A year and a half ago, the world financial system almost blew up. The biggest financial institutions in the United States were on the brink of default and threatened to drag everybody else down with them. It turned out that billions upon billions of so-called assets were really an illusion. The system was saved (at least for now) by injections of unimaginable amounts of cash, and everybody breathed a huge sigh of relief.
Last week, Europe almost blew up. Surprise! This time, it was Greece that threatened to drag everybody else down with it. It turns out that Europe's prosperity is really an illusion. The system has been saved (yet again!) by injections of unimaginable amounts of cash, and everybody breathed a huge sigh of relief. Until the next time.
Meantime, the oil-rig blow-up in the Gulf of Mexico threatens to wreak immense environmental damage. Everyone is pointing fingers at BP's flawed safety record and the lack of oversight. But there are 4,000 rigs in the gulf, and big players like BP are operating at the wild frontiers of deep-ocean technology. Financial Times writer John Gapper compares the task to sending human beings into space. It's so complex that, sooner or later, catastrophic failure is probably inevitable. So welcome to the future. This blowout may be relatively mild.
Could any of these risks have been managed better? It would be comforting to think so. If only we hadn't put such faith in market economics. If only we had forced those wayward Greeks to clean up their act before they got us all in trouble. If only we had regulated Big Oil more tightly, or prevented drilling in the gulf at all.
American thinker Walter Russell Mead argues that all of this is wishful thinking. What we're experiencing is a broad test of our modern faith in liberal enlightenment - the faith that has been embraced by conservatives, liberals and socialists alike for the past couple of centuries. All share the belief that if the right people with the right ideas are in charge, we ought to be able to engineer a world that is safe, just, prosperous and free from nasty shocks, whether economic or technological.
Yet the greatest lesson of this century so far is that we can't do that. Many of the finest minds of our time have been recruited to the fields of economics and finance. Their near-universal consensus - that markets would always work - turned out to be disastrously wrong. Nor was anybody else able to predict the economic upheavals of the past few years. That doesn't mean economics is useless. It means it's limited.
Europe's political elites aren't stupid people either. The creation of the European Union was driven by the noblest of enlightenment ideals. What the elites did not account for were the vagaries of human nature and the deep-rootedness of cultural differences. They thought a common currency would turn everyone into one big happy family. But the Greeks didn't start paying their taxes just because they got the euro. And now the EU will be more fractured than ever before.
The Greek disease is not confined to Greeks. They just have it worse than others. Modern democracies, even relatively uncorrupt ones, tend to stay in power by promising the voters a standard of living and a bunch of entitlements they can't afford. No politician was ever elected on a platform of belt-tightening, even though that's what every country in the West will eventually have to do. Even the smartest, wisest people in the world haven't yet succeeded in reforming human nature.
As for oil, the West will have to drill in somebody's deep waters for as long as we can foresee, or at least until we agree to forget about Three Mile Island and go nuclear. The alternative is to sacrifice our standard of living, and nobody will agree to that.
So this is the age we live in now. Things blow up. And sometimes the smartest people in the world have no idea how to stop that.Report Typo/Error