This is a very informative piece on the course of the EU crisis. Hat tip to Jurriaan Bendien for emailing it to me.
My big quip to the piece is that it suggests that the key to the re-balancing and recovery of the European economy (with growth that benefits working people) hinges on Southern and Eastern Europe increasing their exports to Germany, France, the UK, and the rest of the world.
No. That is a recipe for a depression.
The key to a prompt recovery is outright wealth redistribution in favor of working people (via a mix of mechanisms, from aggressive “stimulus” spending to IMF-suggested inflationary monetary policy to the public insurance of the private debt of working people to confiscatory punishment against financial fraud), something that won’t happen unless Europeans raise hell on the streets, and the EU institutional framework is reshaped.
To put it in ways my macro students will understand:
Y = C + I + G + (X-M),
Over the very long run, you cannot expand the economy of Southern and Eastern Europe by increasing (X-M), because the sum of (X-M) across all countries is zero. It’s beggar thy neighbor! Even in the not-so long run, this won’t work. As global exporting powerhouses, Southern and Eastern European countries are no match to China and Southern Asia in general, with their still huge reserves of labor, scale economies, etc.
Progressive wealth redistribution (beggar thy plutocrats!), on the other hand, allows for more sustainable growth over the very long run (without further economic degradation), if for no other reason because working people have a larger marginal (let alone average) propensity to consume.
The sooner people on the streets realize how wide the actual scope of political possibilities is, the better.