Sinking to the lowest common denominator

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The EU has been a mistake. From Desmond Lachman writing at the American Enterprise Institute:

An unhappy 20th birthday for the euro
It is disappointing that your editorial “ Challenging times lie ahead for the eurozone” (January 2), commemorating the euro’s 20th anniversary, glosses over how miserably the single currency has failed to deliver on the high economic and political expectations of its founders.

Whereas since the 2008 crisis, the US economy has grown by some 15 per cent, the eurozone economy has barely regained its 2008 pre-crisis peak. At the same time, economic disparities between the eurozone’s north and south have widened, as exemplified by Germany’s economy now being more than 10 per cent above its 2008 level while that of Italy remains 5 per cent below that level.

Far from promoting European political harmony, the euro seems to have done the opposite. Those countries in the eurozone’s economic periphery deeply resent the austerity that has been imposed on them, while those in the north increasingly resent having to bail out those in the south. More disturbing yet, especially since 2008, Europe’s poor economic performance has undermined public confidence in its political elite, thereby contributing to a wave of populism across the eurozone.

A key factor underlying the eurozone’s poor economic and political performance was the locking in a monetary union of a poor productivity performer like Italy with a productivity powerhouse like Germany. Without the ability to devalue, Italy was bound to progressively lose competitiveness to Germany, which has resulted in the disparate economic performance between those two countries.

A perfect indictment of socialism and globalism. Some nations are more productive than others. By hamstringing everyone together to a common currency, there is less incentive for the productive members to be - productive. There is also less incentive for the less productive nations to work to become more productive as they know that their more productive partners will float them along.

This has been tried so many times and has failed every time it is amazing that people can still consider this to be a viable option. Occasional-Cortex needs to get a refund from Boston University for her Economics degree.

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This page contains a single entry by DaveH published on January 7, 2019 10:02 AM.

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