I find it very interesting Nesher. I want to start first with a question. Why has the relative stable consensus over the benefits of international trade been fading?
In a democracy, if the economy is underperforming or the satisfaction with the national institutions is failing, then the citizens tend to punish the government officials and incumbents by voting for the opposition. When the countries were not so economically linked, the guilty politicians were easily identifiable.
Nevertheless, since international trade has grown and the economic and political integration have deepened, political incumbents have found a way to get rid of the guilt. Politicians blame the international economic context to justify the malfunction of the economy. So it is true, competitive markets excel at executing painful but efficient decisions and also at diluting the responsibility. In economic terms, this does not pose a threat nor is it a problem, since economic efficiency is obtained. But if we think of the political costs that can be derived of the political diluted responsibility, then the panorama changes.
Many politicians have understood the dilemmas that citizens must face and the problem they have when they can not find out who is to blame for their poor economic situation. Some have called it economic populism, both from the right in Europe and the left in Latin America.
I understand that people see it as a decision between two systems: one where nobody is responsible and the other were the State is the responsible one. But you intelligently said it. Markets failures exists, and therefore the State must intervene in the economy. Though there are levels of intervention.
The State is the sovereign power, not the economy. And the politicians were chosen to rule by the citizens of the country, not the entrepreneurs or the businessman. No democracy can be sustained in a world where the majority’s opinion are ignored in favor of efficiency. Politicians should not be blamed for everything that happens in the economy, but still they must answer to their representatives for the economic performance. If the dilution of the responsibility is high, then the consequences for democracy can be serious.