The Danger of a Global Double Dip Recession Is Real

The modern world has for centuries been dominated economically, intellectually, and physically by the civilization that arose in Western Europe in the wake of the Renaissance and Reformation and spread across the Atlantic.

Will that one day be seen as a passing phenomenon doomed to ascend ever upward and then slowly fizzle out like a firework?

It is nearly a century since that gloomy German mathematician and philosopher Oswald Spengler published his 1918 classic The Decline of the West. His arguments were complex, but basically he suggested that the future of the West was not as limitless as his peers imagined after the ghastly World War I. His thesis was that civilizations had an underlying trajectory, an organic rise and fall; his metaphor was to compare the stages of this process to the stages of our seasons—but seasons of many centuries. In the 19th century we were, he suggested, in the winter of the West, witnessing the triumph of materialism, socialism, and money and that the era of individualism, liberty, and humanitarianism was nearing its end. (When the Nazis rose to power he seemed vindicated—he was a vehement critic.)

Read today, Spengler's forebodings have an uncanny and chilling association with our present predicaments. He was not saying Western civilization would vanish overnight in a puff of smoke. It would erode more slowly, as did some ancient civilizations—not to vanish forever but with symbols of their power and influence surviving (the Pyramids, the Aztec temples, the Parthenon), with the potential to re-emerge as civilizations many centuries later.

Myopic self-indulgence. Are our current plagues—the riots first in Athens and then in Paris, our global economic crisis manifest in the riots and rampant sovereign debt—merely a symptom of a deeper decay of a civilization in the autumn of its existence? A civilization unable to recognize its own vulnerability? The riots were certainly as much an example of myopic lethal self-indulgence as the sovereign debts in all the leading countries of the West. In France, students took to the streets protesting against a rise of just two years in the age of subsidized retirement—a system destined to bankrupt the state long before they, too, want the comforts that will be impossible to sustain.

Among Spengler's convictions was that money, instead of serving mankind, would betray the Western civilization as it had others—and money in politics and media especially. If he could have seen this election season, he would have been even more downcast! Money is surely the great corrupter of American democracy. Congressmen have to spend more of their time raising money for misleading and defamatory television commercials—and resisting briberies of one kind or another—than they spend studying our predicaments.

The global prosperity of much of the 20th century would seem to belie the pessimists, but I don't think there is much doubt the moral authority of the West has dramatically declined in the face of the financial crisis. It has revealed deep fault lines within Western economies that have spread to the global economy.

The majority of Western governments are running fiscal deficits of 10 percent or more relative to GDP, but it is increasingly clear that there will be no quick fixes, that big government and fiscal deficits will not bring us back to the status quo ante. Indeed, the tidal wave of red ink has meant that the leverage-led or debt-led growth model is dead.

Developed countries will be forced to deal with their debt on every level, from the personal to the corporate to the sovereign. Being able to borrow may have made people feel richer, but having to repay the debt is certainly making them feel poorer, particularly since the unfunded liabilities that many governments face from aging populations will have to be paid for by a shrinking band of workers. (Ecoutez, mes amis!)

Demography is destiny. As a result, there is a burgeoning consensus that we are witnessing an inevitable rise of the East and a decline of the West.