Differential Growth – the unsolvable problem of the EU

The problem with a state, is that you need to have a lot in common: common economics, culture, history, education, religion even climate and the more differences there are, the harder it is to keep the “state” together. So, usually large states fail unless they become authoritarian dogmatic and enforce those things that they can: culture, language, law, even religion to compensate for those they cannot (e.g. climate).

One of the few instances in world history where a large state has worked in a semi-democratic way is the US. But this is one of those rare examples which prove the rule. Because here there were lots of “countries” with being formed at the same time from very much the same basic peoples, had very much the same culture, history, laws etc., so came into being with enough in common to merit a union. In other words, there was not a lot of difference … but even so, it still took a bloody civil war to bring them all together.

That is the lesson Europeans seem to ignore! They take the modern US – formed from what in historical terms was almost identical countries and nations – they point to its present success – but ignore what it needed to get there: CIVIL WAR!

In contrast, Europe has a very very long history and the nation states like the UK have had their own way of doing things for millennia. Likewise Germany and likewise France/Gaul. All these nations have existed for over 2000 years and they have entrenched cultural attitudes that no EUrocrat can change. There is no way on earth you can bring all these very distinct countries into one political union without an almighty fight occurring.

The Romans tried it – and failed. Napoleon tried and failed. Hitler tried it and failed. Byt the Eurotic madmen in Brussels ignore all that history and think that somehow they will succeed?

The problem is that a single currency will inevitably force those that stay to be closer and closer and closer politically and economically. A single currency cannot have divergence economies all growing at different rates – or at least any disparity quickly creates enormous stresses that just build and build the more divergent the economies.

The great advantage of a nation having its own currency, is that the currency provides a “slip zone” by which the economy of two countries can diverge. But if two such countries are forced into economic union, then if one group of workers are less productive – rather than dropping wages as is needed to bring in work, they tend to try to maintain “wage parity” with the result that work tends to go to the more economically efficient country.

So, the less economically efficient country gets less work, less work means less income, the tax income to government drops and in turn the government have less money to invest in improving the economic infrastructure. That then tends to create a vicious cycle – the investment in roads, rails, schools etc. goes down, the attractiveness of that country/region goes down and more work goes to the better country/region. That region then has more to spend on infrastructure, schools, roads, etc. and so is even more attractive. And very soon, like Greece and Germany, one country is an economic basket case and the other is booming.

The only ways out are:

  1. To throttle the booming economy
  2. To tax the booming economy heavily and pour huge amounts of public money at the less efficient country in the hope of developing it economically
  3. For the two countries to have their own currencies.

The advantage of the last, is that it allows countries that are falling behind to drop the value of their currency. That means they become more competitive as wages in the country fall. That in turn encourages people both inside and outside the country to buy produce from the country, which then gives a boost to the economy. So, whilst there is a small adjustment – the overall economic impact is much less than if they remain in the same currency.

It’s hard enough for England and Scotland where there are large-scale transfers from London to Scotland (Barnet formula)  – but as everyone knows that relationship is hardly rosy at the moment. But to attempt such an exercise with Greece and Germany is just plain stupid. One of them has to leave the EURO sooner or later, otherwise the only way to align their economies economically is for Greeks have to start working like Germans (LOL), for Germans to start working like Greeks (a basket case economy) or for hard working German tax payers to fund the Greeks with their long holidays, pensions etc. And it won’t just be Greece. Very soon German (& UK) workers will be having their income cut down to that of the Greeks by taking money away in “EU taxes” and handing it over to Greeks, Portuguese etc.

It will be like playing Monopoly – except at the end of each round, everyone hands their money to the EU and then the EU (under Mafia guidance and cream off) then hand the same amount back to everyone no matter how hard they worked. That is the only way to get the whole EU growing at the same speed.

Only a complete madman with no idea of the Euocracy will believe that the “common” economic growth will be closer to Germany’s than Greeks. In other words, the economies will largely grow a the lowest common denominator.

And there is no way on earth that the German public will tolerate it. Nor will the Greeks tolerate living in a Eurozone that massively benefits the Germans and wrecks their economy.

The EU is already a failed state!  Total European union is a physical impossibility which will never happen and it is just nuts to think it will. So, sooner or later Greece will exit the Euro, followed by the next worst economy – then the next, then the next. In other words, when enough time has passed to allow the differential rates of growth to create enough strain, the EURO will start being one continuous stream of exit – bail outs – re-entrants – calm – stress, strain, exit, bail-out.

We in the UK can’t stop that happening – the EU nations appears set on this suicidal course. But we need not be part of the madness.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s