‘Why can’t a woman be more like a man?’ asked Professor Henry Higgins in My Fair Lady, expecting no proper answer. In another context, that of economics, he might have asked ‘Why can’t one country be like another?’
I thought of Henry Higgins as I read a letter recently in the Financial Times. It was written by an Irish civil servant in praise of German efforts to save their weaker brethren of the European Union.
The relationship between economics on the one hand and disciplines such as history, psychology, and sociology on the other is much disputed and seems to me a little like that of couples who live in a state of hostile dependence: they cannot live together but cannot live apart.
Are there rules of political economy such that if they are obeyed prosperity invariably and everywhere results? Or, of course, if disobeyed, impoverishment? Ought an economist to be more like a novelist in his understanding than a scientist?
I recently read an article by Barry Eichengreen, professor of economics and political science at Berkeley, about the Greek crisis, if a situation that has continued for years can properly be called a crisis. The article addresses the mistakes made by Greece. Amen to that: who wants to repeat mistakes?
For those who still have the patience—or the sick curiosity—to follow Europe’s parody on democracy and the rule of law, it’s been a fascinating few days.
Forget Greece and Portugal: fiscal consolidation in Spain and Italy isn’t going particularly well, either. In both countries, the lack of progress has a great deal to do with fiscal federalism’s pathology—i.e., the tendency of junior government to rack up debt and to gamble on a federal bailout. (I’ve droned on about that unfortunate tendency in a series of earlier posts.) In Spain, the regions (which account for the lion’s share of the Country’s excess debt) seem to be winning the game of chicken: the already-bankrupt government in Madrid is sending money their way, in return for empty promises. My buddy Alberto Mingardi’s terrific piece on the Italian situation appears here.
The EU is hardly an innocent bystander. For decades, it has been buttering up regions financially as well as politically, on the theory that what’s bad for nation-states is good for the EU and to the point where it’s hard to explain why Spain or Belgium still exist. They are the functional equivalents of insolvent pension funds with a colorful flag and a Chairman who answers to “His Majesty.”