The present world recession is ﬁve years old and is on course to become the longest in history. The 1930s slump, which lasted 10 years, was ended only by World War II. At present, thank god, there’s no world war in sight. Indeed, there has now been general peace among the great powers for 68 years—something unprecedented and for which we must thank the fear of nuclear weapons.
However, long periods of recession, which tend to be self-perpetuating, are usually ended by war, or by preparations for it. Nazi Germany in the 1930s ended mass unemployment chieﬂy by reintroducing military conscription. Britain’s economy was perked up only by military-related new technology, such as radar and airplane engines. By the early 1940s, World War II had helped pull the US out of the Depression, but Wall Street wouldn’t again reach its pre- 1929-crash levels until 1954.
This time, there won’t be any re-armament to stimulate the world economy, as most major powers are cutting their arms budgets drastically. Nobody really knows how to get things humming again. John Maynard Keynes came closest to it with his vague phrase ‘animal spirits’. A capitalist economy hums when leading businessmen are bubbling with animal spirits and are prepared to sink their money into risky ventures.
Sadly, the world today is a place in which animal spirits are frowned upon. It would be difficult to imagine anywhere less conducive to the concept than Brussels, from which the economies of nearly 30 nations are directed, or misdirected. It is the ﬁrst bureaucratic megalopolis, and its bureaucrats look after themselves generously, having just gobbled up salary raises well in excess of the rate of inﬂation. But these people spend their loot discreetly; otherwise, they wouldn’t last long.
Their latest move is to cap bankers’ bonuses. But the compulsory limits on what people can earn in big business,will lower spirits and make entrepreneurs keep their heads down.In fact, big spenders all over the world, not just in Brussels, are being bullied. The media spot one or two and hugely magnify their iniquity.
Politicians then take up the cries of outrage, and before long, their parties are competing to come up with punitive legislation. Indeed, ‘punish the rich’ is now the chief motivating force in political activity all over the globe. One ﬁnds recent examples of it in Australia, Argentina, South Africa and Chile. In China, big spending, when it peeps through the curtains of censorship, is taken as a sign of corruption. It is rampant in Russia, where it’s identiﬁed with the ‘oligarchs’—though the biggest spenders of all, Vladimir Putin and his family, are protected by state oppression of the media.
Needed: Animal Spirits
Adding to this mournful atmosphere is the current low-quality crop of world leaders. Obama would be a disheartening president even during a superboom, with his grim demeanour and empty rhetoric, as well as his obvious hatred of business bravado. Germany’s Angela Merkel exudes an atmosphere of elderly exhaustion and pooped-out pessimism. Britain’s David Cameron, though by nature exuberant, feels he has to look and sound glum.
And France’s François Hollande seems determined to drive successful businessmen out of the country.
Canada has a good, business-wel- coming prime minister; Australia has an excellent leader of the opposition, who will shortly be running the country; and Hungary has a strongly pro-capitalist regime. But these three countries are, by world standards, on the small side and aren’t capable of changing the economic climate.
The only ﬁgure with the slightest chance of doing this is the splendidly ebullient mayor of London, Boris Johnson. The most gifted and natural British politician since Lloyd George, Johnson may well displace Cameron as leader of the Conservative Party. If he manages that, animal spirits will once again be back in fashion.
Paul Johnson is an eminent British historian and author
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(This story appears in the 03 May, 2013 issue of Forbes India. To visit our Archives, click here.)