I was having an interesting email exchange with a smart person this morning which, in the interest of killing two birds with one stone, I've decided to turn into a post. My correspondent wondered why there was an international move to neo-Hooverism considering the differences in cultures between the various European countries and the US. I replied with a somewhat glib and facile response about disaster capitalism and Pete Peterson, and he pressed for a reason why the rest of the world is on the same bandwagon, especially considering their more generous history with the welfare state. (He also mentioned that Tim Geithner was surprisingly Keynesian at the G20.)
After thinking about it for a bit, I’m not sure the same phenomenon we see here isn’t happening internationally. It’s an article of faith among financial elites across the planet that the welfare state is an abomination and this is a global opportunity to end it. Each culture will deal with it slightly differently --- riots in Greece, marches in France, blog posts in America. But in the end, the result, short of revolution, will be similar everywhere --- the post-war welfare state will be weakened or destroyed. The left is barely relevant anywhere anymore and they simply do not fear any kind of serious populist uprising. I’m not suggesting conspiracy. I think it’s more of a natural result of ideological capture.
I just saw this exchange on CNN between Ali Velshi and some hedge fund manager. They were discussing whether Europe’s woes could come to America:
Hedge fund manager: It all comes down to debt --- if you believe that you can solve the problems that are anchored in debt with more debt… At the end of the day America’s debt to GDP ratio is exactly like Greece. And anytime we have an issue like today’s jobs report, what is the answer? More government, more government spending. Which is going to keep pushing that deficit higher.
Velshi: Hold on hold on hold on. What are you talking about? When you have a jobs report like this week’s there’s got to be more government spending. Where did you hear that from? We’ve been discussing it endlessly and that’s not been anybody’s suggestion.
Velshi was the vociferous defender of government there, insisting that nobody in their right minds was talking about more government spending to create jobs. That’s the limit of our discussion. I know that this is braindead American TV, but I see little appetite to challenge that CW among elites anywhere.
As for Geithner at the G20, I’m guessing that at a minimum, they may see the efficacy of maintaining some flexibility. Their magical thinking hasn’t gotten them to where they hoped it would ---the market hasn’t “fixed itself” at least on terms that are politically sustainable --- and so perhaps they are seeing this as a long term challenge instead of a short term cyclical crisis. I don’t know. But aside from the inadequate stimulus, everything they have said up to now is in service of the hoary old Hooverite ideas about belt tightening and sacrifice even down to giddily announcing they are going to reform social security the "right way." The re-institution of Paygo, the deficit commission, the constant lip service to austerity has led to a validation of the erroneous idea that deficits are causing our economic problems and that government needs to hold back spending to fix them --- when the opposite is true.
I think it's easy to over think this. The world economy is unstable for myriad reasons. But the reasons for insisting on austerity are fairly obvious. The question is whether or not people will see through this or not. Disaster capitalism depends upon the people being confused and stressed for its success. (In that sense, rioting in the streets may actually help them.) And all over the world right now, with the rapid change from globalization and resistance to modernity in general, there is a tremendous amount of social stress and cultural upheaval on top of this economic downturn. It's the perfect time to strike.