including by Chancellor Merkel, who has shown great skill and courage in handling the crisis, is entirely comprehensible as politics. It is to go step by step by a series of increments that are major, but do not deal with all the aspects of the crisis simultaneously. So the European Central Bank action and readiness to buy bonds on the secondary market has hugely helped the liquidity issue and given us some respite.
But it doesn't fully deal with the solvency or growth issues that also dog the euro. The European Stability Mechanism is still untested and, whilst deficit reduction plans are absolutely necessary, austerity makes policies for growth tough. Indeed, sometimes it seems as if the public is being given the choice of austerity with reform or growth without reform. We need growth and reform. And we need liquidity, solvency and growth issues addressed together. Without this, and especially without growth, the pain of the adjustment in debtor countries is frighteningly hard and several years of it may not be politically possible. This is again where politics and economics have to align.
The economics imply a strategy based less on incremental steps and more on a "grand bargain" agreement that deals with liquidity per the ECB: solvency with the necessary fiscal transfers, banking union, a large degree of fiscal coordination, far-reaching structural reform and the back loading, not front loading, of austerity plans, to protect growth -- and all at once. My feeling is that the only way, ultimately, confidence can be restored is with a fully comprehensive set of measures that convince markets and the public alike that the fundamental issues have been overcome. The politics of doing so -- particularly in Germany -- are fantastically difficult. But the economics of not doing so are even more difficult.
That is the immediate challenge. If it is overcome, then the politics of what comes next is also extraordinarily fraught.
Put simply, there can't be the integration of large areas of economic policy -- banking union, fiscal union, even the prospect of an EU Treasury -- without a commensurate political union. So, inevitably now, along with the resolution of the immediate crisis, comes the investigation of what such a union would look like.
We should conduct this investigation with the lessons of previous efforts at integration in mind. There are two crucial strategic objectives which any negotiation for such a political union should strive to achieve.
First, some differentiation in the speed of European integration is now inevitable as members of the eurozone seek to match political structures with integrated economic decision-making. However, this is done is of huge import to the whole of the EU. I can almost feel the relief in some euro-federalist quarters and amongst most euro-sceptics at the prospect of a two or three speed Europe. But I would give a stark warning: if eurozone structures end up with a Europe that is fundamentally divided politically as well as economically, rather than a Europe with one political settlement that accommodates different levels of integration within it, the EU as we know it will be on a path to break up.
Let's be blunt here and go straight to the UK position. It is massively in Britain's interest not to play short-term politics with this issue. Personally, I would like to see the UK take a constructive role in shaping this new union, recognizing the imperative of closer political union for the eurozone countries and trying to keep the necessary divergence in economic decision-making between ins and out, from spilling over into a complete divergence in political structures. It is a very tricky task. But it is an essential one if the UK is not to be side-lined and Europe to be without the active participation of such a large and significant member of the existing union.
The negotiations over the proposed banking union and possibly over the new EU budget will provide an interesting test case of whether such constructive engagement can yield an optimal outcome. But naturally the UK will expect this to be a two-way process. The rest of the EU will have to understand and hopefully accommodate the UK's very special position in the financial sector.
Secondly, we should be heedful of why, when monetary union came into being, structures of full scale political integration were not agreed. They were proposed, by the way. They just weren't agreed. And the reason still has validity as a sentiment today. Greater political integration is indeed inevitable. But any new political union has to balance more carefully than ever before the nation state and EU integration.
This is the hardy perennial of debates over European political union. But now the union proposed for economic decision-making reaches right into the heart of decisions normally reserved for national governments and parliaments. Though the British are often standard bearers of the nation state side of this debate, it is clear many march behind that standard. There is a reason for the referendum results in France and the Netherlands in 2005 and it wasn't just domestic politics overshadowing a European decision.
This has always been the dilemma facing the politics of the EU. People feel far closer to national governments and parliaments. In the minds of the people, there is no plainly unified, homogeneous polity in the way there is, for example, in the USA. Yet as Europe integrates, there opens up a democratic deficit -- namely the gap between the importance of the European-wide decisions and the accountability of the European institutions making them. Hence there is the drive toward more Europe-wide democracy at present formulated in extra powers for the European Parliament.
