[Viewpoint] Ideas over interests

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[Viewpoint] Ideas over interests

The most widely held theory of politics is also the simplest: the powerful get what they want. Financial regulation is driven by the interests of banks, health policy by the interests of insurance companies and tax policy by the interests of the rich. Those who can influence government the most - through their control of resources, information, access or sheer threat of violence - eventually get their way.

It’s the same globally. Foreign policy is determined, it is said, first and foremost by national interests - not affinities with other nations or concern for the global community. International agreements are impossible unless they are aligned with the interests of the United States and, increasingly, other rising major powers. In authoritarian regimes, policies are the direct expression of the interests of the ruler and his cronies.

It is a compelling narrative, one with which we can readily explain how politics so often generates perverse outcomes. Whether in democracies, dictatorships or in the international arena, those outcomes reflect the ability of narrow, special interests to achieve results that harm the majority.

Yet this explanation is far from complete, and often misleading. Interests are not fixed or predetermined. They are themselves shaped by ideas - beliefs about who we are, what we are trying to achieve and how the world works. Our perceptions of self-interest are always filtered through the lens of ideas.

Imagine that you are a despotic ruler in a poor country. What is the best way to maintain your power and pre-empt domestic and foreign threats? Do you build a strong, export-oriented economy? Or do you turn inward and reward your military friends and other cronies, at the expense of almost everyone else? Authoritarian rulers in East Asia embraced the first strategy; their counterparts in the Middle East opted for the second. They had different conceptions of where their interest lay.

Or consider China’s role in the global economy. As the People’s Republic becomes a major power, its leaders will have to decide what kind of international system they want. Perhaps they will choose to build on and strengthen the existing multilateral regime, which has served them well in the past.

But perhaps they will prefer bilateral, ad hoc relations that allow them to extract greater advantage in their transactions with individual countries. We cannot predict the shape that the world economy will take just from observing that China and its interests will loom larger.

We could multiply such examples endlessly. Are German Chancellor Angela Merkel’s domestic political fortunes best served by stuffing austerity down Greece’s throat, at the cost of another debt restructuring down the line, or by easing up on its conditions, which might give Greece a chance to grow out of its debt burden?

Are U.S. interests at the World Bank best served by directly nominating an American, or by cooperating with other countries to select the most suitable candidate, American or not?

The fact that we debate such questions passionately suggests that we all have varying conceptions of where self-interest lies. Our interests are in fact hostage to our ideas.

So, where do those ideas come from? Policy makers, like all of us, are slaves to fashion. Their perspectives on what is feasible and desirable are shaped by the zeitgeist, the “ideas in the air.” This means that economists and other thought leaders can exert much influence - for good or ill.

In the aftermath of the financial crisis, it became fashionable for economists to decry the power of big banks.

It is because politicians are in the pockets of financial interests, they said, that the regulatory environment allowed those interests to reap huge rewards at great social expense.

But this argument conveniently overlooks the legitimizing role played by economists themselves. It was economists and their ideas that made it respectable for policy makers and regulators to believe that what is good for Wall Street is good for Main Street.

Economists love theories that place organized special interests at the root of all political evil. In the real world, they cannot wriggle so easily out of responsibility for the bad ideas that they have so often spawned. With influence must come accountability.

Copyright: Project Syndicate, 2012.

* The author is a professor of international political economy at Harvard University.

by Dani Rodrik
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