The Crux of the Problem: Global Mess, Local Politics
By Shlomo Maital
Why is it taking the world (G7, G8, G20, G284) so long to sort out the financial and economic woes afflicting it? Here is one very simple explanation:
Global troubles. Local politics.
Each country pursues its own interests, ignoring mostly the interests and troubles of other nations. Why? In order to get re-elected, which is the primary goal of politicians.
Take for instance Chancellor Angela Merkel. She is up for re-election in September. She will doubtless win a third term. Why? Today’s Global New York Times (“Germany comes first for Merkel as vote nears”, June 28, p. 1) quotes a German expert:
“…political circles, particularly in the ministries and the Chancellery, say, ‘We know what the financial markets expect of us—but we are not elected by them…..what the Bundestag, or German Parliament, permits, is what we execute.”
And the German Parliament permits what the German voters want, which is – fewer or no bailouts for incompetent spendthrift irresponsible budget-busting southern European governments.
Don’t blame Merkel and Germany. America and Obama do precisely the same, as does Cameron and Britain, Hollande and France (in growing disagreement with their German neighbors), and every government I know, except those headed by the late Mother Teresa, and there are no such governments.
Global woes, local politics. Is there any way to resolve this dilemma?
CALL it a trifecta
One could quibble with the details (why 7% and not 7.1% or 6.9%) but there is an underlying logic that is easy to appreciate.
Bill White was warning about the dangers of this approach at the BIS well before the crisis; he has an excellent update here.