The Economist has published a piece on citizens lawmaking online which refers to my research on Estonia.

Citizen lawmaking
Government by (all) the people
Getting citizens to write laws is a nice idea. When it works
Oct 29th 2011 | TALLINN | from the print edition

RUSSIA may sound an unlikely place for a bold experiment in participatory democracy. But Wikivote, an online forum where citizens collaborate in redrafting laws, seems to be enjoying unlikely early success there.

The website displays a draft law and lets users propose rewrites of each paragraph; others can vote on the suggestions. In another section they can debate “thorny questions”. A reputation-rating system gives serious users’ votes more weight; invited experts get even more. The site’s first full-scale test came earlier this year, when protests erupted over a new fisheries bill that proposed charging Russians for their beloved pastime of fishing in public waterways. At the government’s behest, Wikivote posted the draft bill; it went through two redrafts with over 1,000 proposed modifications, according to Vasiliy Burov, one of the project’s creators. On the site now is a longer and trickier education bill.

Successful examples of legislation by the masses are rare. Most people don’t know how to write laws. Tim Bonnemann, the founder of Intellitics, an American firm specialising in public-participation tools, says a better method is to canvas views widely but use a small team to write a draft. The hard part is not the technology (a simple online discussion forum is adequate) but creating a fair and transparent process that assures people their voices have been heard.

Another problem is that even a public consultation, let alone public law-writing, takes a lot of time and money to do well, especially when large groups are involved. Tom Steinberg, the director of MySociety, a British e-democracy organisation, says most attempts in collaborative lawmaking, whether run by governments or do-gooders, are one-offs that never gather enough steam and public interest.

A third problem is that government websites of this sort are often clunky, and poor at drawing in the public debate that thrives elsewhere online. Professional lobbyists willing to plough through the process therefore often have a big advantage. America’s site for rewriting government rules, regulations.gov, displays the comments on a draft bill as a list of the commenters’ names. These may run into the hundreds and the visitor must click on each name separately to see what was said. That makes getting the overall picture dauntingly tedious. Even Estonia, a world leader in e-government, had lacklustre results when it launched osale.ee, a portal for public comments on bills, in 2007. In the first two years, according to a study by Meelis Kitsing of the University of Massachusetts in Amherst, the most comments any bill got was 27 (one-third got none). In contrast the Brazilian parliament’s cheerful and friendly e-Democracia site is often cited as a rare success story: it channels comments straight to the parliamentary agency that advises MPs.

Non-governmental sites, on the other hand, may be easier to use, but officials are wont to ignore them. Two students who founded a site called Lexpop earlier this year think they may have got around this problem: a Massachusetts state legislator, Tom Sannicandro, has agreed in advance to propose a bill on “net neutrality” that the site’s users will draft. (Drafting hasn’t yet begun, though, and some doubt that anything coherent will emerge).

The big difficulty for such projects in advanced democracies is that they have to break into lawmaking systems that often function tolerably well. Wikivote, by contrast, trades on the fact that some Russian ministries produce legislation so shoddy that it does not work. “The goal of the state is to get higher-quality laws,” Mr Burov says. “It’s not about being more democratic. So much of what’s idiotic in Russia happens not because somebody wants it that way, but because there’s nobody to prevent idiocy from happening.”

Source: http://www.economist.com/node/21534760

Policy & Internet has published my article which gives overview of e-government development in Estonia. My analysis incorporates both public sector initiatives and private sector developments which have contributed to the evolution of e-government. Private sector agents are seen as endogenous, not exogenous, in explaining e-government performance. Ultimately, the development of Internet banking by the private sector was fundamental in enabling the government to launch interactive online services. The findings reveal that the implementation of Estonian e-government is considerably more heterogeneous than previous studies have indicated. Basic service delivery and platforms for participation vary significantly across functional areas. Some ministries have provided innovative online services for the last ten years while others still struggle in making basic information available online. The availability of innovative platforms for online political participation has delivered remarkable outcomes in the last elections, while they have consistently failed to engage the public in the legislative process.

Here is a piece on the Estonian internet voting that I published in the Public Service Europe at on March 17, 2011

In the Estonian parliamentary elections in March this year, almost 25 per cent of voters submitted their ballots online. This indicates widespread adoption of internet voting since it became available in 2005, when less than two per cent of people voted online in municipal elections.

