A cat on the brain
by George Jonas
National Post
July 3, 2010
At the G8/G20 summits last week many people thought the sky was falling, but few were prepared to say it was a problem. Even fewer could agree on how to prop it up. With a fresh gale blowing, yet the global economy in the doldrums, was it time to spread the canvass or take it down?
Germany proposed austerity and America profligacy as solutions. (Americans didn't use the word "profligacy"; they used "stimulus.") Anyway, Germany and America couldn't both be right -- could they? -- but they could both have a cat on the brain.
Is a cat on the brain like a bee in the bonnet? Not quite, but close.
The 18th century Russian fabulist Ivan Krylov wrote animal allegories. In one fable, the Mouse laughs when told about a battle in which the Tiger supposedly trounces the Cat. When the animals inquire what's so amusing, the Mouse replies that the story cannot be true. Everyone knows there's no animal stronger than the Cat.
A "cat" is whatever looms large in a person's or nation's psyche. Last week's summits let some out of the bag. Germany's "cat" is inflation, while America's is unemployment. Each has roots going deep in the nation's historic consciousness. Maybe that's why Germany's formula sees nations penny-pinching their way out of the global economic crisis, and America's formula sees them spending their way out of it. ("Spend" is replaced with the word "stimulate" in White House English but it means the same thing.)
There are additional reasons for German Chancellor Angela Merkel believing in fiscal prudence and American President Barack having a penchant for fiscal promiscuity: Merkel is a conservative -- at least, as conservative as European politicians get these days -- while Obama is living proof that if Hugo Chavez had attended Harvard and lost some weight, he, too, could be the president of a big country instead of a small one.
Conservatives think that without reducing debt, controlling deficit and reining in government spending, economic growth is a pipe dream. This probably leads Merkel to consider Obama's promise of keeping frigid economies in a state of permanent arousal through governmental stimulation fiscal pornography. Obama may, for his part, consider Merkel a silly cow, though so far he has meticulously refrained from saying so. Left to their own devices, I suspect neither would be averse to placing the other under medical supervision, though publicly they say nothing worse than "we should be prepared to respond as quickly and as forcefully as needed to avert a slowdown in economic activity" (Obama in a letter to the G20 leaders) and "I do not think we should relent" (Merkel in a German broadcast).
"Deficit spending as a way of life is unlikely to help nations any more than it would help households" used to be a lesson directed at the capitals of Europe by the White House. Since the incumbency of Obama, it has become the lesson directed at the White House by Europeans. These days it's Merkel's finance minister, Wolfgang Schauble, who explains that "governments should not become addicted to borrowing as a quick fix to stimulate demand" (in the newspaper Handelsblatt) and it's the White House that seems to be saying, not in so many words, but in effect: "Get a grip, fellows, it's only money. If you run out, you can always print some more. We did."
The Germans don't buy it. What they're more likely to buy are the editorial words of the Handelsblatt: "There are no political solutions for most economic problems."
That's a sound observation, by the way. You may want to paste it on your bathroom mirror. I have.
Canadian business opinion seems more in accord with German than with American views this time. "We need fiscal restraint in order to ensure confidence and therefore sustainable economic growth" sounds like something Angela Merkel might have said, and maybe she did, but we see it attributed to Gordon Nixon, chief executive officer of the Royal Bank of Canada.
So in the end what did we get for $1 billion-plus? Not much, thank God. Essentially, the G20 countries agreed to disagree in Toronto, then issued communiquéés to avoid the risk of making plain that they're letting each country pursue the blue bird of economic happiness in its own way. The "world government" of two years ago seems to have vanished.
Not a day too soon, some say. Following the collapse of 2008, G20 conferences resembled mafia bosses meeting in gated country homes to carve up territories after a massacre. Massive state intervention into national economies conjured up spectres far worse than turf wars. But while some feel relieved, the neither-fish-nor-fowl compromise dish cooked up in Toronto has disappointed others.
"By attempting to finesse the trade-off between America's call for ongoing stimulus and Europe's penchant for fiscal consolidation the G20 has come up with a multi-purpose recipe with no enforcement mechanism," Stephen Roach, Morgan Stanley's Asia chairman was quoted as saying. "I'm underwhelmed."
Good, say skeptics like me. Let's hope Mr. Roach stays that way. Escaping world government at $1 billion is a bargain.