Our So-Called Foreign Policy: More Childish Attacks on Trump

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alliances, allies, Council on Foreign Relations, foreign policy establishment, George H.W. Bush, Greece, IMF, International Monetary Fund, international organizations, internationalism, Iran deal, JCPOA, Joint Comprehensive Plan of Action, journalists, Mainstream Media, media, military bases, NAFTA, New Zealand, North American Free Trade Agreement, Our So-Called Foreign Policy, Paris climate accord, Philippines, Richard N. Haass, Ronald Reagan, TPP, Trans-Pacific Partnership, Trump, UN, UNESCO, United Nations, Withdrawal Doctrine, World Bank, World Trade Organization, WTO

I’m getting to think that in an important way it’s good that establishment journalists and foreign policy think tank hacks still dominate America’s debate on world affairs. It means that for the foreseeable future, we’ll never run out of evidence of how hidebound, juvenile, and astonishingly ignorant these worshipers of the status quo tend to be. Just consider the latest fad in their ranks: the narrative that the only theme conferring any coherence on President Trump’s foreign policy is his impulse to pull the United States out of alliances and international organizations, or at least rewrite them substantially.

This meme was apparently brewed up at the heart of the country’s foreign policy establishment – the Council on Foreign Relations. Its president, former aide to Republican presidents Richard N. Haass, tweeted on October 12, “Trump foreign policy has found its theme: The Withdrawal Doctrine. US has left/threatening to leave TPP, Paris accord, Unesco, NAFTA, JCPOA.” [He’s referring here to the Trans-Pacific Partnership trade deal that aimed to link the U.S. economy more tightly to East Asian and Western Hemisphere countries bordering the world’s largest ocean; the global deal to slow down climate change; the United Nations Educational, Scientific and Cultural Organization; the North American Free Trade Agreement, and the Joint Comprehensive Plan of Action – the official name of the agreement seeking to deny Iran nuclear weapons.]

In a classic instance of group-think, this one little 140-character sentence was all it took to spur the claim’s propagation by The Washington Post, The Atlantic, Marketwatch.com, Vice.com, The Los Angeles Times, and Britain’s Financial Times (which publishes a widely read U.S. edition).  For good measure, the idea showed up in The New Republic, too – albeit without mentioning Haass.

You’d have to read far into (only some of) these reports to see any mention that American presidents taking similar decisions is anything but unprecedented. Indeed, none of them reminded readers of one of the most striking examples of alliance disruption from the White House: former President Ronald Reagan’s decision to withdraw American defense guarantees to New Zealand because of a nuclear weapons policy dispute. Moreover, the administrations of Reagan and George H.W. Bush engaged in long, testy negotiations with long-time allies the Philippines and Greece on renewing basing agreements that involved major U.S. cash payments.

Just as important, you could spend hours on Google without finding any sense in these reports that President Trump has decided to remain in America’s major security alliances in Europe and Asia, as well as in the United Nations, the International Monetary Fund, the World Bank, and the World Trade Organization (along with a series of multilateral regional development banks).

More important, you’d also fail to find on Google to find any indication that any of the arrangements opposed by Mr. Trump might have less than a roaring success. The apparent feeling in establishment ranks is that it’s not legitimate for American leaders to decide that some international arrangements serve U.S. interests well, some need to be recast, and some are such failures or are so unpromising that they need to be ditched or avoided in the first place.

And the reason that such discrimination is so doggedly opposed is that, the internationalist world affairs strategy pursued for decades by Presidents and Congresses across the political spectrum (until, possibly, now) is far from a pragmatic formula for dealing with a highly variegated, dynamic world. Instead, it’s the kind of rigid dogma that’s most often (and correctly) associated with know-it-all adolescents and equally callow academics. What else but an utterly utopian ideology could move a writer from a venerable pillar of opinion journalism (the aforementioned Atlantic) to traffick in such otherworldly drivel as

“A foreign-policy doctrine of withdrawal also casts profound doubt on America’s commitment to the intricate international system that the United States helped create and nurture after World War II so that countries could collaborate on issues that transcend any one nation.”

