The forces of nonsense appear to be taking over the world. As in olden time, Italy is entering its third month without a government, and it celebrated the milestone by reelecting Giorgio Napolitano, 87 — the same age as Queen Elizabeth II, now in her 62nd year as British monarch — to the presidency. Napolitano returns to his office with the support of about 25 percent of Italians, as almost everyone is disgusted at the failure of the system to produce any government, but almost as many are disgusted at the thought of a functioning government, and the president was reelected only because the almost equally divided main parties of left and right do not want to go through another election, but show no sign of being able to agree on anything else. Such moral authority as there is is in the hands of Beppe Grillo, the comedian and leader of the unofficial opposition who launched his Five Star Movement by mobilizing two million Italians for “F*** You Day” some years ago.
Japan’s new policy of accelerated quantitative easing, which until the last five years of pandemic economic euphemism was simply inflation through money-supply increases, has been welcomed by everyone. The G-20 (which includes such absurdly mismanaged countries as Argentina and South Africa, and such unrepresentative ones as Saudi Arabia) expressed happiness that the Japanese program was aimed at, to quote the Wall Street Journal, “defeating inflation, not at weakening the Japanese currency.” This, in a phrase of Napoleon’s, is just “lies agreed upon.”
For the world’s third-largest economy finally to chuck in the towel and simply open the spigots of money sounds yet another death knell for serious currency. There has been a concerted effort since the November U.S. election to confect in the United States a psychology of recovery, and the gold price has obligingly declined, as if inflationary fears had abated and economic recovery were visibly progressing between the Scylla and Charybdis of inflation and deflation. But there is no real recovery. There is only puny job creation, and insufficient confidence for investment to revive even with the banking system awash with taxpayers’ money and minimal interest rates. The reason there is no recovery underway or on the horizon is that the advanced world has shot its bolt on consumption, and the developing world — except for some of the countries farthest back in the running in Africa, which have balanced infrastructure development with economic expansion rather than using the first as an engine for the second, and where there is some gratifying progress — has shot its bolt on infrastructure and related investment.
The principal significance of the Japanese move, apart from the confession that everything else has been tried and has failed, is that Japan is deliberately going to force the undervaluation of its currency, as China has done for many years, and this will be a very serious challenge to China, because Japan is a far more competent manufacturer with a much more accomplished work force. Also, unlike China, Japan is not hobbled by a command economy, a financial-reporting system based on the mere conjuration of numbers, the absence of social services, a large proportion of the population still living in primitive conditions, a corrupt and regionally fragmented government structure ultimately based on the army, and the imposition of a policy of one child per couple (which will age the population very rapidly). Japan’s move to get down, in monetary terms, on all fours with China comes when the mystique of inevitable triumph that China has been trumpeting from every parapet of the Great Wall for 20 years is ceasing to resonate.
Having poured trillions of dollars into an astounding infrastructure buildup, China is now facing a severe debt crisis in local government, and an immovable savings rate near 50 percent, as Chinese families cannot rely on public- or private-sector retirement regimes to provide for the steadily swelling ranks of the elderly. Immense building projects have been raised, employing millions of steel and cement and building-trades workers, but the borrowings are excessive and the projects are not uniformly successful at the level of sales and rentals. Chinese bond markets handle about 30 percent of borrowing in the People’s Republic, compared with 70 percent in the United States, and most borrowers rely on the banking system, which is badly over-borrowed and under-secured. The condition is aggravated by the fact that local governments cannot directly raise debt, so they skirt the rules by having special-purpose subsidiary companies issue bonds. The amount and quality of these bonds has become a cause of great concern. The third-ranked debt-rating agency, Fitch, which has less to answer for than the infamous S&P and Moody’s over the 2008 debacle, estimates total real public debt at about 200 percent of GDP, which, if correct, makes China’s vaunted prosperity seem precarious.
In most of the West, the reason there is little job creation and no real recovery, despite the inundation of newly minted money, is that the consumer economy can’t do it anymore. The public is generally wary of personal and family debt. People have been frightened and scorched and they will not bet the ranch on borrowing to upgrade cars, buy luxuries, or take holidays abroad. What is needed is a general rebalancing of the economy of all the advanced countries, except perhaps Germany and the resource-rich nations such as Australia and Canada, so that more people are working and more of those are extracting resources; converting, fabricating, or assembling raw materials into finished goods; or doing white-collar work that is essential.
To return to the perfervid pursuit of nonsense in national policy: The trophy for perennial over-achievement can almost be retired, as the winner is the perennial contender, Zimbabwe, which, building on its status as the most indebted country in the world, per capita, with debt at 220 percent of GDP, has engaged in the wholesale theft of foreign investment in Zimbabwe under the National Indigenisation and Economic Empowerment Board. It simply steals the money of foreign investors. Among the advanced countries, a very vigorous competition with Italy is being conducted by France’s socialist government, with former budget minister Jérôme Cahuzac’s derring-do in acknowledging infection by a “virus of lies,” as he denied existence of his Swiss-bank account, and allegedly filed fraudulent tax returns and underestimated the value of his undisclosed foreign assets, initially by 96 percent.
The relatively feeble American entry this month is the representation of the United States at Margaret Baroness Thatcher’s funeral by Louis Susman, perhaps the most forgettable ex-ambassador to the United Kingdom since the piping days of Alanson B. Houghton in 1929. The last time there was a ceremonious funeral attended by the British monarch, for Sir Winston Churchill in 1965, the U.S. was represented by General Dwight D. Eisenhower and Chief Justice Earl Warren, and President Lyndon Johnson and former President Truman were prevented from attending only by illness. I understand the wish not to inflict Joe Biden on the British at such a time, but the three most distinguished secretaries of state of the last 60 years, Henry Kissinger, George Shultz, and James Baker, all had the decency to attend as private citizens, and could have been named as special emissaries. This is the administration that has signified its interest in what was once called the Grand Alliance and then the Special Relationship by sending back the bust of Mr. Churchill and giving Queen Elizabeth, on her 60th anniversary as monarch, an iPod. Governments that can’t do small things sensibly don’t incite unlimited confidence about their ability to maintain the currency and the Western Alliance.
But in a gripping match, the grand prize for public-policy nonsense this month seems likely to go to Richard Falk, the United Nations’ “Special Rapporteur on the situation of human rights in the Palestinian territories occupied since 1967,” who has declared that the people murdered in Boston in the explosion at the time of the marathon were “canaries” who “have to die” because of America’s “fantasy of world domination.” He added a repetition of his frequent charge that anything Israeli is “the opposite of justice and peace.” Falk, a 9/11 conspiracy theorist, solemnly opined that Bostonians got what they deserved.
Perversely, the most sensible initiative this month seemed to come from the head of the Russian thugdom, Vladimir Putin, who dismissed minority discontent in a speech to the Duma, and said that “Russia does not need minorities. Minorities need Russia. . . . We had better learn from the suicides of America, England, Holland, and France, if we are to survive as a nation.” Suicide is an exaggeration, and Putin’s motives in this case, as in almost everything, are suspect, but on this one subject, the West should heed his warning about the agitations of some minorities.
— Conrad Black is the author of Franklin Delano Roosevelt: Champion of Freedom, Richard M. Nixon: A Life in Full, and the recently published A Matter of Principle. He can be reached at [email protected].