Ebola, ISIS, Ukraine, a stock-market wipeout—there’s nowhere to hide.
History will mark down 2014 as the year predicted 49 years ago by Martha and the Vandellas. In 1965 the group recorded a Motown classic, “Nowhere to Run, Nowhere to Hide.” We’re there, at the brink.
Liberia, ISIS, Ukraine, Hong Kong, a hospital fighting Ebola infections in Dallas, the year’s stock-market gains obliterated, and I almost forgot—just last week Secretary of State John Kerry warned that climate change could end life as we know it.
Then this week the clouds parted and the year’s best news arrived: Led by Europe’s sinking economies, global economic growth is falling, taking stocks and bonds with it, and the world’s central bankers say they have run out of ideas on doing anything about it.
How this is good news requires explanation.
The annual meetings of the International Monetary Fund concluded in Washington last weekend. This gathering of the world’s finance ministers, central bankers and international financial organizations sets the tone for the direction of the world’s economic prospects.
As the meetings ended Sunday, a WSJ.com headline summarized the consensus: “Governments, central bankers have fewer tools left to revive economies after years of sluggish growth.” European officials are now talking about a “lost decade.” The IMF calls the economic policies in the years after the 2008 financial crisis a succession of “serial disappointments.”
Let’s begin with the first and most significant policy disappointment. The central economic event of the past six years, both as policy and symbol, was the Obama administration’s $834 billion stimulus bill in 2009, the American Recovery and Reinvestment Act. Its explicit purpose was to revive the U.S. economy. How was nearly $1 trillion of additional federal spending supposed to do that?