Is it over for the Anglo-Saxons?
A few days ago, Brazilian President Luiz Inacio Lula da Silva blamed the global economic crisis on the “irrational behaviour of some people that are white [and] blue-eyed.”
“Before the crisis, they looked like they knew everything about economics,” he said, British Prime Minister Gordon Brown standing uncomfortably beside him, “and they have demonstrated they know nothing about economics.”
French President Nicolas Sarkozy, abandoning his former persona of free-market reformer, now extols the virtues of the French economic and social model. “When problems arise, our safety nets and automatic stabilizers play a crucial role, much more so than in other countries, for example Anglo-Saxon countries,” he said in February.
Mr. Sarkozy is threatening to walk out of this week's G20 summit unless the U.S. and Britain agree to a new global financial regulator. China, meanwhile, proposes a new global currency to replace the dollar.
English-speaking people are having a lousy year. The Anglo-American model of open markets and minimal regulation is universally and justly blamed for throwing the world into recession. The Washington Post's E.J. Dionne predicts the U.S. “may well turn more toward social democracy, socialism's philosophical brother.”
Perhaps, but not likely. If so, it will be a mistake.
Anglo-Saxon capitalism – investment-friendly, export-oriented, low-taxed and minimally regulated – has been competing with its continental alternative – highly regulated, wealth-distributing and state-controlled – since the late 18th century. The Anglo-Saxon version is better. Britain launched, led and sustained the Industrial Revolution, and the United States launched, leads and sustains the Knowledge Revolution. There've been downturns, but we are wealthier and healthier than we'd have been with, say, France in charge.
U.S. Treasury Secretary Tim Geithner recently noted: “One of the things about the American economy is, change happens here with brutal force, much more quickly than it happens around the world. … But that's a good thing, too, because that means more of that adjustment process is behind us.”
The lack of European stabilizers means American employers shed workers quickly when times worsen, depressing consumer confidence and creating a recession. But once the economy hits bottom, the same conditions make it easier for employers to rehire, which restores confidence and growth. That's why America is usually first into recession and first out and why, two years on, journalists will be writing about Europe's sluggish recovery.
We all want to live in a society where every child gets a good education, the poor have food and housing, and medical care is available for all. But we should also want to live in a society that encourages good ideas by making capital easily available and rewarding risk. Henry Ford and Bill Gates had good ideas. Because they were born in America, we live in their world.
Nothing's black and white. Canada's fusty, inhibiting regulations saved Canadian banks from the contamination of toxic assets. Barack Obama has effectively nationalized General Motors even as Sweden abandons Saab.
Any sensible person agrees that the Thatcher-Reagan philosophy of deregulation went too far, starting in the late 1990s. But deregulation was a good idea in 1980. And if the Obama administration overregulates, a future president will need to loosen the strings.
Anglo-Saxon isn't a race, it's an idea, which is why Mr. Sarkozy will berate Mr. Obama's Anglo-Saxon economics without irony. The recession will end, growth will resume and emerging economies will move closer to the Anglo-American model, because history has proved it works. This truth should be beyond debate, although it's a heck of a job getting some people to see it.