When a state functions well, it can save hundreds of thousands of lives in a single event. And when it fails, as Haiti is reminding the world yet again these days, the consequences often are dire.
LONDON — On January 12, 2010, Haiti suffered an earthquake measuring 7.0 on the Richter scale. Estimates of the fatalities range from 100,000 to 316,000. Barely a month and half later, a magnitude 8.8 earthquake hit Chile, leaving 500 dead, 150 of them from the subsequent tsunami. Whereas large swaths of Haiti’s main cities were reduced to rubble, including the National Palace – the president’s official residence – in Port-au-Prince, in Chile very few multi-story buildings collapsed, killing their inhabitants.
Unlike in Haiti, Chileans benefited from stringent building codes (adopted after another massive earthquake in 1960) and a culture, nurtured over generations, of building inspectors who allowed no construction shortcuts and, crucially, took no bribes. When the state works, it can save hundreds of thousands of lives in a single event. And when it fails, as Haiti is reminding the world yet again these days, the consequences are dire.
Now, this is all so obvious that it should not need repeating, except that it runs counter to the narrative du jour. Citizens are anxious because their governments are not delivering, hums the conventional wisdom. And governments are not delivering because they have been rendered toothless by the forces of globalization. That will take a long time to fix, citizens are told. Until then, they are on their own. No wonder they feel anxious.
When it comes to removing sources of anxiety, being reasonably sure that citizens’ roofs will not cave in, that the banks that hold their life savings will not collapse, and that the currency in which they are paid will be worth something tomorrow should figure high on anyone’s priority list. There is plenty that governments can do to ensure these outcomes.
The last two decades of the twentieth century were rife with financial crises in emerging economies. But, even though rich countries had their own financial meltdown in 2007-09, followed by a deep global recession, and despite the COVID-19 pandemic a decade later, there have been few such emerging-market crises since. That is because many governments decided to do something about their vulnerability.
After their traumatic experience in the late 1990s, East Asian countries – not just rich South Korea, Taiwan, and Singapore, but also middle-income Thailand, Malaysia, Indonesia, and the Philippines – allowed their currencies to depreciate, curtailed their foreign borrowing, exported even more than before the crisis, and imported less. As a result, they were able to accumulate tens of billions of dollars in reserves.
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Even Latin American countries, not traditionally known for prudent economic management, began to get their act together after their traumatic debt crises of the 1980s and 1990s. Some, but not all, allowed their currencies to float, made central banks politically independent, and adopted rules to limit budget deficits.
During the 2007-09 global financial crisis, unemployment in Latin America rose but a financial meltdown was avoided. And when the pandemic arrived, the region’s financial systems did not just avoid a crash. Most governments retained access to international capital markets, which they used to pay for emergency pandemic-related expenditures.
Of course, a benign global environment makes national leaders’ job easier. Emerging and developing economies would not have to maintain high dollar reserves if a global financial safety net enabled them to borrow dollars in an emergency. And low-income countries would worry less about a food-price spike if countries like Russia refrained from invading their neighbors and throwing the world grain market into chaos.
But even when the global environment is not benign, well-run countries can protect their citizens against uncertainty. An economically anxious middle-class citizen is likely to be worrying about how to keep an unexpected illness or the loss of a job from depleting her savings and throwing her family into bankruptcy. Protection against that kind of mishap can mostly be provided within the nation-state, because all people do not become ill or lose their jobs at the same time.
Systems where those who remain healthy and employed lend a hand to those who do not go by the label of insurance. If government plays a role – subsidizing the system to make it affordable for the poor, mandating participation to ensure that the pool of people involved is large enough, or collecting from the young to raise the consumption of the old – we call it social insurance or a welfare state.
The welfare state is a “piggy bank,” in the apt metaphor of my London School of Economics colleague Nicholas Barr. According to the International Labor Organization, nearly half of humanity today has access to some kind of welfare protection. It is not globalization that is keeping the other half from having the same.
If anything, the pandemic should have convinced skeptics of the virtues of modern welfare states. A pandemic is the rare situation in which many people do get sick and lose their jobs at the same time. Insurance across citizens breaks down, and government becomes the insurer of last resort.
To provide extra resources at a time of extreme need, governments must either be sitting on a big pile of reserves (as in East Asia) or have access to credit. Whatever the source of financing, advanced economies managed to spend 15% of GDP on pandemic relief, and emerging economies spent 7% of GDP – figures that were unthinkable only a few years ago.
Such examples of success do not require blood, but without sweat and tears they will not work. Raising construction standards results in pricier accommodations or slimmer profits for builders. Accumulating international reserves requires importing less than we export, for painfully long periods of time. Retaining access to credit in bad times requires running budget surpluses and repaying debt in good times (even rich countries can get into debt trouble, as Britain’s ruinous mini-budget episode revealed in September 2022).
To regain control over their own fate, countries must regain control over their own instincts. But that is not part of the narrative du jour, either. For some of the left, fiscal self-discipline is a quaint twentieth-century relic (why worry about debt if you can always print money to repay it?). For much of the right, all self-discipline has become electorally inconvenient. America will not be great if Russia gobbles up Ukraine and sets its sights on the Baltics, but military and financial support for Ukraine is anathema to the Trumpified Republican Party. Countering an imperialist threat requires effort and sacrifice – virtues that have no place in a populist stump speech. That circle will not square. No wonder citizens are anxious.
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For America to address the glaring flaws in its constitutional order, it will need to move to a system where judicial decisions are made not by “Democratic judges” or “Republican judges,” but just by judges. No other liberal democracy allows for such a corrosively politicized appointment process.
sees the country’s politicized Supreme Court as the biggest obstacle to addressing many other problems.
