The Arab spring of 2011 has been widely interpreted as a sign of hope for those sympathetic to Western-style democracy. Juxtapose it, though, with the ongoing debt crisis negotiations in the United States, and a warning canary flutters out of the mineshaft. Our Western economic basics are much more fragile than we usually presume.
I'm not a numbers nerd, and so I skip most of the details in newspaper reports on the American debt crisis. But you don't need a degree in economics to understand that when the U.S. has to raise its borrowing ceiling, it's probably not a sign of economic health. When the Greek government owes a pile of money to other European countries that it can't pay; when its creditors have agreed to a revised repayment schedule conditional on the Greeks making significant spending cuts; and when many of the Greeks don't like it and are protesting (and sometimes rioting) in the streets—these are not signs of hope. Turn to the next page to find similar stories involving Ireland and Portugal.
It's not that I doubt short-term political solutions will be found in the U.S. by August 2nd, and in Europe within the appointed timelines. The stakes for the value of the American and European currencies are just too high—the powers that be cannot let repayment schedules to be missed and risk the currency confidence crisis that would follow. But all this does is buy a bit of time to restructure how we do things while providing the perception of stability.
What is more significant is that the debt crisis cannot be properly addressed without changes to our expectations and standards of living. In the U.S. economy, approximately 50% of government expenditures are "mandatory" programs (such as social security, health care etc.). Factor in interest on debt and deficits, and it's clear there is no realistic solution that does not involve touching these programs. Many are blind to the implications. More than half of Americans who are the recipients of U.S. social programs believe that "they have not used a government program."
While Canadians are thankfully in much better shape (our debt to GDP ratio is at 64% compared to the U.S.' 95%), the choices will not be that much easier north of the 49th. Presently our economy has approximately five workers for everyone supported by the government; by 2031, that ratio will change to 2:1. We know that the vast majority of health expenditures for the average person come in the last few years of their lives, and a whole lot more of us are getting older. Not only do older people receive pensions, they cost society a fair chunk of money.
No matter how you cut it, this restructuring means that most of us are going to have do with less. For some it will be less support from government. Others will end up with cents on the dollars, as the ultimate payers of restructured loans are ordinary folk who have some investments that will not deliver the promised returns. This income they are counting on for their own retirement won't be there.
But in a sense, those are the easy questions. Tougher still will be the moral questions that will challenge how much we are prepared to sacrifice to provide end-of-life care and support for "non-productive" members of society.
Mineshaft canaries give not answers, but hints. The Arab spring told us that the stifling repression in the Middle East might give way to more openness and democratic participation. The Western economic fall is telling us that unless democratic participation is used in a responsible manner, the hope turns into pain.
I'll leave it to international economists and bankers to slice the numbers and parse the details of the current international debt negotiations. However, it would be silly for me to think that just because I will hear news reports that they have solved matters and met deadlines, all is well. Just because the fall of economic realities seems to be a more dreary season than the spring of democratic hope, does not mean it is any less important.