a Civilizational Crisis

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The fall of the Soviet Union, geopolitically profound as it was, didn’t usher in “a New World Order.” The world still lives in the warmth and prosperity of the dominance of Western Civilization. A collapse of the European Union could well end that world order – which is on notice of a challenge by a Sino-centric power center in any event. But the failure of the eurozone could hasten the challenge and wage it on Beijing’s, not our, terms.

The transatlantic axis, anchored by a prosperous Europe and America, represents a philosophically consistent worldview (Judeo-Christian Greco-Romanism) that has largely driven history for the better part of the last two millennia. The Age of Empire crumbled in the aftermath of World War I; The Second World War brought Japan into the Western fold, and the reinstatement of Israel established a Western outpost in the Muslim Middle East; President Nixon began a process (still underway) to entice a Maoist China in the direction of market republicanism; the collapse of Europe’s last great empire – the Soviet Union – brought about an opportunity to reorient Moscow toward a Western worldview. These last two are works-in-progress that are trending poorly.

The imperial intensions of the Soviet Union were exposed immediately post-World War II, and the Untied States countered by forming NATO to geographically encircle Eurasian Russia, and the Marshall Plan to economically isolate it. “Containment,” we called it. Military competition between us and the Soviets led to the space programs of each, which led to exponential expansion of the ability of each to inflict violence on the other. “Deterrence,” we called it. Containment and deterrence held Soviet expansionism in check until the revelation of stealth technology and our undertaking the design and construction of a ballistic missile shield rendered the Soviet Union economically irrelevant.

It’s ironic that governance failures in Greece and Italy may sink the predominance of Greco-Roman-based Western Civilization. It’s more likely than probable, and more potential then likely, but it could happen; and if a tipping point is reached, our “friends” in Beijing and Moscow will help push us over the edge. An evening of the global balance of power is in PRC’s and Russia’s best interests, and I would expect nothing less from them.

The problem isn’t Greek and Italian prolificacy as much as the false promise of European economic homogenization. It was never possible, awaiting only the first time is was actually needed to illuminate the fraud. Many commentators point to Ireland as the index-case, saying that the euro delivered on its promise – Ireland was bailed-out and has (thus far) repented and is sinning no more. That’s correct, but Ireland isn’t the disease, only the first symptom. The disease is the social-democratic model of European political economics. It just doesn’t work, and the eurozone remedies for assisting individual countries isn’t up to rescuing the ill-designed system upon which the eurozone is based. A failure of the eurozone could bring down the European Union, likewise based upon a myth – that of Europe’s people being more comfortable being citizens of Europe than being citizens of Germany, or France, or Poland, etc. A collapse of the Union in the midst of a surge in nationalist sentiments and economic impotence would provide a feeding frenzy for Moscow and a further economic isolation of the Untied States.

This would not be a collapse of the Old World Order, but it could well begin an irresistible shift in that direction, culminating in a Beijing-centric (or, less likely, a Beijing/Moscow-centric) New World Order in a generation or two.

What that would mean for the rest of the world depends on whether Beijing perceives it in their interest to maintain free world trade, or seeks to dominate world trade for short-term, parochial gain only. Much would depend on whether Beijing sees rabid Islamism as threat to civilization, or suppresses only Uyghur and Tibetan insurrections. Just as Hawaii is a strategic lynchpin in America’s ability to dominate the Pacific, it presents a strategic obstacle for anyone else’s dominance of it – how will a Chinese superpower handle the Hawaiian irritant?

All of this, of course, assumes continued Chinese economic progress, which is in no way a certainty. They are having their very own real estate bubble, but theirs is happening inside a larger, more dangerous currency bubble. Neither is sustainable, and how Beijing handles them will be outcome-relevant to what happens in the wake of Europe’s struggle to restructure itself on the fly.

If Greece fails, or is excommunicated from the euro, the euro will probably collapse as a serious world currency. That would initiate serious self-doubts among members of the European Union, a failure of which would dissolve Europe into Germany, England, the probable loss of much of Eastern Europe into the Russian shadow, and near-Third World conditions in southern Europe. Europe, as a player, would be off the table for at least a couple of generations.

30 thoughts on “a Civilizational Crisis

  1. Command economies are just too slow to react, and their decisions too political, to reflect economic reality. Even with the best of intensions, professional politicians are ill-equipped to address economic issues without regard to the next election – political solutions to economic problems will always resemble “2+2=grapefruit.” Socialism isn’t wrong because it’s evil; it’s insidious because it can’t keep its promises.

