Who’s for it, and who’s against it.
Spain, Poland, Austria, and Belgium are backing the concept, France, UK, Germany and the Netherlands are against.
It seems that the more up-and-coming, politically and economically unstable ones are looking to the the EU for more centralized (and with luck, fair) power partitioning. Poland is still waiting on the doorsteps of the inner circle Europe, so you take good will where you can get it? Austria’s still awaiting the verdict on its eastern European investments, Spain struggling with higher unemployment and general economic ruin, Belgium barely able to keep the country together.
Bigger states like France and Germany want to retain more sovereignty, and it would look both politically untenable and silly to hand over more power when both believe they control the institution anyway. In the UK and Netherlands, the shift to the right has a distinct and not at all unsurprising anti-EU slant to it.
The nineteenth-century German politician Otto von Bismarck was hardly anyone’s idea of a nanny, but he constructed the world’s first nanny state for the sole purpose of making German citizens so codependent on the German Reich that they would never think of rebelling against it. By offering Germans a prototype of the modern welfare state, Bismarck’s goal was not improving the common man’s lot—it was his way of inducing the common man, when faced with personal difficulties, to expect the state to look after him, instead of relying on himself to deal with his own problems.
Ironically, Bismarck launched the first welfare state because he feared the influence of Karl Marx on the German working class. Marx opposed the welfare state precisely because he recognized that it would create a population codependent on the ruling elite in charge of the German Reich. It would tend to make them more docile and helpless, less self-reliant and rebellious. Today’s European socialists, along with America’s welfare statists, are not the descendants of Marx; they are the great-grandchildren of Bismarck.
A rather cynical take on the social psychology behind the construction of a welfare state nowadays.
But as paranoid as some Libertarians may sound, there exist throngs of well-meaning politicians and policy-makers with intentions to improve the general well-being of citizens, but inevitably cultivate a culture of dependence and co-dependence. The spirit of independence might be the de facto norm in many lands, but the zeal to defend it is hardly universal.
Germany is likely the only country in the world where Ricardian equivalence — the theory that the government cannot stimulate private consumption by cutting taxes because rational actors know that taxes will eventually have to rise again and therefore put aside savings — actually holds true.
As for reasons behind Germany’s obsession with savings? Other than the demographic pressures and a cultural of frugality?
History plays a role:
Whereas the Anglo-Saxon world is characterized by what one could call pragmatic optimism, Germans instinctively think about the long term, and they aren’t disposed toward cheerfulness. Whereas America’s recent history teaches hope, Germans see in their history the need to be cautious: In the last 100 years, Germans have experienced two currency reforms and the rise and demise of three regimes.
A distinctly German view on economic activity and the role of trade:
It’s an economic model that traces back to the beginning of the postwar period, when booming exports were the backbone of the Wirtschaftswunder, or economic miracle — the period of strong growth in the 1950s that transformed the destroyed country into a major world economic power. When Germans saw Volkswagens on roads all over the world, it wasn’t only a source of income, but proof that the country was once again an accepted member of the international community. Add Germany’s traditional obsession with engineering and its distaste for the service sector, and it may become clearer why the country is prone to mercantilism.
How government sees its place in macro-economic policy-making:
Germany simply does not have a tradition of macroeconomic policy, at least not in the American sense of managing aggregate demand. Contemporary German economics has its roots in Ordnungspolitik, a unique school of thought that emerged in the 1940s and for which there is no English translation. Ordnungspolitik accepts that government intervention is necessary for the economy to function properly, but the role it assigns to the state is fundamentally different than in the Anglo-Saxon tradition. Whereas most American macroeconomists believe in discretionary intervention in the way of countercyclical monetary and fiscal policy, German economists encourage the government to only alter the framework within which economic agents interact. Read more...
