29
Jul

The absence of leadership in the West is frightening—and also rather familiar

A government’s credibility is founded on its commitment to honour its debts. As a result of the dramas of the past few weeks, that crucial commodity is eroding in the West. The struggles in Europe to keep Greece in the euro zone and the brinkmanship in America over the debt ceiling have presented investors with an unattractive choice: should you buy the currency that may default, or the one that could disintegrate?

In the early days of the economic crisis the West’s leaders did a reasonable job of clearing up a mess that was only partly of their making. Now the politicians have become the problem. In both America and Europe, they are exhibiting the sort of behaviour that could turn a downturn into stagnation. The West’s leaders are not willing to make tough choices; and everybody—the markets, the leaders of the emerging world, the banks, even the voters—knows it. It is a mark of how low expectations have sunk that the euro zone’s half-rescue of Greece on July 21st was greeted with relief. As The Economist went to press, it still was not clear on what terms America’s debt limit would be raised, and for how long. Even if the current crises abate or are averted, the real danger persists: that the West’s political system cannot take the difficult decisions needed to recover from a crisis and prosper in the years ahead.

The world has seen this before. Two decades ago, Japan’s economic bubble popped; since then its leaders have procrastinated and postured. The years of political paralysis have done Japan more harm than the economic excesses of the 1980s. Its economy has barely grown and its regional influence has withered. As a proportion of GDP, its gross public debt is the highest in the world, twice America’s and nearly twice Italy’s. If something similar were to happen to its fellow democracies in Europe and America, the consequences would be far larger. No wonder China’s autocrats, flush with cash and an (only partly deserved) reputation for getting things done, feel as if the future is on their side.

Though both about debt, the arguments in Europe and America have very different origins. The euro crisis was brought on by investors with genuine worries about the solvency of several euro-zone countries. By contrast the stand-off in Washington is a political creation, thrust upon initially incredulous investors (see article). Increasing America’s overdraft beyond $14.3 trillion should have been relatively simple. But Republican congressmen, furious about big government, have recklessly used it as a political tool to embarrass Barack Obama. Read more…

As published in www.economist.com on July 30, 2011 (The Economist – Print Edition).

Comments

Cek Magdurlari October 25, 2011 - 7:30 pm

The problem has nothing to do with an irresponsible government. The framers of the constitution intended it to be that way. Rather, it is a result of the government overstepping its constitutional boundaries. All too often, we hear people say “those conservatives, why don’t they let us pass this budget, or this resolution, or this law,etc. “Economic conservatism is antithetical to the idea that ANY government has the right to control you actions, especially through the form of taxation. Furthermore, a federal government is in fact not necessary to the establishment of Liberal priorities.

The 10th amendment clearly reaffirms the constitutional provisions against the establishment of federal power. In Democrats like the wellfare state so much, they should implement it at the State and Local level. That way, you give people the choice TO LEAVE if they disagree with the policy, or if they feel that taxes are too high. Conversely, you also give people the choice to COME to your state if they like the benefits. The system that is most successful will win out, but there is no reason to have a national policy on these matters.

Conclusion: I believe this bickering is due to the fundamentals of democracy, particularly American, at work. If you value your freedom, and your liberty, you would never abandon what we have here for the “faux” effectiveness of Chinese autocrats. The federal government should NOT force its will on the people or on the states. Wellfare programs should be run (or rather, run by the choice of the people) so that if an individual state chooses to dispose of that system, it can do so without federal prosecution.

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