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Since the crash of 2008, the entire world has relied on a shared, if tacit, plan to avert all-out catastrophe and a second Great Depression. The United States would do what was necessary to prevent its financial system from collapsing and stem the economic decline with massive fiscal and monetary stimulus. Europe would cauterize its debt crisis, which threatened the integrity of its common currency, by bailing out its small, insolvent countries (Ireland, Portugal, Greece) while relying on German growth and Franco-German leadership to pull it through. Brazil and India would continue to grow briskly, and China would shore up global demand with a huge investment in public sector spending. And the world would muddle through, albeit with below-normal growth and above-normal unemployment for an uncomfortably long time. In the interim, social safety nets of varying strength would shield the hardest-hit workers and families from destitution, maintaining social stability. Events of recent days, however, have made it clear that this plan has failed.
I fear William Galston is right.
