Opinion (F.F. Wiley, Cyniconomics blog): “Wars and political systems are the two most basic determinants of an economy’s long-term path.

“Military spending requires a different evaluation because it succeeds or fails based on whether wars are won or lost…. In any case, military spending isn’t our focus here.

“There are 11 countries in our analysis, chosen according to a rule we’ve used in the past – GDP must be as large as that of the Netherlands. We start in 1816 for four of the 11 (the U.S., U.K., France and Netherlands). Others are added at later dates, depending mostly on data availability.

“Not only has the global, non-defense budget balance dropped to never-before-seen levels, but it’s falling along a trend line that shows no sign of flattening. The trend line spells fiscal disaster. It suggests that we’ve never been in a predicament comparable to today. Essentially, the world’s developed countries are following the same path that’s failed, time and again, in chronically insolvent nations of the developing world.

“In much of the world, the Great Depression triggered a gradual expansion in the role of the state. Public officials failed to establish a sustainable structure for their social safety nets, and got away with this partly by sweeping the true costs of their programs under the carpet.

“Central bankers suppressed normal (and healthy) market mechanisms for forcing responsibility, by slashing interest rates and buying up government debt. Regulators took markets further out of the equation by rewarding private banks for lending to governments, while politicians and central bankers effectively underwrote the private bankers’ risks.

“Monetary policies also encouraged dangerous private credit growth and other financial excesses, resulting in budget-destroying setbacks such as stagflation and banking crises.

“Budget decisions were made without consideration of the inevitability of these setbacks, because economists wielding huge influence over the budgeting process assumed a naïve utopia of endless economic expansion.

“On the bright side, a fiscal disaster should help trigger the needed changes.”

My Comment: Or it can happen by realizing the need for fundamental restructuring of the whole of society—its re-education. And it will lead to the restructuring of the entire life: economic, political, social, family, and so on. In our world, there is no other means of changing our life and avoiding disasters, but transforming the human being himself.
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