The economic news this morning is even grimmer than usual. In Europe, the talks on restructuring Greece’s debt have broken down; officials from the lending agencies have flown home from Athens, cancelling scheduled talks and warning the Greeks that they may lose the next $11 billion of bailout money unless Greece both makes some fresh promises and does a better job of keeping the ones it has already made.And lest anybody in America feels smug about Europe’s troubles, news that job growth in the United States zeroed out in August shows that US policy makers are as clueless and dazed as their European counterparts. As the FT described the American jobs news:
Hours worked fell, hourly wages declined, and employment in June and July was revised down by 58,000.
It is tempting to rail at policymakers in these circumstances, and certainly in both Europe and the US there is much to rail about. But in fairness to the political leadership and the central bankers trying to cope with the biggest economic mess since World War Two, we have to remember that the world’s economic problems today are unprecedented. There are no simple cookbook recipes that policy makers can apply with infallible success.The rise of export oriented manufacturing in Asia and the accumulation of vast foreign reserves in countries like China and Japan has changed the nature of global trade and finance in ways that are hard to understand. Western policy makers cannot control their Asian counterparts, and the interests of Beijing, Washington, Tokyo and Frankfurt (home of the ECB) cannot be easily reconciled and wrapped into a global policy package.The integration of global financial markets, the spread of rapid, computer enabled trading strategies, the development of sophisticated new securities products that interact with one another and the real economy in unexpected and unpredictable ways, and the emergence of new classes of sovereign risk associated with the bleak fiscal prospects of both European and American governments long term combine to create a situation in financial markets that is hard to understand, harder still to regulate or otherwise manage.Other huge changes are afoot. The demographic shift is increasing the number of retired people on pensions from China to Europe and the US — even as the number of active workers decreases or holds stable. Productivity revolutions and outsourcing are changing the nature of labor markets in ways that affect government revenue and expenses — and that make politics more difficult and contentious. Large flows of migrant workers, legal and illegal, are creating difficult cultural and political questions on both sides of the Atlantic, and internally in China.It is fun to curse our leaders and throw stones at them, but we should realize that cursing politicians will not create answers where none exist. Sometimes, cursing politicians is a way of whistling in the dark; by grumbling about how stupid and inept they are, we reassure ourselves that answers really do exist and that if more competent people were in office our problems would all be solved.I’m not sure that’s true. I do think our politicians are getting it wrong: too many on both sides of the Atlantic are trying to shore up the blue social model rather than thinking about how to move beyond it. But in fairness to them, what comes next is not so clear.From the Via Meadia perspective, God (history to the agnostics and atheists out there) is telling humanity that it’s time to get up and go. The policy ideas and political methods of past decades won’t do anymore. We’ve made a new and more complicated world; now we have to learn how to live in it.