  2. Ok. I think I get your point. You are saying that the establishment of the Euro and the Eurozone as an economic device will fail because it is based on a socialist philosophy.

    Assuming you are right, how does the U.S. and all of it’s philosophical “Western Civilization” oriented countries disentangle itself from a global economy which is where we all are like it or not?

  3. What I’m saying is that the European problems are potentially more serious than most of the coverage is alluding – everybody knows this is serious in Europe, my point is that it may well reach beyond that. But yes, the eurozone was based on a politically unfulfillable promise (that northern Europe would guarantee southern and eastern Europe). Sort of a supra-national socialism. And that the European Union is a far more brittle institution than previously thought – the French and Germans are getting fed up with having to solve everybody else’s problems. A disillusioned and broke Europe would vastly weaken Western influence around the globe, and I don’t think that would have a calming effect on a troubled world.

    I don’t understand your “disentanglement” question.

  4. I’ll attempt to explain what I meant. The Eurozone was set up to make a group of European countries a more powerful competitor in the global economy. It was meant to supposedly help them compete with the economic superpowers, namely the U.S., China, and Japan. The plan was to combine something like 19(?) country’s individual market strengths and products in a “one big entity” currency to capture more world market share. Hence it would give them a powerful say in global economic decisions. It was an attempt to gain leverage. I think that’s what it was about.

    Now it has run into big trouble because some of the weaker members haven’t upheld their end of the bargain. They didn’t run their economies responsibly. This would be the “southern” contingent: Greece, Italy, Spain, Protugal, and throw in Ireland too. So the “northern contingent which is made up of the nations who had strong economies to begin with: Germany, Brittain, France, Denmark, Sweden, Norway, are being called upon to bolster them up in order to keep the Euro currency and the Eurozone concept from collapsing, right?

    So my question is if the Eurozone collapses the European countries that are members will be right back where they started and they will lose their position of power in the global economy. If that happens it will have very far reaching ramifications not only to those European countries but to our “Western Civilization” economy too. So how do we disentagle ourselves from this European crisis without hurting our own economy. I hope that makes sense.

  5. You are correct in summarizing the point of the euro providing a common currency for the EU (although it has fallen short, encompassing only 17 of the EU’s 27 current members).  It was, however, the EU itself that was formed to compete with America in world markets.  

    You are also correct in noting that the problem economies are in southern Europe (and Ireland), and are being bolstered by northern economies (with the exception of Britain, who does use the euro), which, in practical terms means Germany.  France was an early contributor, but her economy is showing cracks as well, and is putting more and more of the financing off on Germany and International Monetary Fund.  

    And yes, the point of this piece concerns the ramifications of an EU failure.  The problem I see is more geopolitical than economic, though the ramifications of a geopolitical re-alignment will have profound economic consequences, they are unassociated with Europe.  The short of it is, we can’t suffer a European failure without hurting our own economy.  The long of it is, it’s not because of an “entanglement” beyond Europe being our largest trade customer.  If Europe disintegrates into a scramble to “rediscover” sovereignty, it will necessarily weaken their ability to import goods and services, and that will sharply restrict American imports, which directly affects GDP.  

    Greece, and now Italy, have pledged to form “unity” governments to shepherd through the austerity measures required by the benefactors of the emergency cash infusions.  Both governments have fallen since their true economic conditions have become better understood by their populations.  

    Greece will almost certainly default.  The rescue plan is in no way adequate to solve Greece’s economic foundation, but it will allow the default to glide into being, rather than spring fully-formed from Athens.  Italy still has time to right its ship (if it will) before their €1.3-trillion national debt further strains Italian ability to service it.  The EU and its mechanisms are inadequate to bailout Rome – Italy is too big to rescue.  

  6. I must admit I am way out of my depth here. I asked the simple question that if everything you have described in your posting is accurate–and I have no reason to doubt that it is–how do we [aka] the United States extricate ourselves from being involved in the crisis that is happening in the European Union without causing our own economy to suffer from the blow-back. Since our economy is so entwined with Europe’s.

    Hence: “How do we disentangle ourselves from the Global economy?”

