Economic leaders play games with our chips

Last summer, the ratings firm Standard & Poor’s cut the US’s top-tier AAA credit rating after the world’s largest economy took itself to the brink of default due not to economic weakness but to political brinkmanship between the two major parties.

To highlight the turmoil the Western world went through this year, the once unimaginable downgrade of the US that should have been the financial event of the decade now comes almost as an afterthought compared to the near collapse of the European common currency, after a series of mistakes by political leaders that started to unfold during the summer.

The severe potential consequence is not the true similarity between these two events but the fact that they both resulted not from inevitable national or financial conditions as much as from the failure of politicians to do what’s right, even in the face of an economic apocalypse.

People in West have always understood the self-serving nature of national democratic politics, but they believed that self-centeredness would come to a limit; that world leaders would work together to avert a clear and present doom. Similarly, people, including investors who are not famous for their faith in people or governments, believed that while European leaders would take national politics to the EU table and that rich euro-zone nations would try as much as they could to avoid bankrolling troubled southern nations, they would not allow even the consideration of a euro-zone breakup. That’s why Greece had no trouble in selling its bonds earlier despite its problematic economy and bookkeeping. The investors were not trusting Greece; they put their faith in its euro-zone partners.

This faith came not from admiration of democracy or trust in human goodness, but from the simple and logical conclusion of the inevitability of human self-preservation — that the crew of a ship will stop fighting over trivialities and work together once they realise the iceberg is ahead.

In 2011 they realised that this faith was misplaced.

To be fair, politicians acted in the final moment and changed course to avert certain doom. In both cases, however, politicians had indulged in their games too long for the illusion of politicians as crew-members to sustain. Their failure to come to the logical decision of doing the correct thing in the face of sure collapse revealed their true nature – different from ship crews, they have no existential stake in the game they play. It is always the common people who are going to suffer for their failure. And when one is playing with others’ chips, one doesn’t always act logically. The rise of the “Occupy” movements and the flight of investors from toxic euro-zone bonds are both reactions stemming from that revelation.

The China Post has predicted that the “Great Recession” will narrow the scope of application for the word “unthinkable” and present Westernised democracy with a huge challenge. Westernised democracy has yet to pass that challenge, and if politicians do not wake up and rise to the occasion next year, they might be witnessing more realisations of the unthinkable.