Politics

السياسة الغربية وسنوات المحنة الاقتصادية

May 11, 2015 Mohamed A. El-Erian

نيويورك ــ منذ سنوات نشأتي كمراهق، كانت تباديل وتوافيق ومكائد السياسة الوطنية تفتنني دوما. والآن أجد نفسي أركز على اتجاهات سياسية أوسع نطاقا، والتي تساعد أيضاً في تفسير قضايا اقتصادية عالمية.

ومن هذه الاتجاهات ما يتجلى بوضوح من تشرذم سياسي واستقطاب في الديمقراطيات الغربية. فهناك حركات هامشية، بعضها يعمل ضمن هياكل سياسية راسخة ويسعى بعضها الآخر إلى خلق هياكل جديدة، تفرض الضغوط على الأحزاب التقليدية، وتجعل من الصعب عليها حشد مؤيديها، وفي بعض الحالات تلحق بها ضرراً حقيقيا. وفي محاولة يائسة لعدم الظهور بمظهر الضعف، أصبحت الأحزاب الراسخة متحفظة في التعاون مع الطرف الآخر.

وكانت نتيجة رفض العمل التعاوني بشأن قضايا رئيسية أن تأثرت السياسات الاقتصادية بشدة. إن صناعة السياسات التي كانت تصاغ ذات يوم من خلال مفاوضات تدار على مستوى الوسط السياسي، حيث كانت الديمقراطيات الغربية راسية منذ فترة طويلة، أصبحت تتشكل على نحو متزايد بفِعل قوى عنيدة تنتمي إلى أقصى اليسار واليمين.

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Mohamed A. El-Erian

Writing for PS since 2010
161 Commentaries

Mohamed A. El-Erian, President of Queens’ College at the University of Cambridge, is a professor at the Wharton School of the University of Pennsylvania and the author of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse (Random House, 2016) and a co-author (with Gordon Brown, Michael Spence, and Reid Lidow) of Permacrisis: A Plan to Fix a Fractured World (Simon & Schuster, 2023).

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0 Comments on this paragraph, 19 Comments on this article

E Walker May 17, 2015

More of that both sides do it garbage. There is no organized left anywhere in the world. Look at the Red Tories and their sad defeat in the UK, and the pathetic excuse for socialism in France under Hollande. Both practice a weak version of the dominant neoliberal program of lower taxes on the filthy rich, reduced regulation and trade programs designed to screw the workers and transfer more wealth to the 1%. In this they are not different from the US democrats.
The only example we get is the foolish right-wing US tea party, a group the policies of which come from the same playbook but are pursued with more ferocity.
There won't be change until people are so beaten into the dirt that they revolt against the dominant plutocracy.
A new reply to this comment has been posted.
William Pu May 17, 2015

One man one votes is democracy.
One dollar one vote aint.
Unless the majority of voters realize that, nothing will change.
Keep up with the charade.
The big elephant is there.
Trust me! (That's a joke!"
A new reply to this comment has been posted.
William Pu May 17, 2015

It's called $d$e$m$o$c$r$a$c$y$. Don't fool yourself into thinking otherwise.
Do you really think the "two" opposing parties oppose each other?
The campaign financiers own both parties.
It's called "head I win, Tail you lose!". "I" $, "You" vote.
The rest of the game is called "charade".
Everybody plays charade. You do have a good paying job, do you not?
A new reply to this comment has been posted.
john zac May 16, 2015

respectfully sir, economic prosperity may not equate to human or cultural prosperity. In my humble opinion, ideas such as liberal mutualism should be revisited, otherwise we are unfortunately mired in a polarized, fragmented world where parasites rule from above while simultaneously allowing for scavenging from below. I say its high time we let the parasites feed off of other parasites and predators feed upon the naive, unaware or weaker predators. But at the same time allow some people to start something new, maybe something truly better! Mr Soros has always viewed reflexivity as central to his conceptual framework. Liberal mutualism is just the logical extension of this into the field of politics
A new reply to this comment has been posted.
Per Kurowski May 14, 2015