The popularity of internet voting has grown steadily through five elections that have taken place between 2005 and 2011. The parliamentary election in 2007 saw over five per cent of citizens used the method, while in the 2009 European Parliament and municipal elections around 15 per cent of votes were cast online.

On one hand, this has cut transaction costs and made voting easier because people don’t have to leave their home or office. On the other, it requires an Estonian ID card and ID card reader attached to the computer. As the Estonian ID card was launched less than a decade ago and its use diffused slowly in the early years, it is not surprising that over 60 per cent of all internet voters in 2005 and almost 40 per cent in 2007 were using their card online for the first time.

By the 2009 elections, the share of first time users had dropped below 20 per cent, while the relative share of internet voters tripled. The voting initiative can be characterized as a typical process where early adopters show the way and others follow. As the use of the ID card spread in Estonian society and other services became accessible, participation in internet voting also increased. In other words, the online ballot has benefited from network effects as the ID card system is used for a variety of public and private sector services – such as submitting taxes online, registering companies, making bank transactions and so on.

So online voting can be seen as transactional in nature. Fundamentally there is no difference between submitting a tax declaration and a vote on the web. But this does not mean that internet voting is neutral – there are certainly distributional effects. The current centre-right coalition received a higher share of internet votes than the populist centre-left opposition. Indeed, the main opposition Centre Party came second in the elections but fourth among online voters. This trend has existed since the launch of online voting but its importance has increased has more people use the technology. It is a demonstration of the digital divide as the poorer, older, less-educated and Russian-speaking population tend to support the Centre Party while Estonians, wealthier and better-educated groups tend to support centre-right parties.

There is no clear evidence about whether a significant percentage of internet voters would not have voted at all if this method was not available. In the 2009 municipal elections the increase in the percentage of internet voters correlated with increased turnout compared to 2005. However, the turnout in the 2011 parliamentary elections was only one percent higher than in 2007 in spite of the almost fivefold increase in the percentage of internet voters. Several scholars have studied the 2007 elections and found evidence that 10-14 per cent of internet voters would not have voted if this option had not been available. Other studies have found that internet voting did not contribute to the increased turnout. If the latter claim is correct, then the distributional impact is quite limited –voting was simply made easier for supporters of certain political parties.

The internet voting initiative may create the impression that Estonia is moving ahead of others its delivery of e-government. This is hardly true. This initiative has received a lot of attention but it reflects the different priorities that Estonia has in comparison with other countries. In general, the implementation of e-government remains quite heterogeneous in Estonia. There are some good initiatives and ‘islands of excellence’ but certainly a lot of areas are lagging behind.

According to the United Nations E-Government Index, Estonia is ranked among top 20 in the world. The World Economic Forum’s Network Readiness Index ranks Estonia 25th in the world. And the percentage of Estonian households and companies with broadband access is higher than the EU average – though not as high as in Finland, Sweden and the UK. All of these are good, but not fantastic, achievements. Most importantly, internet voting makes casting a ballot easier but it would be a fallacy to think that it improves the quality of democracy.

Source: http://www.publicserviceeurope.com/article/110/estonias-e-ballot-gains-popularity

The Economist’s Democracy in America blog discussed uncertainty last week as a central concept in the Keynesian economic thought. According to the blog entry “Are they all Keynesians again?” government economic policies can reduce uncertainty. This claim is a non-starter because the blogger as well as many modern economists engage in conceptual stretching when they use term uncertainty. They use uncertainty as if it would be synonymous with risk.

In reality, these are two different concepts. Risk is “known unknown’, which implies that we can assign probabilities to happening of future events and design economic policies accordingly. Uncertainty is “unknown unknown”, which implies that we simply do not know what might happen, we cannot assign odds to future events, we cannot calculate risk and design policies. If the current state of economy is characterized by uncertainty, it is impossible to see how government intervention can reduce uncertainty because we simply do not know what the future holds for us. In this sense, doing nothing and doing something may or may not equally reduce uncertainty.

