The Party’s Over: what next for Greece and the Euro?

The Euro Hydra

The best way to deal with the Euro?

The European Project was built from noble and well-intentioned stuff. A common market which would promote the free movement of people and goods, improve cooperation and understanding, and in turn help build barriers to future conflict.

Who wouldn’t want to buy into that?

But somewhere along that line we’ve gone off the rails. Helmut Kohl and François Mitterand (amongst others) started to have bigger dreams of federal integration too. This was the grand political project whose trojan horse was the creation of a single currency, the Euro. However even since it’s launch it has been a solution in search of a problem, and now the bad economics at its core have seen it mushroom into the dictionary definition of a boondoggle project. When adopting the Euro, the tools needed to run the divergent economies of Greece, Spain, Germany, France and Finland were transferred to Frankfurt. Initially, a sudden burst of cheap credit made everyone believe the Euro project was a winner, and a spending spree ensued. But now the poor economics of the Euro have come back to bite us, and the economic tools needed to help at least rectify some of the problems left in its wake are no longer to hand to those that need them.

So now we have a situation where Europe – which should be turning to face the great challenges of our time with a united front – is instead turning it’s back on the world to fight internal fires of it’s own making.

So what to do?

First, kill the debt. People who lend money at high risk should pay the consequences for extending credit in those circumstances. A bitter pill to swallow, but better that than creating an anger vacuum in Greece into which some genuinely crazy and scary ideas might get sucked in and take hold.

Second, kill the Euro, not just in Athens but in Europe. Battling the Euro feels like battling a Hydra – you cut off one head only to watch another two grow in it’s place. Better then to go straight for the heart. Maybe then Europe can start looking beyond it’s own navel and start tackling some of those other issues out there that need our intellectual clout and creativity to get sorted. Time to wake up and shake off that hangover. The party’s over. There’s work to be done. Europeans – and the European project itself – should and can be better than this.
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Down with your staccato triangles of change!

SMITH_MARX

Adam Smith (Institute) vs Karl Marx

A really succinct and excellent piece by Madsen Pirie here on what Marx got wrong, particularly about his Hegelian model of change. As Pirie argues, change is more evolutionary than revolutionary, which means Hegel’s rather violent and triangular model of thesis, antithesis and synthesis is not a great means of describing what actually happens. Read Madsen’s piece on the ASI Website.

Europe’s future will be muddled

merkel cameron hollande

An uncomfortable alliance

Here’s a short, provocative and interesting piece on the past, present and future of Europe by Anthony de Jasay on the Library of Economics and Liberty. It was written before the current debacle in Cyprus, but the conclusions – that Europe will muddle on for the foreseeable future through an increasingly uncomfortable alliance between the UK, France and Germany – will, I think, hold true. At least for now.

Anthony de Jasay, “A Triangular Europe: Three Incompatible Conceptions.” March 4, 2013. Library of Economics and Liberty. 27 March 2013. <http://www.econlib.org/library/Columns/y2013/Jasaytriangular.html>.

In the land of black gold

250px-Tintin_cover_-_Land_of_Black_GoldIs peak oil a myth?

Here’s an interesting piece from Fast Company on the idea of “peak oil”. Far from our supplies of black gold running out, we are in fact finding limitless supplies of the stuff. But can the climate absorb it? At current levels, perhaps not, but who knows what amazing innovation lies just around the corner to help us mitigate the effects? As the author says, “argue for climate change, by all means. But, be wary of using a cause for scarcity to do so”.

As market value is usually a good indicator of supply levels, I’ve taken the liberty of copying in a little historical crude oil price data below.

There’s also a good chart on The Economist that compares Hubbert’s initial 1950 apocalyptic predictions of oil running out by the 1970’s with what’s actually happening.

historic-oil-prices chart

© Copyright 2010 InflationData.com

Chart taken from inflationdata.com

Welcome to the world’s fastest growing continent

More wealth. More democracy. More Peace. Say hello to a new Africa.

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This Special Report for The Economist by Oliver August throws Africa into a whole new light. Prepare to have some of those pre-conceptions you might be holding thoroughly dashed. Optimism is in the ascendant, life expectancy is rising, and freedom is spreading. Up with this kind of thing!

Makers of the world, unite!

The world of trade is changing dramatically. Is the WTO keeping up?

G7 DataSource: CEPR Report on WTO 2.0

We’re moving from a world where goods are simply shipped internationally, to one where goods are also made internationally.

In a fascinating article for the Centre for Economic Policy Research (CEPR), Richard Baldwin argues that while the WTO has done a good job in policing the traditional trade world where we ship goods made in one country to another, it is ill equipped to deal with the emerging world dependent on complex global supply chains (“supply-chain trade”). Before we slide further into a world of trade agreements based on mega-bilaterals and mega-regionals – that will also end up side-lining new trade giants such as China, India and Brazil – should we reconsider the role of the WTO and rebuild it for modern times? This CEPR paper calls for the countries and manufacturers of the world to unite under the common umbrella of a reconfigured WTO 2.0

Hat tip to @peraltenberg for spotting this one.