What Biden and Ryan Should Debate: Stagnation to 2018
October 10, 2012
The International Monetary Fund has identified what should be the major focus of this Thursday’s Vice Presidential debate.
The IMF’s chief economist warned Friday that the global economy was likely to stagnate until 2018.
If true that means little or no economic growth for six more years.
This would be a disaster rivaling the Great Depression.
Robert Samuelson, in a column entitled “The Great Reversal,” warned Monday of the dangers we are running from such a long period of economic decay.
“What we are witnessing in Europe — and what may loom for the United States,” he wrote, “—is the exhaustion of the modern social order. Since the early 1800s, industrial societies rested on a marriage of economic growth and political stability… Over time, prosperity fostered stable democracies in the United States, Europe and parts of Asia. The present economic crisis might reverse this virtuous process. Slower economic expansion would feed political instability and vice versa.”
Everyone focuses politically on the pain currently felt by the American middle class.
This level of economic decay, however, has its greatest impact on the poor, both here in America and around the world.
Consider the impact of economic stagnation on Egypt. Because Egypt has no great oil wealth it has no energy exports to rely on for income. The political chaos of the last year has stifled the Egyptian economy. The result is a growing crisis of basics. Food, electricity and gasoline may all become hard to get in the near future.
The Muslim Brotherhood President of Egypt is rapidly finding himself torn between his radical ideology and his economic desperation. One example is the appeal to the United States for emergency aid, after telling the New York Times in a recent interview that our decades of aid had “essentially purchased with American taxpayer money the dislike, if not the hatred, of the peoples of the region.”
Economic stagnation is going to make it harder for Egypt to earn foreign exchange and harder for foreign countries to provide aid. Yet Egypt has millions of young people who find themselves without work and increasingly without hope of work.
This creates an opportunity for the even more extreme Salafist movement (which wants a return to a very strict Islamic system which makes the Muslim Brotherhood look moderate) to gain ground and possibly even gain control of the most populous Arab country. (Just imagine a Taliban-like government in Cairo.)
In Greece there is already 53% unemployment among younger Greeks. A recovery in 2018 would mean that many young Greeks will be 30 before their first job. By that point many of them may have lost the habits of employment and may literally be unemployable.
In America a similar pattern to Europe exists in which young people and minorities are disproportionately unemployed. A recovery delayed until 2018 will cause levels of bitterness, frustration and dissatisfaction we haven’t seen since the Great Depression.
Vice President Biden and Chairman Ryan ought to focus on how to get economic growth started again.
There isn’t a second issue if we are really trapped in a long stagnation.
It will be impossible to balance the budget in that kind of economic decay.
It will be impossible to sustain our military adequately in a period of economic deprivation and despair.
It will be extraordinarily hard for younger Americans and especially minority Americans to pursue happiness in this kind of economic stagnation.
This is the key issue of our time.