Europe’s Coming Lost Decades

The Guardian reports on a forthcoming Red Cross report on the long-term consequences of austerity:

Europe is sinking into a protracted period of deepening poverty, mass unemployment, social exclusion, greater inequality, and collective despair as a result of austerity policies adopted in response to the debt and currency crisis of the past four years, according to an extensive study being published on Thursday.

"Whilst other continents successfully reduce poverty, Europe adds to it," says the 68-page report from the International Federation of Red Cross and Red Crescent Societies. "The long-term consequences of this crisis have yet to surface. The problems caused will be felt for decades even if the economy turns for the better in the near future … We wonder if we as a continent really understand what has hit us."

The damning critique, obtained exclusively by the Guardian, of the policy response to the debt crisis that surfaced in Greece in late 2009 and raised fundamental questions about the viability of the euro single currency, foresees extremely gloomy prospects for tens of millions of Europeans.

Mass unemployment – especially among the young, 120 million Europeans living in or at risk of poverty – increased waves of illegal immigration clashing with rising xenophobia in the host countries, growing risks of social unrest and political instability estimated to be two to three times higher than most other parts of the world, greater levels of insecurity among the traditional middle classes – all combine to make a European future more uncertain than at any time in the postwar era.

And on a related note, Dissent recently published a special issue on the ineffectual response of the European left. From the introduction:

Those interested in the European left may be the most depressed of all. Despite widespread economic problems and suffering, there has been no upsurge in support for the left. Indeed, when the crisis first hit, most electorates initially turned to center-right parties for solutions. Similarly, the mainstream left has not been able to put forward convincing, coherent, or effective responses to European publics’ cultural fears, first ignoring and then incoherently addressing identity and immigration issues, and vacillating on the role of Europe. 

One thought on “Europe’s Coming Lost Decades

  1. Andrew. You are, I am sure, a highly capable legal scholar. But when it comes to economics, you are just clueless. You don’t get it.

    Blaming austerity for the woes of debtor states is like blaming the forestry fire service for clear cutting fire breaks. Austerity is not the cause, it is a remedy. Now one may well argue that the remedy is insufficient, but it is not the underlying cause. In a forest fire, drought, high temperatures, and thick underbrush combine to create the danger. A lightning bolt or a campfire are just the trigger. But the cutting of fire breaks, while it destroys broad swathes of forest, is not the biggest problem.

    In the present crisis, we don’t have to look far to the main cause. It is the unwise adoption of a common currency by a vastly disparate group of economies with no unified fiscal policy, widely divergent efficiencies, incompatible ideas of law and ethics, and so on and so forth. It was bound to fail from the start, the only surprise is that it’s taken as long as it has.

    The euro, a project ostensibly designed to promote an ever closer union and lock in peace in Europe for all time, has turned neighbor against neighbor, fanned the flames of distrust, avarice, and dishonesty, and reawakened bitter national hostilities and resentments.

    Austerity is the desperate attempt to fix what’s unfixable. But the fire is stronger. It will overrun the fire breaks and destroy forest land as far as the eye can see. The alternative you would have policymakers adopt — economic stimulus a.k.a. pump priming — is insane. It involves loading up tanker airplanes with gasoline and dumping it on trees that have not yet been burnt.

    This fire will have to burn itself out. Only afterward can the rebuilding begin. The euro in its present form must be abandoned and replaced by a return to national currencies (which can depreciate or appreciate as needed), perhaps supplemented by a “son of euro” parallel currency to be voluntarily used whenever market participants find it useful.

    It should have been done yesterday. Unfortunately, the insaniacs in Brussels and in national capitals who got us into this mess are mostly still in power and don’t want to admit they were wrong. Things will have to get a lot worse, therefore, before they start getting better.


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