Saturday, November 22, 2008

meanwhile in the rest of the world . . .

One of the interesting post-election questions is whether an Obama Administration will make the United States "more like the rest of the world," either in the positive sense of bridging gaps or the negative one of imposing "European-style socialism" on the American economy. Both sides of the argument may want to take another look. As it happens, the rest of the world is becoming more like us, and some of the remaining differences (socialist and otherwise) are making things worse rather than better.

A case in point: the cover of this Friday's Yediot Aharonot, the largest Israeli newspaper, carries a banner headline reading "After the Crash: A Safety Net," saying that following the latest decline in the Tel Aviv Stock Market--and notwithstanding an existing emergency program--the Government is considering further steps including additional protections for retirement and pension funds and further interventions in the market itself, which has lost about half its value in the past year. Last week's cover carried a story about a woman who had lost a menial job and could no longer support her family (her husband was disabled, as I recall, and the children were too young to work). Headlines in Italian newspapers were more or less similar. Nor is the problem limited to "small"countries: an article by Joshua Kurlantzick suggests that the current economic crisis could bring down the whole Chinese Government, which has made an effective bargain with its people to accept authoritarian rule in return for economic prosperity, and is now failing to deliver on its half of the bargain.

One obvious danger here is that the new Administration--at the same time it must cope with domestic difficulties--will face a rash of foreign challenges from countries in even worse shape than we are. Economic depressions do not usually make for international stability (see 1930s), and the combination of internal and external problems will give the Obama team very little margin for error.

Another, perhaps more profound point concerns possible remedies. Many of the suggestions being made to fix the American economy involve incremental expansion of the Government's role in the economy: national health care, better unemployment benefits, a Government role in the management of large corporations. But most other countries already have these features and they are suffering anyway (although to be fair Israel has reduced its safety net considerably in recent years). Whether intended as a goal or an insult, "European-style socialism" is unlikely to resolve these problems.

My own view is that we face a much bigger crisis than most people realize and that the prescriptions of both the mainstream right and left are unlikely to address it very effectively. In this I agree, oddly enough, with Paul Krugman of the N.Y. Times, an unabashed leftist who has called on the Obama Adminstration to be bolder rather than more cautious in its approach to the economic malaise. But Obama's entire direction, to judge from his cabinet picks, appears to be largely cautious and conventional. It may be that he is simply outsmarting his opponents (yet again) and building a consensus for more radical steps. But is it also possible that he is what he increasingly appears to be--a well-meaning but essentially elitist technocrat--and that things will only get worse on his watch? Herbert Hoover, it should be remembered, was considered among the best-prepared and most popular people ever to assume the presidency. It didn't quite work out that way.

NOTE: Obama announced today that he would favor a large stimulus package, designed to create up to 2.5 million jobs, but the details of the package--tax cuts, infrastructure spending, and a proposal to create more "green jobs"--sound more like a laundry list of existing proposals than anything having much to do with the current crisis. Vedremo (we'll see).--MAL


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