Europe: Double Dip Recession or Japan Style Stagnation?

As a result of a recently leaked assessment from the UK Treasury the new British Government’s austerity budget will most likely lead to 1.3 million jobs being lost across the British economy over the next five years, with up to half of them disappearing from the public sector.


There are historical reasons for the particular weakness of Britain’s manufacturing and export base, and this time there is only a declining revenue base from North Sea Oil to ease the pain. The Anglo American, de-regulated, free market model was long on the primacy of the financial services industry and short on its regulation. It was also little interested in promoting manufacturing industry.

But right across Europe and the Euro-zone, the story is becoming depressingly familiar. Centre Right Governments such as that led by Chancellor Angela Merkel of Germany, are pushing ahead with major austerity packages. Centre Left Governments, such as that of Prime Minister Papandreou in Greece are being forced to follow suit – but for them, and for Southern European countries such as Portugal and Spain, the medicine risks so damaging the patient that the only real cure could yet be an exit from the Euro zone altogether, or nightmare of nightmares, a default on debts, many of these owed to German banks. While many Germans point to the profligacy of some of their southern neighbours, and a notoriously lax attitude to collecting taxation, others now accuse Germany of damaging the Euro zone house they built, and in the same way that they pulled the rug from under the Exchange Rate Mechanism. And had Germany not allowed irresponsible lending to Southern Europe, would those countries be in quite the mess they are today?

Chancellor Merkel now faces her own political problems with a fractious coalition, and a public alarmed at the sheer audacity of her deficit reduction programme. And reading between the lines of what President Obama had to say during the recent G20 Summit in Toronto, the US is pretty worried by Germany’s austerity programme as well, fearing that Europe’s biggest economy will shrink and demand for US exports shrink with it. Incidentally this is just what some of UK Prime Minister David Cameron’s critics are already saying about his budget of public spending cuts. Cameron and his Finance Minister, George Osborne presume that a private sector, export led recovery, will lead to economic growth over the longer term. But the question comes back to bite them; who exactly will be buying British exports? How is this recovery to come about when domestic and European demand will be so depressed?

Already some of the smarter economic commentators on both sies fo the Atlantic, have criticised the austerity programme of the British Government. "Too far, too fast!", seems to be the verdict. Britain is not Greece, and in normal circumstances, a period of reasonable growht would beging to pay off the deficit. That is not going to happen, and each day Britons wake up to hear yet more dire news about public spending cuts impacting on frontline services.

The shocking truth is that European economic growth has been level pegging at around a measly 2% over the past fifteen years. This compares with Asian growth averaging 8% over the same period. Runaway economic growth in parts of China during the last decade – reaching an annual figure of 15% in one province of the industrial North east of the country I visited five years ago - so alarmed the Chinese Government, it felt obliged to intervene to dampen demand.

But there are more fundamental questions to be asked about this European growth figure, because some suspect that this relatively low average is based largely on European public spending, the ‘endogenous growth’ once trailed with such enthusiasm by Alan Greenspan of the US Federal Reserve and adopted with such relish by Gordon Brown, and which in reality was fuelled by nothing more substantial than the Dot.Com and property boom of the 1990s. Strip all of this out and it seems perfectly feasible that some European economies haven’t really grown in years, and that little wealth is being generated from those older reliables of the real economy. Put like this, Europe begins to look just a little sclerotic, some parts more than others. It seems truly astonishing that only a few years ago, there were European politicians who genuinely seemed to believe that they had banished the economic cycle, and that there was ‘an end to boom and bust’.

The United States may not have an awful lot to boast about either, although the Obama administration has resisted the deficit hawks, it is not meeting the twin concerns of American voters – job creation and the economy. But to all intents and purposes America seems to be a in a better place than Europe, even as the economic stimulus package begins to enter its wind down phase.

The real economic story of the next decade will continue to be the rise of China, the Middle East, India and Brazil, the latter with its burgeoning, consuming middle classes, whereas Europe, and in particular skewed economies such as those of Britain, risk slipping into a Japanese style period of deflation. Here is Richard Koo, economist at the Nomura Institute in Tokyo analysing Britain’s massively deflationary, cost cutting Budget; “The budget itself, I think, is rather poorly timed given our own experience in Japan. You never want to cut your budget deficit when the private sector is de-leveraging.... because we cut our budget prematurely in 1997, we entered into a very steep economic decline and it took us ten years to pull ourselves out of that”. That then is one scenario, but a more pessimistic view of the economic crystal ball has other economists and commentators fearing a second, double dip recession, brought on by the contraction of the major European economies.

