EU: going for broke

The 2012 global economic results highlight the unique counterperformance of the European Union among its major trading partners. According to the end of year statistics published by The Economist, even countries like Japan and the United States have managed growth rates of 2 percent or above. The average growth rate for the ASEAN countries reaches 4.5 percent, whilst China enjoys a still robust 7.5 percent growth this year. In Latin America, the economies of Brazil, Venezuela, Argentina and Chile have grown on average by 4 percent in 2012, a trend set to continue next year as well.

Alas, no such performances for the European Union. Aggregate economic growth for the 27 members is stuck below zero, even if overall the Union has the lowest budget deficits (3.5 percent) and public debt in relation to aggregate GDP within the industrialised world (around 60 percent). Southern EU members such as Greece, Portugal, Spain and Italy experience various rates of negative growth and high unemployment not seen in Europe since the Great Depression, whereas Britain, France and Holland are mired in economic stagnation. The exceptions to the rule are some Nordic countries – notably Denmark, Sweden and Finland – led by Germany. The latter has pressured the other  European Union members into adopting unwise and harmful austerity policies, since its elites display a penchant for economic theories in vogue in the 18th century, when macroeconomics and econometrics had not yet been discovered and economic science was still only a branch of moral philosophy. If one adds to the obsession of the balanced budget – popular among US Republicans in the 1990’s – the pathological German fear of moderate inflation, one can more easily understand the reasons behind the current economic stagnation in Europe.

The IMF has recently tried to educate EU leaders to the effect that a 1 percent reduction in public spending lowers growth by at least 1.5 percent, and not, as originally thought, by 0.5 percent. The IMF’s recommendation was to ease up on austerity measures, since the savage budget cuts requested by Europe’s neoliberals have already done great harm to the continent’s economy. Fully engaged, however, in backing such misguided policies, most EU conservative leaders balk at the IMF’s lessons in econometrics.

The inescapable fact is that a majority of the best-performing industrialised countries in 2012 are led by left-leaning parties. Their leaders are more interested in promoting economic growth and, in Latin America especially, in constantly reducing social inequalities.

The ideologically induced stalemate that has stunted economic growth in Europe is set to continue in 2013 as well. Unfortunately, France’s and Denmark’s socialists are at present overwhelmed by the rest of the EU’s leaders, more at home with the theories of David Ricardo and reverend Malthus than with those of today’s Nobel prize-winning economists…

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