I have no idea how you get to “unleash the prosperity of Western economies” with regulations such as credit-risk-weighted equity requirements for banks, which allow banks to earn higher risk adjusted returns on what is perceived as safe than on what is perceived as risky… as if risk-taking was not the oxygen of any development.

http://teawithft.blogspot.com/2015/05/the-most-incapable-and-failed-risk.html
A new reply to this comment has been posted.
j. von Hettlingen May 13, 2015

Mohamed A. El-Erian sees little benefits in a political landscape, littered with fringe parties! He offers little advice on how to cope with the "locust years" that plague Western politics. Although citizens in Western democracies face "political fragmentation and polarization," no doubt they would rather prefer the status quo to authoritarianism. While the Anglo-Saxon world still dwells on the two-party polity, in many democratic countries, a multi-party system is more a rule than an exception.
It's true that "most established parties are so busy playing defense that they have little inclination to engage in the type of forward-looking strategic thinking that is needed to re-energize," because there are very few new ideas in politics - only old ones presented in new ways. Disenchantment with the established parties is nothing new. Unlike mainstream parties, fringe groups are "driven by single issues," making them vulnerable to trend or fashion, which comes and goes. Their frontrunners often take off like rockets but fall back to earth like stones.
There's a saying: "Too many cooks spoil the broth!" This explains the paralysis in politics, when many parties can't agree on an issue.
Here in Europe mainstream parties face challenges from ultra-left and right groups. On the radical right there are individuals, who try to emulate some whacky figures of the US Tea Party, whose intransigent members had taken America's international standing hostage with a shoutdown of the federal government. The threat of a US default in 2011 had led to a downgrade by Standard and Poor of its Triple A credit rating! Tea Party politics have been criticised as the "interests of the ultra-elite cleverly repackaged as the interests of the common people." That the GOP-led Congress "has very low approval ratings," doesn't come as a surprise.
On the radical left Greece's ruling party, Syriza has taken centre stage in recent months amid negotiations with its creditors. The party won the election on an anti-austerity ticket. Now at the helm of the government, it realises it is not easy to translate all words into action. Now all eyes will be on the upcoming elections in Denmark and Portugal and especially Spain, which had relied on a bailout to stay afloat. Unemployment is the second highest in the eurozone after Greece, and the Spaniards have also had enough of austerity measures.
A new reply to this comment has been posted.
jagjeet sinha May 13, 2015

The roots of Democracy as originally founded always have the answers, because the thinking that created it as the preferred template of governance was predicated on pursuit of knowledge transcended into wisdom. The House of Commons is where all the different pulls and pressures in Society coalesce to produce Vox Populi. But it works in tandem always with another House - House of Lords, College of Cardinals, Club of Billionaires, Concert of Sheikhs, Comrades of CCPs. Inequalities always need to be attenuated with democratization of wealth. Demands that Vox Populi articulates need redressal - the Supply side needs to channel resources that perform. The checks and balances exist - and need to be empowered to discharge their functions. The solution never works when large slices of Society are marginalized or worse when affected Regions reach boiling point. History is often made when Geography changes as a result of Democratic malfunctioning.
A new reply to this comment has been posted.
John Brian Shannon May 13, 2015

Hi Nomen,

I salute your wonderful comment and find myself in full agreement with your point #1.

However, on point #2 I must respectfully take you to task;

"Entitlements (most especially Medicare, Medicaid and Social Security) are projected to grow way beyond our ability to fund current levels of benefits for our future population. Everyone on the left and the right knows this." -- Nomen Penn

And this one;

"The problem of out-of-control entitlements is also widely prevalent in Western Europe." -- Nomen Penn

It is not a case of affordability, it is a case of funding.

Imagine if $2 Trillion dollars hadn't been spent on *two wars that were based on false pretenses* (the U.S. Iraqi Study Group final report said so) and instead were spent on U.S. infrastructure (mega jobs creator) on healthcare, on education, and on urban transit/renewable energy.

We would've seen a far different America by now.

Just think what we would've missed, the 2007/08 financial crisis, the Occupy movement, rising crime and civil disobedience, high unemployment, low aggregate demand and more crumbling infrastructure.

'Nothing is nothing, until you can compare it to something.'

