Inadequate economic policies of the West after 1989: Banking crisis, a globalization deficit and disintegration pressures

Abstract

The socialist economic systems in the countries of Eastern Europe and the Soviet Union collapsed in the late 1980s, whereby the Eastern European EU accession countries later started an economic catching-up process. After 1991, however, the West in part did not draw any reasonable conclusions from the incipient system transformation and entered a phase of low political self-discipline on the part of some Western governments or an expansion of populism – explainable with reference to Harry G. Johnson approaches and identity economics. The transatlantic banking crisis resulted from excessive banking deregulation in the US and UK, which in fact also led the countries of the Eurozone to deregulate banks and which could be repeated in the foreseeable future; also as a consequence of BREXIT. Digitalization lacks an adequate regulatory framework. The absence of such a framework has led to a kind of digital socialism – with negative consequences for efficiency in the market economy and for democracy. With populism in the UK, structural US populism – including anti-multilateralism – and anti-liberalism in parts of the EU27, the West is presumably facing a phase of decline and the EU, in particular, a phase of political tension; a meaningful reform agenda would be an opportunity for the stabilization of the EU, but is partly blocked, while at the same time premature communitarization, for example in the area of deposit insurance, is threatening cohesion. If multilateralism breaks down, this would create a vacuum in the international order that, from a European point of view, could be countered pre-emptively.