|
Commentary on
the risks of human nature’s preference for the status quo, in the face of
changing reality. Nation states
are in decline, as Keith often warns. Does this necessarily mean that in the
increasingly integrated global economy will need a world government body to
manage (avoiding the word regulate) global trade with global policies? Or will
a hybrid regionalized structure on the order of the EU, ASEAN and NAFTA/CAFTA be
cobbled together? Will it take
economic collapse for nations to recognize the need for paradigm change? kwc Capitalism
vs. Democracy:
We often assume they
go hand in hand, but recent elections in Japan and Germany provide a sobering
reminder that there are deep conflicts. By
Robert J. Samuelson, Newsweek,
Oct. 3, 2005 Issue The recent German and
Japanese elections deserve more attention than they've got because they
illustrate the uneasy relationship between capitalism and democracy. Capitalism
thrives on change—it inspires new technologies, products and profit
opportunities. Democracy resists change—it creates powerful constituencies with
a stake in the status quo. Capitalism (by which I
mean an economic system that relies heavily on markets and private ownership)
and democracy need each other. The one generates rising living standards; the
other cushions capitalism's injustices and, thereby, anchors public support.
But this mutual dependence is tricky because if democratic prerogatives are
overused, they may strangle capitalism. Just how to regulate
this relationship was the core election issue in both Japan and Germany. As is
well known, their economies have faltered badly. Since 1997, their annual
economic growth has averaged about 1 percent, roughly a third the U.S. rate.
Compared with the late 1980s, Japan's joblessness has doubled; in Germany, the
unemployment rate has bounced around 10 percent for a decade. The campaigns
centered on these setbacks. Voters seem to reach
opposite conclusions. The Japanese gave a resounding triumph to Prime Minister
Junichiro Koizumi, who made the election a test of his economic-reform agenda.
By contrast, German voters seemed more timid. The pre-election wisdom was that
Chancellor Gerhard Schroeder of the Social Democratic Party (SPD) would lose
decisively to Angela Merkel of the Christian Democratic Union (CDU), who
preached aggressive economic reform. The two parties actually ran almost even.
The CDU got 35.2 percent of the vote; the SPD, 34.3 percent. It's unclear who
will head the next government. Despite the divergent
outcomes, the prospects for economic renewal in both countries remain
uncertain. Proclaiming economic "reform" and doing it aren't the
same. In Japan, Koizumi has championed overhauling Japan Post, which is more
than a mail system. It's also the world's largest bank, absorbing as deposits
about 30 percent of Japanese household savings. The trouble, says Richard Katz,
editor of The Oriental Economist Report, is that much of this money is wasted.
It's funneled into government bonds that often finance dubious public-works
projects—bridges to nowhere and paved riverbeds, as Katz says. Koizumi wants to
privatize Postal Savings—turn it into a profit-making company. That should
favor more productive investments and, thereby, stimulate the economy. Although
this sounds sensible, it's no economic panacea. Katz ticks off some caveats:
first, Koizumi's conversion would take a decade; second, a privatized Postal
Savings could still make big blunders (better to phase it out, says Katz, by
banning new deposits); and third, Japan has lots of other problems (too little
domestic competition, an aging society, scant foreign investment). Similarly, Germany's
sluggishness has many causes. In a study, political scientist Stephen Silvia of
American University writes: "The [government's] share of the German
economy has become too large, crowding out more productive economic activity.
The cost of employing people—in particular, non-wage costs—has become too high.
Government regulations... dampen competition." Schroeder made some
changes. He cut lavish unemployment benefits (which made joblessness
attractive). Merkel proposed easing restrictions against firing workers (which,
perversely, deter companies from hiring new workers) and also wanted to relax
nationwide collective bargaining (which makes wages rigid). All this matters to
Americans for two reasons. First, the weak Japanese and German economies partly
explain the lopsided nature of world economic growth, which is overly dependent
on constantly expanding U.S. trade deficits. From 2000 to 2004, virtually all
of Germany's meager economic expansion stemmed from increased exports; Japan's
performance was also one-sided. Many economists regard this pattern as
unstable, risking a global recession. It would be healthier if the Japanese and
German economies, which together are half the size of the U.S. economy, were
stronger. The second point of
interest involves a useful political lesson. A successful democracy gives people a chance to
protect their interests and lifestyles. But when these protections try to deny
unalterable economic realities, they become self-defeating. Still, it's hard to adjust to shifting
realities because changes offend voting blocs that benefit from the status quo.
So it is that Americans have a massively complex tax system, because powerful
constituencies protect many dubious tax preferences. So it is that budget
deficits persist; any combination of spending cuts and tax increases arouses a
coalition of the angry. And so it is that—despite a gradual aging of the
population that will require huge and, probably, damaging tax increases—no one
has seriously attempted to contain these costs. It is easier to pretend that
there will be no ill effects. The Japanese and Germans took the same attitude
toward their problems. They hoped there would be no day of reckoning. They were wrong. http://www.msnbc.msn.com/id/9466948/site/newsweek/ |
_______________________________________________ Futurework mailing list [email protected] http://fes.uwaterloo.ca/mailman/listinfo/futurework
