Tuesday, March 31, 2009

Should Europe Do More?

. Tuesday, March 31, 2009

McMegan restates the obvious:

But how sympathetic is the US taxpayer supposed to be? We pay for their military protection, we pay for the profits that develop the drugs and consumer goods they happily consume, and now we're supposed to pay for their economic bailout too. Europe could liberalize its markets, let in immigrants, develop a real military, instead of just critiquing the way we do it. We'll continue to let them free ride, because there's no way to stop it. But I'm starting to think we should rub it in a bit more.

The assumption in many quarters is that the rise of BRICs will come at the expense of the U.S., and recent rumblings from China and Russia that the days of the dollar as reserve currency are numbered are illustrative. But it will be a very long time before the BRICs surpass the political or economic clout of the United States. Europe, on the other hand, is well within reach. And the more that Europe aggravates the U.S. by complaining while free-riding, the more incentive the U.S. has to shift its focus away from Europe and towards Asia and the emerging Americas. Indeed, one reason why Europe has been able to afford such luxurious social programs is because the U.S. has effectively subsidized them through security guarantees and transfers of technology and intellectual property.

Now many E.U. leaders wish to "coordinate," by which they mean that they do little or nothing while the U.S. pays yet again. Yes, it's true that the Eurozone has less policy flexibility because of the common currency (and concomitant commitment to tight monetary policy), demographic realities, and already-deep public expenditures. But those problems are self-made, and whining about it, as Chancellor Merkel has done, accomplishes nothing.

Now Europe wants to bolster the IMF, primarily to bail out Eastern European countries that have been battered by the economic crisis. And where is the financing for that to come from? The largest chunk will come from the U.S., of course. Still, we'd probably be happy to contribute if Europe was willing to reciprocate with domestic stimulus, or help in other areas. But Europe is signaling over and over that they are only willing to coordinate on their terms, and if they don't get their way they'll take their ball and go home.

Eventually, the U.S. might call Europe's bluff, and look to the BRICs for future economic partnerships. Would this sting the U.S.? Of course it would. But the consequences would be far more dire for Europe.


Benjamin Thomas Sutpen said...


Should Europe Do More?




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