Conclusion: A World At Risk

As this is being written, everyone's attention is riveted on Europe—and rightly so, because what happens there is very likely to affect the already shaky global economy in a powerful way. Will a major European bank go down, precipitating a global banking crisis? Will a major European economy default on its debt, sending Europe and probably the rest of the world into a double-dip recession or worse? Will Europe throw in the towel and reatomize into something that looks like the Europe of the 1980s?

These are urgent questions, of course, but as I've tried to show at great length in this chapter, Europe's immediate problems are only the symptoms of far deeper maladies. If Europe somehow navigates its current shoals, it can then turn its attention to the entitlement tsunami that is about to inundate the Continent.

But the problem is even worse: Whatever steps Europe takes to deal with the immediate crises of bank and sovereign insolvency are very likely to make the already Gordian long-term challenges even more intractable. For example, what the European states need more than anything else is vigorous economic growth, but what they are getting is more austerity. What the European banking system needs is to get out from under its crushing debt load, but what it is getting is more debt.²⁹

Still, judged according to its original goals the Great Experiment in Europe has been an extraordinary success. Never in human history have so many wealthy countries coexisted in so small a geographical space for so long without warring with each other. The Europeans have carved out lives that are in many ways enviable, less hyperkinetic than our own, more humanistic and less market-driven. There are thousands of places in Europe that cannot be encountered without an immediate attack of coup de coeur.

But all this lies endangered. The danger is Europe's and the world's, and the danger puts our capital at risk. Understanding the scope and depth of the problem and investing accordingly is the best we can hope to do.