Comments on: Halfway Integration of the European Economy Proves Problematic: Matthew Yglesias in The American Prospect http://www.nonesoblind.org/blog/?p=5832 Thu, 09 Sep 2010 18:37:12 +0000 hourly 1 http://wordpress.org/?v=3.0 By: MaskedMarauder http://www.nonesoblind.org/blog/?p=5832&cpage=1#comment-393337 MaskedMarauder Sun, 28 Feb 2010 16:22:31 +0000 http://www.nonesoblind.org/blog/?p=5832#comment-393337 This is just the technocrat's dilemma, trying to manage ethnic, political and nationalistic problems through economic means alone. It gives the illusion of success in good times, but fails horribly when things go bad. Still, the EU is th most advanced and most highly motivated attempt so far to get past the nation state stage of civilisation. Somehow I think they're committed to the path their on and if there is a solution to be had, they are most likely to find it first. We can't even managed intra national tensions between states, we've nothing to crow about here. This is just the technocrat’s dilemma, trying to manage ethnic, political and nationalistic problems through economic means alone. It gives the illusion of success in good times, but fails horribly when things go bad.

Still, the EU is th most advanced and most highly motivated attempt so far to get past the nation state stage of civilisation. Somehow I think they’re committed to the path their on and if there is a solution to be had, they are most likely to find it first. We can’t even managed intra national tensions between states, we’ve nothing to crow about here.

]]> By: Jim Z. http://www.nonesoblind.org/blog/?p=5832&cpage=1#comment-392032 Jim Z. Wed, 24 Feb 2010 18:21:56 +0000 http://www.nonesoblind.org/blog/?p=5832#comment-392032 Yglesias' brief summary of these issues ring true for me. During the run up to the single currency and the Maastricht Treaty provisions (that required each country, before they could enter the agreement, to set its fiscal and economic house in order such as reducing budget defits to a certain % of their GDP, bring inflation down, etc.), the possibility of differential inflation and GDP growth rates among the countries was debated extensively, but was considered worth the risk. The benefits of going to a single currency and of other elements of economic integration (for example the right of any Eurpoean resident to relocate and work, as a matter of right, to any other member country) were felt to be overwhelming (mainly in reduced cross border transaction costs and to rebalance differential unemployment rates across the continent). As Yglesias notes, there was an expectation that the stronger economies would somehow be willing and able to help the weaker ones if imbalances arose. In the intervening years, a formerly weak economy, Ireland, became the "silicon valley" of Europe, giving rise to lots of envy but seemingly demonstrating the success of integration. Now, ironically, the Irish economic miracle has collapsed. Spain was an interesting case as well; it had a relatively poor and less-developed economy, and observers wondered if it woould be helped or harmed by integration with such as Germany and France. It turned out to be a boon to Spain's economy. But the Euro zone's troubles would probably have been tractable had the magnitude of the world financial collapse been so great. There are limits to what shocks any system can absorb. Perhaps this mess is another argument that finance is something that cannot reasonably be left to wild-west deregulation, but rather needs a sort of coordinated regulatory scheme that was let go ove the past couple of decades. Yglesias’ brief summary of these issues ring true for me. During the run up to the single currency and the Maastricht Treaty provisions (that required each country, before they could enter the agreement, to set its fiscal and economic house in order such as reducing budget defits to a certain % of their GDP, bring inflation down, etc.), the possibility of differential inflation and GDP growth rates among the countries was debated extensively, but was considered worth the risk.

The benefits of going to a single currency and of other elements of economic integration (for example the right of any Eurpoean resident to relocate and work, as a matter of right, to any other member country) were felt to be overwhelming (mainly in reduced cross border transaction costs and to rebalance differential unemployment rates across the continent). As Yglesias notes, there was an expectation that the stronger economies would somehow be willing and able to help the weaker ones if imbalances arose.

In the intervening years, a formerly weak economy, Ireland, became the “silicon valley” of Europe, giving rise to lots of envy but seemingly demonstrating the success of integration. Now, ironically, the Irish economic miracle has collapsed. Spain was an interesting case as well; it had a relatively poor and less-developed economy, and observers wondered if it woould be helped or harmed by integration with such as Germany and France. It turned out to be a boon to Spain’s economy.

But the Euro zone’s troubles would probably have been tractable had the magnitude of the world financial collapse been so great. There are limits to what shocks any system can absorb. Perhaps this mess is another argument that finance is something that cannot reasonably be left to wild-west deregulation, but rather needs a sort of coordinated regulatory scheme that was let go ove the past couple of decades.

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