Muddling Toward Mediocrity
The Euro-zone deal, like the ObamaCare decision, continues the slow, damaging drip of pain-avoidance.
If there was any recent political decision more opaque than Supreme Court Justice John Roberts' tortured-if-fascinating majority decision upholding the Affordable Care Act, it might be German Chancellor Angela Merkel's sign-off Friday on a 120-billion Euro "growth pact" that will effectively insulate Italy and Spain from their own high borrowing costs by injecting money directly into their banks from a new European bailout fund. As Reuters delicately phrased it, "Agreed in Brussels, the details of how this new authority will work, what powers it will have and which banks it will supervise remain murky."
Walter Russell Mead, to name one transatlantic commentator with consistently interesting insights, declared that these two major and obviously flawed acts of crisis management nonetheless represented a clear victory for the United States' constitutional, democratically accountable system over the European Union's undemocratic technocracy. In Europe, Mead wrote, "there are no institutions that are capable of coming to grips with the currency question. Meeting after meeting is held, no real agreement is reached. Neither the EU Parliament nor the Commission nor the heads of government meeting in summits has the power or a method to decide. Europe is trying to write a constitution even as it works desperately to stave off an economic collapse."
Even if Mead is right about superior American institutionalism, the two compromises share an enormous commonality: They both find a way to ratify the status quo in favor of statism, while putting off the hard decisions that are being foisted upon policymakers by the nonpartisan cruelty of welfare-state mathematics. The political representatives (I won't call them "leaders") of what is decreasingly referred to as the "West" are locked in a cycle of pain-avoidance, upping the dosage in the drip rather than addressing the long-diagnosed disease in the host.
For those of us who have spent decades warning that entitlements will eventually crowd out most other forms of government expenditure (eventually necessitating ever-higher taxes and debt loads), events like those of last week are licenses for apocalyptic grumbling about looming fiscal catastrophe. Reminding people that we're just one crude external shock away from a runaway debt spiral helps focus the attention, while indulging the universal taste for drama.
But the lived-in reality may be a good deal more boring than all that: a slow leak rather than a sharp slap. As long as the United States and the European Union remain–by far–the largest, most successful, and most liberal blocs in the world, they will likely get to skate above the worst potential consequences of their actions. Thomas L. Friedman fever-dreams to the contrary, China won't be catching up to the U.S./EU lead during any of our lifetimes; the yuan is hardly poised to become the globe's reserve currency. Even better-governed countries such as Switzerland have felt compelled to bend their own monetary policies to accommodate those of their larger, more reckless, cousins.
So if not a clarifying debtpocalypse, what might the future look like on either side of the Atlantic? I'm guessing much like on either side of the Pacific.
In one corner stands Japan, now contemplating a third consecutive "lost decade." The once unstoppable economic powerhouse has been mired in a mild, post-bubble economic malaise for an entire generation, as successive bank bailouts and stimuli failed to jump-start meaningful growth. It's still a pleasant place to live, particularly if you're old, but every year people's sights just get set a little lower. American President Barack Obama, despite explicitly warning against creating another "lost decade," has nonetheless pursued many of the same policies, and produced an economic track record as bad as any modern president's.
But I think the more likely scenario is the one being played out in California: dreary, internecine battles over a shrinking revenue pie, while potholes deepen, libraries close, population stagnates, and lousy political results of all types—unemployment, deficits, even government itself—receive the apologetic prefix of "structural." The kind of place where the largest municipal bankruptcy in the nation's history is greeted with a lecture by the state's largest newspaper to avoid "finger-pointing."
Sure, California (like Japan, and Europe) will always be a comparatively nice place to live. But as long as the rich world keeps reacting to its predictable calamities with evasion, can-kicking, and ever-creative bouts of muddling through, the best-case scenario will be a slow erosion of the very dynamism that made us rich enough to get away with mistakes. This is not the 21st century we signed up for.
Matt Welch is editor in chief of Reason magazine and co-author with Nick Gillespie of The Declaration of Independents: How Libertarian Politics Can Fix What's Wrong With America, now out in paperback with a new foreword.