Without putting too fine a point on it, does that sound like the planet you live on?

I have no idea whether whatever changes President Trump is mulling in foreign policy will prove effective or disastrous, or turn out to be much ado about very little. I do feel confident in believing that the mere fact of rethinking some foreign policy fundamentals makes his approach infinitely more promising than one that views international alliances and other arrangements in all-or-nothing terms; that evidently can’t distinguish the means chosen to advance U.S. objectives from the objectives themselves; and that seems oblivious to the reality that the international sphere lacks the characteristic that makes prioritizing institution’s creation and maintenance not only possible in the domestic sphere, but indispensable – a strong consensus on defining acceptable and unacceptable behavior.

One of the most widely (and deservedly) quoted adages about international relations is the observation, attributed to a 19^th century British foreign minister, that his nation had “no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow.” Until America’s foreign policy establishment and its media mouthpieces recognize that this advice applies to international institutions, too, and start understanding the implications, they’ll keep losing influence among their compatriots. And rightly so.

Our So-Called Foreign Policy: First Thoughts on the Post-Brexit World

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2016 election, Brexit, Catalonia, David Cameron, Donald Trump, EU, European Union, Eurozone, Federal Reserve, France, globalization, Greece, Hillary Clinton, Im-Politic, Immigration, interest rates, Janet Yellen, NATO, North Atlantic treaty Organization, Obama, Scotland, Spain, terrorism, The Netherlands, TPP, Trade, Trans-Atlantic Trade and Investment Partnership, Trans-Pacific Partnership, TTIP, United Kingdom

I sure as heck was surprised by the United Kingdom’s decision yesterday to leave the European Union (EU). Were you? And now that “Brexit” will indeed take place, what’s in store for America and the world? My crystal ball has never worked perfectly, and much of Brexit’s ultimate impact will depend on how London executes the move, and how the EU and financial markets respond. America’s reactions of course will matter as well. Here are some initial reactions. 

>The unexpected Brexit verdict significantly changes the narratives about the global economy’s evolution, about the future of international trade and related economic policies, and about the fate of international political integration.

As recently as 48 hours ago, the safest bet was that British voters would behave similarly to voters elsewhere in Europe who have had the chance to change fundamental political arrangements. In September, 2014, the Scots voted to remain a part of the United Kingdom. Although Greek anti-EU sentiment runs high for reasons that are easily understandable given that country’s prolonged economic crisis, a much-feared (by those who were not hoping for it) “Grexit” vote never took place. Catalonia is still part of Spain, despite a strong separatist movement in the region – and a terrible Spanish economy. And in 2005, the French and Dutch electorates voted down a proposed new EU constitution that would have accelerated political and economic integration – chiefly by streamlining decision-making via greater powers for pan-European institutions. But the issue of departing the Union has not yet come up.

As with Scottish devolution in particular, I thought that instincts for caution would steadily overcome nationalist or ethnic (take your pick) feelings as election day approached, and that the British would ultimately reject a leap in the dark. And of course, my confidence was reinforced by my view that the UK is hardly an economic superpower, and that its prospects outside the EU objectively are iffy.

The British public’s refusal to back down – despite an unmistakable fear-mongering campaign by (now caretaker Prime Minister) David Cameron’s government and even the country’s central bank – signals that Europeans at least may be willing to shift integration into reverse, not simply keep it in place

>In that vein, one of the biggest worries of Brexit opponents entailed the possibilities of contagion – a “Leave” verdict encouraging similar EU opponents throughout the Union. And copycat Brexit votes are clearly back on the table, given widely acknowledged structural defects in the eurozone (a common currency area that includes 19 of the 28 – counting the UK – EU members, and that Britain never joined), Europe’s especially weak recent economic performance, and controversial EU decisions to admit large numbers of Middle East refugees.

