Global Crisis/Innovation Blog 

Four Dilemmas: Some Thoughts on Solutions

By Shlomo Maital   

 In the previous blog, “Four Dilemmas”, I asked readers for solutions to four sticky problems. Here are some of mine. 

1.  Point: Americans are drowning in debt;   

     Counterpoint: But the weak economy needs people to spend, not save.  

     Solution:  Almost obvious.  Encourage people to save.  Mobilize those savings to buy infrastructure bonds, to finance new airports, roads, fast trains, schools, and cheap world-class broadband (America lags pitifully in this area, far behind South Korea).  Investment can supply the demand. The bonds will pay good interest, because the social return on infrastructure is known to be high.   America’s infrastructure is woeful. Put resources into future-oriented investment, not wasteful needless consumption.

2.   Point:   Greece cannot possibly pay even half of what it owes.  

   Counterpoint:   But if Greece does not pay what it owes, EU banks will take a huge hit. 

   The EU’s brilliant solution is to ask China for money (100 b. euros!).  China’s per capita GDP is about $3,000.  Europe’s is about $30,000.  What a perfect idea. Borrow the funds from those ten times poorer, to solve a problem you yourself created.   There must be a better way

3.  Point: America’s weak economy needs huge amounts of dollars to be pumped into it, as it is on life support, to keep interest rates low.

     Counterpoint:  But the buckets of dollars pouring into the world are weakening the dollar, eroding its stability as the world’s currency.   

   Solution:  a Global Central Bank, creating a world currency, on the Three Bears principle:  not too much of it, not too little of it.  If a central bank makes sense for America, Europe and China, why not for the world?

  4.  Point: Democracy is an intrinsic good, an ‘anchor’ value. 

      Counterpoint:  Yet democracy continues to elect incompetent politicians. And they’re getting worse.   

  Solution:  The Singapore approach. Singapore’s Prime Minister and ministers are more highly paid than senior CEO’s.   This is not about the money; it is a signal to young people, that leading your country is valuable and important.  Obama is paid less than a junior manager in GE.  If America believes in capitalism, why doesn’t it practice it?  America’s “business” has $15 trillion in annual revenue. Pay its “CEO” (President) commensurate with the size of the business.