Here is the dilemma. Though in theory, as Europe integrates, people should demand more Europe-wide democracy, in practice, because they still feel a far closer affinity to national democracy, they don't. The Europe political elite does. But the people often don't. The danger is that the more we talk of "bringing Europe closer to the people," the more "the people" feel alienated from it.
The dilemma is deepened by another factor. As the EU has grown in numbers and as the complexity of decisions necessary for things like the single market has intensified, so, for reasons of efficacy, Europe needs to have institutions that can rise above any one individual national interest. It is why, despite UK objections, more majority voting in some areas can be justified, is even essential to make Europe work. Without it, we can get paralysis when we need movement.
On the other hand, take an area like a common defense policy -- launched by the UK and France in 1998. Here there was acceptance that it should be done at a Europe Council level rather than through the Commission.
So designing this new union will be very difficult. Let me make a few quick reflections. A Europe-wide election for the presidency of the Commission or Council is the most direct way to involve the public. An election for a big post held by one person -- this people can understand. The problem with the European Parliament is that, though clearly democratically elected, my experience is people don't feel close to their representatives. This could change, but only if the European Parliament and National parliaments interact far more closely.
Relegating the European Council, which represents the nation states, to a side show would be a mistake. Even eurozone members will look to their own governments first. But there are a myriad of ways of making the Council more open and its relationship with the Commission more transparent. There could even be more explicit links between the European Parliament and the Council.
We should also ask what political union really means. It doesn't mean simply a set of institutional common bonds. It means, also, that in the minds of the people of Europe, there is a close connection between them. This can't be legislated for. It has to be nurtured culturally and socially, as well as politically.
One thing I am certain of: Europe will mean more to people and be supported more by them if Europe refocuses on practical issues that improve their lives in tangible ways. They understand the need for European action on jobs, on trade, on making the financial sector work for their interests -- not against them -- on common energy policy, a common struggle against illegal immigration and organized crime, even on common defense in a world of increasing security risks and declining defense budgets.
I think they could be persuaded to understand the sense of common cooperation on higher education, on science and research on a much bigger scale than present efforts, and likewise with art and culture. If this were combined with a sensible push for subsidiarity -- relegating only those tasks to the center that the nation states themselves can't do -- this could amount to a package that would work.
So the balance will need to be struck. If not, then the whole project risks failure. I can't see any new political settlement being acceptable without direct popular consent through referendums.
So imagine this scenario. Suppose we find the will finally to resolve the eurozone crisis. Suppose we agree the major future steps of integration for European economic decisions as part of that resolution. Suppose we then push forward to a new framework of political union as a necessary part of economic integration. At this point, we need to be reasonably confident the political union will gain consent. Otherwise we will find ourselves with referendums lost and back in crisis -- this time with no clear way out.
One final point amidst all this anxiety about crisis. Despite the present doubts and crisis, we should recognize that the underlying, profound rationale for Europe and its union is stronger than ever.
Ultra euro-skeptics -- by which I mean those essentially in opposition to the whole Europe project -- are on the wrong side of history. The 21st century case for Europe is based not on war or peace but on power, or irrelevance.
A 21st century with China and India that in time, as GDP and population size realign, will become vast economic and political powers, with Brazil and Russia behind, a country like Indonesia with a population three times that of Germany and nations like Mexico, Pakistan, Nigeria and Vietnam all bigger than any European nation. In this new 21st century geopolitics, Europe carries weight, multiplies opportunity and makes sense for its individual nations.
In its essence Europe is the right idea, at the right moment of time and in the right geographical space between East and West.
Tony Blair is the former Prime Minister of Britain. His remarks are adapted from a roundtable discussion at the Berggruen Institute of Governance recent "town hall" meeting in Berlin.
The following themes emerged from a brainstorming session on governance and social media held by the Nicolas Berggruen Institute in Palo Alto on March 4, 2012. Participants included, among others, Jared Cohen of Google Ideas, Microsoft strategist Charles Songhust, Transparent Society author David Brin, Singapore's foreign minister George Yeo, MIT Media Lab director Joichi Ito; eBay founder Pierre Omidyar, political scientist Francis Fukuyama and Alec Ross, the US State Department's top digital diplomat.
1. THE DESTRUCTIVE PHASE: DISRUPTIVE TECHNOLOGIES AND 'CRISES OF PROGRESS'
Disruptive technologies that "augment vision, memory and attention" -- from the printing press to the world wide web -- always produce 'crises of progress' because they undermine the "protective guilds," intermediaries and institutions that once controlled information and power.
