Wednesday, January 4, 2012

13 Years of Euro: What Next?

Chest thumping can be a wonderful feeling. But chest thumping also reminds me of two tired cliches that were flogged in front of us during school days. The first one talks about pride coming before downfall. The second one tells us that the higher we go, the steeper we fall. Both cliches seem apt for another round of flogging today as battered and bruised citizens of Europe try to search for a reason to celebrate 13 years of their common currency Euro. It was on January 4, 1999, that this much vaunted rival to the American dollar made its debut in global financial markets. There was a lot of hope, a hell of lot of optimism and a cocky swagger in the West (I define West as Western Europe and North America) in 1999 about future prospects.

Back then, it appeared as if Asia was down and perhaps out for the count. The financial crisis of 1997 had ravaged virtually all the newly emerging star countries of Asia like South Korea, Malaysia, Thailand and Indonesia. Lectures, hectoring and free advice came the way of troubled Asian economies as fast as the dollars kept moving out. Think Tanks in Washington and London made sniggering remarks about how the Asian miracle was built on castles of sand. The World Bank and the IMF jumped in and flogged their mantra of fiscal austerity. The wisdom was: it was irresponsible leaders, reckless bankers and crooked businessmen of Asia who caused the massive financial crisis and destroyed almost a generation of dreams. Of course, the West was triumphant back then and the dog eat gog kind of Capitalism that was the ruling ideology in Washington and London became the ruling ideology of the world. Many sober analysts and thinkers warned of the dangers of such an overdose of free market fundamentalism. But who was listening?

Now the wheels have turned full circle again. It is leaders and businessmen from Asia that are offering free advice to the West on how to behave responsibly and sensibly. Since 2008, the West has been haunted and tormented by an economic recession that it had not witnessed since the Great depression of 1930s. The same set of policy makers in Washington and London who virtually abused Asian leaders for bailing out desperate banks in their countries happily bailed out American banks as well as Wall Street when push came to shove. The same story is being repeated in Europe as subdued and humbled leaders try to save the banking systems of Greece, Ireland, Italy and Spain. All the lectures that free market fundamentalists gave to Asian leaders after 1997 about letting markets do their jobs seem to have vanished. Free market fundamentalism is still alive and kicking; but now as free for all fundamentalism.

Will Euro prove to have a short life span? Will it even complete 14 years on January 4, 2013? A few years ago, such questions would have sounded preposterous. No longer. If Europe fails to save the sinking ships of Ireland, Greece, Italy, Spain and many more of the 27 member countries, the Euro is bound to die a painful death. With that, hopefully, will come an end of the kind of silly triumphalism that commentators and pundits from the West have been drowning other nations of the world with.

On January 4, 1999, it was Asia-and even Latin America in shambles and the West was looking forward to yet another century of global domination. Today, on January 4, 2012, it is the West which is in shambles and it is Asia that is dreaming of global domination by the end of this century. But there are two lessons for Asia and latin America on this anniversary of the sinking Euro: first, do not subscribe to any kind of fundamentalism-whether it is the free market type or the Marxist type. Just junk ideology and make common sense the ruling ideology. Second, avoid chest thumping!


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