Wednesday, June 27, 2012

Why didn't we see this coming (Euro Crises Version)

In retrospect, it seems obvious that the Euro can't work.  13 or so different countries using the same currency, but not the same taxation rates, regulation or even retirement programs...  It seems destined to fail.  So why did everyone think it would work?
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Well, I think the mobility of labor was kind of assumed to be the biggest brake on possible problems.  The United States has a similar system in miniature.  Sure, the vast bulk of our government spending is at the Federal level, but each state also has an economy that uses a currency they have no control over.  And, each state has different taxation rates and some marginally different regulations.
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So why does it work in the US and not in "Europe"?  Well, the states are legally required to balance their budgets - which the national governments in Europe are not. But, more important, there are few barriers to labor movement int he United States.  As the current race into North Dakota or out of West Virginia shows, people can move to follow jobs - and the state economy has to rebalance to adjust to the changes.
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I think the expectation was the same in Europe, but some serious cultural barriers have cropped up.  First and foremost is probably language (and culture).  It is hard for a Greek person, using a different language AND a different alphabet to effectively produce at a job in Germany or the Netherlands.  I mean, a Greek secretary that doesn't know how to use a latin keyboard isn't particularly useful.
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I am also not sure the national regulations are close enough.  A Doctor or Dentist in Texas can practice in Vermont with very little extra effort (lawyers are different, but they make the laws - so they are ALWAYS different).  Even beyond the language problem, I am not sure a contractor from Portugal could legally build a office complex in Finland - even those they both pay in Euros.
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Finally, the US Legislature has national parties.  There is a European Parliament, but the people in individual countries don't really see or appreciate anything they do.  There isn't a buy in at the personal level to the nationality of "European".  As the recent European championships show, Germany and Greece  root for their national teams.  In the US, we have regional favorites (Green Bay Packers or Seattle Seahawks) but not state only champions for every state (even though we all hate Texas).
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So it seems like Germany keeps putting the paddles to the patient - but I am not sure the patient will ever make a full recovery - but he might be able to stay on life-support for a long time.  It might be time to prep the hospice.

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