The fundamental problem versus the symptoms in Europe
Martin Wolf, always a worthy read, circles around the essential issue of the crisis in Europe today but I think he ultimately misses the fundamental problem. The problem per Wolf is a balance of payment mismatch between Germany versus Portugal, Spain, Greece, et al. In my view though, this imbalance should be seen as a mere symptom of a far larger problem: that we’re tremendously productive within a system of tightly concentrated private ownership.
This is a toxic brew and the normal result, the attractor state so to speak, can only be massive un/under employment given that the need for human labor input is low and ever declining. Productivity depends on economies of scale so we’d expect clustering in some geographic areas and a resulting regional disparity in unemployment levels. But the attractor state for the system as a whole is unchanging: un/under employment and the ever constant political problem of how to provide an income stream, i.e. create jobs, for the redundant population.
The basic trend toward this state can be offset for a certain time through credit. Regions which lack concentrated production operations can increase consumption through balance of payment deficits or through rising government debt. Both, though, are seen as fundamental evils by the Lords of Orthodoxy; in reality they’re needless accounting fictions that do nothing other than restrict the human benefits of productivity. In the real world, it should be seen as absurd that people in Europe (or anywhere else) are forced to live far below technological capacity for no reason other than the enforcement of the accounting principles of trade balance and permissible government debt ratios.
The fundamental problem isn’t balance of payments and it isn’t government debt; it’s how to use our productive potential. The only way out of our problem is to recognize its fundamental nature, to stop focusing on mere symptoms, and to finally do the human work of re-engineering the system so that we’re no longer slaves of accounting.