businessweek.com- Many Greeks view the state with a combination of a sense of entitlement, mistrust, and dislike similar to that of teenagers vis-à-vis their parents. …
US Federal Reserve- “It is not the wolf at the door but the termites in the walls that require attention. The sooner the house’s structure is strengthened, the better.” …
FT- It is time to recognise that Greece is not just suffering from a liquidity crisis; it is facing an insolvency crisis too. …
blogs.ft.com- The eurozone’s most vulnerable economies are getting little benefit from the euro’s fall because they are too inflexible and uncompetitive. …
standpointmag.co.uk- The least bad option would be for the German bloc to leave EMU. Germany’s banks might still have to be recapitalised, but it would be less costly than trying to “rescue” Greece. …
The Economist- Rich countries with their greying populations should be saving whereas younger, fast-growing developing countries should be borrowing heavily. But in fact it is the other way round. …
NY Times- Austrian banks slowly recover from a sharp economic downturn and tries to pay down a pile of private-sector debt. …
marketwatch.com- We’re still living in a fantasyland. Most people have no idea what’s really going on in the economy. …
WSJ- Hayek understood that the opposite of top-down collectivism was not selfishness and egotism. A free modern society is all about cooperation. …
Newsweek- We may be reaching the limits of economics. The disconnect between theory and reality seems ominous. …
newyorker.com- Financial illiteracy isn’t new, but the consequences have become more severe, because people now have to take so much responsibility for their financial lives. …
cjr.org- Rolling Stone made a virtue of the fact that it is not wedded to the news cycle in order to produce journalism that helped drive it. …
seedmagazine.com- No animal spends more of its allotted time on earth fussing over sex than homo sapiens. …
Business
China needs a service-sector revolution
project-syndicate.org- Employing workers in sectors where their productivity is stagnant would not be a recipe for social stability. …
Environmentalists as battered spouses
american.com- Greens keep returning to their abuser after another promise to do good, but nothing in President Obama’s oil spill speech should offer them any hope that the administration is really going to change. …
Flight of the desktops
slate.com- The shift to portable machines fits larger social trends. More Laptops, netbooks, and tablets fit into the new lifestyle. Desktop don’t. …
Pleated pants watch: Don’t you want to be “clean”?
slate.com- Marketing men’s fashion is tricky because, for the majority of male clothes-wearers, the goal is to convince them that it is not fashion. …
BOOM: Big issues
gq.com- Lost in the catastrophic aftermath of the Gulf of Mexico oil spill is the gripping tale of the rig workers and the Coast Guard crewmen who rescued them. …
Finance & Economics
Germany’s super competitiveness
VoxEU.org- German wage restraint has led to a real depreciation of Germany’s fixed nominal exchange rate vis-à-vis its Eurozone members, helping Germany to win market shares at the expense of Southern Europe. …
On the lessons to be learned from the elimination of the Canadian federal deficit in the 1990s
worthwhile.typepad.com- If you’re going to count on exports to sustain aggregate demand while your government cuts back, you have to figure out which foreign economy is supposed to absorb all that extra production. …
Why it’s different this time for housing
online.barrons.com- For the economy as a whole, and housing in particular, restraint in borrowing will keep housing well below past cycles, no matter the level of interest rates or house prices. …
Gartman: Gold is good but Euro is doomed
Credit Write Downs- With the euro crisis and European credit easing, people have awoken to the fact that the euro is also a fiat currency and that the Europeans may be willing to depreciate the value of their currency as well. …
On your Marx
nplusonemag.com- It would add a nice dialectical twist to the future history of our period if it could be said that, around the time the post-Maoist Chinese took up shopping, the post-bubble Americans turned to studying Marx. …
Alan Greenspan v. Paul Krugman
Capital Gains and Games- The fiscal debate has become so polarized that combatants on both sides are glossing over what they don’t know. … Read more...
Let’s tally up all the ways Europe is reversing gains made by decades of painful integration efforts:
- Germany’s North Rhine-Westphalia election clearly put German interests in front of European ones, and its vehement resentment towards Greek bail-out signals the country wants to come out of its WWII political backroom and function as a normal country.
- The Dutch electorate had a clear preference for more right-winged talk this time around. Two of the three top parties ran on platforms that 1) railed against the EU bureaucracy, 2) railed against (real or imagined) Islamic threats in the country.
- Belgians took it one step further than anyone else. Previously the golden child that saw itself the trailblazer in multiculturalism, the original mini-EU is now tearing itself apart at the seam. The Flemish party which ran on a separatist platform won the election. Although rumours have it that De Wever might very well let the Francophone Socialists run the country for a while, just so they can be the ones that nail the Belgian coffin shut for good. In the meantime, this kind of stuff is happening.
- Ring-winged and nationalist parties have always existed on the fringe, but the economic crisis, along with flagrant abuses/misuses of power in Brussels are now ruffling more mainstream feathers than usual. It’s not just France and Switzerland that have the occasional flair-ups, eastern European countries like Hungary have also entered a period of nationalistic radicalism.
