Modern Governments Have Serious Choices To Make

From Current History:

Excerpts with Lucien Crowder on global trends:

"...This is what history might say if it could talk (and fancied itself a wry wit). History might also observe, regarding the rich-world quandary that involves economic stagnation and fiscal imbalance, that governments are not very good at engaging dilemmas. They excel instead at crisis response...."

"...The International Monetary Fund estimates that advanced-world growth in 2010 was a mere 2.7 percent...Yet prospects for the year to come look less inspiring still. Businesses have finished restocking their inventories after letting them run down at the depths of the recession. Real estate markets remain critically weak. Many government stimulus programs are expiring or have expired. Central banks have expended their traditional options for sparking growth. The euro is forever on the verge of or in the midst of a crisis. Fiscal retrenchment is under way in several large economies and is inevitable in others. For all these reasons, advancedworld growth is projected in 2011 to decelerate to 2.2 percent."

"...Thus governments still must promote growth... At the same time they must reduce spending and increase taxes—though doing so will suppress the very growth they mean to encourage. Governments must also, for the sake of their countries’ long-term prosperity, increase expenditures in areas such as education and green-energy innovation. Alleviating a little human suffering might also be a nice gesture.

On the question of how to pursue these contradictory aims, reasonable people can disagree...If austerity is enacted now, is it just in time, somewhat too soon, or far too late?...

Indeed, how to determine that? Unless a politician is endowed with conviction to solve problems, most will just defer the problem until it simply explodes.

The United States, so proud of its separation of powers and deliberative legislative process, cannot achieve even the vaguest consensus on how to pare its deficit, and now pursues shortterm growth almost exclusively through budgetbusting tax cuts. Each of these economies—three of the world’s four largest—faces a different variety of the growth-and-retrenchment dilemma. Has each identified a unique path to failure?"

On China:

"...The boundless masses of poor Chinese who have ascended to the middle class, and for those who still can expect to do so, this is excellent news. It is also good news, generally speaking, for the country’s trading partners. To be sure, China faces stiff challenges. These include long-term problems like negative demographic trends and profound environmental degradation; medium-term economic concerns such as how to invigorate moribund domestic consumption and reduce reliance on low-wage manufacturing; systemic issues such as official corruption and excessive government interference in the private sector; and appalling deficits in democracy, transparency, and individual rights. Still, now and for the foreseeable future, the Chinese production line hums."

He also mentions India and Latin American as part of that expanding growth trend.