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FT’s Beattie: Ben Bernanke Is The Only Hero of the Financial Crisis

Daniel Gross

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Can't anybody here play this game? That's what New York Mets manager Casey Stengel allegedly said about his epically incompetent team in the early 1960s. In his new e-book, Who's in Charge Here? How Governments Are Failing the World Economy, Alan Beattie, international economy editor at the Financial Times, asks the same question about the world's financial ballplayers. Surveying the wreckage of the last several years, Beattie finds very little competence in the individuals and institutions charged with stewardship of the world's economy.

To his mind, the U.S. Federal Reserve headed up by Chairman Ben Bernanke handled the financial crisis best among the world's central banks, with the Bank of England. In fact he calls Bernanke, who is an expert on The Great Depression, the only hero of the financial crisis. But when he looks around the world, Beattie finds a lot of doctors making the wrong prescription. "The worst offenders are the ones in the U.S. who want to replicate the Great Depression," he says. "Half of Capitol Hill wants to return to hard money, balanced budgets in the middle of a recession, even to the gold standard, which is completely insane."

Meanwhile in Europe, the powers that be — the European Central Bank, the European Union, Germany — have also misdiagnosed the problem. "They think it's all about profligacy," he said. While that was certainly the case with Greece, the problems of Ireland and Spain stemmed from banking crises, not from huge explosions of public debt.

To a large degree, the feeble response is a function of poor institutional design. The International Monetary Fund, which proved effective at helping to put out fires in Southeast Asia in the 1990s, simply isn't big enough to bail out large European economies. And to Beattie's mind, Europe's architecture contains a fatal flow — it's a monetary union without a fiscal union. In the U.S., the federal government effectively redistributes money between wealthy states and states that suffer financial and economic shocks. Europe simply isn't set up to do that. "Germany's idea of fiscal union now appears to be permanent austerity and having permanent controls on budgets," Beattie said.

One of the more intriguing components of this smart, brief take on the world's woes deals with the emerging economies like China, India, and Brazil. The conventional wisdom holds that they have stepped up to fill in for missing investment and demand, and are asserting themselves as leaders. But Beattie argues that they aren't pulling their weight in helping to manage the global economy. Beattie notes that emerging markets compete with one another, and frequently cause trade problems with one another, and don't have a unified view on how to cope with significant issues. "When it really comes down to it, India and China fear one another more than they fear the U.S.," Beattie said. Their ratio of rhetoric to action is extremely high.

Daniel Gross is economics editor at Yahoo! Finance

Follow him on Twitter @grossdm; email him at grossdaniel11@yahoo.com