The vested interests of those institutions resist the loss of control while the insurgents persist. The first phase of change is therefore usually conflictive and destructive -- witness the religious wars in Europe after the Guttenberg press. The forces in this phase are centrifugal -- pulling apart and fragmenting.
In our age, the advent of social networks and the transparency of shared networks challenge all hierarchies from monopoly of the mainstream media to professional knowledge protected by credentials, such as doctors, to dictators protected by force.
This unmediated spread of information has given birth both to "the age of the amateur" and the passionate populists of the blog mobs. But the breakdown of intermediaries and the control of information by the credentialed has also given birth to the "unknown expert" whose "10,000 hours" of work and practice is all the qualification required. This breakdown is what has also enabled the leaps of innovation coming from "the dorm rooms and edges" of society.
Systems that adapt to the new transparency, or harness it, can survive. Those that resist will ultimately lose trust, and thus allegiance, and fail.
The rigid, such as the autocrats in Egypt and Tunisia, are brittle and break. The more flexible, such as the medical profession, which have turned patient information websites to their advantage, thrive.
Somewhere in between, autocratic China is headed in two directions at once: a "hyper-surveillance state" that seeks "total information awareness" of the activities of its subjects, yet a state itself subject to the "sous-veillance" of the microblogging population in a kind of "monitory webocracy."
In this sense, China is a "gigantic petri dish" of what comes next. The balance could go either way. To some the monitory webocracy of microblogs helps solve the age old problem of "insufficient feedback to the emperor," which has led to the fall of many an out of touch dynasty.
The hierarchical meritocracy of China is an efficient system, but fails ultimately without feedback loops that provide reliable information, clogging the meridians of the body politic. Social media can become an organic part of the Chinese body politic and thus improve good governance.
Others, like the dissident artist Ai Wei Wei, see a state that always wants to know where you are, what you do and who you talk to in order to be able to "crush" you at will.
2. THE CREATIVE PHASE: BUILDING NEW INSTITUTIONS
a. If social networks can erode trust with tweets, undermine authority and tear down institutions, what might be their role in reconstruction?
After the centrifugal phase of pulling down and pulling apart, the next turn is a centripetal phase which pulls together and builds up new institutions based either on new authorities or conceptions of authority.
Historically, either new elites are installed and hierarchical institutions re-established with a different set of strong rulers and experts (the pyramid), or, in modern (post-Enlightenment) times a diamond shaped structure can form where most people are neither rich nor poor and conflict and competition, ritualized by rules, take place in "arenas" such as courts, markets, science and democracy.
Unlike the top to bottom power structure of the hierarchical pyramid, where legitimacy is invested in the rule of the worthy and the expert, the diamond model's legitimacy arises from a "reciprocal accountability" of its participants.
Today's social network upheaval puts pressure on both models to accommodate more participants who all share the same information.
The pyramid and the diamond are not so much alternatives as symbiotically linked like yin and yang, especially given the participatory power of social media.
Humans respond to challenge in two ways: ontogenetically and phylogenetically. Ontogenetic activities are organized and carried out through centrally designed institutions to shape the development of society. The phylogenetic response is evolutionary, like self-organizing bacteria lacking foresight but responding to the environment.
This relationship is both adversarial and symbiotic. Political authority today is ontogenetic and cyberspace is phylogenetic. The health of human society depends on the balance.
Might this lead to a new "hybrid" model of governance because more players and thus more complexity requires both more hierarchy to manage and, at the same time, more feedback loops of reciprocal accountability?
There is not one answer. A given balance within the operating system of governance will work or not work depending on the conditions. Success will only result from the "field effect" of bringing all the right elements to bear as the circumstances on the ground demand. One-person-one-vote, just like meritocratic rule, must be scaled to the circumstances.
The same happens within companies as well. Google required one kind of governance, more reciprocal and collegial, when it was only 500 innovating employees. With 50,000 employees and globe-spanning markets, complexity requires more hierarchy for efficiency's sake. Yet innovation must retain its own space or efficiency will kill it off.
