So I
believe that there are reasons behind Europe’s
denial to lessen the Monetary Austerity. Monetary Austerity leads to Fiscal
Austerity for the ‘problematic’ countries, but I believe that this is
prerogative for the long-term wellfare. Of course I should explain this view.
The US has problems
of the same nature as the EU, but it has three very important advantages so it
can use monetary policies to stop its crisis.
INTEGRATED SOLUTIONS
The first advantage is that US Government has unified
economic control over all its States. It is very important in time of crisis to
have an integrated plan and at the same time, be able to act concretely in order to overcome such a complicated
problem. The Organization (whether is a country or a company) is like an
Orchestra. Its Leadership (Government/High Management) should have the
authority to lead fast and sufficiently. In time of crisis practically there
isn’t much room for “democratic” debates and philosophical conversation. The EU
was formed on such a “democratic” logic. Every decision takes its time.
The European
Union is a mosaic of countries. Most of the countries have different needs,
different ways of solving problems and mostly different geopolitic targets. In
this mosaic we can separate some teams with close geopolitical targets and
views.
A)
Countries
of the South Europe: Countries with a low production, low competitive position,
low exports, many imports, high rankings of unemployment, large and expensive
public sector, high tax evasion, and finally with no geopolitical ambitions.
B)
Germanic
Tribes (as I like to call them): Consisting of the Nordic and Germanic Nations
which produce much quantities and have many exports, low imports (mostly raw materials),
very competitive economies, big but cheaper public sector and big welfare state
paid by the high taxation, low tax evasion, many International and Global Companies.
C)
British
Empire: By this term I mean the British Commonwealth
which is very large and is already an Economic Zone in the interest of the
English people, in existence more than 100 years.
D)
France with Belgium which politics have each
leg in different boats. In one way French are totally agreed with the Germanic
views, while on the other hand they try to support and enstrengthen ties with
the “countries of the south”.
In reality
Eurozone is the only way that Germans may one day
become a superpower (a different European Union was also the national dream of
Germans even in Hitler’s Era), while Brits try to avoid the restriction that this
causes, not to say that they try to prevent Germanic Tribes from achieving such
a goal. France
realizes the Germanic Dream and follows it, mostly even supports it, while the
countries of the south struggle to keep their economies in existence and their
futures across this dream.
Furthermore
US citizens share the same cultural beliefs to a greater extent than the
European citizens. The US
is more homogenized country. EU citizens see the world differently. The
countries of the south Europe do not have long
term vision. It is obvious in their recent history that they lack of ambition and
aggression. Elements very important in a fast moving (changing/aggressive) environment.
RESERVE CURRENCY
The
difference in the cultural internal environment of EU, lies also in the second strong US advantage. The US use currency
neither as a way to exchange products, nor as a way to store wealth, but uses
it mostly as a product. Why do I believe that they see it as a product? But of
course because most of the value the US Dollar possesses, has little to do with
the exports in relation to the imports (way to store wealth – economic growth
through trade surplus) but mostly has to do with the high demand of dollars in
contrast to the supply. Although the supply (circulation) of the dollar is
already high in contrast with the other currencies it seems that it doesn’t
lose value through its big demand. Many times this demand comes by the force of
power, war, or political pressure. One day a University teacher from the Copenhagen Business School,
explained this to me by the simple phrase “The EU doesn’t have the necessary
military bases” smiling, of course with the knowledge that EU doesn’t have even
a unified army. The US Dollar is and will for many years reamain the world’s
“most wanted” reserve currency.
On the
other hand, northern Europe’s countries desire
power. Its people have a long term vision of accumulating wealth and power. So
they try to be continuously competitive, and “store” their wealth in the market
power/value of their currency. Their high competitiveness leads to high exports
and high exports lead to high demand for the Euro (or to their local currencies
some years ago), high demand with the restricted supply leads to greater value
of the Euro (in comparison to the other currencies), greater value leads to cheaper
imports of raw materials, cheaper raw materials with the wage restriction leads
to cheaper quality products which at last lead to even greater exports, and so
on. Citizens of these countries may gain no salary raises but their buying
capability grows through their cheaper products and the power of their
currency.
In the
other hand countries in South Europe, see
currency neither as a way to store wealth, nor as a separate investment
product. These countries never had any ambition of making their currency a
global reserve currency. These countries see currency simply as a way to
exchange things, as the vehicle to roll their economies. They believe that if
money is in circulation then Economy will roll and the trade efficiency will
grow. They do not care about the value of their currency. The above is proven
by the devaluation of the currencies in the past decades. They do not store
wealth. This is not bad because they had well rolling economies before the
“Euro era” but never did they reach in high positions in economic rankings, nor
had big living standards.
Multinational/International Companies
The third US
advantage is
that the US
leads today’s developments in all the Economic aspects. They have on-shore
companies with great value. Value even bigger than the most countries of the
world (like Apple). These companies and Organizations (because we should not
forget the Universities) lead the world developments in Technology, Science,
Management, Economic/Investment Products and products/services in general.
These Organizations manage to gather much wealth across the globe and greatly
contribute to national salaries pushing them upwards. That is why most times
National Global Product is bigger than the National Domestic Product. The
bigger the National Global Product is, the more it leads to higher salaries
according to the product capacity. Let me give a simplified example, a country
that has a product capacity of $100 and has 5 employees, pays $20 dollars wage
each of them. A country that has $100 product capacity, and has earnings of
another $20 from off-shore operations and investments and still has 5 employees
pays them $24 each.
When a
company on-shore (US based Company) makes profits off-shore, even when it
produces its products and sells them in other countries having no connection
with the country it is based, is taxed for its profits by this country.
Furthermore it pays higher salaries to the people that work for the on-shore operations
that hierarchically are higher than its factory workers in Cambodge or Taiwan. These
salaries are transported through taxes and consuming to the small and mediocre
businesses of this place raising technically more the salaries of the people
who work there etc. The effect is much better than a simple export because many
times we speak for earnings from money invested, not even a product.
In addition
exporting goods and services and investing causes the countries that pay US (one
way or another) to ask for dollar in order to pay their debts, interests, or
dollar in order to transform the earnings in national currencies to dollar and
transport them on the US.
Demand for dollar worldwide raise the value of the dollar eradicating devaluation.
CONCLUSION
These three
advantages diminish in a huge percentage the disadvantages of “printing” money
and lower the Central Bank’s (FED’s) Interest Rates. Exporting money together
with goods, means that US exports all the negative aspects of throwing money in
the economic circle, specifically exporting the inflation and slowing
devaluation. In general US manage to monetarily solve economic problems,
because has the ability to diminish the disadvantages of such policies.
Something that Europe is not able to do
without facing serious consequences. Geopolitics therefore are directly
connected to the global reserve currencies, so indirectly affect the consequences
of monetary solutions to crisis problems. So Europe
should, for sure, have one way of seeing things, not two or worst three. My
opinion is that the solution for EU lies in the middle of these two European
views in the way they see currency, if we want to become a truly unified
economy. South should close the wounds so it can stop bleeding, while north
should heal the wounds so that these wounds will not become an infestation.
Besides northern European countries, in big extend, are also to blame for these
wounds.
Σινίκογλου Μιχάλης
Sinikoglou Michalis
B.Sc. Marketing and Communication (Athens University of Economics and Business)
M.Sc. in Services Management (Management Department, Athens University of Economics and Business)
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