With only a few days left in the year the inevitable happens – the string of columns magically appears, columns that try to put just what the hell happened in the last twelve months in some perspective. And, as always, the general tone of these is that the year in question has been one god-awful mess, and a year like no other in human history, and we should be glad it’s gone. Such columns are almost a tradition, and of course are fairly easy to churn out – no need to come up with a fresh perspective on what just happened, or didn’t, with the Republicans fussing and feuding in Iowa, or something new to say about how the Germans feel about the Greeks and their absurd economy. All you have to do is come up with eight hundred words on what everyone knows has happened. It’s a matter of assembly, not invention. All you need is a good hook.
But that’s what people want – everything wrapped up in a ball and rolled through the iron gates of life (like in that famous poem) – they want closure. This all had to mean something. It’s the end of the year – a time for summing up and assessing your losses and gains, and then closing the books on the year, with everything balanced, according to the generally accepted rules of accounting. The yearly balance sheet is everything. That’s how you know what’s going on.
Of course the strict demarcation of one year from the next is wholly artificial – the first workday of the brand-new year will be much like the last workday of the troubling previous year. The problems won’t change, nor will you. But the fiction of a new start is pleasant – thus all the resolutions no one ever keeps, even for a day – as is the fiction that everything makes sense – that it all does mean something. But this is not the time to dive into a discussion of Sartre and Camus and that existentialist crowd and their notion that it’s all absurd anyway. Perhaps external and fixed significance cannot logically exist, but no one can face the concept of existential meaninglessness on New Year’s Eve. Dick Clark will never say, as that ball drops in Times Square, that, you know, this whole business is silly and quite pointless. So let’s assume it all makes sense, somehow. Let’s assume a twelve-month year is not just an arbitrary concept, and that all that happened within its temporal boundaries makes perfect sense, and the only task is to point to how it all just makes perfect sense.
And that leaves the problem of the hook. You do need a central concept on which to hang seemingly disparate events. That’s the job, and not an easy one. The existentialist of the mid-twentieth century would say that if you’re severely logical and unflinchingly honest, it’s an impossible job. But they’re all dead now. And no one wanted to believe them in the first place. So we get the year-end columns.
And one of the more interesting columns is from David Ignatius in the Washington Post, telling us that 2011 was the year of the befuddled leader:
This was a year in which events rarely turned out as predicted and when much of the world seemed shrouded in turmoil and uncertainty. It was difficult for government analysts back in Washington to know just where they were on the map, let alone where they were heading.
In place of Clausewitz’s famous “fog of war,” we had a “fog of revolution” and consequent “fog of policy.”
So Ignatius rejects Time magazine’s choice for person of the year, “the protester” – important but perhaps too vague – and he dismisses anyone who wants to call 2011 the year of “the dead terrorist” – arguing that the killing of Osama bin Laden, while it marked the emotional end of the decade after the 9/11 attacks, wasn’t that central to the here and now. He prefers “the befuddled leader.” That best sums up things:
This year offered many such candidates, from President Obama, whose reticent style was lampooned as “leading from behind” to the bootless Europeans, Angela Merkel of Germany and Nicholas Sarkozy of France, who spent the year muffing their economic crisis; to the nervous free-market totalitarians, Vladimir Putin in Russia and Hu Jintao in China, looking over their shoulders at technology-empowered citizens.
And don’t forget the most befuddled leaders of all – Hosni Mubarak of Egypt (deposed), Ali Abdullah Saleh of Yemen (has said he will relinquish power by February), Moammar Gaddafi of Libya (dead), and Bashar al-Assad of Syria (probably on his last legs).
That’s a pretty nifty hook. Step back, look, and then consider these folks – it seems leadership just isn’t what it used to be. This was the year world leaders let themselves be jerked around by events. They weren’t making history. They were doing their best to fend it off, and not doing even that very well, although we may be a somewhat special case:
Given the uncertainties facing the world, the United States was probably lucky to have a “no drama” president who sought to avoid mistakes. Still, there’s no disguising the fact that 2011 was a lesson in the diminished power of the United States. One great debate for the 2012 campaign will be whether an American restoration is possible and, if so, within what limits.