I respectfully suggest that you look at Norway (with possibly the largest social 'entitlement' scheme in the world) AND still has over $1 Trillion dollars in the bank, and the 2nd highest per capita income in the world, and so many other first, second, or third place rankings in everything from the Productivity Index to the Happiness Index and everything in between, that it makes me wonder why every country can't follow this model.

(Yes, Norway has some medium sized offshore oil and gas reserves, but many countries have that, but have squandered the resource and the revenue)

Oh, and free universal healthcare ranked #7 in the world, and free university tuition for everyone and among the lowest crime rates in the world at 1 murder per year on average (in the whole country of 5.3 million people).

Other Nordic countries have low Debt-t0-GDP, free universal healthcare, free university tuition (for anyone on the planet) also high per capita income, high productivity, low barriers for trade and high UN Happiness Index rankings, historically very low unemployment, etc.

And look at Germany with a very high minimum wage, and setting a new global balance of trade record every year since 2011, after having bailed out East Germany/German integration (huge pricetag) which began in 1990,also bailed out some of the EuroZone countries (still bailing) and is the main financier of Greece. Added to that are a very generous social welfare state and free universal healthcare and a tuition-free university education available to anyone on the planet willing to live in Germany and pay their own living expenses.

Please see:
http://en.wikipedia.org/wiki/Economy_of_Norway
http://en.wikipedia.org/wiki/Economy_of_Sweden
http://en.wikipedia.org/wiki/Economy_of_Finland
http://en.wikipedia.org/wiki/Economy_of_Denmark
http://en.wikipedia.org/wiki/Economy_of_Germany

In general terms:
http://en.wikipedia.org/wiki/Nordic_model

And just for fun:
http://en.wikipedia.org/wiki/Economy_of_Australia

It isn't the 'entitlements' which working people pay into their whole lives (and should reasonably expect to enjoy the benefits thereof) that are the problem.

The problem is on the spending side. Wars that cost over $2 Trillion dollars which were based on falsehood are the problem -- potentially bankrupting parts of the economy, and putting the squeeze on legitimate 'entitlements' paid for by citizens.

President Dwight D. Eisenhower said;

"Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. This is not a way of life at all in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron." -- Dwight D. Eisenhower, 34th president of US 1953-1961

(From a speech before the American Society of Newspaper Editors, April 16, 1953)

Also:

From:
"The Last Republican" - Dwight D. Eisenhower
~Ike was the last Republican the balance a budget
~He refused to lower taxes
~He paid down the national debt
~He spent money to create jobs
~The Interstate Highway system he built returned $6 in economic activity for each $1 dollar it cost
~He did not lower taxes, cut spending, kill jobs and increase the debt.
~He was the last fiscal conservative.

Best regards to you, Nomen. JBS
A new reply to this comment has been posted.
Michael Public May 12, 2015

This unbridgeable divide has existed since the start of modern politics. On the one side you get the idealistic viewpoint e.g. "ban abortion, its wrong". On the other side you get the practical viewpoint of "Allow abortion, it practical to do so".

The issue is that both viewpoints are correct, but the way in which they are pursued is destructive in the extreme. We are used to thinking of extremists as living in a cave in Afghanistan but extremism is alive and well in the USA and most other 'Western' nations.
A new reply to this comment has been posted.
Nomen Penn May 12, 2015

Mr. El Erian,

Your thought provoking commentary raises some interesting questions about whether and how Western democracies, and particularly the United States, will be able to formulate reasonable political compromises on important issues. You seem to have some kind of vague hope that, somehow, we will be able to "evolve" out of our current our current contentious environment. I believe your optimism is misplaced. Here are two examples of sinister trends of long-term deterioration in America's political environment that appear to be unstoppable:

(1) There was a time when America would pay down its debts in times of prosperity. The last time this happened was in the aftermath of World War 2. Now, the best that politicians can promise is limiting debt increase to a certain percentage of Gross Domestic Product. And, more often than not, they fail to meet these promises. With few exceptions, this attitude also prevails in Western Europe.

