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Economy
In reply to the discussion: Weekend Economists Make War on Charlie Wilson August 22-24, 2014 [View all]xchrom
(108,903 posts)52. Whatever the Question, Americans Think Economic Pressure Is the Answer
http://go.bloomberg.com/market-now/2014/08/21/whatever-the-question-americans-think-economic-pressure-answer/
For two decades Its the economy, stupid, has been the short-form gospel of American politics. The economy is what the public cares about, the thinking goes, so no smart politician is ever going to do anything that damages the economy.
Whether or not this is true in American politics, this four-word philosophy doesnt export well. Its given Americans a persistently optimistic idea of the powers of economic pressure. Whatever the issue at stake, Americans tend to think that other countries will follow the U.S. model and act in their economic self-interest.
The difficulty comes when the public in those countries is convinced that a higher value is at stake. Thats whats going on now in both the Argentine debt crisis and the Russian standoff over Ukraines separatist movement. In the first, investors have assumed that if not paying off bondholders is painful enough for Argentina, then Cristina Kirchners government is bound to come to some kind of accommodation. In the second, U.S. policy makers assume that if they can cause enough pain to the Russian financial system, Vladimir Putin will decide that backing the separatist movement is just not worth it.
Unfortunately, in both crises foreign leaders have made standing up to economic pressure a point of national pride. Whether or not thats fair and the situations are absolutely not equivalent otherwise they have their respective populaces in their corner. In Argentina, the assumption that economic pressure will force a solution is already costing some bondholders dearly.
For two decades Its the economy, stupid, has been the short-form gospel of American politics. The economy is what the public cares about, the thinking goes, so no smart politician is ever going to do anything that damages the economy.
Whether or not this is true in American politics, this four-word philosophy doesnt export well. Its given Americans a persistently optimistic idea of the powers of economic pressure. Whatever the issue at stake, Americans tend to think that other countries will follow the U.S. model and act in their economic self-interest.
The difficulty comes when the public in those countries is convinced that a higher value is at stake. Thats whats going on now in both the Argentine debt crisis and the Russian standoff over Ukraines separatist movement. In the first, investors have assumed that if not paying off bondholders is painful enough for Argentina, then Cristina Kirchners government is bound to come to some kind of accommodation. In the second, U.S. policy makers assume that if they can cause enough pain to the Russian financial system, Vladimir Putin will decide that backing the separatist movement is just not worth it.
Unfortunately, in both crises foreign leaders have made standing up to economic pressure a point of national pride. Whether or not thats fair and the situations are absolutely not equivalent otherwise they have their respective populaces in their corner. In Argentina, the assumption that economic pressure will force a solution is already costing some bondholders dearly.
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