Three years into this epochal crisis and still not much light at the end of the tunnel. However we can now see what has worked – or at least taken the pressure off – and what still needs to be done.
A huge public stimulus avoided the total catastrophe and so did the other emergency behaviors that followed suit during these three years. The whole effort has been to fight fires without properly understanding their causes.
What has clearly not worked is the famous benign concept that market self equilibrium forces would balance things, that globalization would favor the West anyway because it would retain the high value jobs, not just exporting the low income ones, and that more machinery purchased would entail higher hiring. All the opposite took place.
During these three years, we have seen more consolidation, more and higher concentration of risks and wider conflicts of interest, bigger moral hazards, more misalignment and tensions between corporate management, shareholders and the general public of consumers and employees.
Europe is in a mess and, albeit a temporary increase in activity in Germany, the economy is anemic and with several real systemic risks about to bust, to say the least.
The White House economic adviser Larry Summers is now being “released”. His recipe was somewhat easy to administer at the beginning, as the immediate relief effort, but beyond the emergency it has not worked. Now America is losing more jobs than before in quantity and quality and so is the West in general.
Big payouts are still being distributed to bankers and CEOs without resolving the Moral Hazard. Governments have used taxpayer’s money to rescue these businesses “too big to fail”. Yet, the cost of this rescue was met by the honest, hard working public and by the real pillar of modern times: the small and medium enterprise. And at the same time we see widespread and major public spending cuts, with unemployment reaching extreme levels – most affecting those who underwrote the rescue of the banks.
Can all this be politically justified especially in absence of an overall balancing and comprehensive plan? It surely is the responsibility of policy makers to create a plan to fix things permanently and to recreate employment and sustainable growth.
Something must be in the way: it seems that there is a misalignment of interests, an evasion of responsibilities at all levels and between different countries, which makes the entire West incapable of moving forward: “They are fiddling while Rome burns”.
The results of this inaction, or lack of coherent action, could be fatal and we should brace for a rough winter. As only a few commentators notice, no systemic, organic and overall plan has been promoted, while it appears evident that new comprehensive ideas, competence, technology and proper communication of a general strategy, are really necessary as we outline in our plan: “Operation Direct Growth”
This is the time for leadership beyond the boundaries of party politics and it is an opportunity to make a mark on history.