Will the Eurozone enact a Greek tragedy?

23 February 2010

Tuesday


A few weeks ago in The Dubious Benefits of the Eurozone I discussed the dilemma of Greece, and, perhaps more importantly, the dilemma of the other Eurozone economies that are now mere bystanders to a Greek tragedy.

Problems continue to mount, and no solution is in sight. Day after day, the headlines fall like dominoes — last Friday: All for one… The eurozone countries are politically responsible for Greece’s problems, by Tommaso Padao-Schioppa, former ECB board member; Monday: Euro’s critical test: The eurozone needs to have powers to tax member states in a crisis, by George Soros (who needs to introduction), and today, Tuesday: What now for Europe? There is more than money at stake in the Greek crisis, by Gideon Rachman.

The truth of the matter is that the Eurozone has already failed, and it has failed because it has been starkly revealed, with all the blunt disambiguation of a messenger speech, that there is no mechanism in place that will either coerce other members of the currency union to come to the aid of Greece in a robust fashion, or that will coerce Greece to take the painful steps it must take to reform its economy in order to bring it in line with the best Eurozone economies. Either way, action is painful and expensive, but inaction is to condemn the population of a country in crisis to a long slide, at the bottom of which is poverty and economic irrelevance. Unfortunately, since the slide takes time and the consequences are not immediately apparent, it is almost certain that lack of political will means Greece will become a de facto second-class citizen of the Eurozone.

It is a hard saying, but some peoples condemn themselves to long term lower standards of living by unwillingness to work regularly, pay taxes dependably, regulate honestly, and govern transparently. Greece, of course, has a history of crippling strikes and Communist activism that have militated against productivity. In such a context, not paying one’s taxes can be spun as a heroic act of defiance in the face of corrupt governmental interference. And they are right. The government is corrupt. All governments are corrupt to some degree, but we pay our taxes anyway if we want to possess a national infrastructure that will make it possible to live reasonably comfortable lives in the context of contemporary industrialized society.

This impasse should not surprise us in the least. The general principle at stake is that a collective crisis demands cohesive collective action, the sooner the better, the more decisive the better. In most particular instances of the general principle, it does not surprise us when a collective entity that has become too large for its mandate fails to deliver cohesive collective action. When the Europeans announced that they would create a joint military force, no one took it seriously. A joint European military command would be at least as difficult as a joint European foreign policy, and probably more difficult. While divergent national interests appear much more rapidly when it comes to fighting and dying, they eventually appear in economics as well. Taxing and spending is not quite as immediate as fighting and dying, and it is perhaps the next thing on the list that will get people’s attention.

After the Second World War, and again, on a wider scale, after the Cold War, Europe proclaimed itself to be unified. Moreover, it Europe has acted on occasion as though it were in fact unified. An outside observer who knew nothing of European history except what could be documented from public news sources since 1945 might come to conclusions that, despite having better than fifty years of evidence to support them, are still nearly baseless. Such is potentially the fate of all inductive reasoning that does not rest on a foundation that comprehends a period of time sufficient to measure the patterns in the history of the observed entities. Since the patterns of political entities are played out over centuries, fifty years is an insufficient sample for an accurate result.

The need for collective action in the face of crisis, and the lack of a collective will to take action, is the tragic flaw, the Achilles heel, of all trans-national entities. That being said, I am not simply contrasting the supra-national entity of the Eurozone to the successful and robust nation-state, since this implies that the nation-state possesses some special quality in virtue which cohesive collective action is possible (which latter occult quality perhaps resides in the Volk). In fact, extant nation-states do possess this quality — essentially, the quality of being able to act upon raisons d’état — but not intrinsically. The nation-state can be defined ex post facto as that political entity for which raisons d’état are possible; the territorially defined nation-state is the effective limit of cohesive collective action. In other words, nation-states are nation-states because they have achieved national cohesion. To understand the causality to run in the other direction — that nation-states achieve cohesion because they are nation-states — is to get things seriously backward.

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