The blogger is surprised that the concept of uncertainty is so popular with the right. It goes to the great lengths to demonstrate how this concept is central to the Keynesian thought while classical and new classical economists assume uncertainty away in their rationalistic general equilibrium models where agents make decisions with perfect information. At best, this is a caricature of the Western economic thought of the last two centuries.

Keynes was not alone in highlighting the importance of uncertainty (the concept which has been ignored by many of his followers who transformed his ideas into “hydraulic” macroeconomic models found in many contemporary textbooks). The blogger attacks the Chicago-based economists but ignores that Frank Knight, the founder of Chicago School of Economics, distinguished between uncertainty and risk. After all, Knight wrote a volume titled “Risk, Uncertainty and Profit”.

Furthermore, uncertainty has been a central concept of the Austrian School of Economics since the 19th century. This idea has been essential in questioning the government’s ability to direct the economy as well as the whole notion of macroeconomics. Hence, the proper question to ask would be “Are they all Austrians now?”

• Uncle Sam has worse woes than Greece – Laurence Kotlikoff võrdleb USA ja Kreeka riigivõlgasid ning leiab, et USA olukord on märksa problemaatilisem kui enamus arvata soovib.

• Dollari tõus ja langus reservvaluutana – Risto Sverdlik kirjutab E24 jaoks dollari rollist reservvaluutan ning kuidas kullaga tagatud valuutast saia aegamööda paber, mida tagab eelkõige usk.

• The Nonviolent Black Market in Information – Manuel Lora ja Daniel Coleman kirjutavad Mises Instituudi blogis informatsiooni mustast turust ehk digitaalsest piraatlusest ning selle vägivallatusest. Delfi Fortes ilmus ka artikli eestikeelne tõlge Miks informatsiooni mustal turul verd ei valata.

• Britain Plans to Decentralize Health Care – New York Times vahendab inglaste kavatsusi enda tsentraliseeritud tervishoiusüsteemi detsentraliseerida, sõna saavad nii pooldajad kui vastased. Detsentraliseerimise võimalustest Eestis võib lugeda siit (pdf).

• Top Secret America – Washinton Post’i põhjalik uurimus (mitte ainult artikkel) USA lugematute luure- ja vastuluureagentuuride tegevusest ning eelarvetest samas kui kellelgi pole selget ülevaade sellest, mida keegi neist täpselt teeb.

• ‘Peak Oil’ Is a Waste of Energy – Michale Lynch kirjutas New York Times’i arvamusloos eelmisel suvel, miks tema hinnangul on jutud naftaajastu peatsest lõpust liialdatud ning selgitab, miks ta nii arvab.

• Law Remakes U.S. Financial Landscape – Wall Street Journal annab hea ülevaate finantsreformidest USA ja palub anda reformipaketile hinnang 12 eksperdil, kellest enamus leiab, et tegu on parimal juhul puuduliku reformiga.

Naftaajastu lõpu üle spekuleerimine on kestnud aastakümneid, kuid suuremad kõikumised hindades koos loodust laastavate õnnetustega tõstavad pidevalt ent vaikselt käiva diskussiooni sageli ajalehtede esikülgedele, kus mõned olulised nüansid kipuvad kaduma minema.

Üks peamistest kaduma minevatest nüanssidest on naftatootmise tipu saabumine (n.n. peak oil), mille järel tõusevad kütusehinnad enamuse jaoks shokeeriva kiirusega, millele järgnevad kiiresti muud probleemid, mis võivad olukorra teha katastroofiliseks. Ühtlasi ei peeta sageli paljuks lisada, et turumajandus energiakriisi ära hoia.

Mõned aastad tagasi kirjutas James Hamilton postituse “How to talk to an economist about peak oil”, kus üritas vähendada lõhet arusaamades, mis on naftaajastu tipu tagajärgede üle arutlemisel tekkinud teiste seas majandusteadlaste, geoloogide ja keskkonnaaktivistide vahel. Terminoloogilised nüansid, eeldused ja paradigmad on erinevatel gruppidel erinevad, mis tekitab ka segadust vastastikusel suhtlemisel. Diskussioon muutub taolises segaduses aga emotsionaalsemaks ning arutelud kipuvad taanduma inimestele isikuomadustele mitte argumentidele.

