Policy as [Bad] Drama

Is is just me or are we firmly stuck in one of those endless dramas designed to drive us all batty?

David Cameron just gave a speech in which he called for ‘urgent action’ to resolve the Euro Zone crisis. This must be the millionth time a serious person has called for urgency. Just for fun someone should give a speech calling for extended dithering and obfuscation. At least they could later claim to have influenced the outcome.

It takes no insight whatever to remark that if there is one defining characteristic of the Euro Zone crisis it is the remarkable lack of urgency shown by the key figures. That, plus the unrelentingly wrong headed policies they keep coming up with when they do, at last, get something done. Europe has become a classic staged production: the script is cleverly written to keep us all on edge; the actors give brilliant perfect soliloquies; the chorus keeps score; there is both farce and tragedy; hubris meets nemesis; each act sets up the next; and it rivals Wagner for grandeur and length. The only thing missing is a hero to offset the abundance of villains.

Oh. And the script tilts too much towards farce.

The entire Euro edifice is slowly swirling down the drain, along with the lives and aspirations of millions of European citizens, while various erstwhile leaders are creating legends of folly apparently oblivious to the damage they are inflicting. As gripping drama it is first rate. As economic policy it is an epic failure.

I have a great difficulty in trying to understand why all the serious folk at the Euro’s helm have decided – every one of them – that steering the ship onto the rocks is the best way to avoid hitting those self-same rocks. Austerity diminishes an economy. It is an act of shrinkage. It lessens demand. Revenues fall. Paying off debts from a smaller cash flow means there is less cash for other things. Growth shifts to decline. Up becomes down. Duh. What about this is hard?

I also realize that serious folk somehow believe in magic. As in market magic. And that all this shrinkage is supposed to clear away the dross, inspire confidence, and set in motion a phoenix-like resurrection as investors clamor to innovate, lead, and otherwise jump around in Schumpterian joy at the sight of destructive creativity. Or something. Or is it von Mises who advocated depression as a cure for excessive growth? As if dancing on the grave of the middle class was a good thing. Perhaps it was in Austria. Indeed I am not even sure there was a middle class in Austria when von Mises and his ilk were creating their anti-social vision.

Had the Austrians had control of writing a certain document the famous phrase “We, the people … ” would have turned out to be “I, the person … ”

Yes, people, austerity hurts. The puritans want us to think it is good for us. A bitter pill to be swallowed to cure our prior excesses. They look sage and sad administering the pill. They tell us it is good for us. They make us promise not to be bad again. Or else.

Meanwhile in the UK austerity is having its required effect. Business is booming. Things are looking up.

Not. The UK is now mired in so deep a trough that it is actually worse the the 1930’s. Think about that. The UK managed to avoid the worst of the Great Depression because it threw off some of the shackles imposed by serious people back then – notably, it left the gold standard well before the US or France. So here we are many decades later and all that unconventional thinking has been tossed aside. The UK’s contemporary serious people didn’t study the history of economics, they just read the most recent orthodox book. They are competing with Europe for stupid economic policy award status. They might even win.

Think about that for a minute.

Meanwhile here in the US policy is in abeyance. No one actually cares about the economy right now because they are too busy getting elected or re-elected. This means that the competition is not to create dumb policy – that is so 2011 – it is now to create extraordinarily dumb proposed policy. In order to get back into the stupid policy stakes and have a chance of outdoing the Euro or UK lunacy, US politicians are having to propose all sorts of really ridiculous ideas. They are all being very careful to avoid saying anything sensible. That would ruin their chances of winning. So they blather on as if the great recession had never happened. They repeat the same proposals that got us all into this mess.

The trick, this election cycle at least, is to avoid, at all costs, saying anything constructive. Novelty is a distinct no-no. Attacking our problems is so, well, controversial. Far better to attack imaginary problems. Take, for instance, the debt ceiling and the catastrophic impact on our future of borrowing money at 1%. It is far, far, better to allow our children to borrow at 5%. We must not, at all, contemplate borrowing when interest rates at at all time lows. Think of the burden on our kids. No. Let them borrow at much higher rates. It’s the responsible thing to do. We must eschew the chimera of a once in a lifetime deal. We must hold back. We must let the opportunity pass. We must resist temptation. With enough steely self-control and enough hair on our hair shirts we will come through, and the magic will part the clouds, the sun will shine, and we all be saved from the hell of intervention.

Because we all know how evil government intervention can be. Reagan said so.

Whatever next?

Jump starting the economy so our kids actually can get good jobs?

Heavens forfend!

Don’t you believe in magic?