Yes, even the most careful leader must deal with the situation at hand, and even a strong leader can’t resurrect a corpse. But it is best to face facts, and realize what you want can be as dangerous as what you don’t want:
The citizen movement that took flight in Tunisia as the Arab Spring ended up empowering Muslim political groups across the map, to the point that some secular Arabs worry it’s now an “Islamist Winter,” freezing the rights of women and minorities. In Egypt, a military that began the year as the protesters’ ally ended it as their enemy; the Tahrir Square uprising wobbled unsteadily at year-end…
And there’s the whole issue of radical Islam:
The paradox of 2011 was that al-Qaeda, the leading terrorist edge, seemed on the verge of defeat with the death of bin Laden, while the political face of the Muslim Brotherhood was ascendant in Tunisia, Egypt and Syria – not to mention Turkey, which seemed to be bidding in 2011 for neo-Ottoman status, with Obama as facilitator and sometime apologist.
And then there’s Europe and Pakistan, where Ignatius says their political leaders “failed to address existential threats” in any meaningful way:
Europe is still a puzzle at year-end, especially a Germany that acts as if it can flog the rest of the continent to economic health. Coordinated fiscal policy and austerity will certainly be necessary for the euro zone’s future. But what’s needed right now is flexibility and growth – encouraged by a European Central Bank that can act, like the U.S. Federal Reserve, as a lender of last resort.
But the Germans don’t want that sort of balm. Better for spendthrift Europeans to suffer; and so they will, unless Mario Draghi, the central bank’s president, can accomplish by stealth what the Germans (backed by euro-zone treaties) forbid him from doing openly.
And then there’s Pakistan:
It’s a story abetted by U.S. policies that, with the best intentions, kept adding to Pakistan’s destabilization. Through 2011, the Pakistani military rolled over the hapless President Asif Ali Zardari as if he were no more than a gaudy piece of cardboard. The military’s zealotry sought to cover its failure – to find an al-Qaeda leader who had been hiding in plain sight – and to combat an Islamist insurgency that threatens Islamabad far more than the United States ever could.
Can’t anybody here play this game? Those are the words of the frustrated baseball manager, Casey Stengel. That seems to be Ignatius’ hook. That will do.
But there are other hooks. The economist Paul Krugman, with his Nobel Prize and all, decides to go back seventy-five years or so, and offers this:
“The boom, not the slump, is the right time for austerity at the Treasury.” So declared John Maynard Keynes in 1937, even as FDR was about to prove him right by trying to balance the budget too soon, sending the United States economy – which had been steadily recovering up to that point – into a severe recession. Slashing government spending in a depressed economy depresses the economy further; austerity should wait until a strong recovery is well under way.
Unfortunately, in late 2010 and early 2011, politicians and policy makers in much of the Western world believed that they knew better, that we should focus on deficits, not jobs, even though our economies had barely begun to recover from the slump that followed the financial crisis. And by acting on that anti-Keynesian belief, they ended up proving Keynes right all over again.
Do you want to know what really happened this last year? We relived 1937, globally. And the arguments were the same:
In Washington, in particular, the failure of the Obama stimulus package to produce an employment boom is generally seen as having proved that government spending can’t create jobs. But those of us who did the math realized, right from the beginning, that the Recovery and Reinvestment Act of 2009 (more than a third of which, by the way, took the relatively ineffective form of tax cuts) was much too small given the depth of the slump. And we also predicted the resulting political backlash.
So the real test of Keynesian economics hasn’t come from the half-hearted efforts of the federal government to boost the economy, which were largely offset by cuts at the state and local levels. It has, instead, come from European nations like Greece and Ireland that had to impose savage fiscal austerity as a condition for receiving emergency loans – and have suffered Depression-level economic slumps, with real GDP in both countries down by double digits.
