Blame Game Undermines Economic Confidence Too

March 10, 2009

Dreams of a bipartisan effort to fix the U.S. and global financial and economic problems are slip-sliding away.  Little common ground can be found over the causes of the mess or what should be done to fix it.  The Wall Street Journal, a former critic of Fed policy, has shifted its main wrath to the Obama agenda, choosing a different area each day.  Today’s offering, Mergers and Inquisitions, takes on the president’s healthcare proposals, claiming that “the recent rout in health stocks is a case of wealth destruction… and the health destruction that will result if Washington’s current policy trajectory becomes law.”  With the U.S. spending a much bigger chunk of GDP on healthcare than other countries but not ranked near the top of longevity lists and with the massive number of uninsured patients threatening to climb more sharply because of a system that ties coverage to staying employed, can anyone seriously argue against the need for an overhaul?

Pick up today’s Financial Times, and one can read in the lead editorial that today’s world predicament has followed a well-traveled script of over-reliance on self-interest and competition in financial services, beliefs that promoted inaction as easy credit and low interest rates powered a leveraged but ultimately unsustainable asset bubble.  The article concludes, “this is not the bankruptcy of a social system, but the intellectual and moral failure of those who were in charge of it: a failure for which there is no excuse.”

What are investors, consumers, wage-earners, and entrepreneurs to make of endless bickering over whether prior political leadership, new policymakers, central bankers, regulators, or Wall Street types are responsible for depressed current conditions and poor prospects? They can infer that one of the main messages of the November election fell on deaf ears and that the promise of a bipartisan repair effort remains as elusive as ever.  Many voters in November chose Obama on the view that present-day problems are too complicated and intertwined to be alleviated without a commonality of purpose by elected leaders and appointed technocrats.  The domestic equivalent of World War II is simply not emerging.  The lack of such a catalyst and dysfunctional governments in the United States, Japan and Europe allow people to remain pessimistic and not become hopeful.   In the market world of self-fulfilling expectations, such a backdrop becomes a major toxic force in itself.

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


Comments are closed.