gracchusdixit

The global economy is in a strange state, more like a stuporous dream than a reality.  The powers-that-be—the politicians, the bureaucrats, the technocrats, the so-called economic experts—stumble on, like sleepwalkers, as if the worst were behind us.  The reality is that we are tottering at edge of an economic cliff far steeper and much deeper than the so-called “fiscal cliff” we’ve heard so much about.

Here, in the United States, we have been lulled into thinking that our economy, if not entirely well, is at least getting better.  The housing market seems at long last to have turned a corner, unemployment (though still terrible by historical measures) is less terrible than it was, and the profits of American corporations are booming, pushing the financial markets to new highs.

These calming signals are deceptive:  the wages of ordinary Americans are stagnant, millions are still underwater on their mortgages, and millions more have given up looking for work—which, perversely, is one of the reasons the unemployment statistics look better.

Even the rosy profits of American corporations are deceptive. For all too many corporations, profits are up while sales and revenues are down.  Which means that costs (a.k.a., wages) are being squeezed mercilessly.

The much greater problem, however, lies in Europe.

In recent years, we have been inundated with talk of the booming economies of Asia, in particular of China and India.  For all this talk, the reality is that the 27-member European Union comprises the largest economy in the world, larger than ours and much larger than that of any Asian nation or region.  And the more sobering reality is that the European Union has never recovered from the financial collapse of 2007-2008.  Indeed, many of its members are in the most severe economic distress since the Great Depression.

Spain, Greece, Ireland, and Cyrus are experiencing, not cyclical recessions, but what appear to be deep and and irremediable depressions.  In Spain alone, more than 25 percent of the population are unemployed, and the figure is much greater among the country’s youngest citizens.  Other EU members are approaching the same abyss. Those on the brink include the United Kingdom and Italy, which have, respectively, the third and fourth largest economies in Europe and the seventh and eighth largest economies in the world.  If these countries lapse from temporary recession into permanent depression, the consequences for the rest of us will be grave.

There is little doubt that, if Europe does not recover soon, it will drag the rest of the global economy down with it.  The EU is so large, and its problems have such sweeping consequences for the rest of the world, that all our fates depend upon it.

There is, unfortunately, little sign that the steps taken thus far by the world’s economic institutions—the European Central Bank, the International Monetary Fund, the World Bank—are having any positive effect in reversing the situation.

Nor is there any prospect that Asia’s two economic powerhouses, China and India, are capable of making up for Europe’s faltering economic outlook.  China  remains a totalitarian state where the government is free to cook the books and economic transparency is non-existent.  India, for all its undoubted innovativeness and growth, is riddled with corruption and waste.  Neither of these countries is ready to lead a global economic recovery if Europe fails.

For the world to prosper again, Europe must therefore take the lead.  And to do that, its leaders must abandon the failed economic theology that has created political gridlock not only there but here in the United States:  a theology that says slashing budgets, lowering taxes, and paying off bank debt at the taxpayer’s expense will somehow make things better.

In Europe, the main evangelists for this theology are the conservative governments of Germany and the United Kingdom, which continue, in a latter-day brand of Protestant fervor, to insist that “austerity” will bring us to the promised land.  This fervor has little to do with reality and much to do with prejudice.  The Germans and the British love to bask in their contempt for the “irresponsible” behavior of southern Europe, the “lazy” Spaniards, Italians and Greeks and, yes, even the “lazy” French.

What they are not willing to acknowledge is how much their own good fortune derives from their membership in the European Economic Union or, in the case of Germany, its membership in the smaller club of nations that adopted the euro as their currency.  Germany has become rich because of the euro, and without the euro, Germany’s economic preeminence would evaporate.  Now, when the euro is under pressure, it may be time for Germany to return the favor, if only to secure its own self-interest.  If Angela Merkel ever decided to be honest with her electorate, that is what she would have to tell them.  But that, of course, will never happen.

Not will it happen that the Tory Prime Minister of the United Kingdom ever stands before Parliament to admit the utter failure of his economic regime of slash-and-burn austerity, which has done nothing to reverse the downward spiral of the British economy.  The more such policies fail, the more adamantly such people insist on their rightness.  Such people are, in the end, ideologues, like their Republican counterparts here in the United States.  To such people, reality, fact and evidence mean nothing; ideology, and theology, mean all.

This intellectual blindness would be sad in and of itself, if it were not for the much sadder fact is that these ideologues are willing to sacrifice the well being of their fellow citizens on the altar of their theology.  If, because of their blindness, millions of people around the world are made to suffer when the global economy finally does comes apart, may God forgive them.