How governments failed the global economy
Kai Ryssdal: So here’s a thought: What if — and bear with me here — but what if this whole presidential campaign, on both sides of the political aisle, was all for nothing? Economy-wise, I mean.
Because really, if presidents or governments could do something to fix the global economy, don’t you think they would have already? Alan Beattie is the author of a new book called “Who’s in Charge Here?: How Governments Are Failing the World Economy.” He’s also the international economy editor for the Financial Times. Good to have you with us.
Alan Beattie: Good to be here.
Ryssdal: Let’s test the premise here, right? Because the subtitle of this book is “How Governments Are Failing the World Economy.” And granted they are, because we’re still in a global recession — Europe has its problems, America is slow. What, though, specifically aren’t governments doing right?
Beattie: In Europe, the way the dominant — that’s for the sake of brevity, call it Germany — the dominant mode of thinking in Europe with to do with the eurozone crisis is this is all a crisis of profligate governments, as in governments spending too much. In reality, with the odd exceptions of countries like Greece, which is actually a bit of an outlier, most of the eurozone crisis is not really to do with profligate governments. Ireland and Spain went into the crisis with very low government debt. It’s all to do with credit bubbles and reckless banks lending against rising housing markets on the periphery.
Ryssdal: It’s tough to argue with the basic premise, that governments are failing the world economy, because if they were doing the right thing, we’d be in a different place economically. The question, though, is: What’s the option? What choice do we have?
Beattie: Well, you can see the choice that’s been taken by the U.S. over the past two or three years — there has been fiscal expansion; there could have been more. A lot of people who were worrying that if the U.S. government borrows more, there’ll be high inflation, long-term interest rates will rise, it will crowd our private sector investment — I think that’s just been comprehensively disproved by the facts. So what they really need to do is stop the focus in the short-term on screwing down on government spending, and realize that the way to get debt down is actually to get growth.
Ryssdal: You know, the American economy — much less the global economy — is this enormous, intractable beast. I wonder if it’s even fair to ask who’s in charge, because how do you handle something as complex as the global economy?
Beattie: Attempts to kind of guide individual bits of the global economy, and really to micromanage, often go wrong. The role of government is to provide a framework in which the economy can grow, you know? Anyone who says President Obama or President Bush or anyone has created x jobs is clearly talking nonsense unless they are literally talking about jobs in the White House. But that doesn’t, and should not, give carte blanche to governments to intervene everywhere they like, favoring their individual industries, trying to go back to those kind of failed, micromanagement policies that you saw in previous decades.
Ryssdal: How, then, do we get from here to there? Because you as a student of the global economies and perhaps American politics know that that’s no easy thing.
Beattie: No, it’s not. I mean, all economies — not just the U.S. — all economies often take crises to move. So who knows? It may unfortunately take another crisis for the real lessons to sink in. Or perhaps there’s a massive political cataclysm. I think it’s going to be hard to shake the basic pattern of gridlock that we’re in at the moment.
Ryssdal: Alan Beattie is the international economy editor for the Financial Times. His new book is called “Who’s in Charge Here?” Alan, thanks a lot.
Beattie: Thank you.
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