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COMMENTARY
November 16, 2011
Plan \"B\"
In a curious, and rather unedifying way, Europe is showing leadership. The members of the European Union are grappling with their real, material problems in a way that North America is not yet doing. We, and the Americans in particular, are still piling on the public debt, and the congressional task force charged with finding serious cuts is dithering, politically. But the European leaders are getting beyond politics.This could of course be put the other way round. Sharp observers have noticed that representative democracy has taken direct hits in Greece and now Italy. Governments have fallen and been replaced not by elections but by sheer pressure of events. In both cases, "technocrats" have been installed (though by inter-party consent) to deal with a mess beyond the capacity of elected leaders who were, in the colloquial expression, "idiots." This expression has special force in Italy's case. It is hard for almost any foreigner to understand why Silvio Berlusconi was ever elected to any position of political leadership, in view of an ego that openly displays decadence and irresponsibility. And he is not yet gone; still waiting in the wings for his encore. He remains in a position to sabotage everything his successor attempts. This in a country which has, by current western standards, remarkably low levels of private-sector debt, and high levels of personal savings. It is not like Greece, where the whole country was on a bender, privately and publicly, slurred in a culture of appropriation. Italy also has, on the family scale under the radar of crippling unions and regulation, a flourishing black market, and a long history of finding ways around government obstacles. It is perhaps thanks to this "invisible economy" that Italians have survived generations of farce at the national level. Their new prime minister, Mario Monti, must defy huge odds to form a government that can last even to the 2013 elections: for with Mussolini dead, and Berlusconi retired, we return to the tradition of government leaders whose terms in office could be counted in minutes. He is an economist, and thinktank intellectual, of some personal dignity (now in the ultimate dignity-killing job). Banking is his key area of expertise; his background suggests he is better prepared to understand the psychology of banks than the psychology of people. Of all the current European leaders, he probably has the best understanding of complexities that pass over everyone's head. We may hope for the miraculous appearance of a previously undetected gift for political salesmanship - which, in present circumstances, means explaining to very excited people why they should not riot. Italy is now the focus; a much bigger mess than Greece, for the size of the country's economy. The refusal to make an example of Greece necessarily involved defending Italy at the next pass; but now the realization that further retreat brings financial Armageddon, sobers the politicians. Yes, they must do unpopular things, that will cost them their jobs soon enough; but they are staring at worse than electoral annihilation. For who wants his name to go down in history as a by-word for cowardice and incompetence? I began by suggesting they are showing leadership in spite of themselves, by their very grappling. Let me now put this abstractly, though cutely, in human moral terms: Sometimes, one makes a decision by making the opposite decision. That is, given a choice between "A," and "some form of B" (and being B-wildered), one chooses "A," decisively. Whenupon, one almost immediately realizes that "A" is insupportable. But one's path through "B" is now much less B-wildering. The "A" upon which Europe's leadership has been working, is "do whatever it takes to save the euro." This is insupportable. It can't be done. The "B" involves giving up on the aspiration to create a "United States of Europe," with one currency under no God, then cutting members loose to deal with their own insolvencies, each in their own way. Even in Greece, I am confident that the prospect of starvation can create economic efficiencies heretofore unimagined. Individual bankrupt countries can no longer be bailed: the rescue money anyway goes only to revive long-established bad habits. Instead, attention should be focused upon bailing out the banks, which provided so much of the lending, in the demented (but curable) belief that sovereign debt is ultimately good as gold. Why save these stupid, greedy bankers? Because without banks, there can be no economic recovery. Simple as that. But the banks must turn their attention now away from kiting, and back to return-on-investment. They require massive recapitalizations, and governments shouldn't hesitate to take new but temporary equity positions to this end; while fighting the temptation to immobilizing bureaucratic micro-regulation. Some form of "Plan B" can provide a path out of the rubble, and Europe's leaders are to be congratulated for blundering towards it - by recklessly attempting "Plan A." David Warren
© Ottawa Citizen
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