Well, now things get very interesting… For months we have heard an argument that the right thing to do, the plausible thing to do, the only responsible thing to do in Europe is to tighten the belts of the economy. We’ve seen austerity moves applauded by economists while, in the streets – especially of Greece – people rioted, expressing their condemnation of the policies.
The idea is simple and compelling, and it turns on what happens in the credit markets. You’re deeply in debt; the likelihood of pulling yourself out of debt is getting smaller by the minute; and you appeal to your creditors’ good will (and their flagging belief that you’ll make it through the next scheduled debt payment successfully) by saying, “See! We just cut the expense of our governmental programs again. We just eliminated a whole bunch of government workers. We just trimmed pension expenses. We’re acting responsibly. Our economy is righting itself.”
Trouble is, the economy remains as wobbly as a ship whose bow just ran into an iceberg. But here’s the really dangerous part: People on both sides of the argument hold to their positions religiously, not rationally, and doing so means that their positions only harden and narrow over time.
The fact is, both sides are right, in part. Surely the size of government has to be cut down and we all could use a dose of austerity.
Surely, at the same time, the excessive amounts of money that are wasted in vain attempts to warm our national economy only make matters worse, digging us deeper into debt.
Now, if you think that puts us somewhere between a rock and a hard place, you’re doubtless correct. It demands that the U.S.S. Economy be guided by a profoundly wise and sensitive vision. In the midst of a national election, though? – well, pardon my skepticism. The fact is, there are no easy answers here. But our eyes should be on the most likely ways to grow our economy (as is equally true in Europe), and not just on the best ways to defeat the other political party.
(I feel like I’m shouting at the storm here, of course. But perhaps we can, at the least, gain some perspective on what we’re likely to experience in the coming months.)
The French election of this past weekend and its aftermath will very likely teach us a great deal about what to expect in the coming months – and, perhaps, years. The backlash against political conservatism bears some of the hallmarks of the “Occupy” movement – similar grievances against the wealthy, in any case. And it’s reasonably predictable that any number of powder kegs sit ready for matches to light their fuses in the coming months. The Arab Spring could become a European Summer.
At the same time, though, we may see further glimpses of an improving national economic climate – with growing American oil production changing the face of international trade, with more manufacturing coming back to American soil, and even with new housing ideas stimulating the real estate market.
Many things will by vying for our attention – not the least, a constant chorus of analysts who claim that we’re headed for disaster. My guess is we aren’t. But I suspect it will be helpful to watch Europe closely in the coming weeks… Very closely.
In the meantime as the analysts grouse about last Friday’s employment report (detailing the tepid growth of jobs in April), what are we to do with the excellent report last Thursday telling us that the number of new claims for unemployment insurance fell back to the mid-360,000 level? Could it be that the economy is still in the midst of the awkward process of transitioning into greater strength?
Time will tell. But it’s bound to be three steps forward/two back for probably months to come. If so, remember that it could be a lot worse (or do you too find that hard to forget?).