Though antitrust enforcement has been gaining momentum on both sides of the Atlantic, a handful of private actors still wield extraordinary market power – and thus power over ordinary people’s lives. With some calling for more radical action, and others warning that reining in firms’ market power would be unhelpful and even harmful, we asked PS commentators what needs to be done.
LONDON — On January 12, 2010, Haiti suffered an earthquake measuring 7.0 on the Richter scale. Estimates of the fatalities range from 100,000 to 316,000. Barely a month and half later, a magnitude 8.8 earthquake hit Chile, leaving 500 dead, 150 of them from the subsequent tsunami. Whereas large swaths of Haiti’s main cities were reduced to rubble, including the National Palace – the president’s official residence – in Port-au-Prince, in Chile very few multi-story buildings collapsed, killing their inhabitants.
Unlike in Haiti, Chileans benefited from stringent building codes (adopted after another massive earthquake in 1960) and a culture, nurtured over generations, of building inspectors who allowed no construction shortcuts and, crucially, took no bribes. When the state works, it can save hundreds of thousands of lives in a single event. And when it fails, as Haiti is reminding the world yet again these days, the consequences are dire.
Now, this is all so obvious that it should not need repeating, except that it runs counter to the narrative du jour. Citizens are anxious because their governments are not delivering, hums the conventional wisdom. And governments are not delivering because they have been rendered toothless by the forces of globalization. That will take a long time to fix, citizens are told. Until then, they are on their own. No wonder they feel anxious.
When it comes to removing sources of anxiety, being reasonably sure that citizens’ roofs will not cave in, that the banks that hold their life savings will not collapse, and that the currency in which they are paid will be worth something tomorrow should figure high on anyone’s priority list. There is plenty that governments can do to ensure these outcomes.
The last two decades of the twentieth century were rife with financial crises in emerging economies. But, even though rich countries had their own financial meltdown in 2007-09, followed by a deep global recession, and despite the COVID-19 pandemic a decade later, there have been few such emerging-market crises since. That is because many governments decided to do something about their vulnerability.
After their traumatic experience in the late 1990s, East Asian countries – not just rich South Korea, Taiwan, and Singapore, but also middle-income Thailand, Malaysia, Indonesia, and the Philippines – allowed their currencies to depreciate, curtailed their foreign borrowing, exported even more than before the crisis, and imported less. As a result, they were able to accumulate tens of billions of dollars in reserves.
Secure your copy of PS Quarterly: The Climate Crucible
The newest issue of our magazine, PS Quarterly: The Climate Crucible, is here. To gain digital access to all of the magazine’s content, and receive your print copy, subscribe to PS Premium now.
Subscribe Now
Even Latin American countries, not traditionally known for prudent economic management, began to get their act together after their traumatic debt crises of the 1980s and 1990s. Some, but not all, allowed their currencies to float, made central banks politically independent, and adopted rules to limit budget deficits.
During the 2007-09 global financial crisis, unemployment in Latin America rose but a financial meltdown was avoided. And when the pandemic arrived, the region’s financial systems did not just avoid a crash. Most governments retained access to international capital markets, which they used to pay for emergency pandemic-related expenditures.
Of course, a benign global environment makes national leaders’ job easier. Emerging and developing economies would not have to maintain high dollar reserves if a global financial safety net enabled them to borrow dollars in an emergency. And low-income countries would worry less about a food-price spike if countries like Russia refrained from invading their neighbors and throwing the world grain market into chaos.
But even when the global environment is not benign, well-run countries can protect their citizens against uncertainty. An economically anxious middle-class citizen is likely to be worrying about how to keep an unexpected illness or the loss of a job from depleting her savings and throwing her family into bankruptcy. Protection against that kind of mishap can mostly be provided within the nation-state, because all people do not become ill or lose their jobs at the same time.
Systems where those who remain healthy and employed lend a hand to those who do not go by the label of insurance. If government plays a role – subsidizing the system to make it affordable for the poor, mandating participation to ensure that the pool of people involved is large enough, or collecting from the young to raise the consumption of the old – we call it social insurance or a welfare state.
The welfare state is a “piggy bank,” in the apt metaphor of my London School of Economics colleague Nicholas Barr. According to the International Labor Organization, nearly half of humanity today has access to some kind of welfare protection. It is not globalization that is keeping the other half from having the same.
If anything, the pandemic should have convinced skeptics of the virtues of modern welfare states. A pandemic is the rare situation in which many people do get sick and lose their jobs at the same time. Insurance across citizens breaks down, and government becomes the insurer of last resort.
To provide extra resources at a time of extreme need, governments must either be sitting on a big pile of reserves (as in East Asia) or have access to credit. Whatever the source of financing, advanced economies managed to spend 15% of GDP on pandemic relief, and emerging economies spent 7% of GDP – figures that were unthinkable only a few years ago.
Such examples of success do not require blood, but without sweat and tears they will not work. Raising construction standards results in pricier accommodations or slimmer profits for builders. Accumulating international reserves requires importing less than we export, for painfully long periods of time. Retaining access to credit in bad times requires running budget surpluses and repaying debt in good times (even rich countries can get into debt trouble, as Britain’s ruinous mini-budget episode revealed in September 2022).
To regain control over their own fate, countries must regain control over their own instincts. But that is not part of the narrative du jour, either. For some of the left, fiscal self-discipline is a quaint twentieth-century relic (why worry about debt if you can always print money to repay it?). For much of the right, all self-discipline has become electorally inconvenient. America will not be great if Russia gobbles up Ukraine and sets its sights on the Baltics, but military and financial support for Ukraine is anathema to the Trumpified Republican Party. Countering an imperialist threat requires effort and sacrifice – virtues that have no place in a populist stump speech. That circle will not square. No wonder citizens are anxious.