After decades of folly, the chickens are coming home to roost. A society can create safety nets for some groups within it, but a society as a whole has no safety net. The problem for the “rich world” of course, is we passed the point of no return. We are all on welfare: lower classes, middle classes, bankers, car companies, “green companies”, refugees, even foreigners that get welfare from us through foreign aid.
Japan and Europe face very different crises – one brought on by nature, the other man-made. But from a financial perspective, they are strikingly similar. In both cases, the mounting costs of mitigating disaster are stretching governments’ already overburdened finances. In Japan, the advanced world’s most-indebted government, the outcome is still uncertain. In Europe, Portugal could soon become the latest country to seek a bailout.
The strains in Tokyo and Lisbon reflect a broader problem: As advanced-nation governments take on increasing responsibility for insulating their citizens, investors, banks and companies from the pain of disasters, they are pushing their financial resources closer to the limit. That, some economists say, could leave them without enough wherewithal to respond the next time a big crisis happens.