Nationalism can stand alone in a sea of otherwise indifference. But when closely clustered countries start to one-up each other, we get into trouble. A decade ago, Europe could’ve pointed to Turkey’s nationalistic turn and snickered. Nowadays, the pot can’t call the kettle black without sounding like a hypocrite. After all, in 2010, what could be more European? Read more...
Mercer has ranked Vienna as the city that offers the highest quality of living in 2010. In your humble blogger’s opinion, this list is useless at best, and misleading at worst. Having just gotten back from a trip from London, to say that London ranks at 39, Berlin at 17, Toronto at 16, Amsterdam at 13, versus Vienna at 1, sounds pretty unlikely to me.
By Mercer’s own fluffy standards, it is hard to say that any countries in the top 50 is better than the next when it comes to basic household ownership of appliances, or the availability of basic public transportation, or the availability of meet and vegetables.
I would guess that the reason why North American cities tend to rank rather poorly on those quality of living indexes is most likely due to the urban sprawl, relatively weaker public transportation system, increased chance of congestion and pollution due to higher ownership of cars, lower concentration of older and more prestigious art and cultural installations, and perhaps less care when it comes to more environmentally friendly and aesthetically pleasing urban infrastructure and architecture.
Here are some observations from my casual encounter with Vienna:
- It does not feel as safe as most other western European cities. That’s not to say that is is dangerous, but seeing homeless-ish people and young thugs with muzzled pit bulls along with a high level of police presence around subways does little to paint a picture of peace and tranquility.
- There are visible signs of greater income inequality than what I’ve encountered elsewhere. With the possible exception of Berlin, I have seen little outward appearance of income inequality in western Europe, other than Vienna. People tend to be more shoddily dressed, and looked less healthy. But of course the latter could be attributable to its meat-heavy diet.
- Vienna is not a particularly clean city. Lots of people have called London dirty. London is not dirty compared to Vienna. Read more...
Harsh criticisms over this non-optimal currency zone is now emerging from within the EU.
Here, president of the Czech Republic talks about the conflict that many Eastern European countries faced after the fall of communism: the need for closer integration with the west, in this case, western Europe, while shying away from the statist aspirations spear-headed by France and Germany that only reminded them days of Soviet rule.
People like me understood very early that the idea of a European single currency is a dangerous project which will either bring big problems or lead to the undemocratic centralization of Europe. My position was clear: With all my reservations, we had to apply for EU membership, but at the same time we had to fight against projects such as the euro.
His criticism separated the idea of European cooperation, from the euro project itself, which for all intents and purposes, has failed. Klaus the economist says:
The huge amount of money that Greece will receive can be divided by the number of the euro-zone inhabitants, and each person can calculate his or her own “contribution.” However, the “opportunity” costs arising from the loss of a potentially higher growth rate, which is much more difficult for a non-economist to imagine, will be far more painful. I do not doubt that for political reasons this price will be paid and that the euro-zone inhabitants will never find out just how much the euro truly cost them.
Unsurprisingly, as the leader of a country that’s suffered dearly in the hands of communism, Klaus the politician minces no words in his critique of opaque bureaucracy centered in Brussels.
The recent dealings in EU headquarters in Brussels—literally behind closed doors—about the aid package for Greece demonstrated that there is no democracy there. The German-French tandem made the decision on behalf of the rest of the euro-zone countries, and I am afraid this will continue.
Not everyone heeds to this view, of course. As late as March, many eastern and central European states still aspire to join the euro party, many already pegging their own small currencies to the euro.
While Horst Köhler’s resignation cannot be directly attributed to the euro crisis, it certainly epitomizes the clash between the post-war political configuration in Europe and the increasingly impatient Germany.
In the past, Germany has always provided the passive sheet-anchor stability that allowed Europe to work. Occasionally a Schmidt or a Kohl would find partners and a surge of European integration would take place. But now Germany has no idea of what to do next. It will not admit that its economic weltanschauung, based on relentless exports and damped-down internal demand, is now part of the European and world crisis of capitalism.
The new Germany would like to behave as a normal nation and certainly has national security on its mind. Both domestic and European-wide politics have yet to catch up with it, even when the question of military interest is framed within the scope of expanding and protecting its economic interest.
