European Economy May Determine Presidential Election

It might have been one of the more disturbing quotables I’ve heard since I have been working in Brussels. “The election in the US will be decided downtown,” said a senior official, gesturing vaguely towards the European Commission, the executive of the European Union. “If they cannot make up their minds or solve this mess, then Obama is out and Romney is in.” It was the kind of statement that forced you to see the world in a whole new way whether you wanted to or not.

It is a nasty truth that no one wants to admit. Worse, it might be a truth we simply have not come to recognize in the first place. Economies are no longer the exclusive property of polities or citizens of a given state. The American economy is no more “American” than the Cypriot economy is exclusively “Cypriot” or the South Korean economy solely comprised of the efforts of the Koreans. Rather, we are now a series of interlocking mechanisms, of long lines of trade that link state to state, resources to labor, product to consumer.

Our political discourse is hopelessly anachronistic. The White House, Congress and our entire government are no longer in a position to completely shape the day-to-day happenings of our economy. Rather, they are only able to react. Certainly, some policies do impart some level of economic change, but what seeds are sown will always be questionable until the harvest comes. For instance, a protectionist steel tariff may revitalize Ohio and Pennsylvania but it may have negative consequences on our trade balance in a myriad of other ways – or, truthfully, it may still not have the desired effect because raw material in china changed the calculation for everyone.  I am not arguing that government has NO impact on the economy.  What I am saying is that the impact is unpredictable because we simply cannot hope to control all of the variables in our integrated global economy anymore.

If anything, the only countries that are still able to exert full control of their economies are those states that are the worst models in the world: North Korea, Eritrea, Burma.

There are innumerable examples you can point to in the last ten years alone that prove the limited ability of the governments to enact serious, lasting economic policies. A monsoon in Thailand floods factories producing flat screen televisions for American markets, leaving shelves empty on Black Friday with little to nothing that could be done by Washington. A tiff between Russia and Ukraine leaves most of Western Europe freezing and impotent to do anything to gain access to desperately-needed natural gas. A downturn in the worldwide economy leads to a series of revolutions in which unemployed, highly-educated people overthrow autocratic dictators in the Middle East. In each instance, governments could either gnash their teeth at their powerless stature, or topple.

If the Eurozone crisis has been able to teach us anything, it should be this lesson:  Governments are increasingly impotent to act effectively in the economic sphere.  Interrelated as it is, the EU has faced nearly insurmountable problems trying to resolve its internal contradictions with the Euro. But the ways in which they have been affected are telling. The debt “haircut” for the Greeks led experts to predict that banks would recoup costs by raising interest on borrowing by Italy, Spain and Portugal. They did. Cyprus, with its multiple ties to the Hellenic banking system, is now being dragged down by nothing more than a financial equivalent of being guilty by association. Greece is now discussed as a contagion, a foreign body working its way through the body politic of Europe and damaging all it touches. It is more fitting than most realize.

Not all is doom and gloom, however. Governments can still react effectively and lessen the impact of the actions that are a constant threat to stability.  Sometimes, the key is not in what you try to do, but how you chose to do it. John Kornblum, former ambassador to Germany and former Assistant Secretary of State for European Affairs, mentioned there is a clear difference between the way Americans reacted to the great recession and the way the Europeans reacted. The United States, when pushing TARP, effectively forced banks to accept the details of the agreement, or die. The Europeans have held summit after summit after summit to try to resolve the problems relating to their single greatest experiment thus far. While the US economy is far from completely recovered, it is far better off than most economies in the world and standing high above Europe at the moment.

However, it remains to be seen how economies will fare in the near future. China shows worrying signs of either recession or outright collapse. Europe is stagnating, both economically and politically. States like Russia that have made their entire economic well-being based on the export of energy are realizing that a dearth of new oil and gas fields in far more stable regions of the world are undercutting profits and leaving them sliding into the red. At home, some of the policies that Washington is enacting may have long-term negative effects that far outweigh short-term solutions. I, for one, worry that lower interest rates, an attempt to put more money into the markets and to fight off the Keynesian paradox of savings, might in the long run create a generation that relies on credit, does not save, and grows accustomed to spending with irrational exuberance. Basically, the same conditions that led to the collapse of the financial sector in 2007.

As this election goes on, I can only shake my head at the anger and vitriol that are flung at both candidates from their respective enemies. Whether it be jobs added or talking heads reading tea leaves over proposed taxation schemes, one thing is clear: the integrated economic problems that face our world cannot be solved by the people in Brussels or the man in Oval Office, alone. But the integrated economic problems that face our world very well may determine who the man in the Oval Office will be for the next four years.

About Daniel Green, Contributor

Daniel Green is a contributor to Media Rostra and Managing Editor of Arkansas:Abroad (http://www.arkansasabroad.org/). He received a BA in History from the University of Central Arkansas and is currently pursuing a MA in International Studies at the Josef Korbel School of International Studies. He spends way too much time working in a variety of organizations in Denver, giving him that salt-and-pepper look his girlfriend loves. He will be spending his summer working at NATO.