Can Europe have a good crisis?

The Lisbon Strategy intended to deal with the low productivity and stagnation of economic growth in the EU, through the formulation of various policy initiatives to be taken by all EU member states. The broader objectives set out by the Lisbon strategy were to be attained by 2010.

It was adopted for a ten-year period in 2000 in Lisbon, Portugal by the European Council. It broadly aimed to “make Europe, by 2010, the most competitive and the most dynamic knowledge-based economy in the world”.

The rest, as we know, is history: southern Europe failed to become more competitive and went on a cheap money bender; the gap between the industrious EU countries and Club Med widened; massive debts were built up by governments and householders in many places; the EU economy is teetering on the edge of the abyss. Or to put it in EUrospeak, progress towards Europe-wide economic competitiveness was “unconvincing”.

What now? Well the political classes in the usual suspect countries presumably expected to carry on as they had always before: by inflating and devaluing the results of their persistent deficits. They must have hoped that the Euro would be less like the Deutschmark and more like the Escudo. Whatever their actual thought processes, they never told their voters that by adopting the currency of an industrial giant would mean a change in economic mentality.

But is this now a good opportunity for European countries to get a move-on with the reforms they should have started making thirty years ago? Haven’t we seen something like this before? As a keen reader of The Economist in the late 1990s (no, I did not have a girlfriend) I recall countless articles banging on about how Germany in particular had a lot to learn from the British revolution under Thatcher and Major. The argument was that enough people in Germany were comfortable for there to be little appetite for serious reform. This turned out to be too simplistic: Germany took a more measured and iterative path, not needing the crash-bang-wallop emergency reforms that Britain did to stop itself completely imploding in the 1980s. New Germany is booming.

It is not controversial to say that deregulation, privatisation and proper competition can revolutionise an economy in the doldrums. Britain, New Zealand and several former-Eastern Bloc countries prove that. But it’s not easy for politicians to go from here to there. Often there has to be a crisis before voters will accept their medicine. Britain was forced into spending cuts in 1978 by the IMF. New Zealand virtually went bust before it could revitalise its prospects. We all know what happened in Eastern Europe. Most electorates simply aren’t as sensible as Zie Germans.

Whilst I am inherently against even further detaching the politicians from the people they pretend to represent, it is an obvious fact that sometimes even sensible people need to be forced to do the right thing. The diet can always start tomorrow. Whether that means that the technocrats in Brussels need to take charge in the way they have over the continent’s competition regime – for example – or the national parliaments themselves somehow assert themselves in the face of popular discontent I wouldn’t like to suggest.

Europe should be the best place in the world to live and work. We are mostly free, well-educated and enjoy excellent infrastructure. We have world-beating universities and industries. The continent has plenty of space and natural resources, including intellectual assets. We have labour mobility and supposedly free markets. The best bits of Europe are the best in the world. The worst bits need to do some serious catching up. Maybe this financial crisis is exactly the kick up the arse that the continent needs.

8 Responses to “Can Europe have a good crisis?”

  1. 14 July, 2011 at 8:15 pm

    Of course they all are Blues!

    All in a huge trough of money to ‘stop everyone fighting each other’, and little else!

    Huge money being taken by individuals who would never get a real job in industry and commercial knowledge levels are zilch!

    Been there, met the pillocks, don’t want to discuss business with them – they’re totally naive, except where their expense are concerned…

    Go for their demise, possibly vote UKIP – I don’t know just yet, but probably will.

    If you have an hour or seven, I’ll tell you about a meeting I had in Brussels with the equivalent of a third-tier-bottle-washer in an awful restaurant in Balham – and he was in charge of a budget which would make your eyes water.

    Dreadful crowd of below-ordinary wasters there.

    • 14 July, 2011 at 11:43 pm

      You are right of course. The more bureaucracy and government there is the more chance there is for the bad to build a little fiefdom. Can you imagine someone as useless as Gordon Brown coming close to and kind of influential office in the Victorian era??

  2. 3 Electro-Kevin
    14 July, 2011 at 11:31 pm

    I must say, your blogging and commenting seems to have gone up a notch or two. I’d forgotten how seriously good you could be.

    Of Europe: I’m quite mystified that, for all the well educated people there were in the USSR (many in sciences) that they weren’t more successful. Education/infrastructure = Success. This is not axiomatic.

    Just as with hard working individuals, success is largely down to luck – which, I believe, is largely an attribute of those who do not give too much of a shit about others.

    Lucky people tend not to give too much of a shit about others. How does that sound as a maxim ? They’re not too tied by conscience. I suppose the USSR was so wrapped up in making each other equal that it got unlucky.

    So where does that leave us with our fixation about saving the environment and the Third World ?

    • 14 July, 2011 at 11:41 pm

      I hadn’t thought of it in that way, but you are spot on: people have to want to make something of themselves. Under Communism there was little point in pushing yourself unless you had political ambitions. The Americans worship “success” so there is social status in fulfilling one’s potential. In the UK we tend to slag people off who have done well…

      I do worry about people who claim their motivations are selfless. Might they just be hurting themselves and their beneficiaries??

    • 14 July, 2011 at 11:44 pm

      Oh and PS thank you for your kind words :-D

  3. 14 July, 2011 at 11:55 pm

    Europe has a lot going for it, agree 100% there. It is a bit crap in places. Pretty much any city in the UK or Europe has it’s crap parts. You ever gone exploring the old soviet tower block estates in Prague? They are huge (and horrible) and the workers in the centre can be a bit embarrassed about them when you ask questions.

    But the point is that I felt safe walking around them as a foreigner. Most US cities have places you just can’t do that!

  4. 17 July, 2011 at 3:13 am

    Did Germany really do lots of incremental reforming? I’m not particularly disagreeing with you, I just haven’t seen much evidence either way. Is it easy to look at them in a favourable light because they have had a good crisis?

    I think the problem is that change beings social unrest and politicians look to avoid that so they don’t get voted out.

    P.S. There is nothing wrong with reading The Economist.

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