In short, the world got stupid again:
This wasn’t supposed to happen, according to the ideology that dominates much of our political discourse. In March 2011, the Republican staff of Congress’s Joint Economic Committee released a report titled “Spend Less, Owe Less, Grow the Economy.” It ridiculed concerns that cutting spending in a slump would worsen that slump, arguing that spending cuts would improve consumer and business confidence, and that this might well lead to faster, not slower, growth.
They should have known better even at the time: the alleged historical examples of “expansionary austerity” they used to make their case had already been thoroughly debunked. And there was also the embarrassing fact that many on the right had prematurely declared Ireland a success story, demonstrating the virtues of spending cuts, in mid-2010, only to see the Irish slump deepen and whatever confidence investors might have felt evaporate.
And this kept happening over and over:
There were widespread proclamations that Ireland had turned the corner, proving that austerity works – and then the numbers came in, and they were as dismal as before. Yet the insistence on immediate spending cuts continued to dominate the political landscape, with malign effects on the U.S. economy. True, there weren’t major new austerity measures at the federal level, but there was a lot of “passive” austerity as the Obama stimulus faded out and cash-strapped state and local governments continued to cut.
Maybe 2011 was the year of “cut and grow” austerity economics, trying over and over to prove shutting things down left and right makes the economy boom. And one day, somewhere, somehow, that may work. But this wasn’t that year. And the evidence was clear enough:
Washington may be obsessed with the deficit, but financial markets are, if anything, signaling that we should borrow more. Again, this wasn’t supposed to happen. We entered 2011 amid dire warnings about a Greek-style debt crisis that would happen as soon as the Federal Reserve stopped buying bonds, or the rating agencies ended our triple-A status, or the superdupercommittee failed to reach a deal, or something. But the Fed ended its bond-purchase program in June; Standard & Poor’s downgraded America in August; the supercommittee deadlocked in November; and U.S. borrowing costs just kept falling. In fact, at this point, inflation-protected U.S. bonds pay negative interest: investors are willing to pay America to hold their money.
The bottom line is that 2011 was a year in which our political elite obsessed over short-term deficits that aren’t actually a problem and, in the process, made the real problem – a depressed economy and mass unemployment – worse.
Can’t anybody here play this game? When it’s time for summing up and assessing your losses and gains, and then closing the books on the year, with everything balanced, you get your answer. No.
In passing it might be worth noting there was a blast of overheated prose from the right – most notably from Steven Hayward at Power Line here – excoriating Krugman. But it was odd. It seems John Maynard Keynes once made some anti-Semitic comments, and the assertion was that Krugman, who happens to be Jewish, must have known that, and thus Krugman hates Jews, and thus hates Israel, and thus hates Jesus – and thus how can anyone who is anything like John Maynard Keynes or Paul Krugman be right about anything, ever? For a full analysis of all that see Cerberus at Sadly, No! – “Cause hey, if Darwin was a racist then that totally would mean evolution was false, right?” The whole back-and-forth is depressing.
But it’s no more depressing than the hook that Andrew Leonard chooses, saying this was the year of the world on the verge of a nervous breakdown:
An earthquake in Japan sent the global auto manufacturing industry into a conniption. A flood in Thailand drastically reduced supplies of computer hard drives, forcing even a titan like Intel to swiftly reduce revenue forecasts. State-subsidized solar panel production in China crushed a U.S.-subsidized solar start-up, thereby igniting a Washington political scandal.
It is child’s play to find further examples. The underlying reality is that unexpected consequences make everyone nervous. Sensibilities are on hair trigger. Just two weeks ago, the New York Times captured the new jitteriness in a single quote. In a story reporting how U.S. stock traders were increasingly setting their alarm clocks for the middle of the night, in order to absorb the latest news from Europe as soon as it started to break, one stock analyst, Michael Mayo, complains in a tone of bemused wonder: “Who would have thought we would have to be looking at Italian sovereign debt yields to figure out what Morgan Stanley’s stock will do?”