Their success would be a genuinely historic, and indeed seismic, development, as Europeans themselves since the end of World War II have generally acknowledged that closer, more regularized economic ties were essential for breaking their centuries-old cycle of major conflict. It’s possible concerns about keeping Europe peaceful are overblown. For all the importance of economic integration, the main pacifier of the continent has been the American commitment to European defense embodied in the North Atlantic Treaty Organization (NATO). Brexit per se does nothing to change the UK’s role in the alliance.

Nevertheless, economic and security issues are never, or even often, completely separate. Therefore, particularly over the longer term, Brexit and other withdrawals from the EU could well turn Europe into a much less stable place than it’s been for the last 70 years. More uncertainty could be added to the European security scene if presumptive Republican presidential nominee Donald Trump, an outspoken critic of America’s NATO policy, won the presidency.

I’ve strongly critical of continued U.S. NATO membership, too – especially of what looks to me like a possibly suicidal nuclear security guarantee. Indeed, the risks created for America by its continued NATO role convinces me that fundamental changes in the alliance’s structure are inevitable anyway, since the U.S. promise to risk its existence on Europe’s behalf has become ever less credible. If Brexit brings the EU’s dissolution, or significant weakening, closer, then Washington will face fateful NATO choices it has long tried to avoid sooner rather than later. And the foreign policy establishment’s demonization of all proposals for proactively dealing with these dilemmas has left the nation completely unprepared for their growth to critical mass.

>Economically, Brexit carries disruptive potential, too. Just look at the financial and currency markets today. But epochal political events inevitably create short-term costs; any other expectations are completely unrealistic. Especially inane have been claims on social media (e.g., by The New Yorker‘s Philip Gourevitch) over the last twelve hours that the initial turbulence touched off by Brexit proves it a failure.

Sure to be complicated greatly, however, are efforts to conclude a major trade agreement between the United States and the EU. This Trans-Atlantic Trade and Investment Partnership (TTIP) has been a long slog anyway. But since such negotiations always entail achieving a delicate balance of interests, and since the UK is a significant part of the overall EU economy, any important compromises that have been struck in the talks would seem to be threatened.  

President Obama has already concluded with eleven other countries a Pacific rim-centered trade agreement called the Trans-Pacific Partnership (TPP), but it’s doubtful that Brexit will do much to dispel Congressional skepticism that has prevented Mr. Obama from formally submitting it for approval.

Keep in mind, though, that trade – including with Europe – is still a pretty minor part of the U.S. economy. The channel through which the biggest Brexit impact is likeliest to be transmitted to America is monetary policy – the province of the Federal Reserve. At the Fed’s June 15 meeting, Chair Janet Yellen made clear that the possibility of Brexit, and especially its impact on financial markets, was one factor behind the central bank’s decision to keep interest rates on hold. Until business-as-usual in the world economy resumes, don’t expect any rate hikes – good news if you believe that the U.S. desperately needs super-easy credit to sustain its current feeble recovery, and bad if you believe that prolonged near-zero rates have prevented the post-financial crisis adjustments needed to restore real health to the economy.

>In fact, such existing skepticism around these trade issues, as well as around immigration policy, makes me doubt that Brexit will have a notable effect on American politics and policy. Sure, the same kinds of economic anxieties that have fueled Trump’s campaign helped lead to victory for “Leave.” But his followers won’t be able to cast more votes for him as a result of the British decision.

Supporters of his presumptive rival, Democrat Hillary Clinton, are surely horrified by the resistance to unlimited immigration and massive refugee admissions signaled by Brexit, so they wouldn’t seem headed for the Trump camp. And it’s difficult to imagine many independent voters marking their ballots in November based on the British vote. Indeed, this poll tells us that Brexit isn’t even on the screens of most U.S. voters. Rightly or wrongly, that choice will be overwhelmingly Made in America.

One possible exception – but one that’s largely independent of Brexit: A wave of overseas terror attacks could easily heighten American anxieties about their own security, whether an Orlando or San Bernardino repeat occurs or not. Ditto for some major military success by ISIS or a similar group abroad, or an unrelated international crisis. More terrorism-related developments could favor Trump. Something like a showdown with Russia over Eastern Europe or China over the South or East China Seas could break in Clinton’s direction (due to judgment and experience considerations). In the process, these contingencies could also remind us how quickly Americans might forget all about Brexit.

