There is a parallel between the subprime loans crisis and the western nations’ public debt crisis. First a huge dose of “who cares: someone else will pay for my mistakes” approach. Second ignorance and lack of clarity of how many peripheral, individually insignificant decision impact the system. Third, lack of leadership, which manifested itself in two very different ways. I park for brevity the story about the subprime crisis. In the public debt crisis the leaders of subprime nations mismanaged and ransacked the public finances for decades to ultimately please the electorate (and get reelected). Leaders who drove a bit more restraint did not get elected (in Italy the left). The more the electorate is immature the more the restraint will be enforced by fear and force, just before the patient goes down. Unfortunately the price to pay in this way is much higher. Instead of a bit of initially annoying preventive medicine mismanaged nations now get chemotherapy. I am afraid that given an immature electorate and political class this is the unavoidable result. The problem is the ignorance of the electorate. Even if a politician would say and do the right things, it would be easily beaten by demagogues and populists. The perfect example is Berlusconi in Italy. Another bad example is unfortunately the USA, and this is bad news for the whole world. A fairly good example is Germany. Ten percent of a competent electorate is not enough in a democracy. To educate a nation could take 25 years… Going away from democracy is a cure far worse than the solution. Democracy is an insurance against the worse excesses, but is not a guarantee for good management, actually it seems to be a guarantee for mediocrity. What is necessary is a political innovation, a paradigm shift to set free the infinite creativity and energy of the people.
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