Apparently, I am far from the only person with a reflexive dislike of "Anglo-Saxon" models of economic governance. Although you can describe them any number of ways, these typically involve a focus on citizens-as-consumers and heavy reliance on consumer credit. Exemplars are, of course, the US and UK--countries now saddled with massive economic woes largely of their own creation. To be sure, the world economy has great ambivalence about this state of affairs. While they profess disdain for such fiscally permissive societies, many export markets they rely on would simply not be sizeable enough if it weren't for American-style megaconsumption--what I have styled as America's jihad on fiscal sanity. Even in the teeth of a massive economic slowdown, American consumers engaged in a shopping orgy over "Black Friday" weekend, which is so named because it's the date when most retailers break even for the year. This year, of course, few will break even.US Treasury Secretary Henry Paulson has come under massive criticism from all sides at home. The left dislikes his willingness to secure bailouts for wealthy former Wall Street colleagues, while those from the right show disdain for saddling the US with massive debts. Internationally, others are similarly aghast. The Financial Times has a new feature that suggests an anthropological approach may be required to sort out the current mess. Just as Asians are amazed at the rate Americans pile on debt, Germans who still maintain a real Protestant attitude of thrift, hard work, and sacrifice do not see how Paulsonite solutions of piling even more debt can remedy woes caused by taking on too much debt. While some have likened Paulson's nefarious activities to a Nigerian scam, I like to think of him as undergoing a transformation when subject to excess stimuli from Wall Street veteran to...The Great Paulsonio: "I am Paulsonio! I need greenbacks for my money pit!" etc, etc. He is simply a reflection of a society that has allowed him to flourish.
There has been some speculation on why Americans are like this. Taking a neuroeconomic-ish stance, Peter Whybrow has postulated that the aspirational culture of America--which has attracted high achievers to its shores--is responsible for these insatiable Beavis-style debt cravings. Publisher's Weekly summarized Whybrow's thesis thusly:
Genes are to blame: programmed to crave material rewards on the austere savanna, they go bananas in an economy of superabundance. Americans are particularly susceptible because they are descended from immigrants with a higher frequency of the "exploratory and novelty-seeking D4-7 allele" in the dopamine receptor system, which predisposes them to impulsivity and addiction.
This certainly is an interesting thesis. Regrettably though, Whybrow--whose biography describes him as the "Director of the Semel Institute for Neuroscience and Human Behavior at UCLA" does not have much of an empirical basis to back this assertion. It would have been nice if he performed an international study comparing the discount rates persons of various nationalities apply to future events (like retirement). If Whybrow is right, hedonistic Americans would have toweringly high discount rates, indicating a planning horizon of nearly zero, while others would have significantly lower rates. Again, the British example gives me reason to pause. The same sort of modified American exceptionalism cannot be applied to the British case of achievement-oriented migrants seeking the land of milk and honey and so forth as these are the very ancestors of the many who left Britannia for America. The thesis hasn't been disproved of course, though I would most welcome some studies along these lines.In the meantime, the task of explaining pathological addictions to debt will fall under a more prosaic explanation: some people just lack common sense about handling money, such as "don't borrow money you don't expect to be able to pay back." Ironically, the most financialized economy on the face of the Earth is largely populated by folks who do not understand such a simple notion. Seen in this light, the rest of the world's apprehension towards "Anglo-Saxon" models is certainly understandable. From the Financial Times (note how the more US-friendly Sarkozy gets implicated here):
To the German radio presenter, the real news about the measures announced by Washington on Tuesday to jolt banks into lending again was not so much the astronomical costs, but a little-noticed comment in Hank Paulson’s statement.
“Millions of Americans,” croaked the US Treasury secretary, were being denied credit or facing rising credit card rates, “making it more expensive for families to finance everyday purchases”. The notion that families should finance everyday purchases on credit, the anchor commented, “suggests Washington has still to understand what brought us there in the first place”...
What is happening is a classic clash of cultures, and anyone puzzling to grasp Germany’s anaemic reaction to the financial crisis and its economic fallout could do worse than take a stroll through its inhabitants’ mental landscape. Much of the economic thinking taking place in German political circles is guided by what Otto Friedrich Bollnow, a mathematician-cum-philosopher, once described as “economic virtues” – frugality, diligence, industry and so on. One widespread notion is that one should not borrow without being in a position to pay back...
With this in mind, it becomes easier to understand Chancellor Angela Merkel’s warning to the US this week that its efforts to keep money cheap and people borrowing could plant “the seeds of a similar crisis in five years’ time”. Ms Merkel’s speech, defending her cool-tempered crisis management in the face of foreign criticism, was overflowing with economic virtue. Germany’s economic health and solid finances would allow it to weather the storm, she said. Some governmental action would be needed, but the goal of balancing the budget remained. To French, British and American pyrotechnics, she opposed “a policy of measure, moderation and practical common sense”. Interestingly, she stressed the need for Maß und Mitte – literally measure and centrism – no less than four times. The expression was coined by Wilhelm Röpke, an economist, wartime anti-Nazi activist and inventor of “economic humanism”...
With morals, values, moderation and solid common sense looming so large in Ms Merkel’s economic thinking, it is no surprise she would see overindulgence and irresponsibility in the way the UK and, above all, the US are treating their own recessions. If you think of borrowing as akin to smoking – a minor sin that carries heavy risks – then the notion that one should tackle a slowing economy by encouraging over-indebted people who stand a good chance of losing their jobs to draw new credits and splash out comes across as sheer madness.
