Taiwan - World's economic leaders play games with other people's chips

Taipei (The China Post/ANN) - In 2008, the world lost its innocence.

After the Western financial system got unthinkably close to collapse in that summer, people woke up to a great surprise, not by the meltdown of the economic system but by the fact that they once honestly believed a financial mechanism managed by people can be failure proof.

In 2011 the world woke up once again to their naivety, this time for their misplaced trust in the infallibility of the Western democratic system. This summer, the ratings firm Standard & Poor's cut the U.S.' top-tier AAA credit rating after the world's largest economy took itself to the brink of default due not to economic weakness but to political brinkmanship between the two major parties.

To highlight the turmoil the Western world went through this year, the once unimaginable downgrade of the U.S. that should have been the financial event of the decade now comes almost as an afterthought compared to the near collapse of the European common currency, after a series of mistakes by political leaders that started to unfold during the summer.

The severe potential consequence is not the true similarity between these two events but the fact that they both resulted not from inevitable national or financial conditions as much as from the failure of politicians to do what's right, even in the face of an economic apocalypse.

People in the Western world have always understood the self-serving nature of national democratic politics, but they believed that self-centeredness would come to a limit; that world leaders would work together to avert a clear and present doom. They believed that the Republicans would play their "party of no" card as much as they could to ruin Barack Obama's presidency, but they wouldn't push their game so far as to damage America's financial credibility. That's why many believed the congressional approval of the debt ceiling increase was one of the safest grounds for bipartisan cooperation.

Similarly, people, including investors that are not famous for their faith in people or governments, believed that while European leaders would take national politics to the EU table and that rich eurozone nations would try as much as they could to avoid bankrolling troubled southern nations, they would not allow even the consideration of a eurozone breakup. That's why Greece had no trouble in selling its bonds earlier despite their problematic economy and bookkeeping. The investors were not trusting Greece, they put their faith on its eurozone partners.

These faiths in the U.S. and European governments came not from admiration of democracy or trust in human goodness, but from the simple and logical conclusion of the inevitability of human self-preservation - that the crew of a ship would stop fighting over trivialities and work together once they realized the iceberg was ahead.

In 2011 they realized that this faith was misplaced.

To be fair, politicians acted in the final moment and changed course to avert certain doom. In both cases, however, politicians had indulged in their games too long for the illusion of politicians as crewmembers to sustain. Their failure to come to the logical decision of doing the correct thing in the face of sure collapse revealed their true nature - different from ship crews, they have no existential stake in the game they play.

It is always the common people who are going to suffer for their failure. And when one is playing with others' chips, they don't always act logically. The rise of the Occupy movements and the flight of investors from toxic eurozone bonds are both reactions stemming from that revelation.

The China Post has predicted in this space that the Great Recession will narrow the scope of application for the word "unthinkable" and present Westernized democracy with a huge challenge. Westernized democracy has yet to pass that challenge and if politicians do not wake up and rise to the occasion next year, they might be witnessing more realizations of the unthinkable.

Editorial Desk in Taipei/The China Post | ANN

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