(What’s Left of) Our Economy: New Evidence that Greece’s Former Prosperity Really was Built on Sand

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bubbles, consumption, Europe, Eurozone, France, Greece, incomes, Ireland, Italy, Spain, {What's Left of) Our Economy

A new Pew Research Center report is a gold mine of information that I’ll be returning to in the next few days and weeks. But given the intensification of the Greece crisis this weekend, it seems especially important to note briefly what it shows about that country’s experience in the Eurozone. It’s especially revealing on how the easy access to credit made possible by Greece’s membership created one of history’s most stunning examples of false prosperity.

Among other statistics, Pew’s study of global incomes over the last decade presents figures on the shares of many national populations that could be classified as “high income” in 2001 and 2011. And the Greece numbers are mind-blowing. In 2001, 10.8 percent of Greeks belonged in the category with family per person income (or consumption) of $50 or more per day. (These figures are expressed in 2011 dollars adjusted for differences in price levels across countries.) By 2011, this share had more than doubled – to 23.8 percent. Moreover, the share of “upper middle income” ($30-$50 per capita per day) Greeks by this measure increased from 49.8 percent to 54.2 percent.

Even given the relatively low base from which Greek incomes began, it has to be significant that the only other countries in Western Europe that saw anything close to this progress were the continent’s other problem debtors. In Italy, for example, the high income share of the population just about doubled, from 17.1 percent to 34.8 percent. Spain saw 18.4 percent to 27.3 percent growth in this category, and the numbers were 21.2 percent to 36.2 percent in Ireland. (Pew did not present any figures for Portugal.)

Among economically and financially healthier Western European countries, oil rich Norway’s high income residents rose from 56.3 percent of the population to 77.2 percent, while the comparable numbers for France were 27.3 percent and 37.9 percent.

Moreover, Greece was a major out-performer in the Upper Middle class as well. In Italy, Spain, and Ireland, this group fell as a share of the population from 2001 to 2011. Ditto for France.

In case you’re wondering, the United States is one of the few wealthy countries studied that saw a decline in its share of the population living on more than $50 per day between 2001 and 2011 – from 58.2 percent to 55.7 percent. The Upper Middle class increased only from 31.4 percent of the American people to 31.9 percent. And therein hangs many a tale, as I’ll be reporting.

Following Up: For Greece and Creditors, Minimalism = Realism

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Angela Merkel, austerity, bailouts, debt, EU Stability and Growth Pact, euro, European Central Bank, European Union, Eurozone, Following Up, France, Francois Hollande, Germany, Greece, International Monetary Fund, Russia, Syriza

Every new fact emerging from Greece and its plight seems weirder and weirder. Today, the day of the country’s referendum on its creditors’ proposals to handle its financial crisis, the Greek government started issuing “official projections” of the final results. Not that Greece covers multiple time-zones like the United States, but I’m sure glad Washington isn’t in that possibly elections-altering business.

As of this writing, the only (apparent) certainty about the Greece mess is that its population has rejected the latest bailout-for-austerity deal offered by the European Union, the European Central Bank, and the International Monetary Fund. Even Europe’s most important national leader, Germany’s Angela Merkel, doesn’t seem to know what comes next; before the polls closed, she announced that she’ll meet tomorrow with French President Francois Hollande for a “joint assessment of the situation.”

Europe’s immediate challenge is deciding what a “No” vote by Greece means for the future of the European Union and of the eurozone – since Greece appears to have decided to break the rules of these rules-based institutions. (Here it’s important to note that Greece has by no means been the first rule-breaker, and that two of the biggest outlaws – when it comes to the EU’s Stability and Growth Pact – have been Germany and France.) How the continent handles the Greek challenge will surely influence how other economically hurting, debt-strapped – and larger – members of its defining organizations will react.  Specifically, will Portugal and Spain and ultimately even Italy more actively wonder whether they are better off remaining within such arrangements or leaving?

