Friday, October 12, 2012

"The Great Reversal"

Robert Samuelson:

What we are witnessing in Europe -- and what may loom for the United States -- is the exhaustion of the modern social order. Since the early 1800s, industrial societies rested on a marriage of economic growth and political stability. Economic progress improved people's lives and anchored their loyalty to the state. Wars, depressions, revolutions and class conflicts interrupted the cycle. But over time, prosperity fostered stable democracies in the United States, Europe and parts of Asia. The present economic crisis might reverse this virtuous process. Slower economic expansion would feed political instability, and vice versa. This would be a historic and ominous break from the past...
Economic progress -- progress that people can feel and that feeds hope and optimism -- favors political stability. If progress shrinks or vanishes, stability may suffer. People lose faith and feel betrayed. The role of economic growth in advanced societies is increasingly to satisfy the many claims from different groups. People can (or think they can) pursue their self-interest without harming the common good. When the system reduces or rejects many of those claims, as is now happening in Europe, the pursuit of self-interest becomes more contentious and destructive.
What's happening in America is different in degree, but not in kind, from what's occurring in Europe. Stalled economic growth there is straining the political system's ability to meet all expectations. People take to the streets; extremist parties expand. To avoid Europe's fate, we should reduce people's claims on the system and strive for faster economic growth. That's the lesson. If we ignore it, history may slip into reverse.

The nightmares of modern civilization-- the Nazis, the Bolsheviks, the Iranian Imams and so many of their spawn in the Third World-- arose from socioeconomic crisis, from Weimar and World War I and the Shah's reckless socialism. It is this scenario that concerns me the most in the West. What will happen if the economies of Europe and the United States implode? The recent past is not reassuring. People panic, mobs explode in anger and vengeance, and otherwise prudent citizens embrace demagogues.

If this scenario were not bad enough, keep in mind that the exploitation of economic collapse is a quite explicit tactic of the far-left political faction occupying our White House today.

The Left is prepared to exploit the economic crisis-- the unsustainable debt of socialism-- that they have created, and that they seem happy to exploit.


  1. I suppose it is appropriate, as Athens burns, that the EU just got awarded the Nobel Peace Prize. It's the best award since Yasser Arafat, The World's Most Repulsive Terrorist, won the Prize in advance of the Second Intifada.

  2. The Left have created the economic crisis? Yeah, right. Do you actually believe that rubbish?

    No, it's basically down to unregulated globalization of industry and financial speculation. It's the Right that wants to prevent any and all forms of regulation, calling it 'socialism' to scare the brainwashed masses into supporting them.

    As long as globally wages are far from equilibrium, big companies can increase profit by shipping jobs to low-wage countries.

    As long as banks can freely gamble with other people's money, privatizing profits and socializing losses, boom-and-bust cycles will continue to wreck economies and especially those at the lower end of the wealth spectrum.

    To blame that on the Left is laughable.

  3. Unregulated?


    "COMMISSION REGULATION (EEC) No 1677/88 of 15 June 1988
    laying down quality standards for cucumbers[...]
    Cucumbers must be sufficiently developed but their seeds must be soft. [...]
    be well shaped and practically straight (maximum height of the arc: 10 mm per 10 cm of length of the cucumber) [...]"
    etc, etc.,etc.

    I think not.

    1. Point taken. A lot of stuff is over-regulated, but the important stuff, like banking, isn't sufficiently regulated.

      EU food regulation is out of control. Example: pigs grown in Holland are trucked to Italy, where they are stamped, then trucked back to Holland for slaughter and processing, just so they are allowed to call the hams 'authentic' Parma ham and charge a much higher price. It's outrageous.

  4. I disagree that banking in Europe (and the US) is insufficiently regulated. In my opinion, banking is improperly regulated. Banking in Europe (and here) is regulated to ensure a leftish politically desirable outcome (e.g., the Community Reinvestment Act). And don't get me wrong... rightish outcome-oriented regulation would be no better.

    Banking regulations should be written to achieve a level playing field for bank customers and clients (no minimum number of giveaway, "subprime" mortgages required to open a branch bank), to keep speculative and fiduciary activities separate (Glass-Steagall), and to encourage competition (no more "systemic" threats).

    Dodd-Frank fails on all three of those points, as do EU banking regulations.

    The banks love that kind of regulation. It encourages the politicization of lending and the explosion of lobbying, allows them to speculate with customer dollars, and freezes the current winners in amber.

    Good regulation is essential. Bad regulation is dangerous, as the meltdown in '08 and the current status of Spanish sovereign debt at 1 level above "speculative" richly illustrate.