For this the Europeans and the Americans have only themselves to blame. But at least America seems to have a better understanding of how to go for growth again.

Scientists find a horrible new way cocaine can damage your brain

Swiss researchers identify new dangers of modern cocaine.

Getty Images
Mind & Brain
  • Cocaine cut with anti-worming adulterant levamisole may cause brain damage.
  • Levamisole can thin out the prefrontal cortex and affect cognitive skills.
  • Government health programs should encourage testing of cocaine for purity.
Keep reading Show less

How to vaccinate the world’s most vulnerable? Build global partnerships.

Pfizer's partnerships strengthen their ability to deliver vaccines in developing countries.

Susan Silbermann, Global President of Pfizer Vaccines, looks on as a health care worker administers a vaccine in Rwanda. Photo: Courtesy of Pfizer.
Sponsored
  • Community healthcare workers face many challenges in their work, including often traveling far distances to see their clients
  • Pfizer is helping to drive the UN's sustainable development goals through partnerships.
  • Pfizer partnered with AMP and the World Health Organization to develop a training program for healthcare workers.
Keep reading Show less
Politics & Current Affairs

Political division is nothing new. Throughout American history there have been numerous flare ups in which the political arena was more than just tense but incideniary. In a letter addressed to William Hamilton in 1800, Thomas Jefferson once lamented about how an emotional fervor had swept over the populace in regards to a certain political issue at the time. It disturbed him greatly to see how these political issues seemed to seep into every area of life and even affect people's interpersonal relationships. At one point in the letter he states:

"I never considered a difference of opinion in politics, in religion, in philosophy, as cause for withdrawing from a friend."

Today, we Americans find ourselves in a similar situation, with our political environment even more splintered due to a number of factors. The advent of mass digital media, siloed identity-driven political groups, and a societal lack of understanding of basic discursive fundamentals all contribute to the problem.

Civil discourse has fallen to an all time low.

The question that the American populace needs to ask itself now is: how do we fix it?


Discursive fundamentals need to be taught to preserve free expression

In a 2017 Free Speech and Tolerance Survey by Cato, it was found that 71% of Americans believe that political correctness had silenced important discussions necessary to our society. Many have pointed to draconian university policies regarding political correctness as a contributing factor to this phenomenon.

It's a great irony that, colleges, once true bastions of free-speech, counterculture and progressiveness, have now devolved into reactionary tribal politics.

Many years ago, one could count on the fact that universities would be the first places where you could espouse and debate any controversial idea without consequence. The decline of staple subjects that deal with the wisdom of the ancients, historical reference points, and civic discourse could be to blame for this exaggerated partisanship boiling on campuses.

Young people seeking an education are given a disservice when fed biased ideology, even if such ideology is presented with the best of intentions. Politics are but one small sliver for society and the human condition at large. Universities would do well to instead teach the principles of healthy discourse and engagement across the ideological spectrum.

The fundamentals of logic, debate and the rich artistic heritage of western civilization need to be the central focus of an education. They help to create a well-rounded citizen that can deal with controversial political issues.

It has been found that in the abstract, college students generally support and endorse the first amendment, but there's a catch when it comes to actually practicing it. This was explored in a Gallup survey titled: Free Expression on Campus: What college students think about First amendment issues.

In their findings the authors state:

"The vast majority say free speech is important to democracy and favor an open learning environment that promotes the airing of a wide variety of ideas. However, the actions of some students in recent years — from milder actions such as claiming to be threatened by messages written in chalk promoting Trump's candidacy to the most extreme acts of engaging in violence to stop attempted speeches — raise issues of just how committed college students are to
upholding First Amendment ideals.

Most college students do not condone more aggressive actions to squelch speech, like violence and shouting down speakers, although there are some who do. However, students do support many policies or actions that place limits on speech, including free speech zones, speech codes and campus prohibitions on hate speech, suggesting that their commitment to free speech has limits. As one example, barely a majority think handing out literature on controversial issues is "always acceptable."