In turn, these decisions have huge national security and geopolitical implications. However flawed they have or haven’t been, pan-European institutions have been major pillars of the free world’s strategy for turning the continent into a zone of peace following centuries of calamitous wars.  In a nuclear age, for the entire world’s sake, these conflicts simply could not be allowed to continue. It’s eminently arguable that these institutions were insufficiently democratic or badly structured from an economic standpoint, or simply that they sought too much too soon (or too little too late, depending on your viewpoint). But if they fall apart, recreating them will be excruciatingly difficult, and Europe will surely become a more, not less, combustible place.

Worse, this new instability would emerge just at a time of rising tensions between America and its European allies on the one hand, and Vladimir Putin’s Russia on the other. Indeed, it’s entirely possible that Greece’s Syriza party leaders are betting on precisely these dangers to produce greater flexibility by their creditors.

But as important as these threats are, it’s tough to imagine any of them being solved or even headed off for very long if Greece’s fundamental economic problems aren’t solved, and what’s painfully clear to me is that no one in charge anywhere has a realistic plan.

As I suggested last week, Greece lacks a viable national economy. And no bail-out programs or austerity policies, much less further can-kicking, do anything to change its fundamental predicament. It doesn’t produce enough goods and services at affordable prices to meet its own current (first world-level) desires. It doesn’t produce enough of anything that the rest of the world is willing to purchase from it that’s needed to fill the gap. And I haven’t seen any evidence that any Greek leaders or European leaders are even thinking in detail about these issues – which matter crucially these days because the world economy is growing so sluggishly.

The closest I’ve seen to any micro-economic and structural thinking about Greece’s future is the idea that the country could ride a tourism boom back to respectable growth if either (a) the Germans and other wealthier Europeans would simply spend more of their incomes on Greek vacations; or (b) a currency devaluation following an exit from the euro made Greek vacations an irresistible bargain for the entire world.

Leaving aside the lunacy of believing that tourism and the overwhelmingly lousy jobs it creates can sustain Europe-style living standards, how many Europeans and others are likely to flock to Greece for the foreseeable future? By all accounts, many of its neighbors’ populations are thoroughly fed up with Greece’s perceived insolence, and its likely near-term future of economic turbulence doesn’t look like a formula for filling hotel rooms.

So I see no reason to change my view that most of Greece is headed for at least years of third world living standards no matter how the next few weeks and months turn out. It’s true that no one “owes Greece a living,” especially given the spendthrift choices made by its leaders and accepted with varying degrees of enthusiasm by so many of its people. Similarly, it’s true that no one forced the Greeks to borrow all the money that private sector European lenders foolishly provided. But it’s also true that both European financiers and the pensioners and other clients whose funds they invested in Greece, have gotten off pretty easy for their reckless choices, with the continent’s taxpayers and the governments they underwrite absorbing many of these losses.

As a result, maybe at least some of the intertwined political and emotional obstacles to genuinely constructive Greece policies could be cleared away with two measures. First, European authorities in particular should offer Greece some honesty. Second, that country’s financial enablers should be required to help fund purely humanitarian programs aimed at helping those Greeks who are suffering through no fault of their own.

(What’s Left of) Our Economy: Can Greece Ever Bounce Back?

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Asia, Austan Goolbee, competitiveness, currency, devaluation, education, European Union, Eurozone, exports, Gary P. Pisano, Greece, Harvard Business School, human capital, industrial commons, manufacturing, Marc Champion, productivity, recovery, savings, technology, trade surpluses, Willy C. Shih, {What's Left of) Our Economy

Trying to cover the Greece crisis is the analytical equivalent of driving through a very small town. If you blink, you might miss the latest development. So rather than try to keep up with each new twist and turn, let’s look at the most important economic question raised by the country’s predicament: Is there any hope for a return to decent, healthy growth rates?

The textbook economics conventional wisdom seems to be Yes, albeit with great difficulty. I’m a lot less sure, for reasons that reveal many fundamental flaws with textbook economics – mainly its inability to eliminate political, social, and cultural differences.

