Paul Krugman, ever the liberal, is less vituperative than usual in today’s column in the New York Times. It is entitled Europe’s Austerity Madness and is well worth reading. Not for the column’s correctness but for its clarity. He outlines with rare accuracy the predominant views of the cause of Europe’s financial woes and the solution for them.
First we must note that what passes for the Right in most of Europe would be called Liberal in the U.S. This places Krugman’s argument more in the Socialist camp than Liberal. He says of the European Right,
Talk to German officials and they will portray the euro crisis as a morality play, a tale of countries that lived high and now face the inevitable reckoning.
And fear of a backlash from voters who believe, wrongly, that they’re being put on the hook for the consequences of southern European irresponsibility leaves German politicians unwilling to approve essential emergency lending to Spain and other troubled nations unless the borrowers are punished first.
Despite the insertion of the word “wrongly”, Krugman has done a good job of stating the argument coming from Europe’s Right. One other fault to find, it’s not punishment that’s sought; it’s bearing the consequences of one’s own decisions. If you choose to live beyond your means don’t ask someone else to pay for it.
In Krugman’s view,
More austerity serves no useful purpose; the truly irrational players here are the allegedly serious politicians and officials demanding ever more pain.
Consider Spain’s woes. What is the real economic problem? Basically, Spain is suffering the hangover from a huge housing bubble, which caused both an economic boom and a period of inflation that left Spanish industry uncompetitive with the rest of Europe.
Spending was not the problem and austerity is not the solution. Greece and Spain are victims of a housing boom and collapse that occurred in the private sector. The fault is with other nations in the Eurozone that are failing in their moral obligation to redistribute some of their relative wealth to where it is needed. Inferred in that view is the notion that the greed of capitalism was the source of the problem and socialism is the solution. Get the cause wrong and so it will be with the solution.