Europeans 4, Anglo Saxons 0
Anatole Kaletsky

25 May 2011

Today Anatole Kaletsky has written one of the best articles that I have ever read on the European crisis and the new economic and political developments taking place across the Western world. There is a firewall at The Times, but Rupert Murdock has done enough damage to this world without holding back a God, so here are his pearls of wisdom in shortened and edited form:

Creative Europeans 4, Anglo-Saxon Cutters 0 (Kaletsky, The Times, 25 May 2011)

Last week I chaired a session of the Munich Economic Summit, organised by Ifo, the leading German economic research institute. The conference title, “The Role of the State in a Globalised World”, drew attention to the widening gulf between European and Anglo-Saxon thinking.

For Europeans it is increasingly clear that redefining a new and more creative relationship between the State and the private sector is the main challenge of the post-crisis period. The belief in constructive state intervention is, if anything, even stronger among the pro-business conservative parties that currently rule Germany, Sweden and other successful northern European economies than among their social democratic oppositions, influenced as they still are by proletarian interests rather than the economy as a whole.

In essence this new European thinking describes a more cohesive, more professional economy which is less loud and confrontational than Anglo Saxon capitalism. Indeed this more co-operative and technocratic model between business and government also accords with European mixed-economy political traditions.

So it seems that the Western world is beginning to split into Anglo Saxon and European viewpoints. Could it be that the sort of self confidence Cameron and Obama displayed yesterday in the Anglo-Saxon model of governance is reaching the point where nemesis follows hubris?

There are four broad reasons why I believe the period ahead may surprisingly go down in history as a European triumph:

The first is that present financial crisis can only be resolved by a further big step towards economic and political integration among the members of the Eurozone, which will unleash the sort of economy of scale advantages the designers of the EU always envisaged, but which have been held back up until now by small minded national politicians horse trading decisions.

The second is that Europe has been much better than America in producing the goods and services demanded by China, India and the other emerging nations that will power growth in the decades ahead. It seems that European engineers and designers have a certain idealism and discipline which the more materialistic and shallow Americans are missing.

The third reason for optimism is that Europe has become remarkably cost-competitive, not just because of productivity growth and wage restraint in Germany, Sweden and the other now-booming Nordic countries, but because of the integration of low-cost East European workers into the German-led industrial system. Polish, Hungarian and Slovak workers have cut costs for German businesses just as Mexico has cut costs for the US business, but education levels and infrastructure in Eastern Europe are far superior.

The fourth and most important reason for optimism is that the EU can only progress by reforming European democracy, and it precisely the ideological rigidity of populist Western democracy that is causing Western economic decline. In America, for example, the rise of the Tea Party and the political gridlock in Washington suggests that overcoming democratic naivety will require another crisis even bigger than 2008.

This what I call a truly brilliant article. You have to concentrate to read it, but if you get hold of what he is saying, you will see far below the surface into the very heart of the issue. In fact it goes so deep it's almost psychological. Nevertheless, it's profoundly simple, his genius was primarily figuring it out, and the smarter you are the more it hits you. He goes way beyond just a few surface observations, you can use his profound ideas to see deep into the evolution of mankind. So what you end up with is a sort of prophetic vision of the future which you can watch unfolding for yourself.

How far is this kind of article away from other journalists? The chasm is so vast it is almost incomprehensible. Most journalists do not believe in a new economic or political era let alone try to describe it. Martin Wolf, for example, still denies the Stiglitz idea of a paradigm shift in economics, and recently predicted the world is returning to 80s libertarianism! Martin Wolf isn't especially stupid, your average journalist hasn't even gotten around to noticing that there is even a paradigm shift debate taking place! Even people like Stiglitz don't understand the connection between economic models and human personality, so he only talks about a paradigm shift in economics not politics.

There are only a handful of people in the world who can engage in this sort of long term big picture psychological discussion, even top people like George Soros and Warren Buffet aren't there. Kaletsky has always been an elite respected journalist, but like Lord Turner, this crisis has transformed him, it has made him into a real legend. I think this credit crisis is a little bit like that famous film "The Forbidden Planet", when you think about it you take the Krell brain booster test, which either turns you into a vegetable or makes you into a genius. Alas those who come out like Kaletsky are very few and far between.

How does all this chime with my own work? Kaletsky describes the new economic world as a "co-operative model between business and government". It's not about old fashioned socialism full of out of date working practices and special interest groups, it's a sort of third way which takes the best features from capitalism and socialism. Kaletsky also talks about the incompetence of democracy and the problems of populism. I guess where Kaletsky and I differ a bit is that I call the new era "anti-liberal" whereas he probably just calls it "technocratic". I say the sins of the world are "individualism", and individualism manifests in inefficiency and irrationality. The only famous name is who close to my analysis is Francis Fukuyama. He has just begun vaguely talking about a connection between a new paradigm in economics/politics and the psychological failings of individualism - perhaps he has been reading my blog! Of course, I have don't claim to be a God, just the first person to make progress understanding Plato. Following his work I have traced the new paradigm even deeper, into the "what is" and "what is not" or "one and many" nature of intellegence.

So the stages of advancement in understand the new era are as follows:

(1) Realization that a new era might be taking shape in economics
(2) Realization that co-operation and specialization underpin this new era
(3) Realization that the new economic era connects with politics
(4) Realization that the problem of the Western World is individualism
(5) Realization that all complex problems resolve in psychological paradoxes
(6) Realization that the world is caught in an intellectual regression which is about to crack
(7) Realization that behind the psychology are philosophical issues
(8) Realization that Western failure is connected to though processes
(9) Realization of how extremely dangerous this discussion is ;-)