(2) Entitlements (most especially Medicare, Medicaid and Social Security) are projected to grow way beyond our ability to fund current levels of benefits for our future population. Everyone on the left and the right knows this. And yet politicians are unwilling to confront this problem. In the 1980s Ronald Reagan and the Democratic House Speaker, Tip O'Neal, were able to hammer out a compromise on Social Security reform which helped to put Social Security on a much firmer footing. Now, almost every politician, Democrat or Republican, is afraid to touch these entitlement programs because the beneficiaries of these programs will vote them out of office if benefits are reduced. The problem is not with our politicians but with the people who elect them. I don't see any evidence of a change in the attitudes of the electorate that is going to allow politicians to solve this problem. Do you? The problem of out-of-control entitlements is also widely prevalent in Western Europe. This is the root cause of the current crisis in Greece.

When America convened its Constitutional Convention in 1787, the political challenges confronting the delegates were far greater than the challenges confronting our politicians today. Initially the dissension was so great that, the Constitutional Convention nearly disintegrated. And yet, somehow, the delegates were able to not only produce a magnificent, historically unprecedented constitution, but they were able to do so with the unanimous consent of all 13 colonies. To understand how this happened, may I suggest that you read the following blog:

http://twttatl.org/what_is_really.htm

This blog will also explain what I believe to be the root cause of the deteriorating long-term trend in America.
- John Brian Shannon May 14, 2015
  
  Hi Nomen,
  
  I salute your wonderful comment and find myself in full agreement with your point #1.
  
  However, on point #2 I must respectfully take you to task;
  
  "Entitlements (most especially Medicare, Medicaid and Social Security) are projected to grow way beyond our ability to fund current levels of benefits for our future population. Everyone on the left and the right knows this." -- Nomen Penn
  
  And this one;
  
  "The problem of out-of-control entitlements is also widely prevalent in Western Europe." -- Nomen Penn
  
  It is not a case of affordability, it is a case of funding.
  
  Imagine if $2 Trillion dollars hadn't been spent on *two wars that were based on false pretenses* (the U.S. Iraqi Study Group final report said so) and instead were spent on U.S. infrastructure (mega jobs creator) on healthcare, on education, and on urban transit/renewable energy.
  
  We would've seen a far different America by now.
  
  Just think what we would've missed, the 2007/08 financial crisis, the Occupy movement, rising crime and civil disobedience, high unemployment, low aggregate demand and more crumbling infrastructure.
  
  'Nothing is nothing, until you can compare it to something.'
  
  I respectfully suggest that you look at Norway (with possibly the largest social 'entitlement' scheme in the world) AND still has over $1 Trillion dollars in the bank, and the 2nd highest per capita income in the world, and so many other first, second, or third place rankings in everything from the Productivity Index to the Happiness Index and everything in between, that it makes me wonder why every country can't follow this model.
  
  (Yes, Norway has some medium sized offshore oil and gas reserves, but many countries have that, but have squandered the resource and the revenue)
  
  Oh, and free universal healthcare ranked #7 in the world, and free university tuition for everyone and among the lowest crime rates in the world at 1 murder per year on average (in the whole country of 5.3 million people).
  
  Other Nordic countries have low Debt-t0-GDP, free universal healthcare, free university tuition (for anyone on the planet) also high per capita income, high productivity, low barriers for trade and high UN Happiness Index rankings, historically very low unemployment, etc.
  
  And look at Germany with a very high minimum wage, and setting a new global balance of trade record every year since 2011, after having bailed out East Germany/German integration (huge pricetag) which began in 1990,also bailed out some of the EuroZone countries (still bailing) and is the main financier of Greece. Added to that are a very generous social welfare state and free universal healthcare and a tuition-free university education available to anyone on the planet willing to live in Germany and pay their own living expenses.
  
  Please see:
  http://en.wikipedia.org/wiki/Economy_of_Norway
  http://en.wikipedia.org/wiki/Economy_of_Sweden
  http://en.wikipedia.org/wiki/Economy_of_Finland
  http://en.wikipedia.org/wiki/Economy_of_Denmark
  http://en.wikipedia.org/wiki/Economy_of_Germany
  
  In general terms:
  http://en.wikipedia.org/wiki/Nordic_model
  
  And just for fun:
  http://en.wikipedia.org/wiki/Economy_of_Australia
  
  It isn't the 'entitlements' which working people pay into their whole lives (and should reasonably expect to enjoy the benefits thereof) that are the problem.
  
