Farewell to the Noughties

December 29, 2009

The decade from 2000 to 2009 was an age of irony and mis-framed missions.  Within countries and between them, diplomatic relations became more fractious.  As in the century left behind, ideological thinking and the corrupting force of power in various different manifestations hampered economic development.  The period is ending with unfinished business on many fronts. 

Islamic terrorism came of age as an international force with a riddle: attempted containment by the use of military force against Al Qaeda promotes conversion to the enemy’s cause.  The evidence suggests that most of the world’s 1.4 billion muslims oppose the rigid dogma and violent means of the terrorists, but it is a silent majority, fearful of speaking out against a far better armed, motivated, and less corruptible extremist minority.  The United States won’t use weapons of mass destruction to stop terrorists from using them first because that its an unthinkable option and an impractical one when the enemy is everywhere and nowhere.  With conventional weapons, however, the result has been a prolonged and unaffordable stalemate.

The implications of global warming also intruded daily discourse last decade, spreading fear but not enough around which for all nations to rally.  Scientists continue to argue endlessly over man’s role in the phenomenon, what might happen if man does nothing to change trends, and how to share the burden of any policy response.  Perhaps it’s time to try a whole new approach.  Reverse the usage of fossil fuels not to save the environment but to starve world terrorism of its funding.

The past decade saw extraordinary advances in communication-networking technology.  There, too, there has been a clear connection to terrorism.  Smart phones enable recruitment of would-be anarchists and planning by their organizers.  They become a harder target to defeat.  For the advanced economies, the new technologies lifted productivity but not economic growth.  The United States, euro area, and Japan expanded at annualized inflation-adjusted rates of 1.9%, 1.4% and 0.7% during the period, all well below the norms of prior decades.

U.S. efforts to counter terrorism by proselytizing the virtues of democracy were impeded by the West’s own economic difficulties in the period.  China’s explosive 9.4% growth offered a compelling alternative example that non-democratic political systems utilizing market elements to complement a command economy framework might work much better for raising standards of living.   In spite of a terrific final year, stock markets in the United States and other advanced economies performed very poorly in the whole period.

Arguments also festered between the U.S. and European models of capitalism.  The discrepancy between the U.S. and Euroland GDP growth rates could be explained by America’s faster 1.2% annualized population rate, which was twice as fast as the euro area’s, and Euroland and Britain each grew more rapidly than the U.S. in 2006, 2007, and 2008.  Issues of bad corporate governance arose early in the period when Enron failed spectacularly and in 2007, when flawed internal management and government regulation of U.S. financial institutions ignited a chain reaction of systemic breakdowns that led the world economy into a deep recession.   The U.S. debate over health care reform illuminates the gulf between European and U.S. different views.  Opponents of the legislation derisively call it socialist Obamacare.  But from the other side of the Atlantic, the need for significant change is a no-brainer.  Quoting from today’s Financial Times editorial page, “To put it mildly, the system needs change: it is expensive, gets mediocre results, and leaves 40m people uninsured.”

The noughties saw grass-roots resistance to world trade mount rapidly and mutate into a more hostile form.  The Doha Round of multilateral trade talks had a history of broken intentions and a wide spectrum of political leaders who put parochial interests above the collective good that freer trade has been shown repeatedly in history to promote.  Economists have long viewed the dismantling of the process of lifting trade barriers as a development that must keep moving forward, lest it slip backward with adverse consequences to potential economic growth.  The noughties seemingly corroborated those beliefs.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.

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