The protracted financial and economic crisis discredited first the American model of capitalism, and then the European version. Now it looks as if the Asian approach may take some knocks, too. Coming after the failure of state socialism, does this mean there is no correct way of organising an economy?

Today’s global economy is a riot of slipping economic models- Harold James

In the aftermath of the subprime crisis and the collapse of Lehman Brothers, fingers were pointed at the US as an example of how badly things could go wrong.

Immediately after Lehman Brothers’ collapse, German Finance Minister Peer Steinbrück argued that the problem lay in over-reliance on highly complex financial instruments, propagated by globalised American institutions. Steinbrück’s successor, Wolfgang Schäuble, persisted in the same tone.

But such criticism ignores the problems faced by banks that did not use or deal in complex financial products. Bank regulators had long insisted that the safest possible financial instrument was a bond issued by a rich industrial country. Then came the eurozone’s sovereign debt crisis, with its roots in lax government finance in some (mostly southern European) countries.

Critics now had a new focus. Naturally, many conservative Americans were delighted by the imminent failure of what they saw as Europe’s tax-and-spend model, with its addiction to a costly and inefficient welfare state.

They were not the only critics. The chairman of China Investment Corporation, Jin Liquin, commented on a proposed Chinese bailout of Europe, which he called “a worn-out welfare society” with “outdated” welfare laws that induce dependence and sloth.

Criticism of large European transfer payments may have some justification, say, insofar as French, Greek, and Italian civil servants could indeed retire young. And restrictive labour laws have indeed discouraged many firms from hiring new workers.

The fiscal problems of Greece and Spain were also the result of spending a great deal on high-technology and high-prestige projects: facilities for the Olympic Games, new airport buildings, high-speed train links. And Spain and Ireland before the crisis did not have a fiscal problem, owing to the rapid economic growth produced by a real estate boom that seemed to promise a new era of economic miracles.

One of the most widely-used Chinese terms of recent years is best translated as schadenfreude: somebody else – some other society – tripped on an enormous political banana peel. Asian critics looking at America and Europe could easily convince themselves that the Western model of democratic capitalism was collapsing.

But haven’t similar capital investments and soaring property prices also been an increasingly important part of China’s transformation since the 1990s?

Schadenfreude comes in several flavours. Russia’s prime minister Vladimir Putin and Argentina’s president Christina Kirchner liked to think that their versions of a controlled economy and society built in the aftermath of default on foreign debt offered a more viable alternative to cosmopolitan international capitalism. Both now face major problems with disillusioned populations.

The world’s major economies share many more vulnerabilities than is commonly supposed. A response to global challenges based simply on schadenfreude may promote a short-term sense of well-being, as people often like to think how lucky they are to have escaped a mess that originated elsewhere.

But soon they encounter their own banana peel; indeed, today’s global economy is a riot of slipping economic models. And tomorrow the cacophony will be even louder.

Underpinning comparisons of different models is the wish to find an absolutely secure way of generating wealth and prosperity.

In a market economy, however, competition rapidly leads to emulation, and high profits associated with an original innovation turn out to be transitory.

From a longer-term perspective, there are only temporary surges of relative wealth, just as there are only temporary surges of apparent success in a particular way of doing business.

© Project Syndicate, 2012

Dr James is professor of History and International Affairs at Princeton University and professor of History at the European University Institute, Florence. He is the author of The Creation and Destruction of Value: The Globalisation Cycle.