It became panic-time, all the time:
For most of November and December, the health of Italy’s debt sales became not merely a judgment on Italy’s economic health and fiscal stability, but a swiftly translated proxy for investor sentiment about the state of all Europe. If Italy ran into real trouble, so the theory went, France and Germany would soon be swept into the vortex. And a European recession would obviously be bad news for the rest of the world – so one unsuccessful auction in Rome becomes immediate cause for bearish sentiment in New York and Tokyo and Shanghai.
And no one wants to be caught more than one nanosecond out of the loop. If the orders go out to sell or buy, you want to get there first. Since now, more than ever, bad news travels fast, everyone’s got to be quick on the trigger.
So this was the year everything changed:
It doesn’t seem healthy, but we’re going to have to get used to it. Volatility and vulnerability are built into the infrastructure of our modern world. The jury may still out on the chaos theory question of whether a single butterfly flapping its wings in Botswana can cause a typhoon in the Philippines, but we now know without a shadow of a doubt that the relative success or failure of a troubled European government’s attempt to raise cash can send instant shock waves across financial markets across the globe.
And we know, intimately, that it doesn’t take much to set off a cascade of trouble – after the great global crash of 2008, traders everywhere are in a state of permanent PTSD. Beyond the obvious surface connections between markets – that European recession slowing U.S. economic growth – there are abundant linkages beneath the scenes that are obscure and hard to unravel, interconnections woven by complex derivatives and hedging strategies and computer-driven high-speed trading algorithms that instantly translate woe in one market to panic in another.
The inescapable conclusion: Our modern high-tech markets, in which more money than ever before swirls around the globe in a blink of an eye, are better at transmitting panic and fear than anything heretofore created by humans.
So this is a big deal:
If civilization is supposed to imply progress, then something has gone very awry: In the second decade of the 21st century, our infrastructure is increasingly fragile, increasingly prone to disruption. The sword of Damocles hangs above everyone’s head, and the thread that keeps it from falling is fraying perilously thin.
But it had to happen:
What is perhaps most fascinating about this state of affairs is how it has arisen as a consequence of global capital’s relentless quest for lower operating costs and greater efficiency and flexibility. The better we get at extending supply and production chains across the globe, the more vulnerable those chains become to a disruption at any given point. The faster we enable the transmission of information around the world and through the financial markets, the more volatile those markets become, as every new headline sends a different trading signal.
And it seems we’re going to see more of this in the future, lots more of this:
Climate disruptions will increase in frequency and severity, influencing commodity prices and immigration flows and insurance-industry profit margins. Higher prices for fossil fuels will complicate those transportation logistics – a single shock in Saudi Arabia would blast through economies everywhere. The temptation to hit the panic button will become increasingly irresistible.
Our systems need more redundancy, and our temperament would benefit from a heaping dose of prudence. But it’s hard to see where the encouragement to change our ways will come from. Because if there’s one thing that’s even more clear than the emergence of a constantly-on-the-verge-of-a-nervous-breakdown global economy, it’s that, for the most part, our political systems are not up to the task of dealing with these challenges.
That’s what David Ignatius was saying, but Andrew Leonard is concerned with our new overall sense of hyper-anxious powerlessness:
As individuals, we’ve never been so much at the mercy of events that play out thousands of miles away, and we are remarkably unable to do anything about it. And here comes 2012, which will witness a U.S. presidential election, crunch time for the European fiscal union, a potentially slowing Chinese economy, more weather disruptions, and a whole bunch of stuff that we have no idea is coming.
Ah, so the idea is to close the books on nasty old 2011 and start 2012 fresh, with a shiny fresh year after all the parties and after the hangover clears – but our leaders can’t lead, we’re stupidly trying to ruin the economy with absurd austerity-is-prosperity theories, and we’re all on the verge of a nervous breakdown. It seems the coming year will be much like this year. Perhaps the twelve-month year is just an arbitrary concept after all. Still we love these columns. You assess what you have, and drink heavily.