  7. The problem is that are no simple questions regarding complex systems.  As Einstein told us, “You can’t do just one thing.”  The world economy is finite but unbounded matrix of feedback loops – adjust any one of them, and you change the value of all of them.  If by “disentangle” you mean “withdraw” from the world economy, that’s not possible.  Taken as a whole, the 27 GDPs of the European Union’s members are slightly greater than that of the United States, and a deep recession in the EU will affect the world’s economies.  That’s just how it works.  If by “disentangle” you mean not to lose money on failing economies, we can do that by not joining in any bailout attempts.  Some of our banks hold bonds denominated in euros (and hence vulnerable to Greek, Italian, Spanish, Portuguese, Irish and French fortunes), and our government, of course, is major funding source of the International Monetary Fund (which is supplying a significant amount of backing for the bailout bonds).  But beyond that, there’s not much we can do except to configure our own economy so that its natural tendency is to grow rather than stagnate.  Rather than try to emulate the failing European model, we should try to demonstrate the natural advantages of the American model.  

  8. Thank you. You have answered my question. We should not join in any bailout attempts, and if the IMF decides to try and bailout any of these failed economies we should strongly object to that and point out to them that we our the major funding source of the organization. I understand your advice.

    I wonder how the EU would take it if we followed that advice? I suspect they might think we were trying to throw our weight around and dictate to them what they must do, don’t you?

  9. Actually, I don’t advise that we object to IMF activity, one way or the other. I only mention our involvement with IMF as an example of how our economy is affected by the fate of Europe. By not participating in bailouts, I meant that we (read: our banks) should not take extraordinary steps to organize or participate in separate efforts to bail out European economies.

    I will be disappointed if we don’t at least examine the serial failures of big-government economies for any lessons that might benefit us in our struggles with the role of our own government in our own economy. But I’m probably asking too much of professional politicians.

  10. I understand and I agree that our banks shouldn’t take extraordinary steps to participate in efforts to bail out EU economies.

    And I fully understand the point that you are making in your second paragraph. I just don’t happen to agree with it. (Surprise!).

    I would add a qualifier to your last sentence though. I think what you are saying about “professional politicians” doesn’t quite apply. It is too much to ask of Democratic politicians. Republican politicians and all the Republican hopefuls seem to be on the same page with you.

  11. Actually, Republicans aren’t as bad as Democrats at “government is the answer” and they give lip-service to “small government,” but in practice, all professional politicians are addicted to power, and that translates into more government. I fully understand that I’m engaged in wishful thinking – wanting Congress to diminish its own power – but Republicans are the only ones that voice allegiance to the principles of the Founders in admitting out loud the wisdom of limited government, and recognize the limited legal authority the Constitution gives Congress.

    I know you favor big government, but I can’t believe you don’t see the danger when it is happening in front of your eyes. The cradle-to-grave European welfare-state model is crumbling on the stagnant economies and mountainous debt that it creates. To expect that “we could do it better” is to keep trying the same thing and hoping for different results.

  12. “The cradle-to-grave European welfare-state model is crumbling on the stagnant economies and mountainous debt that it creates”.

    Does that rule apply to Germany and Denmark and Sweden and Norway too? All of them prime examples of big government welfare states. And last I heard they were doing pretty well with their high-taxes-universal-healthcare-government-pensions plan[s] of government. Better than we are right now as a matter of fact, I observe.

  13. Denmark, Sweden and Norway are small enough to practice whatever economic theory their people will put up with, as long as their outside income (exports and tourism) provide the revenues that taxes do not.  Germany has designed its economy around exports, and has engineered the entire eurozone around German needs – which has been allowed because the rest of Europe knows that without German capital, the whole experiment would have failed from beginning.  And that arrangement has pretty much run is course.  

    The German people are tired of having their success bled dry by what they see as irresponsible governments.  They are facing the choice of having their standard of living lowered by the decisions of others, and they aren’t happy about it.  The simple truth is that there isn’t enough money in the eurozone to save the failing states within it, and the people are beginning to understand that.  

    All economies are blends of pure capitalism and pure socialism – I’ve never denied that – the trick is finding the balance that a given country’s people and traditions will permit.  Europe has lived off of others since the close of hostilities in 1945 and became addicted to it; the American people have taken pride in being self-reliant, and are resisting becoming dependent on politicians for their every want and need.  The natural balance between achievement and succor will be different for each culture.  Europe is having to re-think theirs, and we still have the opportunity to make the choice before it’s forced upon us.  The question is: will we?  

  14. I think we will move to reduce the debt below European levels – even some Democrats are horrified at what they see happening in Europe, and see the handwriting on the wall as our own debt escalates unchecked. That movement will be agonizingly slow (every “excess” program is someone’s pet project), but it will happen before serious risk of default appears. Remember, the new debt-ceiling will be breached this month – another national discussion on responsible spending will be our Thanksgiving present from Washington.

  15. I love your optimism! Check out what is happening within the “Super Committee” with one week left to go before the automatic debt reduction formula kicks in. Just sayin’.