That conventional wisdom was recently summed up by the University of Chicago’s Austan Goolsbee, who served as President Obama’s chief White House economist. As Goolsbee told the Washington Post, Greece’s main problem is a woeful lack of price competitiveness. Its costs to produce goods and provide services – and especially its labor costs – are way too high, and its productivity and quality levels are way too low to give its businesses much hope of outselling foreign rivals. In other words, unless you ignored economics completely, or there was simply no choice (as with many personal services), you’d have to be an idiot to Buy Greek in most cases.

Goolsbee proceeded to note that countries in this situation can generally at least hope to gain competitiveness by devaluing their currencies. This step makes the price of anything turned out by the devaluing country cheaper than foreign counterparts (all else, like productivity, equal). But since Greece is a member of the Eurozone, it lacks this option. Its price gap can only be closed if enough of its fellow Eurozone members stoke inflation in their own economies, or if it boosts its own productivity by slashing wages (and/or in principle other business costs, like excessive regulations).

But let’s say Greece takes one of these two basic roads. Does anyone honestly think it will start winning in global markets, or even its home market, even once a respectable stretch of time passes? If so, they shouldn’t. To begin understanding why, let’s recall that Greece got into its mess in the first place largely because a big macro-economic prediction failed. Specifically, Greece’s entry into the European Union (in 1981, long before the Eurozone currency area was born in 1999) didn’t bring nearly enough durable convergence with its more prosperous and better run neighbors.

As required, Greece brought its laws and standards in line with the new European norms. And it made non-trivial economic progress – particularly after it began receiving huge injections of foreign aid. But that’s about where convergence worthy of the name stopped. Bloomberg’s Marc Champion tells the story well. Unlike most of the rest of the European Union, Greece collectively took the money and ran, embarking on a huge spending and stealing (literally) spree rather than investing in productive activity. The Euro’s creation wound up simply giving Greece many more resources to waste, as it enabled Greeks to borrow at the kinds of low rates much more appropriate for a much better-run economy. And for good measure, Greek governments for years lied massively about the nation’s finances – with a helping hand from Wall Street.

That is, Greece squandered nearly all the economic opportunities that macro-economics had predicted from its membership in Europe because – like the rest of the currency union in particular – it was free to remain largely autonomous politically. In every way other than economic, Greece was free to remain Greece, and too much of that identity had become a formula for profligacy.

But just as macro-economics can’t come close to adequately explaining Greece’s descent into economic degeneracy, it struggles at best to illuminate a plausible path to real recovery. For Greece needs much more than competitive prices to return to some semblance of economic viability. It needs a reliable legal and regulatory environment, to persuade domestic capital to stay home for productive use and to persuade foreign capital to give it a chance. Even if it had noteworthy natural comparative advantages in any sectors other than some farm products that are hardly staples, it would need the kind of scale that few of its extractive and especially manufacturing industries boast.

And to achieve that end, it would need what Harvard Business School professors Gary P. Pisano and Willy C. Shih and Samuel P. Pisano have called an industrial commons – the “R&D know-how, advanced process development and engineering skills, and manufacturing competencies” needed to produce the high value products and services upon which first world living standards ultimately depend. Countries without these capabilities are doomed to lengthy servitude in what’s called the low-value ghetto – simple, labor-intensive activity that pays very low wages, fosters very little learning or innovation, and, by the way, is an awfully crowded neighborhood in today’s global economy.

As numerous Asian countries have demonstrated, the low-value ghetto can be left behind by economic strategies that (to simplify a bit) successfully encourage very high rates of domestic saving and a laser-like focus on quality education that can create the wherewithal needed to advance up the value and skills ladder. In some cases, such progress has been able to start attracting – and effectively absorb – the foreign capital and knowhow that can provide a vital boost. Does that sound like spendaholic Greece today? Of course, as the Asian experience also demonstrates, it’s also essential to have a robustly growing global economy that can accommodate ever greater exports and indeed trade surpluses. Does that sound like the wheezing global economy today?

