In October 2008, as the economic crisis became manifest, I wrote:
“Perhaps what we witness here is a logic of modernity: as financial and political systems expand, crises cannot be contained, and enlargement and consolidation of powers is deemed to be the only solution. A system inaugurated theoretically with the aim to shrink government to small and legitimate size has been the driver of the most massive expansion of public, financial, police and military power in the history of humanity…. Periodic crises and disruptions – beginning shortly after the Revolution with the perceived inadequacies of the Articles of Confederation, continuing through the New Deal until our current crisis, all point to the need for greater consolidation and coordination of centralized systems of response. Our demand for security results in its purchase at the cost of greater scale and concentration, which in turn sets up the likelihood of a greater future crisis that requires even larger expansion of centralized power – an outcome we welcome in the name of liberty.”
I quoted the prescient warnings of the Anti-federalists, who warily regarded the proposed Constitution as affording a grant of powers that might lay dormant for some time, but which – in the midst of crisis – would be readily seized upon as providing the only means for remediation of whatever dire exigency might be facing the nation. Thus, Federal Farmer wrote, ” The lever by which power would ultimately be accrued was the use of powers not necessarily then required, but granted for future possible use as would be “necessary and proper.” Wrote the Pennsylvania minority, “the legislature of the United States are vested with great and uncontroulable powers, of laying and collecting taxes, duties, imposts, and excises; of regulating trade, raising and supporting armies, organizing, arming, and disciplining the militia, instituting courts and other general powers…. And if they may do it , it is pretty certain that they will; for it will be found that the power retained by the original states, small as it is, will be a clog upon the wheels of government of the United States; the latter, therefore, will be naturally inclined to remove it out of its way.”
I found myself today recalling this posting, and the profoundly prescient warnings of the critics of the Constitution, as I read this article in Bloomberg, in which former Bush Secretary of the Treasury John Snow argues that the Greek debt crisis requires a far more consolidated central European government to set uniform economic and political policy across the whole of Europe, to the end of preserving the viability of the Euro.
“I hope it works, I believe in it,” Snow said in an interview late yesterday at the University of Oxford’s Said Business School in Oxford, England. “But the economist in me says that it’s going to be tough without accommodations.For the euro to be able to survive long term, fiscal consolidation of some kind — tax policy consolidation, fiscal policy consolidation — is probably necessary,” he said. “But that’s not enough, you really need one labor market, one capital market. Europe is going to face hard choices in the future to make this thing work.”
At the Washington Post, David Ignatius makes the same case: “The good side of the austerity measures is that they are a step in the direction of economic integration, which has been the missing link in the eurozone since the Maastricht Treaty of 1992. The conditionality of the rescue plan opens the possibility for a common European fiscal policy that, over time, would make the common currency sustainable.”
What is effectively being proposed is the creation of a single, consolidated power that will have the authority to direct policy – particularly economic policy – “among the several States.” Yet, as the Anti-federalists observed, this fosters the very conditions that give rise more comprehensive crises that in turn require even more expansive consolidation. And – to quote further from Secretary Snow’s speech – there is an acknowledgment that the Greek crisis not only concerns the fate of Europe, but that of the United States and the world:
“The problem is that this is so widespread, the United States has its own exposure to fiscal risk, sovereign risk, most of Europe does — Greece is the canary in the coal mine, as they say,” he said. “Who do you turn to if we get a run on sovereign debt, who backstops it? That’s the whole problem, there isn’t a backstop.”
We continue to draw the wrong lesson from these accumulating pieces of evidence. We treat each crisis as a discrete occurrence that seemingly came out of nowhere (or, better still, look for “someone” to blame – rather than seeing the more comprehensive picture). In the face of such crises, we accede to the ponderous and ominous pronouncements of suited men that the only thing that can save us is to invest more power in the Fed, the bureaucracy, in Brussels, somewhere else. We should draw the right lesson from “our” and “their” economic crises: an economic “monoculture” is subject to universal devastation from one virus or pathogen. The solution is not to double down and expand the monoculture, but to stop fostering a system that generates crises that have no boundaries.
Rather than agreeing with our masters that further consolidation is necessary – even the thought of World Government becomes daily more viable, as a steady succession of economic crises will threaten the world’s increasingly integrated economic system – the lesson we should draw is to govern ourselves more locally, to run our economies more regionally, to make possible a restoration of cultures that learn the art of living within their means within more local contexts. Our pursuit of endless expansion, “comparative advantage,” the globalization of resource depletion, only appears to be making us richer, but the accumulating evidence suggests that it is making us poorer in every sense, and will literally bankrupt our children. Yet still we accept the words of “experts” like Secretary Snow – who, recall, was the immediate predecessor to Secretary Paulson, and was doubtless as “shocked, shocked” at the economic crisis as Alan Greenspan. It gives a whole new meaning to the phrase “snow job.”