  16. There’s no way the SuperCommittee is going to solve this problem in an election year. They’ll find some way to punt the ball back to Congress without having the “sequestration” kicking in (even Democrat Leon Panetta says these cuts would be ruinous to the military). The ideological gap is too wide to bridge just before an election. This argument will be decided on November 6 next year.

  17. My point is, however, once the election dust settles, we will find a way not to default. Spending will be reined-in and the tax code will be revamped to broaden the base and lower rates – both of which will increase revenues for a given GDP.

  18. And I say once again I admire your optimism. Your conclusions as to what will happen once the election dust settles are all based on the premise that the Republican Party will have won the Presidential election and taken control of the Houses of Congress–it seems to me.

    For instance, “Spending will be reined-in. Tax code will be revamped to broaden the base and lower tax rates.” Both are Republican ideas as to what needs to be done to avoid default.

    You surely don’t hold out any hopes that this formula for economic success will happen no matter which Party is in charges of government?

  19. You’re right in that if Democrats hold the White House, we will draw closer, faster to default, because they just don’t understand economics (or worse, they do and just don’t care). I do believe that the GOP will take the White House and perhaps the Senate – a GOP House is a given … I don’t see any inclination whatsoever of a national swell to put Democrats back in control of that organization.

  20. So if your belief that the Republicans will take control of both Houses of Congress and the White House in this election, you will suspend your own rule of one Party in charge of both branches of government isn’t a good thing. You will make an exception in this one case? I understand. There are always exceptions to Rules in extreme circumstances and we all make them.

  21. No, I will not suspend my belief that one-party rule is a bad idea, I was only speculating on what I thought would happen in the 2012s, and the results of that election on government. Do I think that taking our fiscal behavior seriously is better than what is going on now? Yes, but that’s not an endorsement of one-party rule. It’s a bad idea, and are living the proof of that.

  22. I will venture an opinion on one party rule: Due to the extreme partisanship that has infected Washington in the past several years, it seems that nothing has been or will be accomplished unless we subject ourselves to one party rule. If anything is to get done it will have to be One Party forcing it’s will upon the other Party. As you say, we are (have) living proof of that.

    Since last year’s elections when the Democrats lost control of the House to the Republicans and we now have once again established a “balanced” representation; NOTHING has been passed of any consequence. My observation.

  23. Your observations are accurate, but that doesn’t mean that must be the future. You can’t go from hyper-partisanship to meaningful coalition overnight. One-party rule leads to hyper-partisanship (not the other way around), and as the people get tired of it, pressure will be brought on elected representatives to get their act together or be voted out. A lot of people are making noise right now along those lines, but until they start rejecting incumbents, they’re not serious about it.

  24. I wonder if perhaps you are envisioning a reenactment of the 1980 general election results? Do you follow me?

  25. I’m not sure what aspect of the 1980 elections to which you refer. The great shift in the makeup of Congress began in the 2010s … rendering a failed president to a single term, maybe? My point is that, after a while, the pulling of Congressional activities to both extremes in constant bickering wears thin the public, and the public has the last (if sluggishly moving) word on the matter. More than ideology, ineffectiveness irritates Americans. Most people don’t care about foggy promises about a rosy future; they deplore a government that just doesn’t work. Mr Obama was elected because his rosy outlook was accompanied by what voters believed to be a post-partisan approach that could work. It has proved to be neither post-partisan nor workable.

  26. I was wondering if you were envisioning a governmental situation that would mimic what happened in 1980. Jimmy Carter (Incumbent and a Democratic President) was defeated by Ronald Reagan the Republican challenger. After that happened according to you and other political pundits, the Democratic Congress lead by Tip O’Neal took Carter’s defeat as a mandate to forget their agenda and start working with the new Conservative President to advance his agenda. Because that’s what “the American People” wanted. And after that all was sweetness and light between the opposing political parties, of course. That’s what I was referring to.

  27. Eventually, I assume the parties will get back to governing … will it happen after the 2012s? No. The partisanship is too pronounced right now. The environment is vastly different now than in 1980, when much of the Democrat leadership was dissatisfied with Carter’s mishandling of the economy and the ever-present hostage crisis in Iran. Today’s Democrats aren’t there … they still see the problem as being Republicans who are too stupid to understand the grandeur of Leftism.

    Tip O’Neal was an extraordinary political leader who never lost sight of his principles while realizing that America is a representative system where both sides need to work together. Neither Pelosi, Reid, Boehner, nor Mitchell fit that mold.

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