Everywhere, advanced nations face similar problems: overcommitted welfare states, aging populations, flagging economic expansion. These conditions define the global crisis and explain why it’s struck the United States, Europe and Japan simultaneously. We need to move beyond daily headlines to understand this larger predicament.
The old order, constructed by most democracies after World War II, rested on three pillars. One was the welfare state. Government would protect the unemployed, aged, disabled and poor. Capitalism would be tamed. A second was faith in economic growth; this would raise everyone’s living standards while permitting income redistribution. Growth was ordained, because economists had learned enough from the 1930s to cure periodic recessions. Finally, global trade and finance served countries’ mutual interests.
All three pillars are wobbling….