Don´t be afraid to see what you see
Thursday, 24 May 2012
The euro is "ripe for creative destruction"
The Guardian´s economics editor Larry Elliott thinks that the euro is ripe for "creative destruction". And it is difficult to disagree with him:
Despite this monetary chaos, there are still some in Brussels or Frankfurt who argue that the euro has been a success and will go from strength to strength. They sound suspiciously like the members of the politburo who in the 1980s said the Soviet Union was working and would last for ever. The undoubted political commitment to the euro means that there are now calls for a fast-track approach to full political union, but this means repeating the top-down approach used for monetary union and – at a time when the markets are talking about a Greek exit within weeks or months – would take years to finesse.
Instead, the realistic options for the euro are that it breaks up or staggers on in a zombie-like condition, with low growth, high unemployment, growing public disenchantment and widely divergent views in Europe's capitals about what needs to be done. As a company, the euro would have gone bust by now. It had a duff business plan, which has been poorly executed. The experiment survived in the benign conditions of the early 2000s but only the core business, Germany, has been able to cope with the much tougher climate of the past five years. There is boardroom squabbling, the workforce is in open revolt and there are no new product lines.
The euro, in short, is ripe for what Joseph Schumpeter called creative destruction. Capitalism, according to Schumpeter, was the story of constant, normally gut-wrenching change, in which innovation put established firms out of business and made whole sectors obsolete. Anybody working in the music industry, publishing or newspapers in the past decade understands what Schumpeter was talking about.
Does Schumpeterian theory apply to the eurozone? In a way, it does. The centre of gravity in the global economy has moved from Europe, which looks old-fashioned and lumbering in a world of rapid innovation and loose networks. Tweaking the flawed model in the way François Hollande is suggesting will not do the trick. The only real solution is to rip up the blueprint and start again with the small group of countries that could hack it together. Making the eurozone work is like finding a long-term business model for HMV or Thomas Cook. Like them, monetary union is the past, not the future, an analogue construct in a digital world.´s