Monday, December 12, 2011

Storm Clouds Over Europe

Paul Krugman reminds his readers today that tough economic times can sow the seeds of authoritarianism. He then offers an analysis of what is happening in Europe. The economic crisis there, he writes, is killing the European Dream:

Specifically, demands for ever-harsher austerity, with no offsetting effort to foster growth, have done double damage. They have failed as economic policy, worsening unemployment without restoring confidence; a Europe-wide recession now looks likely even if the immediate threat of financial crisis is contained. And they have created immense anger, with many Europeans furious at what is perceived, fairly or unfairly (or actually a bit of both), as a heavy-handed exercise of German power.

And the truth is that, historically, what happened in the United States in 1932 -- the election of a leftist government -- was the exception, not the rule. Europe appears to be following the rule:

Right-wing populists are on the rise from Austria, where the Freedom Party (whose leader used to have neo-Nazi connections) runs neck-and-neck in the polls with established parties, to Finland, where the anti-immigrant True Finns party had a strong electoral showing last April. And these are rich countries whose economies have held up fairly well. Matters look even more ominous in the poorer nations of Central and Eastern Europe.

The more the political elites on both sides of the Atlantic preach austerity, the worse things will get for ordinary citizens. And, as their anger grows, there is no guarantee that they will turn to another Franklin Roosevelt -- even if such a leader is available.

This entry is cross posted at The Moderate Voice.


Anonymous said...

Austerity means nothing but running the wealth siphon on high.

Are there really shortages of food and other necessities? Are there even shortages of iPads? No? Then why the "austerity" rationing?

In Europe they have the excuse of being trapped with the Euro, with no sovereignty over their own currency. They also have no programs like equalization to help smooth out the results of imperfectly combining flawed man-made economic structures, but these excuses don't apply anywhere else.

Owen Gray said...

Unfortunately, those who insisted on moving Europe from a common market to a monetary union ignored some obvious problems with their design.

Like the people who sliced and diced mortgages on Wall Street, they made assumptions which long experience threw into question.

Property values go down as well as up; and a central bank should do more than just print money.