  The problem is on the spending side. Wars that cost over $2 Trillion dollars which were based on falsehood are the problem -- potentially bankrupting parts of the economy, and putting the squeeze on legitimate 'entitlements' paid for by citizens.
  
  President Dwight D. Eisenhower said;
  
  "Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. This is not a way of life at all in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron." -- Dwight D. Eisenhower, 34th president of US 1953-1961
  
  (From a speech before the American Society of Newspaper Editors, April 16, 1953)
  
  Also:
  
  From:
  "The Last Republican" - Dwight D. Eisenhower
  ~Ike was the last Republican the balance a budget
  ~He refused to lower taxes
  ~He paid down the national debt
  ~He spent money to create jobs
  ~The Interstate Highway system he built returned $6 in economic activity for each $1 dollar it cost
  ~He did not lower taxes, cut spending, kill jobs and increase the debt.
  ~He was the last fiscal conservative.
  
  Best regards to you, Nomen. JBS
  A new reply to this comment has been posted.
A new reply to this comment has been posted.
Tony Hockey May 11, 2015

Unfortunately the issues identified may take time to resolve, particularly in some Western democracies, as voters come to terms with the political impasse. Hopefully, voter frustration will eventually provide the mandate for change resulting in economic and social reform. The sooner the better for many.
A new reply to this comment has been posted.
dan baur May 11, 2015

Perhaps more direct democracy like in Switzerland is the answer - people are tired of closed door negotiations that perpetuate the status-quo.
- dan baur May 11, 2015
  
  Recent technology allows for great direct democracy. Why should we continue to elect "representatives" like 100 years ago?
  A new reply to this comment has been posted.
A new reply to this comment has been posted.
Kenneth Pao May 11, 2015

This article pointed out a problem - political fragmentation caused by political extreme left/right in the US and EU, and in India and Japan, by too many political parties - that causes political paralysis hence at best limiting political and economic progress or worsening political and economic malaise. The article prescribed no solution except offering time will hopefully help ease the pain.

I think that top thinkers and strategists, of either left or right political spectrum, ought to pick up this challenge to devise a path to break this impasse within national boundaries. Perhaps non-political institutions, NGOs and or traditional religious groups leaders can appeal to the fragmented political parties and their leaders to come to their senses of what this political paralysis is doing to the country, the national economy and their own children's future ?

The question is how should this call to action of the national non-political institutions, NGOs and or traditional religious groups leaders be issued ?

Just my 2 cents ... Comments ?
A new reply to this comment has been posted.
Eusebio Manuel Vestias pecurto vestias May 11, 2015

I do believe in time the western political systems will envolve in other countries the European Democracy is the most modern in the world
A new reply to this comment has been posted.
Curtis Carpenter May 11, 2015

"Over time, Western political systems will evolve to meet the needs of their economies."

That may well be true -- and in my view can be read as a terminal diagnosis for liberal democracy. The political system abandons any pretense that it should evolve to better serve the people: the demos is reduced to a source of material consumption and not much else. Notions of trust, justice and social equity are factored out of political discourse because they don't fit well with a supply and demand paradigm.

Perhaps it would be helpful to ask: to what extent the evolution of our politics to serve our economies _driven_ our political fragmentation and polarization?
A new reply to this comment has been posted.
Paul Daley May 11, 2015

The question Mohammed leaves unanswered is how you do what he wants to do; how do you push voters towards the center? Will open primaries help? An end to proportional representation. Or do we just allow power to migrate to unelected bodies?
A new reply to this comment has been posted.
Ariel Tejera May 11, 2015

This article by Mr. El-Arian adds to his vast collection of insightful publications.

However, the point he comments here has a well known root cause, methinks.

Other than Canadians and Australians, who are leveraged by vast natural reserves, and have effective wealth distribution mechanisms, the rest of the Western Economies are living the drama of having their middle classes now competing in productivity with the rest of the world, and specially with those of Asian countries. Visionaries were the Germans that limitied economic retribution of their working class but enhanced industrial competitiveness, through a nation-wide agreement, decades ago.
A new reply to this comment has been posted.

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