Global Economy’s Real Problem: Leadership Vacuum

The latest chatter on Wall Street after several weeks of stock sell-offs is that we’re headed for a big slowdown in growth in 2016 and possibly another recession. If the economy does plunge into negative territory, it would cap off the weakest economic recovery in 50 years, at a time when family finances are still not fully recovered from the 2009 crash.

Why is it happening? The Obama administration and the Fed are blaming everything and everyone but themselves for the global economic rut. The problem is said to be China, Japan, low oil prices, snowstorms, a commodities glut and on and on.

Yes, these are all contributing factors to the global malaise. But they are mostly symptoms, not causes, and in any case it’s a cop-out answer because there’s not much that the U.S. can do about any of it — though Barack Obama clings to the delusion that he can change the weather.

What the world is glaringly missing today is stiff-spined and visionary leadership — which of course has to come from America, the hub of the global economy. The freedom movement is screaming out for the kind of take-charge leader seen in Churchill and FDR and Reagan and Thatcher. Today the most forceful leader on the world stage is arguably Vladimir Putin. Ugh.

The greatest contribution that the U.S. can make to the fragile world economy is to steer the world back to the wealth-enhancing power of free markets — and to do so by adopting them ourselves.

Look back to the late 1970s, when the world was similarly unhinged and rudderless, and freedom and free markets were under assault here and abroad. What brought that grim era to a close was the election of Ronald Reagan and his relentless faith in the power of free markets, trade and low tax rates.

His policies not only supercharged the U.S. economy but the world financial system as well.

Reagan and his partner in liberty, England’s Margaret Thatcher, adopted a gutsy agenda of tax cuts, sound money, deregulation, trade liberalization, privatization and, in the case of Britain, a rollback of unfettered and corrupt union power.

They similarly built an unwavering coalition and mighty military force not just to contain but to roll back the Soviet communist menace. Europe, which was dominated by peacenik pacifists, was brought along kicking and screaming, and originally protested the installation of missiles in Euroland.  But Reagan’s steadfastness prevailed, the essence of American power and leadership.

On the economic front, nearly all Ivy League economists, whose statist/Keynesian models had brought the world economy to its knees, assured us that Reaganomics would never work, just as the British press attacked Thatcherism in England as an assault on the working man. The dean of academic economists at the time, Nobel laureate Paul Samuelson, wrote that it would be “a miracle” if the Reagan agenda contained inflation and restored jobs.

The “miracle” did happen, and the U.S. economy soared with a ferocious recovery and expansion.  Britain also rebounded, putting its “working men” back to work. Right on cue, the rest of the world began to follow suit.

Around the world, confiscatory tax rates fell dramatically in the 1980s and 1990s from an average of 70% down closer to 40%. The world began to deregulate in industries including transportation, finance and energy. Welfare states were slowly reined in, and the dignity and payoff from work was at least partly restored.

The dominoes began to fall in spectacular ways as freedom created its own momentum. Communism crashed in China and the Soviet Union.  Trade liberalization and freer markets spread throughout the western hemisphere and then into Asian countries such as India.

The 1980s and ’90s saw more people (1 billion) around the world move out of poverty and into the middle class than at any other time in human history.  Free markets moved more people out of severe deprivation than all of the government antipoverty programs ever invented.

Contrast all of that with the dizzy situation in America and the world today. There is no political leader crusading for free markets, limited government, lower taxes and free trade. On the presidential campaign trail, the two leading Democrats for president are articulating dangerous economic anti-capitalist gibberish.

Hillary Clinton is a colossal disappointment, as every day she lurches to the left (and away from Bill Clinton centrism) to take votes away from her socialist opponent Bernie Sanders — whose whole campaign is simply a rant against the rich, with promises of 70% or 80% tax rates.

Whole segments of the population are feeling so hopelessly beaten down by this miserable economy that Sanders isn’t being laughed out of the gymnasium.

Republicans are all over the map, with some even adopting populist Pat Buchanan rhetoric of shutting down trade and immigration altogether. There’s no “shining city on a hill” imager.  In Congress, the GOP is so dependent on the corporatists at the Chamber of Commerce that they can’t even push Boeing off the federal dole by defunding the Export-Import Bank.

The latest polls show Donald Trump ascendant in large part because Republican voters are understandably furious with the GOP leadership’s trail of broken promises. Exhibit A is the atrocious budget sellout that the party signed with Obama late last year.

At the center of this crisis, of course, is a president who will not or cannot lead and continues to move ambitiously in the opposite direction of free markets on nearly every fiscal and regulatory front.

When he pulled the political leaders of the world together in Paris, his agenda was not to fight the terrorists or stimulate world growth. Instead he made a messianic pitch to the world that everyone must help save the planet from the absolute certainty of climate change Armageddon by shutting down the world’s cheap energy sources.

To China and Russia and the rest, Obama pledged that he’ll be the first to jump off this cliff. Obama reminds me of P.J. O’Rourke’s maxim: “Everyone wants to save the world, but no one wants to wash the dishes.”

Is it any wonder that the rest of the world is flirting with socialism and communistic government command-and-control experiments when America — the beacon of freedom — is meandering down this course? We have evidence only that the Obama-Clinton-Sanders model leads to lower living standards every time, and of course socialist Greece is underwater because it didn’t borrow and spend enough money.

‎Most Wall Street analysts have the global economic story all wrong. Profits are falling and the world growth machine is starting to stall out and even teetering on the verge of another collapse, not because of cheap oil (which is a global production stimulus), but because ‎no one is standing up for growth and free-market capitalism.

We won’t see another 1980s or 1990s bull-market prosperity until America finds a leader who does.