Why does world news sound like a broken record?

This morning in United States when the voting is over in Egypt and Greece and results are not known, is a nice time to reflect why countries around the world are crises that sound so similar. Whatever be the specifics of each crisis, underlying them all are the dysfunctional elements in the marriage between economics and politics. The Second World War was a major shock. Democratic nations of Europe faced an existential threat. Continental Europe was devastated and the economy of the United Kingdom was in dire straits and Soviet Union had expanded its political hegemony to Berlin and to the fringes of the Mediterranean Sea. The United States and the remaining West European democracies were willing to pay any price to stabilize Europe. Marshall Plan provided aid needed to rebuild the economies. NATO provided a military bulwark against the Communist treat. Yet the aftermath of civil war in Greece created a communist militia that had to be feared. The Truman Doctrine of 1947 offered economic and military support to Greece and Turkey to prevent communist takeover. Economists have known for long time the need for coordination of fiscal and monetary policy. The Stability and Growth Pact (SGP), in principle, forces the governments in the common currency area to abide by guidelines on public debt. Yet it known that Greek government manipulated data to gain entry and ever since. It was overlooked partly because the problems in implementing the SGP rules in a world where economic fluctuations occur was not well thought out and partly because of political reasons. The European unity got precedence over what was thought to be temporary lapses. Germanys current unwillingness to impose more cost on its citizens to assure the solvency of the Mediterranean economies in understandable but it overlooks the fact that the Germany and other members of the Union failed to address the profligacy of Greece and Italy before it became intolerable. The United States, as a haven of stability and growth, always attracted a flow of foreign funds. It allowed the government to created entitlements beyond its ability to fund and budget deficits accumulated. It is not a conservative-liberal issue; excuses differ but both types of administration has contributed to ballooning of public debt. Now it is faced with the challenge of developing policies to reduce debt at a time of recession and international uncertainty. Immanuel Kant believed that democracies will not start wars as they will be unpopular with the voting public. It can be asked whether the exigencies of winning elections elected officials to adopt policies with short term gains even if they know that they have adverse consequences in the long run. Rama V. Ramachandran
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Copyright 2012 Rama V. Ramachandran