Lessons from Europe
While the Washington Post today was busy recasting disgusting crassness, arrogance, and criminal incompetence as "wit," "brilliance," and "authenticity" in a political eulogy to Barney Frank--as well as trumpeting the stunning new statistic that every third woman in Atlanta has had an encounter with Herman Cain--they relegated news on Europe to a back-burner. Which is weird because the euro may be about to disintegrate. Even if--as European officials insist--the euro is here to stay, there is a real possibility of cataclysmic breakup of the EU, with dire consequences for Western economies. Specifically America, with its banks' exposure to European debt and the euro.
The pre-mortem post mortem:
1. It cannot be emphasized enough how much damage experimentation with bureaucratic visions of utopia during convenient economic times can do. When reckless bets on suicidal subprime loans sparked our financial crisis, our government and financial institutions were paying homage to cheap credit and the idea of the "ownership" society in which every American, no matter his credit, could "finance" his home. And of course this idea was allowed to poison our country because everything looked good as long as home prices were going up. Similarly, the reckless bet on suicidal subprime inductees(Greece, Spain, Italy...) into the euro looked great as long as everyone could borrow forever.
2. Globalist institutions and reckless "integration" into the world economy without adequate study of the domestic costs of globalization do not serve American interests. When we were the biggest lake in the ecosystem, but still isolated by land, we could absorb drought, shocks, and runoff. Now that channels have been dug between us and every other lake, the runoff is overwhelming. I understand that America has always been vulnerable to shifts in the world economy, but it seems like we have been punished over the past decade for not realizing two things about globalization. Attempting to reap benefits by turning a heap into a web is very difficult for those who are already at the top of the heap. And in the modern age, when economic entanglements and political entanglements are synonymous, "entangling alliances" are more deadly than even President Washington could possibly have imagined.
Any others?
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Comments:
Re: Lessons from Europe
What do you propose as an alternative to integration into the global economy? Who should do the studying of the cost-benefit analysis? Do you think it should be done by the government? Should it then have the power to tell American businesses that they cannot do business abroad?
Dec '10
Re: Lessons from Europe
Bravo for daring to poke the viper's nest on No. 2.
It is not a matter of whether or not one integrates, but a matter of the terms on which one integrates. Currently our regime has a set of rules largely defined by what is good for large business interests in terms of short-term profitability. It is not written in stone that those criteria are the best for the long-term economic health of a population.
To dorkily quote Rush: If you choose not to decide, you still have made a choice.
Aug '10
Re: Lessons from Europe
We are going through a financial collapse as big as if not bigger than the stock market crash of 1929, but unemployment is 9% not 30%, GDP hasn't contracted by serious double digits, there are no bread lines and the only Hoovervilles are those set up by pampered college kids. That is globalization for you. Diversified systems are more resilient to fault than monolithic ones. We get to draw from the strength of the thriving economies when we take a hit. The real problem we have now is that stupid statist policies are being followed nearly everywhere that we face the potential of a global depression. To the extent that is the fault of globalization, it is because the system is so tough no one can believe it can be taken down that hard.
Feb '11
Re: Lessons from Europe
Globalization..,
"Unfortunately in the year 1914 the whole world was one large international workshop. A strike in the Argentine was apt to cause suffering in Berlin. A raise in the price of certain raw materials in London might spell disaster to tens of thousands of long-suffering Chinese coolies who had never even heard of the existence of the big city on the Thames. The invention of some obscure Privat-Dozent in a third-rate German university would often force dozens of Chilean banks to close their doors, while bad management on the part of an old commercial house in Gothenburg might deprive hundreds of little boys and girls in Australia of a chance to go to college."
This is from Hendrik Willem Van Loon’s book The Story of Mankind, published in 1921.
Feb '11
Re: Lessons from Europe
"It cannot be emphasized enough how much damage experimentation with bureaucratic visions of utopia during convenient economic times can do"...this is correct, however it should also be noted that excessive belief in the prediction of experts, even within the private sector, can do considerable damage. In the case of the housing bubble, far too much credence was placed in the predictions of statistical models which claimed to be able to analyze the risk of mortgage portfolios.
Basically, PhDs with IQs of 150, working with MBAs with IQs of 135, approved batches of loans which individually would never have been approved by an old-line loan officer with an IQ of 115.
Re: Lessons from Europe
It's not a question of doing business abroad(though it would be nice, as some paleoconservatives have advocated, to eliminate taxes on corporate profits earned inside the U.S. as an incentive to keep jobs here). The issue is not that we don't want to export to the EU, China, global markets, etc; of course we do. And yes, I am not the Thomas Friedman type who thinks globalization is some fantastic new phenomenon. Of course foreign shocks created domestic panics in 1914 and 1929, and America cannot realistically disengage from the world economy. My feeling is that we have sabotaged ourselves by overexposure to those aspects of the global economy that do not work(the "bad" of globalization) and not being aggressive enough to set the "terms of integration" to bias the game sufficiently to our advantage in foreign markets that DO offer opportunities(the "good" of globalization).
Edited on November 29, 2011 at 8:28pmFeb '11
Re: Lessons from Europe
Eurocrats in Brussels pushed for the common currency despite each nation having its own fiscal policies. Eurocrats knowingly let Greece lie its way into the eurozone. What was folly to many ten years or so ago is folly today and the eurozone's collapse will hurt many. The mantra of "ever closer" has become "too close, but no closer" for the sane in Europe. Wrap it up now. It will be worse the longer the charade goes on.
Our bankers were stupid enough to buy subprime paper so they probably have a lot of eurozone sovereign debt on their books as well. The problem isn't globablization, it's bad banking.