Thursday, August 11, 2011
World at a Tipping Point
While this extra hot summer appears to be adding to the problem it can feel some days as though we are all losing our senses. Maybe it is the heat-maybe it is living in Washington but the US seems right now to reflect the world's self destructive mood as its leaders failed to rise to the challenge of the time and focus on the right issues--job creation and not short term deficit reduction. Perhaps it takes an outsider like former PM Gordon Brown writing an op ed in the Washington Post to nail just how bad the latest US debt deal was:
"At the core of Washington’s debt decision last week were four “no-go” areas for policy: no more taxes, no more stimulus, no more public investment and no more cuts or increases in entitlement spending. Under these politically imposed constraints, growth from consumer spending and public investment is blocked off. With little chance of private-sector investment in a stagnant home market, America has locked itself into a low-growth cycle for years to come."
We did it to ourselves and now the only hope for the global recovery--that stands in the way of the double dip recession that the debt crazed Republicans seem to have welcomed with their threats of bringing about default if their demands were not met (is this is the only strategy they can come up with to defeat Obama in 2012 one wonders?)
Gordon Brown's solution is --"to export our way to growth"--which is exactly the strategy of every other country--in the world--including China, Germany, and the rest. We cannot all export without someone importing all the stuff we produce and that is why Brown hangs his hopes on the G-20 meeting later in the year coming out with some kind of grand bargain, but:
".. without a grand plan, the “export or die” strategies look like a zero-sum game..Is it possible to find a pathway to balanced, sustainable growth in a world that cannot sign a global trade agreement or a climate-change agreement (despite the fact that it would have stimulated billions of trade in renewables) and where the instincts of protectionism and nationalism are far more powerful forces than the imperative for global cooperation?"
We have to hope that the world that has been driven near to the brink by greedy bankers and their aiders and abetters among the political class will finally come to their senses. The media has to stop playing court to spin doctors and rise to the challenge of explaining to people the stakes since the politicians seem incapable of even telling simple truths that tax cuts will not do anything to create the new jobs we need in the quantity we need them and that taxing billionaires at a rate above the level that their secretaries pay is not some form of class war but a reasonable effort to create a fairer and more equal society. But as long as the media paints these ideas as extreme we will not make much progress. At some point we all need to focus on the real issues that long term unemployment and the sense of hopelessness among the youth is far worse than any short run deficit as it undermines social stability. You don't have to take a look at the London riots for examples just take a tour around any major or minor American city in the mid west's rust belt and you can see the devastation this kind of economy takes on people's lives and hopes. Let's hope that we come to our senses before it is too late.