Majandusteadlaste seisukohtade illustreerimiseks toob Hamilton näiteks olukorra, kus naftahind tõuseb kahe aasta pärast enam kui kolm kord (60 USD’lt 200 USD’le) ja küsib, kui nafta on kahe aasta pärast enam kui kolm kord kallim, siis miks peaks kasumist huvitatud ettevõtja müüma nafta täna kolm korda odavamalt kui ta on veendunud, et paar aastat ootamist võimaldab tal naftat oluliselt kallimalt müüa:

If oil producers did respond to these very strong incentives by holding back oil from today’s market, the effect would be to drive today’s price up. This profit-seeking wouldn’t drive the price all the way up to $200, because you have significant interest, storage, and idle capacity expenses from trying to wait around a couple of years before getting your profit. An economist would expect the end result of this profit-seeking to be that the price today is lower than what it will be in two years by an amount that reflects these interest and other expenses, but certainly far less than the difference between $60 and $200 a barrel.

Hamilton ei häbene tunnistamast, et tegu on lihtsustatud ja ekstreemse näitega, kuid märksa realistlikumad detailid ei muuda inimesi vähem enesekasupüüdlikeks. Vaba turumajanduse tingimustes on naftahindadesse integreeritud kõigi turul tegutsejate informatsioon. Tänane hind on ühtlasi parima suunanäitaja homsele hinnale. Kui inimestel on oma raha mängus, siis on neil alati ainuüksi enesekasupüüdlikel põhjustel oluline olla võimalikult hästi informeeritud muutustest, mis võivad hinda üles või alla lükata.

Naftaajastu lõpp ei tule kiiresti ja katastroofiliselt vaid järkjärguliselt, paljude jaoks lausa märkamatult. Naftat kasutatakse mitmetes erinevates valdkondades ja mitmetel erinevatel eesmärkidel miljardite erinevate inimeste poolt, kelle tundlikkus nafta hinna suhtes sunnib neid, kas naftat vähem tarbima või leidma alternatiive. Mitmed alternatiivid on juba täna olemas, kuid naftaga on sarnaste eesmärkide saavutamine tänaste hindade juures sageli odavam.  Kui alternatiiv muutub mõnes valdkonnas aga odavamaks, siis loobutakse nafta kasutamisest, mis omakorda vabastab mingi koguse tarbimisest, mis omakorda stabiliseerib hindasid.

Kõrgemate naftahindade juures muutub kasumlikumaks nafta tootmine keerulisemate ning kulukamate tehnoloogiliste lahendustega alustades kilomeetrite sügavuselt merepõhjast puurimisega ja lõpetades tõrvliivadest nafta eraldamisega. Mida kõrgem on nafta hind, seda suuremaks muutuvad tänu kasumliku kogumise võimalusele potentsiaalsed naftavarud ja seda mõjuvamaks (eelkõige rahaliselt) kujunevad ajendid uusi tehnoloogiaid välja töötada, mis võimaldavad omakorda kas kokkuhoidu või ligipääsu uutele varudele.

Nii nagu James Hamiltonil tekib ka minul järjekordsest katastroofilisest naftaajastu lõppu kuulutavat artiklit lugedes, et kui varsti on nafta sedavõrd väärtuslik, siis miks keegi rikkaks ei taha saada:

How could it be that there are billions and billions of easy dollars to be made, and nobody can be bothered to collect them? Unless you have a clear answer for that question, an economist at that point is going to ask whether you’re sure that you’ve got all the facts straight, that oil really is going to sell for $200 a barrel in just two years.

Kui midagi suudab naftaajastu lõpu saabumist leevendada ja üleminekut alternatiividel soodustada, siis on see just efektiivselt toimivad turud, mis suudavad läbi hindades sisalduva informatsiooni suunata enesekasupüüdlike indiviidide valikuid.

Samal teemal:

• The Future of Global Oil Supply: Understanding the Building Blocks (2009)
• 5 põhjust, miks naftahind lähi-aastatel langeb (2008)
• Nafta hinnast ja nafta ammendumisest – paanikata (2005)

It’s a pity that Russia has not made much progress in the last decade. Seven years ago I published an article on Russia where I compared Putin’s reforms to building a Potemkin village. If published today, the article would still be an accurate description of Russia. At that time, my points seemed perhaps too harsh as Putin had served as the president for three years and Russia was in the middle of economic recovery. However, the recent special report on Russia by the Financial Times makes similar points.

