On crisis, Europe to US: 'I told you so'
Europeans blame economic mess on US 'anything goes' capitalism as Iceland faces a full meltdown.
The economic image of the United States as a high-rolling tycoon at a Vegas casino, willing to gamble and reap rewards, has always stood in stark contrast to that of the European bean counter.Skip to next paragraph
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Now here in Europe, long a bastion of distrust toward unfettered capitalism, there's a question running underneath the financial crisis: Is the era of "anything goes" free markets over?
French President Nicolas Sarkozy is refuting the infallibility of free markets. Italian Finance Minister Giulio Tremonti is touting his best-selling book, a treatise against globalization. His German counterpart, Peer Steinbrück, points a sharp finger of blame at the United States, telling parliament recently that it is "the source" and "the focus" of the crisis.
"Some in Europe see the financial crisis as a win on points for the Continental financial system against the Anglo-American one," conservative commentator Friedhelm Hengsbach recently wrote in the Süddeutsche Zeitung, a German daily.
These instances of schadenfreude and we-told-you-so have tapered off lately as Europe, seeing many of its own financial institutions fail in the past week, has been unable to hold up its financial systems as better prepared to mitigate an economic meltdown. Iceland, for instance, is at risk of "national bankruptcy," according to Prime Minister Geir H. Haarde.
But they underscore the fundamentally different philosophies of the US and EU toward market economics, and suggest that a deep-rooted disdain for US financial policy is peaking here. They also go some way to explaining how both sides of the Atlantic are responding to the crisis and which direction capitalism might take when financial systems finally recover and rebuild.
The US – and to an extent, Britain – have traditionally favored a hands-off approach to economic policy punctuated by risk-taking, a basic trust in financial institutions, and a preference to react to markets rather than influence them. Continental Europe is more cautious, favoring national regulation and oversight and choosing, philosophically, to side with social welfare and job security over corporate culture.
The difference can be seen in how each is responding to the financial crisis. The US passed a $700 billion bailout fund. European countries have acted to save their own banks, but on an EU level there is little agreement on a similar fund, and debate has centered on the extent to which the bloc should guarantee private bank deposits – with several countries deciding to back them 100 percent.