UPDATE: The publication of this column by Amity Schlaes adds a bit of prophecy to my concerns expressed here.
Will 2013 be 1937? This is the question many analysts are posing as the stock market has dropped after the U.S. election. On Nov. 16, they noted that industrial production, a crucial figure, dropped as well.
In this case, “1937” means a market drop similar to the one after the re-election of another Democratic president, Franklin D. Roosevelt, in 1936.
If I could be more worried about the future, this column might do it. Read it.
Russ Douthat’s column in the NY Times today points out a few problems with the left’s gloating about winning the election. I apologize for my pessimism but I can’t help looking at the facts beneath the surface.
The first comment beneath this article confirms my belief that the left ignores economics and is solely concerned about social issues and “stuff.”
The ideas that Republicans championed in the last election could have easily been heard at a segregated lunch counter in the ’50s. Suspicion about immigrants, fears about socialism, the subservience of women, back-of-the-bus-style racism, and disgust at the very thought of homosexuals were cornerstones of the Republican ethos. If there was an underlying wholesomeness in their belief in God, family, and tradition, I couldn’t detect it over the din of hateful, destructive rhetoric aimed at the majority of ordinary Americans.
The re-election of Barack Obama has ended the possibility of a serious effort to deal with out of control spending and debt in this country. The “fiscal cliff” is coming soon and there is speculation that one side or the other will “cave” in negotiations. It doesn’t really matter as no serious proposal is under consideration. The tax rates on the top 2% of incomes don’t matter. It’s not worth the trouble for Republicans to defend these tax rates for a group that may not even vote for them.
The whole world cartel of spending is coming to an end and it may not just involve national bankruptcy. It may be the end of an era, maybe of democracy which seems to be incapable of managing debt. An article in Der Spiegel sounds to me like a prediction of the future.
In the midst of this confusing crisis, which has already lasted more than five years, former German Chancellor Helmut Schmidt addressed the question of who had “gotten almost the entire world into so much trouble.” The longer the search for answers lasted, the more disconcerting the questions arising from the answers became. Is it possible that we are not experiencing a crisis, but rather a transformation of our economic system that feels like an unending crisis, and that waiting for it to end is hopeless? Is it possible that we are waiting for the world to conform to our worldview once again, but that it would be smarter to adjust our worldview to conform to the world? Is it possible that financial markets will never become servants of the markets for goods again? Is it possible that Western countries can no longer get rid of their debt, because democracies can’t manage money? And is it possible that even Helmut Schmidt ought to be saying to himself: I too am responsible for getting the world into a fix?
The answer will not be pleasant to consider. We may have run the course on modern national financial competence. Japan, twenty years ago, was a warning we did not heed. Stimulus, as in spending billions on infrastructure, did not work. Japan had a real estate bubble and the response was to try to reflate the bubble. It failed.
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