Backlash Against Conformity
This is getting interesting now. Governments in Europe are toppling like subprime lenders in the US, circa 2007. Smaller European political parties are gaining traction as they resist proposed spending cuts.
This whole chain of events is part of the idea that the failed monetary and fiscal policies in Europe are now political problems. The financial crisis of the Welfare State undermines the legitimacy of the Welfare State itself. The financial becomes political.
Now, financial markets have been pretty exciting the last few years. You’ve had Ponzi schemes of Madoffian proportion. You’ve had defaults, bankruptcies, “flash crashes” and more. But when it comes to show-stopping drama and social upheaval, nothing can match politics. And that’s what scares us these days.
Europe’s political crisis is evidence of deep structural problems in the European Union that can’t be solved by more central bank liquidity. Europe went for monetary union ahead of political union when it started down this path many years ago. The common currency allowed European governments to borrow at low interest rates and run up large deficits.
The trouble now is that there’s no way to impose a political solution on the economic problem. That’s probably a good thing, now that we mention it. Imposing solutions from on high has not worked very well the last few years. But it does leave markets with a giant question mark hanging over them. Namely, how will this European mess end?
One option is that Europe will go the way of Japan. This is a best-case scenario. In this scenario, the authorities prevent a climax to the debt crisis by extending it out over time. We say “best case” in the sense that a long, drawn-out, crisis that turns the financial market into a Zombie may be preferable to a political and social crisis. But then, a political and social crisis seems inevitable at this point. Why wait?
Clearly, the eurozone architects failed to account for the fact that the national identities/personalities of Europe are as diverse as any extended family. You’ve got the stern grandmother, the crazy uncle and at least two teenagers who are off somewhere trying to “find themselves.”
But the eurozone architects ignored Europe’s heterogeneity in order to impose a faux homogeneity — a structure in which, as Principal Skinner on The Simpsons put it, “Nobody is better than anybody else and everyone is the best.”
For a while, this fictional sameness worked…or appeared to work. But it never really worked…as the expanding crisis is demonstrating all too clearly. Even though the eurozone structure enabled the Greeks to borrow money as if they were Germans, it did not prevent them from repaying their debts like a Greek.
No political authority can mandate “sameness.” There is no such thing as multi-national sameness. Besides, at a very core level, nations and individuals covet their unique identities. People don’t like being “the same.” They like being different. That’s why they get nose rings…or dye their hair blue…or vote against “austerity measures” imposed by the EU and IMF.
Europe is revolting against “sameness” — the enforced sameness of the common currency is causing a backlash. The French want to be French. The Dutch want to be Dutch. The Greeks want to be Greeks. None of them want to be German. And the Germans want to stay German. All these primal, tribal, political loyalties are in conflict with the sameness and conformity required by political and monetary union. Something has to give.