The Open Forum panel on the Eurozone started with an expression of optimism and relief. Despite recent drawbacks, the Eurozone is out of the emergency room after years of trials and tribulations. While the recovery was still in doubt at the previous World Economic Forum, the illustrious panel of national ministers and think tank directors at WEF 2013 unanimously agreed with the aforementioned assessment. Though the latest report by the European Commission throws some doubt on this assessment, it is clear that the Eurozone has issues to tackle that are beyond the immediate economic collapse of some of its members. With some countries still in recession, an average unemployment rate of over 11%, and an increasing lack of popular support, it is clear that the status quo is unsustainable.
At a Wall Street Journal conference in 2009, then White House Chief of Staff Rahm Emanuel stated that one should never let a crisis go to waste. In this sense, the 2008 financial crisis is just like any other crisis: a disaster and an opportunity. A disaster because it led to the destruction of $4 trillion worth of global assets, millions of people losing their livelihood, and bringing the whole economic system incredibly close to a cataclysmic meltdown. An opportunity in at least two ways: firstly, in its ability to showcase how the risk-taking nature of the financial system exposes society at large and secondly, in its ability to create pressure on the legislature to address these inherent risks. The scope and reach of the crisis is reminiscent of the Great Depression – the single greatest economic calamity in recent economic history. Indeed, a closer look reveals that these two periods have more in common than the extent of economic catastrophe.
Unless you are an anarchist, you probably appreciate a little bit of state in your life – the collective force that upholds public order, guarantees your personal security and protects your private property. In the 17th century, the English philosopher Thomas Hobbes asked what would happen if individuals were allowed to interact with each other in the absence of a powerful state apparatus, that is in the absence of a Leviathan. He asserted that competition, jealousy and selfishness would lead to a war of all against all, making, in his now famous words, the life of man “solitary, poor, nasty, brutish and short”. For generations that have never witnessed civil war, this seems exaggerated, but it serves to illustrate the dangers associated with leaderless political communities. In the future, the global order might be characterized exactly by this absence of leadership.
Forget the G-8, the G-20, the United Nations and all other initiatives of global cooperation – in the emerging global order every nation fights for itself. At the World Economic Forum in Dubai few were as outspoken in the exclusion of the possibility of truly global cooperation as Dr. Ian Bremmer, who argues that it is to the benefit of nobody to close one’s eyes to the volatility, insecurity and humanitarian casualties that arise as ever fewer nations have the capacity and none have the willingness to exercise global leadership.
Economic paradigms come and go. The seemingly endless debate between neo-liberals and –Keynesians in the past century provides a fascinating account of this. It shows that there must be words in economic debate other than last words – that no matter how certain an insight might seem in a particular instance, it will likely be proved wrong in the myriad combinations of circumstances that history inevitably yields. The essence of capitalism evolves around the centrality of profit, which in many ways is the very reason it has outcompeted its economic alternatives. Few would disagree with the central claim of University of Chicago’s Milton Friedman’s controversial essay on social responsibility (New York Times Magazine) that the paramount social objective of any business is to achieve profits within its legal constraints.