Greece does boast formidable human capital – just take a look at the math, science, and engineering faculties of any number of major American colleges and universities. That suggests potential in fields like software development, as well as lower value tech work like call centers (which are much likelier to create significant job opportunities). The country’s geography also suggests continuing possibilities in logistics (which is why shipping has always been strong).

But it’s precisely these kinds of changes that will have to begin and take hold for Greece to escape basket-case status. If they don’t, expect to keep hearing nonsense on the order of “If enough wealthy Germans and other Europeans would just take more vacations there, Greece’s problems would be solved.” That may make macro-economists feel good, but it represents a cruel hoax on Greece.

(What’s Left of) Our Economy: Greek Lessons

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an economy built to last, big government, bubbles, business spending, Eurozone, Financial Crisis, GDP, Greece, gross domestic product, growth, housing, personal consumption, {What's Left of) Our Economy

RealityChek’s more discerning readers might recall that I spend a fair amount of time commenting on the quality of America’s growth and the makeup of its economy. The idea is that, although economic growth is economically good, all else equal, the way the economy grows is crucially important, and that it needs to result in a healthy balance between production and consumption. That lesson (should have been) brutally brought home for Americans by the financial crisis – which was preceded by several years of quasi-respectable but very low-quality growth. More specifically, that expansion was led by interlocking housing, borrowing, and personal spending booms, which lacked the underpinning of adequate output and income growth.

These days, the battered population of Greece is getting an even harsher tutorial on the imperatives of high quality growth and an “economy built to last.” But judging from the political tumult shaking the nation in recent days in particular, there’s little evidence that its population or leaders – or its creditors and the rest of the global economic policy – understands the message. 

The available economic data for Greece aren’t exactly the same as those I use to show the quality of America’s economic structure and growth, and they don’t cover all the bubble years, but they’re still awfully suggestive. In particular, they illustrate how during the global bubble decade, Greece’s economy and growth, too, were dominated by household spending, along with a lots of Big Government.

There’s no doubt that, viewed from 30,000 feet, Greece enjoyed banner years from 2000 to 2007. In inflation-adjusted its gross domestic product rose by 4.0, 3.7, 3.2, 6.6, 5.0, 0.9, 5.8, and 3.5% – much better than the performance of the rest of the Eurozone. Statistics from the Organization for Economic Cooperation and Development (OECD), however, indicate that throughout this period, Greece’s economy was incredibly household- and government spending-heavy.

According to the OECD, a grouping of high income countries, in 2006 and 2007 (the earliest available data years), household spending made up 56.33 percent and 54.99 percent of Greece’s gross domestic product. For those years, the averages for the Eurozone were 29.59 percent and 29.44 percent – a little over half of Greece’s levels. In 2006 and 2007, government spending comprised 17.87 percent and 16.66 percent of Greece’s economy. For the rest of the Eurozone, the figures were 13.97 percent and 14.04 percent. And whereas Greece’s corporate spending represented 25.8 percent and 28.4 percent of its GDP, the comparable Eurozone numbers were more than twice as great – 56.4 percent and 56.5 percent.

As numerous analysts have (correctly) noted, the United States isn’t Greece. Most important, Americans and their government can borrow in their own currency, and have substantial control over their financial fate. Yet even so, the U.S. economy has suffered painful and wrenching change since the financial crisis broke out roughly eight years ago, and the damage inflicted by that near-catastrophe is by no means completely fixed.

In other words, because the United States spent its first nearly 200 years generally managing its economy responsibly, it enjoys the wealth and creditworthiness that can long protect it from Greece-style tragedies. But even if a climactic Day of Reckoning never comes, America’s poor quality growth and subpar economic structure appears to have pushed it into a stretch of secular stagnation that should worry everyone.

(What’s Left of) Our Economy: Despite Marriage Equality Ruling, it’s Still the Economy….

