The welfare state is today's equivalent of the gold standard. With aging societies, advanced countries have promised more benefits than their tax bases can support. Hence, high government debt. Greece is merely the canary in the coal mine. But politicians resist cutting popular benefits except under extreme pressure. It takes a crisis. Greece, again. Another unsettling parallel is the global economy. The United States' leadership since World War II is eroding before China's ascent. There's a danger now, as then, of a power vacuum. Witness the long delay in coming to Greece's aid. No one country acted decisively, even as markets grew nervous.
Thursday, May 13, 2010