One of the reasons that Paul Krugman is a hero of mine is that he has the guts to look unpleasant facts in the face:
…The Europeans have shown us that peace and unity can be brought to a region with a history of violence, and in the process they have created perhaps the most decent societies in human history, combining democracy and human rights with a level of individual economic security that America comes nowhere close to matching. These achievements are now in the process of being tarnished, as the European dream turns into a nightmare for all too many people. How did that happen?
The linked article is a caution and corrective to the binary thinking that afflicts both Left and Right nowadays.
It’s all in the nuances…
Please share widely!
I’d like to make a couple of observations about Krugman’s analysis:
1) The Baltic countries would probably even give up 1/2 of their wage/benefit system to get into the euro zone. It
may be a shock to many Americans, but the fact is that after WWII the Baltic nations considered that they had suffered much more under communist Russia than under Nazi Germany. Places like Moldavia, Poland, Bulgaria and western Ukraine are probably not far behind in their dislike of what passed as Russian victory in WWII.
My conclusion here: Eastern Europe will support the Euro 100% come hell or high water.
2)Krugman never looks at the influences of China and Russian economies on the Euro. In fact, I often think of the Philips company which makes tv sets and electronic gadgets: a Dutch company, the GE of Europe if you wish, will never be able to compete with the Chinese; they continue to lose market share around the world. The question which Krugman never directly addresses is this: can European companies which have wonderful benefits and saftey nets compete in the world market against China and Russia, where the oligarchic governments don’t care squat about the living standards of their workers? My conclusion: don’t put your 401K money into European funds, growth or otherwise.
…who can’t fathom prefering Nazi Germany to Soviet Russia in most cases. The former commits atrocities against people while the latter simply doesn’t know how to manage an economy. (Though if Stalin is the example of Soviet leadership it’s a bit more understandable; I’ve always thought of him as the communist dictator who ruled more like a fascist.)
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p>Europe’s going through a rough patch to be sure, but it still sounds like a single currency has more pros than cons, especially in the long run. Our monetary system was a mess under the Articles with each state issuing its own currency.
Siberia simply for being suspected Nazi sypathizers you might have a different perspective. You would be surprised by the number of people in the Baltic and Eastern Europe who have never forgotten the communist atrocities. Our history courses, especially those in the public schools, omit the sheer terror imposed by communism in Eastern Europe. Trust me, the word “kolyma” is a word that has as much of an emotional impact in Eastern Europe and the Baltic today as “Auschwitz” has for survivors and families from the Holocaust.
were still being sent to gulags until the fall of 1988 when Gorbochyov finally put an end to that practice. Neither Stalin nor Hitler acted in a vacuum-each had hundreds of thousands of willing cohorts.
But back to economics: Georgia has let it be known that it wants very much to join the euro zone, too. Ironically, it will probably be Germany which will save the euro by taking charge of debt repayment and setting tough, new standards for government spending.
…that because of my age my image of the USSR is primarily of Gorbachev’s USSR. I should be clear I am absolutely not defending the Soviet regime before then. Just that all things being equal if I had to choose between a Communist and a Nazi regime I’d choose the former; obvious neither is ideal by any stretch. At least I can make communism look good on paper; can’t say the same for Nazism.
better off in Nazi Germany. You might not want to be associated with anti-semites, but at least you’d have a quality of life.
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p>Stalin killed between 1 and 2 million people in the Purges, but an estimated 3-7 million starved to death during the collectivization of farming. Of course, Stalin killed his fair share of Jews as well. The Soviet Union was never a friend to Jews for an extended period of time.
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p>As many as 45 million people may have died during Mao’s Great Famine. That was in the late 50s and early 60s.
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p>As you may know, and Edgar can surely tell you, the Armenians were also victims of genocide in Turkey, which, incidentally, still denies its attempt at ethnic cleansing. Turkey treats Armenia like crap: what’s being called the Iron Silk Road will stretch from Baku, Azerbijan to Tblisi, Georgia to Kars, Turkey, intentionally skirting Armenia.
Edgar, you made two points I’d like to address:
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p>The first point – that fear of Russia in its pre-Communist, Soviet, and Putinesque iterations is a factor in Eastern and Central European politics – is true in isolation. The issue is not, however, World War II-redux, but access to a common market which promises upward national economic mobility for ex-Warsaw Pact populations.
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p>Your point about Phillips is true, but it illustrates a narrow datum limited to that company, and not at all germane to Europe’s economic engine. The German economy is based upon export-driven, value-added manufacturing. Its politics are based upon shifting balances of economic liberalism and civic (not social) conservatism that the US abandoned circa 1966. Germany, given that manufacturing base, is not economically threatened by China; the same isn’t true for Europe as a whole.
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p>I use “liberal” and “conservative” in the sense of “reform” versus “preservation”, which presumes an overlap of core values between contending political forces.
costs outweigh the benefits of adopting the euro.
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p>He sees some benefits, but believes being relinquishing control of your country’s currency gives up monetary policy. I don’t know what Milton Friedman said on the subject, if anything, but I have to think he’d agree with Krugman on this one.
As Krugman alluded, the Euro project took off as a fantasy of a cabal of fiscal ministers who dragged along oft-inattentive political minders, much the same way that finances were de-regulated in this country. Despite failures in currency unions in the past — in the Caribbean, say — they were insistent. This project was never really aired out or threshed out. It just sort of happened behind closed doors and in soft-voiced meetings alongside conferences. One major deficit is that no European population voted on accepting the Euro. There have been very few referendums on any stage of the European process, and when the citizenry says no (as Ireland did recently), they are effectively badgered, even threatened, until they change their mind.
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p>Secondly, another thing I’m surprised Krugman didn’t mention is that the EU has penalties for wayward members, but never applies them. Almost no country consistently met the standards to join the Euro (not even Germany), but aside for vigorous tut-tutting, there was no penalty. There was a clear moral hazard created — there was going to be no downside to spending profligately, because you were never going to be kicked out.
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p>A currency featuring fictional buildings and monuments where one group of people pays the bills and another make the purchases, knitting together all manner of economies without the fiscal tools to make it work…it’s a wonder it’s held up as well as it has.
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p>Finally, one last point — Krugman mentions Argentina, but never completes the story. Argentina’s economy is in excellent shape right now (one can’t quite say the same as their democracy). Why? They defaulted massively on their national debt, told the IMF to take a hike, and listened to their own experts, rather than the international bureaucrats who basically represented the multinational banks.
American Conservatives, pledging their allegiance to American Exceptionalism, want to make the USA the unEurope. Weak unions. The welfare state replaced by charity. They like to base points on how badly off Europe is. If the problems of Ireland, Spain, Greece, and Portugal can be ascribed to failures of liberal policy, then, bingo, conservatives have been right all along and we can all go home.
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p>But if those problems have other origins, like a wrong turn on currency and the irresponsibility of Greece’s right-wing government, then maybe we don’t have to go home. Conservatives are misconstruing the evidence.