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China, debt, euro, Eurozone, Financial Crisis, gay marriage, Great Recession, Greece, Lehman Brothers, LGBT, marriage equality, Obergefell vs Hodges, political correctness, Puerto Rico, punditocracy, recovery, stock market bubble, Supreme Court, {What's Left of) Our Economy

For the last two days I’ve been commenting on social issues – kind of a departure from my usual focus on economics and foreign policy, but worth doing as I saw it because the Supreme Court’s marriage equality raised so many issues that are both intrinsically interesting to me, and that bear importantly on the nature of our American society and political community. Over the last twenty-four hours, though, have come reminders – in the form of the (seemingly) climaxing Greece crisis and the deflation of China’s stock market bubble – that if the country doesn’t get its economics and finances right, none of that’s going to matter much.

Not that you would have gotten any sense of that from the major TV and cable talk shows yesterday. I saw every one of them except for CNN’s version, and I don’t believe the words “Greece” or “China” were even uttered. The Court’s Obamacare ruling got a fair amount of air time – but not because it will crucially impact a huge and growing share of our economy. Instead, the focus was on the decision as one sign of what a terrific week the president enjoyed, and what a pickle this (supposedly) creates for Republicans.

As the Beltway-centric punditocracy saw it, the mega-story was marriage equality – which should make clear that its worldview is grossly distorted by its cloistered collective life inside a media (and connected academic-arts-entertainment) bubble in which gays are robustly represented. After all, though the Obergefell vs Hodges ruling was a major social and cultural landmark for Americans, and will dramatically affect LGBT citizens, the latter comprise less than four percent of the U.S. population according to the best estimates. So it’s time to curb at least some of the euphoria touched off by Obergefell outside the LGBT community.

As for the alarm bells that have been ringing: First, many Americans who aren’t straight won’t choose marriage in the first place, much less child rearing. What of worries that the decision will set off an explosion of other kinds of nontraditional marriages, and foster the kind of child abuse strongly linked with polygamy? That very danger will naturally create a firewall against such units adopting or having test-tube kids that simply can’t be justified for LGBT couples and the loving, responsible parenting so many have been providing (and that we’re not seeing from too many traditionally married couples).

Nor do I see any threat to freedom of religion or conscience. If you didn’t approve of non-traditional marriage before the Court ruled, you’re just as free to disapprove today, and to express this disapproval. Your place of worship is just as free to preach against it, as will religious and other private schools. Businesses that oppose it will continue to be free to refuse to provide goods or services that would require them to participate or be present at weddings or other ceremonies or events they abhor. But they will rightly be required to serve LGBT customers at their place of business – including public officials who issue marriage licenses. If your faith now prevents you from signing forms that authorize LGBT couples to wed, you’re in the wrong job.

I can sympathize with marriage equality critics who are uncomfortable with the idea that LGBT Americans will assume a higher profile in the nation’s daily life, and who resent being labeled (often wrongly) as homophobes and, more broadly, “haters.” But ironically, they’re also sounding like the lefty political correctness types who favor turning offended sensibilities into a major criterion for limiting speech and other forms of free expression – or actual behavior. That’s the road to pervasive censorship and social controls that are thoroughly and dangerously un-American. Like the PC crowd, marriage equality critics are simply going to have to toughen their skins. In particular, if you want to air your views in public, rough pushback is often the price you pay. P.S. If you have real faith in your convictions, it shouldn’t be such a big deal.

Meanwhile, the future of the world’s biggest currency area – the Eurozone – is completely up in the air over the Greece crisis, and most of the world’s major private sector financial institutions (including America’s) are exposed directly or indirectly. Moreover, in the world’s second largest national economy, one of the most mammoth stock market bubbles in recent history is deflating – and the emerging Chinese stock bust could burst other immense bubbles Beijing’s economic policies have helped inflate.

Not that I’m predicting imminent apocalypse, or even a new Lehman Brothers moment, from either development (or even combined with the distinct possibility of a debt default by Puerto Rico). But when I think of how further national and global financial instability could affect an already under-performing, heavily indebted U.S. economy, and compare that with the fallout from the marriage equality decision, it seems clear that everyone should start leaving Obergefell in the rear-view mirror.