Friday, January 2, 2009

Recession, rethinks, reality check

Jan 2, 2009

By Timothy Garton Ash

HAPPY new year? You must be joking. 2009 will begin with a wail, and then get worse. Millions of people have already been put out of work in this first truly globalised crisis of capitalism. Tens of millions more will be made jobless soon. Those of us lucky enough to still have jobs will feel poorer and less secure.

Economic troubles will exacerbate political tensions. But rumours of the death of capitalism have been exaggerated. I don't think 2009 will be to capitalism what 1989 was to communism. I don't see any serious systemic competitor on the horizon - in the way there appeared to be in the days of Soviet communism before 1989. The Hugo Chavez model of socialism depends on capitalists buying his oil.

Something will be very wrong, however, if the assumptions of the kind of free-market capitalism - sometimes called 'neoliberal' - that has appeared triumphant since 1989 are not re-examined in this 20th anniversary year.

First there's the balance between state and market, public and private, the visible and invisible hand. Even before last September's meltdown, US President- elect Barack Obama was trying to nudge his compatriots towards the idea that government is not always a dirty word.

Subsequent months have seen a dramatic shift towards a larger role for the state, usually in spasms of desperate governmental improvisation - sometimes (as in Mr Gordon Brown's Britain) ideologically legitimated as Keynesianism, sometimes (as in Mr George W. Bush's United States) just plain, unvarnished Desperationism.

How much of that shift is temporary and how much will endure is something we won't know by the end of this year. While most of the movement is towards strengthening the visible hand of government, it may not all go that way. A leading Chinese economic reformer recently argued that the Asian financial crisis of a decade ago had catalysed market-oriented reforms of the Chinese economy, and this one would do the same.

If he is right, one could even imagine a kind of global convergence on some version of a European-style social market economy, with the US and China approaching from different ends. But it's important to stress the words 'some version'. Even within Europe, there are large variations in the mix of state and market, and in the way that mix is organised. There's no universal formula. What matters is what works for you.

A second rethink for 2009 concerns what is needed for sustainable, green, low-carbon growth, to avert the tipping-point in global warming. At issue is how much and what kind of growth. Yet on balance, this seems likely to be a bad year for the fight against global warming.

Moving towards a sustainable, low-carbon economy requires both companies and governments to pay short-term costs for long-term benefits. When they have their backs to the wall they usually do the opposite. Perhaps the best we can hope for is that they will avoid the beggar-my-neighbour economic nationalism of the 1930s. To get them beyond that will require a deeper shift in the expectations of voters and shareholders.

So long as we, the people, are guided in our personal choices by the lodestar of short- to medium-term economic gain, we shouldn't blame our leaders for trying to give us what we ask for.

So a third essential prise de conscience involves looking again at our personal lodestars. How much more in money and things do we need? Is 'enough' a feast? Could we manage with less? What really matters to you? What contributes most to your individual happiness?

Believe it or not, there's now a whole academic subfield of 'happiness studies'. Economist Richard Layard has written an interesting book, Happiness: Lessons From A New Science. A Dutch scholar, Mr Ruut Veenhoven, has created a World Database of Happiness, including national rankings. Its results were reported on a Canadian website under the headline 'Canada beats US in global happiness index' - beating the US being itself a contribution to Canadian happiness.

A rival ranking has emerged from Leicester University, in which Denmark scores first. There's even a Journal of Happiness Studies. Whatever you think of the substantive value of this stuff, you can spend a happy hour surfing it on the Web, and wondering how much of it was invented.

Seriously, though, some of the choices do come back to individual middle-class citizens of richer countries. It must be obvious that the planet cannot sustain 6.7 billion people - let alone the projected 9 billion in mid-century - living as does today's middle class in North America and western Europe. Either a large part of humankind has to be excluded from the benefits of prosperity or our way of life has to change.

The mantra with which most political and business leaders enter 2009 is: 'Back to economic growth, whatever it costs.' Like the crew of a sailing boat in a storm, they just want to keep it afloat and moving through the waves in some direction, never mind which.

But even as we weather the worst of the storm, which has not hit us yet, we should be taking a hard look at the course we are steering. That requires leadership of a high order, but also citizens demanding such leadership.

The writer is professor of European studies at Oxford University and a senior fellow at the Hoover Institution, Stanford University.

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