Putin’s social contract for delivering increasing living standards in exchange for political passivity is no longer working. This outcome is not surprising given that the contract is based on something so volatile as the price of oil. No wonder that the Kremlin has decided to engage in the expansive interpretation of continental shelf and seeks opportunities for oil production in the Arctic.

Most importantly, citizens do not think that economy is improving and middle-class savings have been exhausted. Some experts argue that Russia looks more and more like the Soviet Union and point out similarities with the Brezhnev era. Sure, the GDP and real incomes doubled in the last decade. But this achievement had little to do with good governance and economic reforms. The growth relied on oil exports which created complacency and reluctance to carry out both economic and political reforms. Money from oil exports was used to buy political support and keep “semi-feudal” governance structures in place.

As the Financial Times points out “Kremlinology” is back in fashion as experts are looking for clues whether Putin or Medvedev will run for the president in 2012. Something as important as the choice of next president is characterized as a decision between two people. In this context, the description of governance process as a semi-feudal would be understatement. It is simply feudal.

Anarhism seostub enamusel inimestest vägivaldse segadusega, mida on põhjust vältida pea igal võimalusel. Isegi autoritaarse diktatuuri kehtestamine tundub olevat eelistatum anarhistlikust ühiskonnakorraldusest, kus tsentraliseeritud institutsioonid roll on minimaalne või olematu samas kui enamus otsuseid tehakse individuaalselt vabatahtlike kokkulepete raames. Vähemalt teoorias.

Bryan Caplan, kelle kirjutatu on varsemalt Cui Bono blogis mainimst leidnud, on tundnud mõnevõrra sügavamat huvi ka anarhismi vastu. Tema tõenäoliselt üheks olulisemaks panuseks on analüüs anarhismi praktiliselt rakendamisest Hispaanias 1930ndatel The Anarcho-Statists of Spain: An Historical, Economic, and Philosophical Analysis of Spanish Anarchism.

Tegu on pika ja põhjaliku analüüsiga “anarhismi” rakendamisest nii linnades kui maapiirkondades. Caplan üritab läbi vaadata idealistlikust retoorikast ja toetuda enda analüüsis pigem anarhistide tegudele, mis väljenduvad eelkõige institutsionaalsete muudatuste ja nende mõju välja toomises, anarhistlikest põhimõtetest lähtuvate reformide tagajärgedel ja piirangutel, mida anarhistid olid keskvõimu abil kehtestatud korra kindlustamiseks sunnitud rakendama.

Caplani ülevaade on mitmekülgne ja juhib muu hulgas tähelepanu anarhistlike rühmituste kiirele eemaldumisele enda esialgsetest põhimõtetest pärast üle võetud võimu nautimist ja ajenditel, mida väidetavalt anarhistlikud reformid lõid nii töötajatele kui ettevõtjatele linnades ja põllumajanduses maapiirkonnas. Caplani peamiseks Hispaania anarhistliku perioodi järelduseks on, et teadmata, millised on sinu tegude tagajärjed, on keeruline midagi head teha:

The Spanish Anarchists demanded the abolition of all government in the name of human freedom; but once they had the power to do so, they both participated in and established governments which were no less oppressive than any other. The proximate cause, I have argued, was that their underlying theories of freedom, capitalism, and socialism were uniformly in error. There was however a deeper cause: The Spanish Anarchists theorized emotionally and dogmatically, insofar as they theorized at all. For the most part, they accepted their confused theories as obvious, and instead focused their attention on “action.”

