Mark Blyth is flying us over the embattled Eurozone — populations aging, economies flagging, and now democracy shrinking as technocrats in bankers’ gray stand in this week for the elected political chiefs in Greece and Italy. The New York Times is in an editorial panic this morning about “Europe’s Contagion” — even “financial catastrophe.” Which sounds like what Professor Blyth, the political economist and excitable Scot on our Watson Institute corridor, was warning us about when Ireland’s crisis was the proverbial cloud no bigger than a man’s hand. It’s a year now of the Blyth color-commentaries on a rock slide — in which over-leveraged banks foisted their debts on their “sovereigns,” and a banking crisis fused a chain of political and national crises — and from there a crisis of European unity, maybe the Decline of the West. Somewhere near the core of the problem, in the Blyth narrative, is the fashionable fixation on public-sector austerity, choking the growth that might refloat the European economy and our own. Part of what’s thwarting a rescue of the Euro this week is the illusion that Europe’s single-currency zone is a single economy. I am wondering what it would take for Europe to go the last kilometer to an economic union, with a single central bank as powerful as our Federal Reserve. What would we learn from a popular referendum on the United States of Europe?
If you can’t listen as fast as Mark Blyth talks, by all means listen twice.
Usually you do referenda in Europe to stop things happening. The Greeks were a classic example of this: would you like to have ten years of deflation and most of the smart people leaving the country and to be left with no tax base? No, thanks. It was a bargaining chip.
If you want to say at this point, let’s sign up to what Merkel wants, “more Europe,” well what does that mean? … It assumes that the whole world can work as Germany, which is basically a giant exporter that runs a permanent surplus against the rest of the world. This is madness. You can’t run a permanent surplus. Somebody has to be importing for somebody to be exporting. Who’s going to buy all those BMWs? We can’t all export to Mars.
CL: China does …
China does precisely because America gives it the credit to. Germany was able to sell all that stuff to Southern Europe precisely because it gave it credit. Now they’ve stopped the credit lines. That’s the problem. What they should be doing is turning on the taps to provide credit, not to continue to buy things they can’t afford, but to allow enough liquidity in the economy to stop the banks seizing up. What’s happening is just that: the banks are seizing up…
Mark Blyth with Chris Lydon at the Watson Institute, November 17, 2011.
It’s still a banking crisis pretending to be an economic crisis, Mark Blyth would tell you. But couldn’t it still become a civilizational crisis unless the rest of us, non-bankers, wake up?