It seems that global financial leaders are starting to recognize that there is no hope of dragging the Greek crisis along until it somehow resolves without a default. However, having spent two years getting to this point, they now need to find a solution fast, before bank panics spread.
This will be a tough week — two weeks ago Doug McWilliams gave Europe a month to solve this crisis before markets crash. Yet the crashing has begun, and now it’s a matter of days until markets either see a way out, or decide that there is no plan.
Meanwhile, the U.S. government is four days from another shutdown if Congressional leaders cannot resolve a minor disagreement over how to fund emergency responses to Texas wildfires and New England floods.
What is wrong with our leaders? The answer is — nothing. It is a story that has been repeated throughout history. I began my comparative historical and political studies motivated by one question: how do government leaders, with access to all the experts and all the knowledge their nations command, so often make terrible mistakes? Why do they so often blunder into unwanted wars, depressions, riots, revolutions?
The answer turned out to be simple. First, political leaders are politicians first, leaders second. They have spent their lives figuring out how to get into, and stay in, the offices they hold. So their instinct is always to do what must be done to win the next election.
If every leader is focused on the next election, however, then putting short-term political issues ahead of long-term national interests is wise policy. Anything else is political suicide. Term limits are designed to erase this problem, but they bring problems of their own — a different kind of short-termism (grab what you can while in power, and kick problems down the road when they will explode on someone else’s watch). Second term U.S. presidents are perhaps the only ones free of this problem, but even they are stymied by a Congress that views them as lame ducks and is concerned to do what will continue their careers, not what will hand a long-term victory to a departing President.
So here we are in the third year of a major global depression with leaders who for the last three years have been seeking short-term politically attractive options. But now those short-term options have failed to stem the economic downturn, and instead have pushed several countries into growing debt problems. We need a major, coordinated push for global refinancing, debt write-offs, and stimulus.
However, those in power the last few years are loathe to admit they didn’t do enough; those in opposition are eager to claim the leaders did too much. Neither knows how to escape the short-term political pressures to do something acceptable to their core supporters, even if that won’t solve the major problems.
So if leaders look like deer in the headlights — suddenly in the spotlight with no idea where to turn — that is why.