Europe's Sacred Cows That Need Slaughtering
Europe, as most know, is in a bad way right now. Europe's problems have been building for years so they are unlikely to be resolved quickly, but more than that they are unlikely to be resolved because the only realistic solution run counter to four of Europe's most cherished sacred cows, or I should say the European elite's sacred cows.
1) The Euro Itself - the common currency has many well documented flaws and it was judged to be unworkable in the long term before it was even initiated. The principal set of flaws obviously are the productivity gap among European nations, the wide range of fiscal behaviors across the continent, and the differences in the economic models of the countries in the zone. It is unclear that the Euro can ever work, even if governments didn't engage in profligate fiscal policy and the banking system was healthy. Which leads us...
2) The Social Democratic Welfare State - there simply is no future for countries that work ever shorter weeks as part of ever shorter careers. The developing world wants to be rich too and they will out-work and out-compete lazy developed countries in time. Productivity is a relentless force, if you are not standing still, you are falling behind. Furthermore, spending enormous sums of money, more money than you have, to subsidize the falling behind will accelerate the process.
3) Champion Banks - European nations protect their leading banks and use them to advance the elite's broader agenda. Everyone knows that banks buy the government bonds that enable the welfare state and support nationalistic industrial policy. If JP Morgan bought Societe General, for example, this game would quickly come to an end, but that is how these banks can mostly painlessly be saved. European banks need capital, and foreign banks could come in with oodles of capital and fix things pretty quick, but Euro elites s can't conceive of ceding control of their banks and couldn't bear the thought of taking orders from New York or London or Beijing.
4) Green Energy - climate change and all the windmill-tilting silliness that has emanated from a belief in it is destroying Europe. First, it's enormously expensive when they desperately need the money and can't afford such frivolity. Second, it makes European economies uncompetitive, which undermines society as a whole. Unless you have an unassailable competitive advantage in something, like say the Germans have which engineering and manufacturing, higher energy costs will drive most of your business away in time.
Maybe one or two of these sacred cows can lumber on and Europe can right itself, but certainly not all. Europe is going to have to slaughter a couple of these if not all of them if it is to recover.
UPDATE: In a move that puts me in mind of Christopher Walken demanding "more cowbell", the EuroGeniuses have just thrown a 130 billion euro slab of Keynesian stimulus over the transom. This is dumb, of course, and will do nothing. So why bother? Merkel has been under pressure to loosen the purse strings on the German taxpayers' wallets and the big meeting in Rome today was a chance for the other three Euro doofuses to gang up on her to that effect. With this paltry concession, which will likely be financed disproportionately by Germany, Merkel can say she's on board and helping when she really probably told MontiRajoyHollande to go suck a bratwurst. The leadership vacuum in problem beset Europe remains, the leadership for Germany remains stalwart.
1) The Euro Itself - the common currency has many well documented flaws and it was judged to be unworkable in the long term before it was even initiated. The principal set of flaws obviously are the productivity gap among European nations, the wide range of fiscal behaviors across the continent, and the differences in the economic models of the countries in the zone. It is unclear that the Euro can ever work, even if governments didn't engage in profligate fiscal policy and the banking system was healthy. Which leads us...
2) The Social Democratic Welfare State - there simply is no future for countries that work ever shorter weeks as part of ever shorter careers. The developing world wants to be rich too and they will out-work and out-compete lazy developed countries in time. Productivity is a relentless force, if you are not standing still, you are falling behind. Furthermore, spending enormous sums of money, more money than you have, to subsidize the falling behind will accelerate the process.
3) Champion Banks - European nations protect their leading banks and use them to advance the elite's broader agenda. Everyone knows that banks buy the government bonds that enable the welfare state and support nationalistic industrial policy. If JP Morgan bought Societe General, for example, this game would quickly come to an end, but that is how these banks can mostly painlessly be saved. European banks need capital, and foreign banks could come in with oodles of capital and fix things pretty quick, but Euro elites s can't conceive of ceding control of their banks and couldn't bear the thought of taking orders from New York or London or Beijing.
4) Green Energy - climate change and all the windmill-tilting silliness that has emanated from a belief in it is destroying Europe. First, it's enormously expensive when they desperately need the money and can't afford such frivolity. Second, it makes European economies uncompetitive, which undermines society as a whole. Unless you have an unassailable competitive advantage in something, like say the Germans have which engineering and manufacturing, higher energy costs will drive most of your business away in time.
Maybe one or two of these sacred cows can lumber on and Europe can right itself, but certainly not all. Europe is going to have to slaughter a couple of these if not all of them if it is to recover.
UPDATE: In a move that puts me in mind of Christopher Walken demanding "more cowbell", the EuroGeniuses have just thrown a 130 billion euro slab of Keynesian stimulus over the transom. This is dumb, of course, and will do nothing. So why bother? Merkel has been under pressure to loosen the purse strings on the German taxpayers' wallets and the big meeting in Rome today was a chance for the other three Euro doofuses to gang up on her to that effect. With this paltry concession, which will likely be financed disproportionately by Germany, Merkel can say she's on board and helping when she really probably told MontiRajoyHollande to go suck a bratwurst. The leadership vacuum in problem beset Europe remains, the leadership for Germany remains stalwart.
posted by Donny Baseball at 4:36 PM
2 Comments:
DB, You really ought to cross post this at SAB when you have a moment.
There's another aspect of Europe's problems that bears watching. Merkel has lost the last two parliamentary special elections. And sooner or later, as with the TEA Party in the US, Europe's more productive taxpayers will start to resent the notion that they are obligated to carry the weight of their more indolent neighbors. And the recent French election results can only add to the German taxpayers' burden.
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