Monday, June 18, 2012

Paul Krugman on the Greek Myths


Paul Krugman had a good article in Sunday’s New York Times in which he bursts the bubble of the austerity brigade by exposing some of the widely-circulated myths about Greece’s current crisis. 

To wit, Greeks don’t live the decadent, labour-free lives that hyperventilating commentators spin out of decades-old caricatures of southern Europeans: “[the Greeks] work longer hours than almost anyone else in Europe, and much longer hours than the Germans”, whose gimlet-eyed Chancellor, Angela Merkel, has become the embodiment of the austerity doctrine.  Moreover, Greece does not have “a runaway welfare state, as conservatives like to claim; social expenditure as a percentage of GDP, the standard measure of the size of the welfare state, is substantially lower in Greece than in, say, Sweden or Germany, countries that have so far weathered the European crisis pretty well”. 

Krugman argues, persuasively, that Greece’s crisis was brought on by the poor management of the Euro, and the eagerness of investors of all stripes in northern Europe to manipulate the country’s government debts, encouraging the very deficit spending against which they now inveigh from Brussels and Berlin. 

Europe’s powerful nations, primarily Germany and France, took the decision to export the risks associated with the rather mangled half-way house that is the existing Eurozone.  Krugman castigates the leaders of those nations for exacerbating the problem “by substituting moralizing for analysis”.  It’s all the worse because if they took their own little morality play seriously, they’d be the chief villains.

The current cry of those who are looking for a fairer and more rational answer to Europe’s conundrum than a punishingly, ideologically-driven austerity state, is realignment: to erect a fiscal union alongside the monetary union.  In theory, that makes sense: Europe probably needs to go the ‘whole hog’ if it wants to save the Euro.  Krugman echoes this argument, drawing the comparison between U.S. states which can rely on what are effectively spectacularly-sized bailouts from the central government in times of trouble, and individual European countries, which still lack a strong, unifying force capable of directing economic policy at the heart of the EU.

But what’s worrying about the drive to invest greater powers in existing or theoretical organs of the European Union is the distance of those organs from the people they purport to represent.  The cynic in me suspects that the EU has become far too much of an abstraction, and that its institutions are prohibitively rooted in solicitude for particular economic doctrines and deplorably removed from both the concerns and wishes of European citizens.

Localism is about more than parochialism of vision.  It is about—at least if we continue to prize the notions of democracy and accountability—functionality.  The EU in its current form is an unwieldy, undemocratic, and technocratic assemblage which is failing its people.  As a model for a functional democracy, it leaves much indeed to be desired.  And its leaders need to get a lot more serious about evaluating the viability and form of the European project if it’s going to go anywhere.

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