…the past two weeks of dismal economic news have made the new reality impossible to ignore: the West–and most immediately Europe–is in serious trouble. This is no blip but a crisis of the old order, a phrase once used by historian Arthur Schlesinger Jr. to describe the failures of capitalism in the 1920s. It is a crisis that is shaking not only markets, jobs and national growth prospects but an entire way of thinking about how the world works–in this case, the assumption that life gets better and opportunities richer for each successive generation in the West.
As bad as things might seem in the U.S., the smoldering center of the crisis is Europe. Volatile continental markets and angry demonstrations from Athens to Madrid are manifestations of the desperate scramble by European politicians to contain the euro-zone debt crisis that threatens to unravel the single currency and destabilize the region. The European Union and the euro zone were supposed to bring about economic stability and remove traditional barriers to growth, such as tariffs and regulations. Instead it’s become a selfish union in which flailing economies feed rising nationalism, angst over immigration and simmering distrust between rich and less affluent countries. “Europe is at the center of the global financial problems,” wrote Michael Hartnett, chief global equity strategist for Bank of America Merrill Lynch, in a recent note to investors. “Those problems have been exacerbated by the inability, or the unwillingness, of policymakers … to address the debt issues.”