A WORLD ADRIFT

BLOG #43, SERIES #6
WEDNESDAYS WITH DR. JOE
A WORLD ADRIFT
October 28, 2015

Once, very long ago, we had Pax Romana, which lasted for a very long time. If you include the Eastern Byzantine Roman Empire, it lasted well over a thousand years. Then came Pax Britannica that lasted over a hundred years. It was followed by Pax Americana—it has lasted about a hundred years. But now that America has all but abdicated its role of global peace-keeper, the proverbial Pandora’s Box has been opened with a vengeance.

Up until recently, a system of global alliances, anchored by the authority and credibility of America, has helped keep the world from ripping apart. Not so today: Hardly any nation seriously believes America cares much about anyone other than itself any more. Result: Russia has stormed into Ukraine—and now Syria; America is retreating from Iraq and Afghanistan; and is permitting China to challenge it across the Pacific. The Middle East is in shambles and millions of displaced people are overrunning the nations of Europe. Europeans assumed national boundaries meant something—but when people are starving, nothing short of wholesale slaughter will stop them from their desperate search for a better life.

In history, democracies have rarely lasted longer than two centuries. Now many are wondering whether or not the same will hold true for America.

In economics, if global trust breaks down, nothing will be able to save the global economy.

If we ever needed God before, we certainly need Him now.

A Trembling World, Part Two

 A TREMBLING WORLD
 Part Two

 WEDNESDAYS WITH DR. JOE

In earlier blogs, I have referred to my own fascination with the turning of zeroes, how every fin de siecle results in a fruit basket-upset of all the values by which society lives.

Well, the last eleven years have proved that my assumption remains valid.  Almost nothing is the same as it was back in the 1990’s.

For one thing, never before has our planet been more interconnected, with national borders meaning less than today.  The world wide web has nailed the lid on that old order.  Thanks to this web, dictatorships are falling like so many dominoes in the Middle East.  But what takes their place is anyone’s guess.

Perhaps the supreme question is this: Is democracy possible in the Muslim World?  Or does the theocratic nature of Islam preclude the establishment of a true democracy.  As I write these words, thoughtful Egyptians are extremely apprehensive about what may follow Mubarak.  No one knows if Tunisia is capable of establishing a free society.  The same is true of Libya.  Turkey has been tilting backwards from a secular free society towards theocratic governance.

What we do know is that all across the Middle East there is a yearning for the freedoms we westerners take for granted.

STAGGERING TOWARDS A NEW TEMPLATE

What is coming at us, no one knows.  All we know is that there are ominously deep cracks in the old one.  According to famed economist, Kenneth Rogoff, “Europe and the U.S. are not experiencing a typical recession or even a double-dip Great Recession. That problem can ultimately be corrected with the right mix of conventional policy tools like quantitative easing and massive bailouts.  Rather, the West is going through something much more profound: a second Great Contraction of growth, the first being the period after the Great Depression.  It is a slow-or no-growth waltz that plays out not over months but over many years. [Quoted by Rana Foroohar, in “The Decline and Fall of Europe (and maybe the West),” Time, August 22, 2011].

In the U.S., as elsewhere in the world, what is desperately needed is not politicians but statesmen: men and women who put the good of their country over mere re-election.  In times like these, weakness at the top will inevitably prove fatal.  Not a temporizing Chamberlain but a Washington, a Lincoln, a TR or FDR—a Winston Churchill.  This is why so many current “leaders” are going to be “weighed in the balances and found wanting.” (See William Broyles “Oval Office Appeaser” (Newsweek, Aug. 22, 29, 2011).

Foroohar is anything but optimistic in her analysis: “The euro is the only viable alternative to the dollar as a global reserve currency.  The British pound is history, and emerging-market currencies are still too small, volatile and controlled.  And while plenty of investors are fleeing into gold, the world gold market isn’t big enough to accommodate serious dollar diversification without massive inflation in gold itself. . . .  It is unclear at this stage whether the euro will even survive the debt crisis that has engulfed Europe, one that is in many ways worse than the one we’re experiencing in the U.S.”

So, will Germany be the white horse that rides to Europe’s rescue” Foroohar is doubtful: “Even in good times, it is never easy to balance the fiscal needs of a high-cost exporter like Germany with those of cheap and cheerful service economies like Greece, Spain, and Portugal.  In bad times, it’s impossible.”

What about the U.S., are we likely to be the white horse again like we were after World Wars I and II?  Foroohar’s assessment of that likelihood is bleak: “both Europe and the U.S. will continue to struggle with the crisis of the old order.  Populations will have to come to terms with no longer being able to afford the public services they want.  Investors will have to cope with a world in which AAA assets aren’t what they used to be.  Businesses will deal with stagnating demand, and workers will face flat wages and high unemployment. . . .  It’s the end of an era in which the West and western ideas of how to create prosperity succeeded.  The crisis in Europe and the challenges yet to come on either side of the Atlantic take us into a whole new era.”

So, with Japan still reeling in the East, does that leave China as the answer?  Not likely.  China’s current growth rate of 8% will inevitably stall, and ominously its people are pouring billions into a housing bubble that may be even worse than those experienced by Japan and the U.S. (See Niall Ferguson’s “Gloating China, Hidden Problems,” Newsweek, August 22, 29, 2011).

So what are our options?

Next Wednesday, we’ll discuss some of them.