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Opinion: The end of Western capitalism?

Not quite, but both flavors — unfettered American-style and European social democracy — are in trouble.

Over the course of 18 months, many of the cozy economic assumptions of the “post-war world” have unraveled spectacularly. For the second time in two decades, a radical transformation of geopolitical and geo-economic relationships are coursing through the global bloodstream, inducing changes we can’t yet see on the surface and can only make educated guesses about going forward.

Think of the first of these changes: The Cold War’s end brought all the things which were obvious the day the Berlin Wall came down 20 years ago — political freedom, a “peace dividend” and the end to the hair-trigger world of U.S.-Soviet Armageddon. At least as important, however, were the things no one thought of for years: the unleashing of frozen ethnic conflicts in Europe (the Balkans, particularly); an upsurge in proliferation aimed at remaking the old five-member “nuclear club”; and most importantly, the addition of 3 billion new, low-wage workers to the world’s capitalist labor force.

Only now is this last factor showing surface symptoms. The European Union’s ignominious decision to turn to the International Monetary Fund to bail out a member state, Greece, is a canary in the coal mine. It the world we live in today, what multinational firm in its right mind would build a factory in Greece, where the work week is legislated at 35 hours, vacation time equals six weeks, the retirement age is 61 and hiring and firing strictly limited by law — instead of India, Brazil, Vietnam, South Africa, Mexico or China?

It’s not just Greece. The rest of the “PIIGS” — Portugal, Italy, Ireland, (Greece) and Spain — suffer from similar problems, though each case has its own flavor. Indeed, Britain could turn out the be the biggest “pig” in Europe — its government deficit now flirting with 8 percent of GDP, and overall national debt at 59 percent of GDP and rising. (The U.S. figure, by comparison, is 53 percent, and the Congressional Budget Office expects that to reach 100 percent during the coming decade before it starts falling again).

On this side of the Atlantic, meanwhile, sub-economies much larger than the laggard Greek one teeter on the edge. We’re talking here about the “NINCs” — New York, Illinois, New Jersey and, most of all, California, which for reasons not so different than those pushing Greece toward tragedy, have spent themselves into a corner.

Now, profligate states have something this week’s events in the EU proved Europe lacks: a bailout of last resort. Ours is called the Fed, and its literal license to print money means California, in spite of its self-inflicted idiocy, will never really go bankrupt.

But that’s cold comfort for those who, following the collapse of the Berlin Wall, hired themselves out as gurus to what used to the vanquished states of the Soviet bloc and developing nations worried about being left behind. Increasingly, nations in both of those categories — Emerging Markets in the jargon of today — are viewing China’s example, advice and business as preferable.