Köhler made the point that German military capability was relevant to German interests, including German economic interests. As the world’s second biggest exporter after China, Germany has a self-evident interest in keeping the world as open as possible for the free flow of trade and commerce, and to help defeat the growing scourge of piracy. This is so worrying Nato policymakers that an entire session at the Nato parliamentary assembly’s spring session this weekend in Riga was devoted to the question of how to ensure peace and free traffic on the high seas.
Some political and business leaders are quietly applauding the continual slide of the euro as one of the tools to stimulate exports in the region, others argue that a weak euro do more harm than good in eroding business confidence in the region, which may prove to be the worst legacy resulting from this ongoing fiasco.
The biggest worry for European business, however, is not so much the decline of the euro itself but rather what it says about the European economy. European governments will have to reduce public spending dramatically to allay the market’s fears. Spain has already announced that it is cutting public-sector wages by 7% and Greece by 16%. This will inevitably remove spending power from the European economy and so dent its short-term prospects. Read more...
Courtesy of Viewsflow’s Daily Briefing. You can also follow it here, get it in your inbox by signing up here.
TECH & MEDIA
Why I Switched from iPhone to Android
pcworld.com -”I used to feel that, to get the best smartphone software and hardware experience, I had to live in Apple’s walled garden. Now, the walls are getting higher, and life outside the garden looks better and better.”…
Why you shouldn’t believe ‘Facebook backlash’ numbers
news.cnet.com – The lack of alternatives to Facebook means that many dissatisfied members probably will not delete. their accounts altogether. It’s more likely that they may be clamping down on privacy controls. …
M.I.A.’s agitprop pop
NY Times – What Maya wants is nearly impossible to achieve: she wants to balance outrageous political statements with a luxe lifestyle; to be supersuccessful yet remain controversial; for style to merge with substance. …
What’s the matter with Sweden?
pitchfork.com – Think the cool Swedish indie band you’ve just heard of on the radio made it out of the Nordic wild all by themselves? Think again. Across the western world, different states have long played, and some still are, a vital role in the promotion of music. …
BUSINESS
How China is trying to go green
Newsweek – As China gets richer, it will slowly but surely create its own equivalent of a Whole Foods buying, eco-tourism-enjoying middle class. That’s the very group that will be most likely to question the cost of unbridled development. …
Positive sign: Worker mobility
The Big Picture – The natural wanderlust of a segment of employees was suppressed, and is now busting out again. …
Where the smart people live
blog.robpitingolo.org – Looking at educational attainment density measured as college degree holders per square mile, here are the cities and counties that made it to the top. …
Are there too many psychopaths in Corporate America?
bakadesuyo.com – The prevalence of psychopathic traits in corporate professionals is higher than that found in community samples. …
FINANCE & ECONOMICS Read more...
The best part of blogging is when the world echoes back, and someone challenges me on my ideas. The latest question came from a dear reader, Amit, on the post I did a while ago on women’s labour participation in the OECD, particularly that of Japan and the Netherlands.
I’ve edited our email exchange slightly for easier web consumption.
Amit says:
1) The use of “abysmal” suggests that there is a pre-posited ideal state. Why so? It remains unclear as to whether the US and Scandinavian experiences with bringing vast numbers of women into the workforce fulltime are “correct” in an absolute sense.
Elizabeth Warren points out in her analysis of the US middle class, that women in the US workforce are there not just because they “want” to be, but often because they “need” to be, to afford housing and consumption at levels conditioned by media/pop-culture. She shows how the debt burden has risen per family, consistently, to the point where a prole+/bourgeoisie family has no alternative but to post 2 incomes to afford its suburban house (to which schooling is tied).
The US does not frown upon “assisted childcare” to allow women to work fulltime, but it also does not provide such care (though Scandinavian states do). For a mom to work fulltime in the US, the family takes on an additional expense burden (that eats away further into that debt servicing cash flow) of nannies and playschools, and the angst of knowing that this type of care is unregulated, and is held to a standard only on a caveat emptor basis.
Why is the US model good? Most American women (of a bourgeoisie status anxious grad schooled variety) I know, feel severe pressure to work and retain the “victories” of feminism, despite the strain it brings to their nesting and breeding instincts.
2) The Atlantic this week features the “millennial response” to the hook up culture, see it if you have time, and juxtapose with the Japanese sub-20 aspiration Read more...
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