A Top-Down Disaster

Paul Krugman has a great column about the effort by the transatlantic policy elite to blame current problems on politicians’ undue willingness to placate the public:

The answer is, three main things. First, there were the Bush tax cuts, which added roughly $2 trillion to the national debt over the last decade. Second, there were the wars in Iraq and Afghanistan, which added an additional $1.1 trillion or so. And third was the Great Recession, which led both to a collapse in revenue and to a sharp rise in spending on unemployment insurance and other safety-net programs.

So who was responsible for these budget busters? It wasn’t the man in the street. [...]

The real story of Europe’s crisis is that leaders created a single currency, the euro, without creating the institutions that were needed to cope with booms and busts within the euro zone. And the drive for a single European currency was the ultimate top-down project, an elite vision imposed on highly reluctant voters.

I think it’s important to recognize that this was no accident either. Technocratic leaders like Alan Greenspan were on hand to explain to elite audiences that dissipating budget surpluses and preserving a high level of indebtedness was the point of the Bush tax cuts, while European elites hoped that pushing forward with monetary union would force a level of political integration that European voters wouldn’t otherwise accept. It’s true that if we adopted a strict “listen to the voters” approach we’d wind up trying to balance the budget exclusively through foreign aid cuts. But that doesn’t change the fact that what we’re largely living through is a massive failure of elite governance with key concepts in national security policy and financial regulation revealed as bankrupt.