Home > EMU Crisis > What is Wrong with the EU?

What is Wrong with the EU?

December 5, 2013 Leave a comment Go to comments

Eurostat just released the 2012 figures for poverty and social exclusion in the EU. The numbers are terrifying. Let me quote the press release: “In 2012, 124.5 million people, or 24.8% of the population, in the EU were at risk of poverty or social exclusion,  compared with 24.3% in 2011 and 23.7% in 2008. This means that they were in at least one of the following three conditions: at-risk-of-poverty, severely materially deprived or living in households with very low work intensity
One may be tempted to shrug. After all, 1% in four years, is not that much. Let me put actual people behind the numbers: The number of people at risk of poverty increased of 5.5 millions between 2008 and 2012. Strikingly, always looking at Eurostat data, the number of jobs lost in the EU28 over the same period is almost exactly the same (-5.4 millions).

This is plain unacceptable. And teaches us two lessons

  • Our welfare system is not capable anymore to shield workers from the hardship of business cycles. We progressively dismantled welfare, becoming “more like the United States”. But we stubbornly refuse to accept the consequence of this, i.e. that fiscal and monetary policy need (like in the US) to be proactive and flexible, so as to dampen the cycle. Constraints to macroeconomic policy, coupled with a diminished protection from the welfare state, spell disaster, social exclusion, and the destruction of the social fabric.
  • The second lesson is that these numbers are there to stay. The economy may recover, but the loss of confidence, of capacity, of social status of those who we pushed into hardship, will stay with us for years to come. We are destroying human capital at amazing speed.

What is enraging is that none of this was inevitable. The crisis could have been shielded by less ideological leadership in European institutions and in some most European capitals. Frontloading of austerity in the periphery was a terrible mistake. Not accompanying it with fiscal expansion in the core was a crime, showing of how little solidarity counts, facing the protestant urge to “punish the sinners”.

The result is that one of the most affluent economic areas of the world barely notices that one quarter of its population lives at risk of poverty. What is wrong with us?

Advertisements
  1. Sergio Bruno
    December 6, 2013 at 8:42 am

    The situation you describe was avoidable. The reactions to it become every day more difficult. As you say the bulk of what is happening is the destruction of capital. It takes little time to destroy capital, it takes years to construct it. But what is more important is that what the European policies are destroying is what is behind the construction of capital: the hope and the trust which are the basis for the positive expectations which bring to invest in the construction of new capital.

  2. raffaele
    December 6, 2013 at 10:55 am

    To be more synthetic: If you stop putting fuel into the car, the car stops. But if the car remains stationary too long, when you put once more fuel into it, it will not start anymore.

  3. July 10, 2014 at 7:30 am

    Thank you, I’ve just been searching for info approximately this topic for a while and yours is the best I’ve found out till now.

  1. December 6, 2013 at 8:52 am

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: