Project Syndicate
February 13, 2012
On a recent visit to Europe, I found economists, journalists, and business people thoroughly frustrated with their politicians. Why, they ask, can’t politicians see the abyss that yawns before them, and come together to resolve the euro crisis once and for all?
Even if there is no consensus on what a solution might be, can’t they meet and thrash out a plan that goes beyond their repeated half-measures? It is only because of the European Central Bank’s bold decision to lend long term to banks that we have seen some respite recently, or so their argument goes. Politicians, in contrast, are failing Europe by being forever behind the curve. Why do they find it so hard to lead?
One answer that can be easily dismissed is that politicians simply don’t understand the gravity of the situation. Political leaders need not be economic geniuses to understand the advice that they hear, and many are both intelligent and well-read.
A second answer – that politicians have short time horizons, owing to electoral cycles – may contain a kernel of truth, but it is inadequate, because the adverse consequences of timid action often become apparent well before they are up for re-election.
The best answer that I have heard comes from Axel Weber, the former president of Germany’s Bundesbank and an astute political observer. In Weber’s view, policymakers simply do not have the public mandate to get ahead of problems, especially novel ones that seem small initially, but, if unresolved, imply potentially large costs.
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