What the Spanish Anarchists failed to realize is that clear, rigorous thinking is the most important form of “action” that any critic of the status quo can perform. It does no good to seize the initiative and try to change the world unless you can reasonably expect your changes to be genuine improvements. History is filled with examples of deluded zealots who marched forth to save the world, defeated their enemies, and proceeded to make the world even worse. The example of the Russian Communists should have been omnipresent in the Spanish Anarchists’ minds; or they might have looked back to Spain’s conquest of Latin America; or to any number of other examples. Historians usually label such conquerors “misguided idealists,” but it would be far more accurate to label them “willfully self-deluded murderers”: “murderers” because they killed many innocent people; “self-deluded” because they were convinced they had the truth in spite of the limited time and effort they put into thinking about fundamental philosophical and political issues; “willfully” because they did not choose to devote the necessary time and effort to informing themselves about such fundamental issues.

Viimaste aastakümnete jooksul on anarhismi uurimisele ja teoreetilisele käsitlemisele oluliselt rohkem tähelepanu pöörama hakatud. Tõenäoliselt on üheks taolise suundumuse põhjuseks näiliselt kaootiline ja anarhiline tegevus internetiavarustes, mida kellelgi süstemaatiliselt kontrollida on keeruline.

Loetud päevad tagasi tekkis anarhistliku ühiskonna korralduse sügavamast käsitlemisest huvitatud majandusteadlastele uus ressurss Analytical Anarchsim lehekülje näol, mida autorid kirjeldavad järgmiselt:

Why anarchy? Research in anarchism has a fundamental theoretical importance for understanding the mystery of cooperation among strangers, which forms the basis of modern social order. Understanding anarchy also has a critical practical importance for transition economies, Third World development, and post-war reconstruction. Economic analysis of these problems cannot assume a functioning state.

Esialgu on leheküljel materjali veel üpris vähe, kuid kõige väärtuslikum on peaaegu 200 sissekandega kirjanduse loetelu, mis on autorite poolt tehtud hõlpsasti otsitavaks ja viidatud artiklid/teosed ka leitavaks. Väärib sirvimist.

The debt crisis suggests that not much has changed in Greece since the first performance of the Oresteia in Athens in 458 BC. Similarly to the Oresteia, there are no good choices available. Whatever path is chosen, politicians will be tormented by the Furies making it impossible to have a peace of mind. You will be damned if you do, damned if you don’t. Greece is cursed.

The choices are complex and difficult because it is not a temporary crisis of liquidity but that of solvency. Throughout the last decades Greece has not been able to raise sufficient government revenue to match its growing expenditure. The constant gap between expenditure and revenue was exacerbated by the financial crisis. As Dr. George Pagoulatos, Associate Professor of Politics at Department of International and European Economic Studies of Athens University of Economics and Business, pointed out in his presentation on March 24 at Harvard University: “This is crisis of our own doing.”

According to Dr. Pagoulatos, Greece lived through “the decade of complacency” after the euro entry in 2001. There was rapid credit extension because interest rates were lowered and it was cheaper to borrow. This concealed structural weaknesses of the economy. GDP growth relied on consumption which was fuelled by bank credit. Dr. Pagoulatos argued that this is really a crisis of Greek economic model.

The nature of crisis shows that Greece has operated like a huge socialist enterprise under what Hungarian economist Janos Kornai called “soft budget constraint”. The decision-makers have not had incentives to impose financial discipline because government was always able to issue more bonds with low interest rates in order to finance its debt. There seems to have been implicit assumption that if the situation turns worse, then assistance can be given by fellow eurozone governments. Dr. Pagoulatos pointed out that there is no rationality in budget process of many Greek government agencies. For example, public hospitals have accounting problems and do not submit balance sheets to government. Similar problems exist in local governments. The situation is made worse by wide-spread corruption.

The key to understanding the crisis and offering solutions is to figure out how to change incentive structure of and institutional constraints faced by Greek decision-makers. Dr. Pagoulatos argued that “Greece was not adequately monitored and sanctioned by the EU and the Greek government did not receive enough pressure from the EU.” This sounds like blaming murders in the House of Atreus as characterized by the Oresteia on the Trojan War. There might be indirect connection but this is not a cause of the tragedy.

Certainly, EU governments should have enlightened self-interest to assist Greece. Many of their financial institutions hold Greek government bonds. Greece is a small country but its crisis may have contagion effects on other EU countries. For instance, the Asian financial crisis in 1997 started in Thailand and spread from there to larger economies such as Indonesia and South Korea. However, at the same time EU governments must not create moral hazard and keep in mind that the whole Greek economy needs fundamental restructuring.

