More of the same (and more)…

Blogging is a great opportunity to comment on the news of the day.  But what happens when the news simply repeats?  Here are some headlines that are basically unchanged for the last two years:

Casualties mount in Syria’s civil war.

US decides against major support for rebels in Syria.

European economic growth slows, dips into recession.

European leaders continue to hold the course on austerity measures.

Inequality grows in the US, other developed economies; trends remain negative for long-term unemployed and labor force participation.

Governments in developed countries focus on government debt as their major fiscal policy issue.

You have to wonder — how long before the more of the same gives way to some pent-up explosion of demands for change?  In the US, most trends (excepting inequality) have stopped getting worse for most people.  So it will likely take a new shock for popular anger to rise.  But in southern Europe things ARE continually getting worse.  So there the question is which country will see its people strike out first – Spain, Italy, Greece, Portugal?

Most government leaders will, when asked, say you should never just throw money at a problem in the hope of solving it.  Yet in this economic slow-down, that is exactly what they are doing — and it is working, to a point.  The Fed, the European Central Bank, and the Bank of Japan have been printing and distributing trillions of dollars their banking systems, in the hope that this will ignite growth.  Have they undertaken structural reforms to invest in future growth?  Very little.  Have they focused efforts on combatting unemployment or used the tax system to limit or reverse recent trends in inequality? Nowhere.  Are buildings and bridges falling down, plants blowing up, and talent being wasted?  Everywhere.

So what can be done?  Nothing much.  Lessons to remember:  (1) Politicians take the path of least resistance.  (2) Politicians out of power will gladly tolerate problems that might help them regain power.  (3) People tend to be passive until obvious opportunities and shocks push them into action.

I still believe we are heading for a crisis, as simply printing money and throwing it at banks will not solve the problems of giant aging cohorts heading for retirement in rich countries at a time of severe state indebtedness, insolvent public pension plans, shrinking workforces and stagnant economies.  It may be another 10 years before the crisis hits, and it can be averted with reforms that will restructure future obligations and enhance future economic growth.  But if we continue on the present course, with the present behavior of politicians and people unchanged, it will come.

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About jackgoldstone

Hazel Professor of Public Policy at George Mason University
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