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Desperately Looking for Leadership

André Pratte | September 23, 2011
World Bank President Robert Zoellick (R) gestures next to France's Finance Minister Christine Lagarde after a signing ceremony for France's contribution to the Clean Technology Fund at the World Bank headquarters building in Washington October 8, 2010. REUTERS/Yuri Gripas (UNITED STATES - Tags: POLITICS BUSINESS)

As the world is on the verge of a second economic crisis in fewer than five years, western political leaders seem unable to act in as unified and determined way as they did in 2008 and 2009. All are very good at lecturing others, specially at the Europeans (as John and Jennifer have mentioned in earlier posts).

I could not believe my eyes when I read that US Treasury Secretary, Timothy Geithner, would press the EU to do more to solve its sovereign debt crisis. Then on Thursday, our own Finance Minister Jim Flaherty said Europe needed to do more: “Certainly, in Europe, we need an exercise in political will, we need decisiveness, we need clarity.” Who are we to provide advice on political courage?

It  is easy to criticize European leaders for not being decisive enough. Yet we should recognize that most are, locally, in a very difficult political situation. Chancellor Angela Merkel, for instance, has seen her grip on power considerably weakened as Germans get ever angrier about footing the bill for the continent’s less disciplined nations. On the opposite side of the bill, it is difficult to imagine what more Greece’s PM George Papandreou could do to satisfy the country’s creditors.

Managers and consumers desperately need to be reassured. “We need a conductor,” said the head of an investment firm quoted by the Globe and Mail. “If we don’t get that conductor, it is going to be a very messy orchestra.” Of course. But who could it be?

Herself calling for strong, collective action, IMF Managing Director Christine Lagarde added a note of realism: “There is obviously a gap between very solid, very strong governmental commitments at the highest level and the implementation time. That’s inherent to parliamentary life … we are no longer in Napoleonic times when a leader could just snap his fingers and make it happen. We are in democracies and it takes time.”

So the kind of leadership the world needs is not only one that will convince fellow heads of government to act but also that will persuade the citizens of each country to support the measures necessary to avoid the precipice.

In the US, not only is the economic situation dire but the political gridlock renders any government action impossible. President Obama may look like a great conductor but half the orchestra is looking the other way. As Mr. Geithner recognized after his first unfortunate intervention in Europe, the Americans “are not in a particularly strong position to provide advice» to other countries about political will.” Who knows how high the unemployment rate will be before the November 2012 elections free Washington.

As far as Europe is concerned, most experts believe that in the longer term, the common currency will survive only if the member countries agree to a closer coordination of their fiscal policies. European Central Bank’s President, Jean-Claude Trichet, has even called for a European Finance Minister.  But such changes would need popular approval through referendums; in the current context, such a result is highly improbable.

So yes, extraordinary political leadership is desperately needed in these troubled times. But what if the world has become so complex and are democracies too weak (cynical politicians, embittered citizens) that finding and implementing solutions is beyond our capabilities?

Photo courtesy of Reuters.

  • Anonymous

    Andre,

    I am puzzled by your criticism of Geithner’s and Flaherty’s comments that Europe do more. It makes sense to me to remind EU policymakers that inaction could be catastrophic not only for Europe but also for a fragile world economy, despite the political difficulties that they face.

    The fear is that if the EU sovereign debt crisis escalates, and their banks begin to implode and face a “Lehman moment”, they will not be able to act and the situation will continue to deteriorate rapidly. Despite Washington’s dysfunctional politics, the US is able to act decisively when it has to, for example after the Lehman bankruptcy in 2008. The nightmare scenario for the world economy is the EU facing a similar situation and not being able to act quickly enough to keep the situation from escalating further.

    So, any encouragement/pressure toward EU policymakers to do what they know they should do, but find politically very difficult, is good in my view.