Most importantly, many macroeconomic analyses of the crisis ignore basic political economy. The root cause of the crisis stems from the nature of Greek interest groups. These groups are militant and narrow-minded demanding fulfillment of their pockets without any consideration of the consequences of their actions on overall economy. Greek politicians have found it easier to cave in. They have raised public sector wages, created more jobs in public sector and increased benefits. No wonder that government increased wages and pensions by 10.5 percent in 2009 – even if signs of the crisis were hard to ignore at that time.

It is hard to imagine that IMF and EU can impose conditionality, which would fundamentally alter this existing political economy equilibrium. Hence, the change has to come within Greece. The internal devaluation by cutting wages by 20 % or more could bring about “Creative Destruction” and get the Greek economy out of death spiral. The Oresteia is untypical tragedy because Athena intervenes and the play ends on a happy note. Why shouldn’t the Greek economic tragedy have a happy ending?

Is the Left taking over Germany? Is Germany becoming more isolationist? Is the country returning to the 18th Century provincialism? According to Jacob Heilbrunn’s article in the National Interest, the answer is affirmative to all these questions. However, I find this beautifully written characterization of modern-day Germany puzzling. This perspective seems to be suggesting that Germany is almost about to become another Italy – except with better mass market car production. Let me point out some points about the beauty of Germany capitalism.

Free market supporting Free Democrats gained seats in the 2009 parliamentary elections. Center-right Christian democrats did much better than their former coalition partner Social Democratic Party. The results of last elections show a strong support the center-right political agenda despite of the financial crisis. The success of the extreme left party Die Linke stems from the weakness of Social Democrats and populism of Die Linke’s leaders such as Oscar Lafontaine (who retired in January).

Opinion polls suggest that more Germans see capitalism as the best possible system than Americans, Brits, Australians, Canadians and of course, French, Italians and Spanish do. The Economist (February 13) issue shows that less than 10 % of Germans agree that capitalism is fatally flawed and a different economic system is needed. Roughly 13 % of Americans and 42 % of French agree with this statement.

The recent Economist survey suggests that Germany has become more Anglo-Saxon in its economic policy reforms. In this context, Rammstein’s song “Amerika ist Wunderbar” should be seen as a sincere statement – not sarcastic one. The government has reformed some elements social welfare system and it looks in much better shape than other continental European countries. Germany has been much more successful than the US and UK in implementing conservative fiscal policy and is a strong supporter at European Central Bank of sound monetary policies.

As far as isolationism is concerned, German politicians have sent troops to Balkans and Afghanistan despite of wide-spread pacifism at home. They may be reluctant to commit more troops (they are already third largest contributor) to Afghanistan and making more straightforward contribution by lifting the limits for engagement. Similarly, German politicians may be reluctant to bailout Greece but it is not clear why this reluctance to help other countries in the middle of debt-crisis has to be seen as a sign of isolationism. If we factor in historical, constitutional and political economy factors for the limited military engagement and the reluctance for bailout, then it is hardly a sign of German isolationism.

Most importantly, Germany is more engaged with the world through international trade than almost any other country. Even if the country is no longer the largest exporter in the world (the place was recently taken by China), it is the second largest exporter. Germany has managed to bring down real wages which has boosted the competiveness. As many small and medium sized firms are becoming more and more involved in international markets, it is difficult to argue that the country is moving towards greater isolationism.

The success of export-driven model has led to another type of criticism that Germany is not increasing its consumer spending and investments. Higher consumer spending and investments would increase demand in Germany for imports. This would allow Germany to export more as markets in its partner countries would expand. This criticism is offered from a particular macroeconomic perspective and it may have merit in the world of stylized economic models. As a matter of political economy, it is difficult to see how politicians could pull it off in the country that relies on the principles of fiscal conservatism and social equality. Lowering taxes requires cuts in government budget which would decrease social spending. Tax cuts without spending cuts would increase budget deficit.

All of this is not to say that Germany does not have any problems – certainly there are many such as rigid educational system, high unemployment in some regions and among some groups, too generous welfare state and so on. However, there is certainly more hope for Germany’s future than some commentators suggest. Fiat lux!