It’s all the fault of those people who work and save too much
One thing we’ve learnt from the crisis is that if something sounds funny it probably is. All that talk about slicing and dicing subprime debt to turn it into triple-A securities was hard to understand at the time and now we know it was just the 21st century equivalent of alchemy.
The current debate about the responsibility that surplus countries like China, Germany and Japan share for the crisis has a similar ring.
Plenty of people warned that the huge deficits and debts that countries like the United States, Britain and Spain ran up over the past decade were unsustainable. Recently the argument has been made that the countries that sold the Americans and Brits all those things they bought on credit share the blame.
In economic terms, it takes two to tango: if one country has a deficit, there must be a surplus somewhere else. In fact, if you run a big surplus, you are practically forcing someone else to have a deficit.
Well before the crisis broke, in March 2005, Fed Chairman Ben Bernanke discussed the “global savings glut” as an explanation for the persistent and rising U.S. current account deficit.
In recent weeks, The Economist has subjected the economies of surplus countries China, Germany and Japan (as well as that of the United States) to critical examination in a series on “rebalancing the world economy”. In its latest edition, for example, it describes the Japanese as “serial exporters”.
People in those countries need to loosen up a bit, spend more, take longer holidays (the Germans? oh the Japanese), deregulate their service sectors and stop obsessing about selling us stuff that is so cheap or of such high quality that we can’t resist it. That way they’ll help us to spend less and save more and the world will be in perfect harmony.
To be fair, the Economist acknowledges that the last attempt to get the Japanese to spend more, in the 1980s, got out of hand, creating a huge bubble whose effects Japan and the rest of the world are still recovering from.
But doesn’t this sound a little like an effort to spare American and British voters from having to make painful adjustments?
We all know from looking at our own communities and circles of acquaintances that, usually, if you live beyond your means you eventually have to pay a price, which may mean tightening your belt and doing without things for a while.
It’s hard to argue that the guy up the road who works hard, lives frugally, and never runs anything up on his credit card is somehow responsible for our plight. We can resent his smugness and pity his boring life, but blame him for our mess? Hardly.
You can imagine a village where some people work hard and others sit back and enjoy themselves. Of course, if everyone else is so poor or in debt that they can’t afford to buy anything, the honest craftsman may have trouble selling his wares. To that extent surplus and deficit countries are linked.
But the basic difference between thrift and extravagance has been understood, intuitively, for thousands of years. Aesop described it quite well in his fable of the grasshopper and the ants.
Tango REUTERS/Marcos Brindicci
Bubbles REUTERS/Claro Cortes
Grasshoppers REUTERS/Marcos Brindicci
Ants REUTERS/Juan Carlos Ulate