With this in mind, the problems seen on college campuses are also being seen on a whole through other pockets of society and regular everyday civic discourse. Look no further than the dreaded and cliche prospect of political discussion at Thanksgiving dinner.

Talking politics at Thanksgiving dinner

As a result of this increased tribalization of views, it's becoming increasingly more difficult to engage in polite conversation with people possessing opposing viewpoints. The authors of a recent Hidden Tribes study broke down the political "tribes" in which many find themselves in:

  • Progressive Activists: younger, highly engaged, secular, cosmopolitan, angry.
  • Traditional Liberals: older, retired, open to compromise, rational, cautious.
  • Passive Liberals: unhappy, insecure, distrustful, disillusioned.
  • Politically Disengaged: young, low income, distrustful, detached, patriotic, conspiratorial
  • Moderates: engaged, civic-minded, middle-of-the-road, pessimistic, Protestant.
  • Traditional Conservatives: religious, middle class, patriotic, moralistic.
  • Devoted Conservatives: white, retired, highly engaged, uncompromising,
    Patriotic.

Understanding these different viewpoints and the hidden tribes we may belong to will be essential in having conversations with those we disagree with. This might just come to a head when it's Thanksgiving and you have a mix of many different personalities, ages, and viewpoints.

It's interesting to note the authors found that:

"Tribe membership shows strong reliability in predicting views across different political topics."

You'll find that depending on what group you identify with, that nearly 100 percent of the time you'll believe in the same way the rest of your group constituents do.

Here are some statistics on differing viewpoints according to political party:

  • 51% of staunch liberals say it's "morally acceptable" to punch Nazis.
  • 53% of Republicans favor stripping U.S. citizenship from people who burn the American flag.
  • 51% of Democrats support a law that requires Americans use transgender people's preferred gender pronouns.
  • 65% of Republicans say NFL players should be fired if they refuse to stand for the anthem.
  • 58% of Democrats say employers should punish employees for offensive Facebook posts.
  • 47% of Republicans favor bans on building new mosques.

Understanding the fact that tribal membership indicates what you believe, can help you return to the fundamentals for proper political engagement

Here are some guidelines for civic discourse that might come in handy:

  • Avoid logical fallacies. Essentially at the core, a logical fallacy is anything that detracts from the debate and seeks to attack the person rather than the idea and stray from the topic at hand.
  • Practice inclusion and listen to who you're speaking to.
  • Have the idea that there is nothing out of bounds for inquiry or conversation once you get down to an even stronger or new perspective of whatever you were discussing.
  • Keep in mind the maxim of : Do not listen with the intent to reply. But with the intent to understand.
  • We're not trying to proselytize nor shout others down with our rhetoric, but come to understand one another again.
  • If we're tied too closely to some in-group we no longer become an individual but a clone of someone else's ideology.

Civic discourse in the divisive age

Debate and civic discourse is inherently messy. Add into the mix an ignorance of history, rabid politicization and debased political discourse, you can see that it will be very difficult in mending this discursive staple of a functional civilization.

There is still hope that this great divide can be mended, because it has to be. The Hidden Tribes authors at one point state:

"In the era of social media and partisan news outlets, America's differences have become
dangerously tribal, fueled by a culture of outrage and taking offense. For the combatants,
the other side can no longer be tolerated, and no price is too high to defeat them.
These tensions are poisoning personal relationships, consuming our politics and
putting our democracy in peril.


Once a country has become tribalized, debates about contested issues from
immigration and trade to economic management, climate change and national security,
become shaped by larger tribal identities. Policy debate gives way to tribal conflicts.
Polarization and tribalism are self-reinforcing and will likely continue to accelerate.
The work of rebuilding our fragmented society needs to start now. It extends from
re-connecting people across the lines of division in local communities all the way to
building a renewed sense of national identity: a bigger story of us."

We need to start teaching people how to approach subjects from less of an emotional or baseless educational bias or identity, especially in the event that the subject matter could be construed to be controversial or uncomfortable.

This will be the beginning of a new era of understanding, inclusion and the defeat of regressive philosophies that threaten the core of our nation and civilization.