Notes
1 This chapter is adapted from Greycourt White Paper No. 52: The End of History (Again): Why We May Be Living in a Permanent Financial Crisis (2012), available at www.Greycourt.com.
2 See Chapter 5.
3 Published in the current affairs journal, The National Interest.
4 The End of History and the Last Man (New York: Harper Perennial, 1992).
5 This probably came as news to the fundamentalist Islamic states that have cropped up since Fukuyama wrote—to say nothing of China.
6 1st ed. (Princeton, NJ: Princeton University Press, 2009), 234–237. A separate study by David H. Papell and Ruxandra Prodan puts the average time for recovery after a financial crisis at nine years: “[T]he Great Slump is not yet half over.” See The Statistical Behavior of GDP after Financial Crises and Severe Recessions, prepared for the Federal Reserve Bank of Boston conference on “Long-Term Effects of the Great Recession,” October 18–19, 2011. Note that the Japanese crisis began in 1992 and is ongoing—20 years and counting.
7 The Nikkei Index, which measures the performance of the Japanese stock market, peaked at over 24,000 in 1992 and is now hovering around 8,000.
8 By “indebted,” I include both the sovereign debt that has destroyed places like Greece and the private debt that destroyed places like Ireland and Spain.
9 See, for example, Niall Ferguson, Civilization: The West and the Rest (New York: Penguin Press HC, 2011).
10 We're going to focus on Europe, where the Industrial Revolution began, although of course the United States was facing the same issues at roughly the same time.
11 Shirtsleeves-to-shirtsleeves in three generations. This phenomenon is so universal that similar aphorisms exist in other cultures: rice paddies to rice paddies in three generations (Chinese); potato fields to potato fields in three generations (Irish). I am indebted to Jay Hughes for the non-U.S. versions. See James E. Hughes Jr., Family Wealth—Keeping It in the Family: How Family Members and Their Advisers Preserve Human, Intellectual, and Financial Assets for Generations (New York: Bloomberg Press, 2004).
12 The official occupation of Germany ended in 1955, but U.S. troops remain on German soil as part of NATO.
13 The European Defense Community (EDC) was proposed by France in 1950 and was to include West Germany, France, Italy, and the Benelux countries.
14 To simplify the discussion, I am describing the wealth-redistribution strategies as though they occurred in strict chronological order. In fact, of course, the strategies overlapped in time.
15 “The power to tax is the power to destroy” was spoken by Daniel Webster, arguing before the U.S. Supreme Court in the case of McCulloch v. Maryland in 1819. The question before the Court was whether a state could impose a tax on the Bank of the United States, a doomed predecessor of the Federal Reserve Bank. Chief Justice Marshall adopted the same words in holding that it could not. I am suggesting that the power to tax is capable of destroying not just entities and individuals, but entire societies.
16 The top regular bracket was 83 percent, but there was also a 15 percent soak-the-rich surcharge on interest and dividends, bringing the total rate to 98 percent.
17 If you are skeptical, try paying your workers according to that principle and see what happens to you.
18 Actually, thus far only 17 of the 27 states of the EU use the euro. Many of the others don't meet the budgetary and monetary requirements (and others claim to but don't). Denmark and the UK opted out and Sweden, though a member of the EU, refuses to use the euro by intentionally not meeting the requirements.
19 Carmen M. Reinhart and Kenneth S. Rogoff, “Growth in a Time of Debt,” paper prepared for the American Economic Review Papers and Proceedings (draft of January 7, 2010), 7–8.
20 That is to say, most of Europe wanted to borrow to offer ever-more-generous entitlements to their citizens, and Germany wanted everyone else to borrow so it could keep the German export economy booming.
21 I am channeling Tom Lehrer, who in his famous lyric put these words into the mouth of Wernher von Braun, the controversial German-American rocket scientist: “‘Once the rockets are up, who cares where they come down?/That's not my department,’ says Wernher von Braun.”
22 More recently, a new-and-improved Italian government proposed that henceforth women in the private workforce would have to wait and retire at the same age as men(!).
23 See U.S. Department of Commerce, Bureau of Economic Analysis, “National Economic Accounts: Gross Domestic Product: Current-dollar and ‘Real’ GDP,” BEA.gov, July 29, 2011.
24 It's fine for Simpson-Bowles, the Gang of Six, and others to show that entitlements need to be cut and taxes increased. The trouble is that these ideas aren't implementable. Until someone shows us how to get from here to there, I can safely consider that no solutions are on the table.
25 Many historians believe that the plucky Greek resistance to the Axis armies changed the course of the war. When the Italians were pushed back by the Greeks, Hitler was forced to divert German troops to help get the job done. Ultimately, this delayed the German invasion of Russia by about a month. A month may not seem like a long time, but when the Russian winter is coming on, it's an eternity. If the Greeks had simply rolled over, and if Hitler had captured Moscow, and if the Axis powers hadn't had to fight a two-front war—well, better not to go there.
26 In his recent book, Boomerang, Michael Lewis refers to Greece as a country in “total moral collapse” (New York: W. W. Norton & Company, 2011).
27 Exports account for almost 50 percent of German GDP, versus less than 30 percent for the United States and most other developed countries. In absolute terms, only China exports more than Germany. For a scathing look at German hypocrisy toward the rest of Europe, see our blog at www.Summitas.com/blogger/gregory-curtis.
28 A third possibility would be for the Western nations to repudiate their debt and start over. I think this is likely to happen at the fringe, but not at the core.
29 In late December 2011, the European Central Bank lent the European banks $638 billion on three-year terms.