The Global Temper Tantrum

Fury is spreading. But the mobs ignore the real culprit behind broken economies.

Yiorgos Karahalis / Reuters-Landov

Riot police at a protest against austerity measures in Athens on June 28, 2011.

This is the age of indignation. Politics in the Western world are becoming more emotional—because our problems are so intractable.

Recently a Chilean friend of mine was at a bullfight in Barcelona, where a spectator threw a bottle at one of the picadors. The police duly arrested the bottle thrower. But as he was led away, the crowd began to boo the policemen and to chant “Libertad! Libertad!”

This captures the illogical mood of the moment. Leave aside your feelings about bullfighting, because this could equally well have happened at a tennis match. Throwing a bottle at a participant in a sporting event is a dangerous criminal act. Someone who behaves that way deserves to be arrested. Yet the crowd’s feelings of hostility to the police trumped that rational view. The arrested man became a symbol of oppressed liberty, despite the fact that everyone had witnessed his crime.

“The Indignant”—los Indignados—are now a distinct group in Spain. They are the young people who take to the streets to protest against high unemployment, government spending cuts, and anything else that ticks them off. But this is no longer a purely Spanish phenomenon. The Indignant are everywhere. They were in the streets of Athens, throwing-Molotov cocktails at police while the Greek Parliament debated its latest austerity budget.

On July 1 the Indignant were marching and yelling outside my London office, too. What was this lot indignant about? Yes, cuts once again—to be precise, the British government’s plan to reduce public-sector employees’ pensions and increase their retirement age.

Indignation takes different forms in different places. In Europe it’s directed against cuts in public spending. In the United States it’s directed against tax hikes, which are anathema to the Tea Party.

What all the Indignant have in common is the refusal to address squarely the problem that nearly all Western countries face. That problem is that the welfare systems that evolved in the mid-20th century are unaffordable under the demographic and economic circumstances of the 21st century. The financial crisis has merely exacerbated what was already a severe structural crisis of public finance, boosting deficits while slowing growth.

The scale of the challenge ranges from the really, really hard to the absolutely impossible. According to the Organization for Economic Cooperation and Development, just to stabilize its debt the U.S. government needs to turn its current primary deficit of 7 percent of gross domestic product into a primary surplus of 1.4 percent. That’s roughly double the fiscal squeeze Greece needs to make.

In a rational world, electorates would recognize the need both to reduce entitlements and to increase revenue. But indignation isn’t rational. The Tea Party position is that the deficit should be reduced without any increase in revenue, even the elimination of tax breaks and loopholes that all serious economists now define as “tax expenditures” (because they essentially give revenue away to lucky special interests). At the same time, many Tea Party supporters appear reluctant to accept that cuts would apply to their own entitlements as well as everyone else’s.

Even more self-contradictory is the readiness of young people in Europe to back the interest groups opposed to spending cuts. The recent demonstrations in London were essentially on behalf of teachers relatively close to retirement. “It’s for the future generations that we’re doing this,” claimed one protester, “not just for ourselves. We’re doing it for everybody.” Baloney. It’s the government that has the future generations in mind, not the protesters. The young people who join in such protests are suckers, demonstrating for the right to pay much higher taxes in the future.

Today’s proponents of austerity are like toreadors, fighting the raging bull of debt. I can understand the vested interests throwing bottles at them. It’s the cheers of the Indignant that are bizarre.