Blogging has been non-existent the past few days because more pressing work has taken precedence. One such thing was an essay (with Thomas) for ForeignPolicy.com on why we should all be more blase about the Greek situation. It's very counter to the sort of convention wisdom that you can find here (other examples cited in our article).You can read it here. Our central claim:
Further economic and financial deterioration in Greece would certainly have negative impacts there and might adversely affect Greece's southern European neighbors, who are facing similar circumstances. But financial weakness in Greece is unlikely to spark a global crisis analogous to the one triggered by Lehman Brothers' collapse in September 2008 -- even if economic woes eventually force Greece to exit the monetary union. Instead, the global consequences of southern Europe's debt crisis are more likely to resemble the Latin American sovereign debt crises of the early 1980s, the East Asian crises of 1997-1998, and Argentina's crisis at the turn of the millennium. Each of these had significant local effects -- widespread bank failures, sharp increases in unemployment, large exchange-rate devaluations, deep recessions -- that were not transmitted globally. Indeed, in each of these cases the global economy continued to grow, major world equity markets held their value, and world trade expanded. None had the dramatic global consequences sparked by Lehman's collapse.We're already getting some pushback -- as we have from the underlying research that informed this piece -- such as this from Dan Drezner:
I think you understated the global impact of the 1997 East Asian crisis. I'd rather avoid another one of those.On the one hand, I agree: I'd rather avoid another one of those, although I don't know how that's possible. On the other, I don't think we understate the global impact of the E. Asia crisis. I think many people dramatically overstate it. The period during which the E. Asian crisis occurred -- the late 1990s -- is associated with one of the largest periods of global economic growth ever. These days we look back on it with nostalgia, and wonder how we can do it again. The E. Asian crisis was a crisis for E. Asia, but not so much for everyone else. I think it's likely that the S. European crisis will be the same. Actually, given the slow-motion nature of the thing, I think it's likely that the S. European crisis will be even less of an event.
We may soon see. I hope we don't.