In short, governance is an open-ended operating system based on what works. The most adaptable will survive.
b. Since social networks and shared knowledge continuously challenge elites and credentialed meritocracy, it is likely in the future that a new "agile meritocracy" whose transient power rises and falls based on reputation and performance -- will replace entrenched elites.
c. It takes an institution. Crowd-sourced authority is good for some things, not others. It is good for innovation and protest; it is bad for governance.
It is a libertarian illusion to believe that distributed networks of amateurs or "unknown experts' can self-administer a society based on rational self-interested decisions. Retail sanity does not necessarily, or even usually, add up to wholesale rationality. As often or not, retail sanity can add up to wholesale madness.
It was the distributed networks of financial experts that instigated the Wall Street meltdown. It was up to the stodgy old "drunk uncle" institution of the US government to salvage the system.
3. DEMOCRACY, DELIBERATION AND 'SMART MOBS'
a. The crisis of governance today in democracies results from the "lack of deliberation." Deliberation is necessary so that democracy produces collectively-intelligent decisions instead of dumb politics.
Without deliberative mechanisms for making decisions that weigh consequences and balance trade offs, social networks that only enhance unmediated participation and information also just enhance the "dumb mob."
Turning the "dumb mob' into the 'smart mob' is one of the key challenges for the immense participatory power of social media.
As it is now, social media like Twitter or Facebook are good for simple minded mobilization of those prepared to act, but not for the processes of negotiation and consensus building required for intelligent decision making.
To bring deliberative polling to cyberspace might be one way to help forge the smart mob out of the dumb mob.
As deliberative polling experience -- from California to China to Japan to Europe -- has shown, the public is not as polarized as political elites. This is especially true in the US where politicians are often driven to extremes by the primary process.
Consensus can emerge, however, when citizens -- selected as indicative representatives of the electorate at large through scientific sampling -- are put in a depoliticized zone, or an "island of goodwill" beyond the reach of the "persuasion industry" that dominates elections, and given the facts and access to experts with contending points of view.
While deliberative polling has been done physically -- by bringing 200 or 500 people together through scientific sampling (not unlike in Athens 2400 years ago where the assembly of 500 was chosen by lottery) -- it has not been done virtually.
The success of on-line seminars by universities such as Stanford -- where as many as 160,000 people participate virtually -- suggests the possibilities.
b. Neither transparency nor opacity are in and of themselves stand alone virtues.
Too much transparency can destroy the robustness of deliberative institutions. This is the "paradox of openness."
If deliberative polling requires a certain 'depoliticized space,' deliberative institutions require a certain opacity to shield their decisions from popular pressure and "tyranny of the majority.' This is why the Supreme Court and the Federal Reserve are not "transparent' institutions. Opacity allows the breathing space for reasoned deliberation not subject to popular opinion.
However, to ensure that deliberative institutions don't become hidebound, they must be linked to robust feedback loops and replenished or 'aerated' periodically by rotations of personnel.
4. NEUTRAL MEDIA VS. MONETIZING ATTENTION
Neutral, objective, quality information is the basis for solid deliberation.
Yet, here, we face the same politicization and polarization as in political life. Just as primaries drive politics in democratic societies to polarized positions, the imperative of "monetizing attention' for niche markets contaminates the objective quality of information, which is edited to sell. Bloggers talk only to their own tribe. People find only the information they are looking for. Information becomes non-communication.
What social scientists predicted has come to pass: greater bandwith has meant more compartmentalized information.
Curating information -- sorting out intellectual quality and truth claims or communicating across boundaries -- is akin to governance through deliberation.
Perhaps "the value of curation" may one day be priced accordingly by the market. But today, objective, neutral, quality information must be provided as a "public good" and thus subject to the problem of "free riders."
5. BELOW THE NATION STATE
Much of the discussion has been focused on the relationship of social media to the nation-state. Yet, we've known, and it's been said, for a long time that the nation state is too small for global problems and too big for local problems.
In a networked world of distributed power it would make more sense to seek change from the bottom up, from the city to the subnational level, than from the nation state or the level of global summitry.
This is especially so as the world has become mostly urbanized with an archipelago of megacity regions with 20-million-plus inhabitants each, especially in Asia. Megacities are the network nodes where people live and work (or are unemployed), where they play and pollute.
Already dense with feedback because of physical proximity, the intensified feedback loops of social networks can make cities even more intelligent.