The latest round of euro-jitters emphasizes the unimaginative contest between the advocates of austerity and the quantitative easers. But while the consequences of the application of alternative economic measures are often unpredictable, the wellsprings of economic woes are not usually hard to find. In the present problems, the same difficulties afflict Europe and the United States, though in different degrees. It is entirely inappropriate for the U.S. government, with its unspeakable extravagance and anemic and fragile recovery, to lecture Europe or anyone, except perhaps Zimbabwe and Argentina, about national economic management.
The entire welfare system of the West was established in the ambition of avoiding another economic disaster on the scale of the Thirties, with the resulting political instability and the (unspoken but vivid) consequent fear of the rise of political extremism and the outbreak of international conflict. Europe, particularly, has a very long and terrifying history of mob rule when placebos aren’t regularly distributed to the working and agrarian classes, and the largest Western continental European countries — Germany, France, Italy, Spain, and Poland — all have bloodcurdling heritages of internecine strife in living memory and for many centuries before that, “forever and ever,” in the words of the Christian liturgy.
The levels of social safety, ranging from a somewhat threadbare net in parts of the United States to a luxuriously upholstered hammock in France and parts of Scandinavia, were set when assumptions of birth rates and life expectancy were much different from the facts today. The sharp decline of the birth rate and heartening increase in life expectancy in all of these countries have ensured that, even without the increases in benefits against the electoral temptations of which our political classes have been resistless, all Western countries will go bankrupt without course corrections.
All human nature’s less commendable impulses seem to be accentuated and more frequently encountered in our politicians, perhaps inevitably when they depend on the endorsement of a plurality, and in this long-impending crisis we have seen all the obvious evasions of what is essentially a budgetary problem formulated in the terms of Grade Five arithmetic. First, there was the pretense that it wasn’t happening, and that the figures would reverse. How they would reverse, short of engaging in widespread, drumhead euthanasia, was never clear, and it didn’t happen. Then there was the expedient of immigration, which led to the Islamic threat in Europe and the abrasions of tens of millions of undocumented Latin Americans in the United States (a problem aggravated by inexplicable decisions to make the U.S. less accessible to its most assimilable, traditional, and objectively desirable sources of immigration, especially Europe).
Then, denial returned, and the problem was ignored and obscured by the perilous joys of inflation; debt and debt service grew and grew, the unmentioned, steroid-bloated monster in the room. Now, even U.S. student loans are a trillion dollars. Finally, in Europe, Eurofederalism and the common currency enabled the most fiscally weakened countries — Greece, Italy, Spain, and Portugal, which between them had not had a hard currency since Plato’s tetradrachma — to pile into the Euro on false prospectuses of the value of their assets and underlying currency strength. This was the providential exploitation of German chancellor Helmut Kohl’s desire for a “European Germany and not a German Europe.” He wanted Germany in a cocoon of friendly and grateful allied neighbors and to that end was prepared to have the Federal Republic’s pocket picked, starting by the impecunious East Germans, coming off 60 years of Nazi and Communist misrule.
Kohl’s successor, Gerhard Schroeder, slippery political opportunist though he often was (and he is now well-paid by Vladimir Putin’s nefarious regime), acted with great foresight and even courage by introducing drastic labor-market flexibility, incentivizing investments, and simplifying taxation. The result was the reduction of German unemployment from 10 to 5.5 percent. When it is impossible to lay people off, no one is hired. But while Germany was taking prudent measures in prosperous times, like the clever little pig building a brick house, the Europhoria of union caused European financial markets to succumb to the equivalent of Bovine Spongiform Encephalopathy (mad-cow disease), and for almost a decade accorded the same yield to Euro-denominated bonds, whether the issuing country is Greece or Germany.