Forget QE2, or the talk of an impending QE3. The biggest, although most negatively charged, "stimulus program" in the world today stems from the unsavory fact that each of our main economic cultures — the United States, Europe and Asia — is culpable of talking down at least one, if not both, of the other economies. It’s time to end this global economic blame game, argues Stephan Richter.
Americans like to chide a gerontocratic Europe. Europeans, meanwhile, argue that the Americans are utterly reckless in their disregard for the environment and energy conservation. Asians, in turn, have less and less regard for either Europe or the United States, whom they increasingly see as two regions of over-indebted has-beens.
Such blame-shifting may be good for self-motivation, but not of the constructive kind. It just reaffirms our instinctive, biologically motivated interest in self-preservation — by convincing ourselves that we are better than the other guy(s).
While understandable psychologically, it is not helpful either from a biological or an economic perspective. Presumptions of one's own superiority, in nature, often cause one to let one's guard down ill-advisedly. Along with false pride, that only delays the inevitable adjustment and adaptation process.
Without a doubt, blame-shifting is far from the ideal response for a world that already finds itself in considerable trouble due to ever-increasing complexity and resource pressure. Blame-shifting — convenient, self-pleasing and stimulating as it is over the short term — actually endangers the adaptability, if not the life, of the larger system. We should all be mature enough not to depend on such sugar highs.
Let's start our inquiry with the latest "modern world," Asia. Clearly, the continent is on the move and has plenty to be proud of. And the economic dynamism that prevails there has something intoxicating about it. Here are cultures — which had been shackled for decades, if not centuries, and accounting for nearly 60% of humanity — concurrently and cumulatively eager to set themselves free and realize their full potential.
However, quite a few of Asia's strategic thinkers are intoxicated with something quite different. Call it the "441 syndrome." You see, according to the IMF, 441% (as a share of debt-to-GDP) is the predicted average level of public debt in the wealthy G7 economies by the late 2040s, if current trends continue. In other words, in order to be debt-free as governments, these countries would have to work for almost 4.5 years without spending a dime. Not a rosy prospect. And certainly not a realistic one, either.
While Asia's public debt levels are relatively low at this stage, both as a consequence of economic development and societal preferences, these countries do face major problems of their own. These include over-population in some countries, the dramatic shrinking of family sizes in others, rapid urbanization and increasing pressures on (largely non-existent) pension systems.
While it is often, poignantly, said that China will grow old before it grows rich, the same truth applies to many of Asia's largest societies, possibly with the single exception of India. Environmental and infrastructure stresses add to the complications, which — for all the economic growth potential these societies can look forward to — will add to Asia’s cost pressures and debt levels.
It does, however, have the distinct advantage, for now, of having been late to the global party, meaning that its own excesses (and debt increases) are still in the offing.
As regards the United States, many Americans pride themselves on having considerably lower tax levels than Europe, although they moan and groan under what they must pay. Half of the U.S. Congress seems to be moving rapidly to a worldview according to which any tax rate above zero is seen as destroying the American Dream.
The equally important questions — What do the taxes Americans pay buy them? And who benefits? — are getting short shrift. The U.S. tax code, contrary to the widespread belief in the United States itself, is actually quite tough on poor people, and quite generous in spreading around benefits (such as the home mortgage interest deduction) to the haves of the middle and upper middle classes.
The anti-tax mood is colliding head-on with a severely stunted U.S. infrastructure, which is drawing on the last systematic investment effort made under the Eisenhower Administration 60 years ago.
The United States, at this juncture, demonstrates less the economic than the cultural limits of accumulating public debt. One would expect that a society with so much physical space and (past?) dynamism as well as human resource potential ought to be able to make significant investments in its own future. Interest rates are certainly low enough to justify such expenditures.
And Europe? There, some jigs that have been playing out since the Middle Ages, or so it would seem, are up. Italy, for one, needs to shed both its duce complex, as well as its tendency to be too clever by half (and pickpocket itself via such niceties as tax evasion).
The continent as a whole needs to end the self-service mentality of much of its public service, which — even in presumably efficiently run countries like Germany — has gotten out of hand. It's not so much the costs of civil servants and public employee services that are devastating, but the sheer number of these individuals who then specialize in inventing, or expanding, procedures to justify their own (continued) existence. That doesn’t stimulate the already weak economy, but strangulates it.
In short, there is plenty of blame to go around. As an immediate first step, the rather infantile practice of blaming the respective other two forces in the economic triad for their shortsightedness and stupidity ought to be brought to an immediate end.
Any efforts to play the blame game are entirely misleading. In the end, we all have to work through similarly tall, although quite differently structured, mountains of problems.
Hence, the only stimulus program that will ever resuscitate domestic economies, as well as the global one, is this time-tested maxim: Anytime one points the finger at somebody else, three fingers point back at oneself. That is excellent advice for making real progress when it comes to global problem management.