Thursday, May 10, 2012
Ghosts from the 1930s have returned to haunt us
May 10, 2012
Ghosts from the 1930s have come back to haunt us. We may not yet have succumbed to a Great Depression but depression, in one form or another, is all around us. And we are witnessing the rise of political extremism, a nationalist backlash against a country’s obligations towards its – typically foreign – creditors.
Recovery has either been remarkably muted or, in many parts of Europe, totally non-existent. For some eurozone nations, economic freefall threatens. Politicians and economists squabble over what needs to be done next, as noted by Jeffrey Sachs on the FT A-List (“We must move beyond growth versus austerity”, 7 May 2012).
The emergence of Nikos Michalolikos and his Golden Dawn party – its emblem a thinly-disguised swastika – in Sunday’s Greek elections together with the bumper vote for Marine Le Pen in the first round of the French Presidential Elections two weeks earlier only serve to highlight the growing disillusionment of voters with mainstream political parties seemingly able to offer neither jam today nor jam tomorrow. For those on the outer fringes of the political spectrum, this is fertile ground – as it proved to be in the 1930s.
The problem can be simply stated. With levels of national income now a lot lower than expected just five years ago, the willingness and ability of debtors to repay their foreign creditors has been seriously reduced. The new slogan for debtors is in danger of becoming “can’t pay, won’t pay”.