The debt crisis sweeping back and forth across the Atlantic merits a comparative perspective on the two starkest cases: the United States and Greece. While those responsible for carrying out the steps that led to the debt crises should be held accountable for their actions, it is precisely the respective policy environments created by ruling elites in both countries that should be blamed. In order to resolve the crisis, we have to think about flexible policy responses that are not bound by party lines.
In the United States, the right-wing shift of the neo-liberal period began with Ronald Reagan in the 1980's and was implemented as the dominant paradigm of economic organization for the subsequent generation. For America, several main aspects characterize this trend: a meteoric rise in military expenditures in the 1980's and following the end of the Cold War, outsourcing productive capacities to developing countries, the decline of social systems, the stagnation of wages, insufficient taxation, the growing economic inequality, and relaxed regulatory regimes for the financial sector. The outcomes are clear: A polarized system, the prospect of a bankrupt America, high unemployment, an astronomical budget deficit, disastrous military adventures with unclear results and collapsing social systems.
America exemplifies what happens when minimalist right-wing policies take effect without considerable challenge from the counter-balancing force (Democrats) to act as a check on misguided neo-liberalism between the 1980's and 2000's. The trend continues, as we have seen. The highlights of President Barack Obama’s first term are the extension of tax cuts, a worsening economy, being mired further into Iraq and Afghanistan, rabid resistance to his universal health care initiative (a main sticking point of the 2012 elections) and facing the paradox of a bankrupt superpower in three weeks. That is, the inertia of the neo-liberal legacy is too difficult to overcome and will likely cost the president a second term.
In a previous article, I covered Greece in more detail. It is the example of unsustainable left-wing policies. Two strong parallels are the lack of transparency and out-of-control government spending. While social systems may work well for a while, the end result is that the draining of resources beyond regeneration causes abrupt collapse of pensions, wages, jobs and benefits.
Government is not able to meet its expenditures from sustaining a system it cannot afford and that is how we have the Greek debt crisis. The economy, much too reliant on the unsustainable public sector suffers consecutive downturns that hamper its recovery without fundamental re-adjustments. As a result, Athens has to deal with a restive public, a multi-hundred billion euro debt, continuing economic decline, a dramatic rise in unemployment and unparalleled austerity.
Government remains essential to the functioning of a state, but it must be recast in a light of moderation with healthy influence from both left and right. For the sake of stability and prosperity, both the U.S. and Greece need to move in towards the center, from the right and left respectively.
Closer to home, this means the Republicans need to look past party lines and start working with the president for the general interest of this country. For Prime Minister George Papandreou, the task is even heavier: unpopular measures include reducing the government sector and encouraging a more independent private sector. Overall, the changes on either side are not pleasant; we might lose a decade doing it, but the lesson is that centrist politics just might be the antidote to crises like these.