Given that few people have ever heard of him -- he didn't even have his own Wikipedia page until just a few months ago -- David Beers has a remarkable ability to make the world's most powerful governments and corporations hang on his every word. In August, the division of Standard & Poor's he heads sent shock waves through the global economy by downgrading the United States' sovereign-credit rating from AAA to AA+. Beers, a two-decade veteran of the firm who previously assessed sovereign debt for Salomon Brothers, was quick to deflect charges of partisanship. "It's about the difficulty of all sides in finding a consensus around fiscal-policy choices," he said, putting his finger precisely on the source of Americans' growing frustration with their government. The move sent markets tumbling and prompted angry rebukes from U.S. officials, including President Barack Obama. Beers later targeted Greece, Italy, and Spain with S&P downgrades as well, a move viewed as so damaging that the European Union is considering banning agencies from assessing countries receiving bailouts.
That Beers and his cohorts were taken so seriously may be surprising, given that just three years ago, the credibility of rating agencies was at an all-time low following the collapse of firms like Lehman Brothers and AIG despite their gold-plated ratings. Some will continue to question S&P's credibility -- and the firm didn't do itself any favors by backing up its decision to downgrade U.S. debt with calculations containing a $2 trillion error -- but the firm's overall conclusion that "the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges" seems harder than ever to refute. If it finally forces Washington to address its long-term debt crisis and political dysfunction, Beers will have done the world a great service.
Stimulus or austerity? Instead, focus on supply-side measures to boost economic growth.
America or China? Both. This is not a zero-sum game.
Arab Spring or Arab Winter? Arab Spring, with caveats.
Reading list Against the Flow, by Samuel Brittan; American Sphinx, by Joseph J. Ellis; The Ascent of Money, by Niall Ferguson.
Best idea Successful completion of the Doha round of trade talks.
Worst idea Breaking up the eurozone.
With the eurozone economies crumbling left and right, Germans rightfully take pride in being among the last in Europe who can pay their bills -- and they resent being asked to prop up debt-strapped Mediterranean spendthrifts like Greece, Italy, Portugal, and Spain. Which is why Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble have in effect become Europe's leaders this year; without their cautious but firm action, few doubt the European Union would be even closer to collapse.
Their nearly impossible task: devise an approach that prevents a complete sundering of the union, but also doesn't give a blank check to its most profligate members. Schäuble has played the tough guy in the duo, putting off suggestions to expand the European Union's bailout fund and stressing that Greece would only get a cash infusion after sweeping austerity measures. As he put it, "You can't cure an alcoholic by giving him alcohol."
Merkel, who grew up in East Germany in the shadow of the Berlin Wall and is well acquainted with both the political and economic rewards of reunification, has stressed the reforms that the EU must take on its path toward a more perfect union and held to the idea of the union even as her political popularity has plummeted. She joined with French President Nicolas Sarkozy to call for more economic coordination among the eurozone countries and proposed that each nation pass a balanced-budget amendment. "There is no alternative to a global framework for a globalized economy," she told a joint session of the U.S. Congress. "This is a second wall that has to fall: a wall standing in the way of a truly global economic order."
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