Polls apart

摘要

The row about whether to modify Greece's bail-out has provoked claims that democracy is being ignored. The electoral mandate of the Syriza party, it is said, is being overridden by Greece's creditors. In fact, there have always been limits on voters' freedom to pursue their desired economic policies. The first is on the ability of the majority to tax the minority, be it high-earning individuals or companies. Clearly there is some point beyond which higher taxes lead to lower revenues, as effort is discouraged. There is no general agreement over the point at which diminishing returns set in, but in an age of mobile people and firms, the threshold is probably lower than it used to be. The second limit occurs when countries become dependent on international creditors for finance. They cannot force those creditors to roll over their debts, nor can they dictate the terms on which they borrow. Countries are free, of course, to default on their debts; eventually creditors forgive (or forget) and start lending again. In the short term, however, default is likely to lead to budgetary constraints. Voters may end up with austerity after all.