If you’re looking for insight into the lessons learned from the global financial crisis, you could do a lot worse than this Walter Russell Mead essay. Mead nails down a bunch of thoughts that have been swirling in my head recently, that I haven’t had the time or the talent to express as articulately. In particular, the idea that the Battle of Financial Markets, as he calls the initial stage of the crisis, has now given way to the Battle of State Finance. By that he means that the global economy’s theoretic backstop — i.e., the state’s capacity to rescue the system — has now been called into question. This, combined with his treatment of the politicization of economic governance, is what I was searching for here:
States have not been intervening in markets to correct for inefficiencies. They’ve been intervening to protect outcomes, thereby exacerbating those inefficiencies. Now their ability to protect those outcomes has been called into question by the very markets they’ve been trying to save. It’s hard to see how we can avoid a very bumpy landing in returning to contact with reality.
For more on pulling back curtains, with particular regard to Europe, see John Vinocur’s column, too (via Art Goldhammer). Again, there’s plenty of blame to go around.