Argentina is no danger to the world - but the eurozone is

Did South Korea need to join a currency union in order to bring about its remarkable economic revival in the wake of the Asian financial crisis of the late 1990s? No, it reformed itself, and, assisted by the following wind of a more competitive exchange rate, has been booming ever since, in a way that the afflicted nations of the eurozone, five long years into the worst economic collapse of the modern age, can only dream of.

Europe offers nothing in the way of solutions, just grinding, destructive austerity, which has inflicted seemingly permanent economic damage on once proud nations. Only growing labour migration prevents a more serious form of what economists call hysteresis – the loss of skills, and therefore economic potential, associated with prolonged periods of high unemployment.

Against the self-harm of the eurozone, Turkey and Argentina look like mere fireflies before the storm. In the scale of things, they don’t matter, and in themselves are unlikely to alter the wider picture of what’s happening in the world. The greater menace still lies in Europe, which, as the US Treasury has observed, now adds a seemingly permanent deflationary bias to the global economy. The structural reform Europe fondly imagines its disciplines impose is just skin-deep. It will, in any case, have only limited impact in economies where the stuffing has been knocked out of demand. Since subjecting itself to the diktats of the EU troika, Ireland has slipped ever further down international “ease of doing business” league tables, while in Italy they cannot even manage to deregulate the taxi service without the country grinding to a halt in a wave of protests.

One thing the crisis has succeeded in doing, however, is dramatically cutting wages in affected economies. If clobbering people’s standard of living counts as policy success, then Europe is setting new standards, never mind that reduced nominal wages only further increase the size of the debt overhang, making countries even more prone to future financial trouble.

Unable any longer to afford its own goods and services, Europe instead dumps its excess production on the rest of the world and calls it progress. There could scarcely be a more counterproductive approach to policy. Incapable of going either backwards to the sovereign independence of the past, or forwards to the burden-sharing which necessarily underpins any successful monetary union, euroland has become stuck in a destructive stagnation of its own making.

All Europe’s great gifts to the world – its inventiveness, industry, art, music, forms of governance, its very sense of identity – spring from its cultural, economic and national diversity. Crushing the life out of this infinite variety in pursuit of some corporatist vision of low-cost international competitiveness seems to have become a goal in itself. Even the ludicrous Kirchner seems a cut above such tyranny. Look on my works, ye mighty, and despair.

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