Lists & Rankings

Winners & Losers 2011: Solutions for the global crisis

Ideas trying to change the economic world.


Economist, Nobel Laureate and New York Times columnist Dr. Paul Krugman (Photo: Wally Trenholm)


The fix: Impose a tax on all financial transactions
Proponent: Nicolas Sarkozy, president of France
Bad idea: A revenue generator, sure, and French banks, the lead lenders to Greece, should take some responsibility for extending credit in the first place. But how will it get money flowing again?


The fix: Germany guarantees debt of struggling EU members in return for control of a tighter monetary union; U.S. guarantees household mortgages in return for a share of future price appreciation
Proponent: Kenneth Rogoff, Harvard University economist
Good idea: The world’s savers are bound to be penalized for misallocating their capital. This looks like an inevitability more than a prescription


The fix: Abolish the U.S. Federal Reserve, leaving interest rates up to the market
Proponent: Ron Paul, Republican presidential candidate, Texas congressman
Bad idea: Founding father James Madison, the original opponent of a central bank, changed his mind by the time he became president. A free America, he decided, needs the tools to quickly raise money to equip an army


The fix: Two new surtaxes, one on people with incomes above US$1 million a year, and a higher levy on those earning US$10 million or more
Proponent: Warren Buffett, chairman of Berkshire Hathaway, world’s third-richest man
Bad idea: Would generate at most $200 billion a year—and probably more like $50 billion once the target group’s accountants figure it out—far short of America’s $1.4-trillion deficit


The fix: Troubled countries like Italy and Greece must quit the euro and issue their own currencies, allowing them to become competitive and grow again
Proponents: Economists Nouriel Roubini and Nobel laureate Paul Krugman
Good idea: This is how most other sovereign defaults were resolved. But painfully: imagine paying back euro-denominated debts with lira and drachmas


The fix: Make the European Central Bank the lender of last resort to insolvent eurozone members, buying their bonds with newly minted money
Proponents: Non-German governors of the ECB
Bad idea: Effective in the short term, but hugely destabilizing to trade and investment flows. And there’s little likelihood profligate countries will start living within their means. Besides, Germans, still haunted by memories of hyperinflation, won’t allow it


The fix: Create a “central world bank” to regulate the flow of international monetary exchanges
Proponent: Pontifical Council for Justice and Peace, a Vatican think-tank
Bad idea: The European crisis shows the perils of greater integration among supposedly sovereign states