Growth: Talking the Talk and Walking the Walk

21 May 2012

Monday


OK. So the G-8 summit at Camp David has concluded with an official communique, a declaration laying out the agenda of member nation-states, with the top agenda item (nos. 2 through 9) being “The Global Economy.” There is scarcely a word in the document that is not hedged. Even in the title to this section we have an equivocation, since by “the global economy” the G-8 really means their concerns about the Eurozone — whether Greece will leave the currency union, what follow-on contagion effects such a Greek departure might have, whether there will be a run on European banks, how much the Eurozone economies will contract as a result of the financial crisis, and whether market pressures will also force Portugal, Spain, Ireland, and possibly even Italy out of the Eurozone.

The G-8 declaration talks the talk of growth. Indeed, it talks a lot about growth. The word “growth” appears ten times in sections 2 through 9. The G-8 has even seen fit to include such dispensably obvious nostrums as, “Our imperative is to promote growth and jobs.” If you have to say it, you’re probably already in trouble. And in fact we know that the Eurozone already is in trouble. The bill has come due for 67 years of welfare state largesse, which means that two or three generations of Europeans have been raised up in the belief that they are entitled to a cradle-to-grave social support network, regardless of consequences or conditions.

Here are some further unsurprising declarations from the G-8 declaration:

“…we commit to take all necessary steps to strengthen and reinvigorate our economies and combat financial stresses, recognizing that the right measures are not the same for each of us.”

“We welcome the ongoing discussion in Europe on how to generate growth, while maintaining a firm commitment to implement fiscal consolidation to be assessed on a structural basis.”

“We all have an interest in the success of specific measures to strengthen the resilience of the Eurozone and growth in Europe.”

There is a sense in which it is almost comical to engage in public rhetoric of growth while the Eurozone economies are shrinking because of the financial crisis and the greatest worry is stopping a run on the banks, but if it is comical it is black humor and no laughing matter.

What exactly does “growth” mean in this artfully vague declaration by the G-8? “Walking the walk” of growth might mean Keynesian-style financial stimulus, in which governments would undertake to spend money (perhaps on “shovel-ready” projects) in order to “kick-start” the economy by the influx of money, jobs, and economic activity. It might even mean the economically largest nation-states in the Eurozone — Germany and France — using their money for economic stimulus in Greece, Portugal, Ireland, Spain, and Italy. And how long would such a practice be expected to continue? Once you begin spending German money on Greek construction projects, where does it end? More likely, the talk of growth means Eurobonds mutually issued and mutually backed, with the proceeds ploughed into the ailing economies. These aren’t really “growth” measures; they are firewalls to contain a crisis, but they must be said to be about “growth” because the public does not want to hear about austerity.

Does anyone believe that this is really going to happen? The Eurobonds might happen, but the longer the crisis goes unresolved, the more those Eurozone nation-states with something to lose will hesitate to throw good money after bad. And since there is a tendency to kick the can down the road rather than to take decisive action, things can easily go from bad to worse, making it look like marginal Eurozone members are clearly not worth saving, and even more clearly not worth sacrifices on the part of another nation-states and their peoples.

So what is really going on here? Under pressure from vacuous protests from people who are angry but have no ideas that will move the debate forward, no constructive policy prescriptions, and no agenda beyond an economic cri de cœur, the heads of state of the largest and wealthiest nation-states in the world today have issued a vacuous declaration. This is, in short, a feel-good measure — tit-for-tat vacuity.

However, dangerous illusions are perpetrated by vacuous protests and vacuous declarations intended to mollify vacuous protests: the idea that government declarations can create jobs or grow the economy, the idea that government services can expand while tax revenues fall, the idea that no one need suffer in an economic downturn, the idea that someone or some institution is to blame for the business cycle, and that by punishing the malefactors that the body politic can be made whole again. This is not an exhaustive list.

The most obvious and most dangerous illusion is that talk can substitute for action. There is a very old phrase for those who will not be honest about their public pronouncements: crying wolf. What happens when you cry wolf too many times? No one pays attention when there really is a wolf at the door.

If you prefer a Biblical reference to a fairy tale, I can cite Jeremiah 6:14, where the prophet says, “They have healed also the hurt of the daughter of my people slightly, saying, Peace, peace; when there is no peace.” Our politicians today say growth, growth when there is no growth, and there is no prophet who is apparently willing to speak truth to power in this respect, despite the superficial currency of that slogan (i.e., “speaking truth to power”).

Finally, if you prefer classical antiquity to fairy tales or Bible prophets, I can cite the famous passage from Thucydides about corruption of language that came from radicalization during the Peloponnesian War:

“Words had to change their ordinary meaning and to take that which was now given them. Reckless audacity came to be considered the courage of a loyal ally; prudent hesitation, specious cowardice; moderation was held to be a cloak for unmanliness; ability to see all sides of a question, inaptness to act on any. Frantic violence became the attribute of manliness; cautious plotting, a justifiable means of self-defence. The advocate of extreme measures was always trustworthy; his opponent a man to be suspected.”

Though we face no war like the Peloponnesian War, we see that under the political pressure of the economic crisis in Europe that words are forced to change their ordinary meanings. Dishonesty and the degradation of language have follow-on effects every bit as severe as austerity measures: it becomes impossible to discuss the economy honestly, impossible to tell people what they need to hear, and difficult if not impossible to act decisively when decisive action might make a decisive difference.

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Grand Strategy Annex

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