Krugman in Europe

Whether or not the Nobel Prize for Economics is a "real Nobel," Paul Krugman knows more about money than you do. So it was unsettling to see his suggestion that the European Monetary Union could have been a mistake.

According to Krugman, it's not the cumbersome welfare state that has Europe in so much economic trouble. He argues that financial authority has not been centralized enough in Europe, that is, that the slow development of E.U. political institutions has prevented decisive action to save the economy. Hendrik Hertzberg compares the current E.U. to our own Articles of Confederation-era, when state sovereignty precluded cohesion.

Just like America, Europe has a sunny southern peninsula that recently enjoyed an ill-considered housing boom. All the construction led to an influx of immigrants into Spain, a country that historically exported more people than it took on. Spanish unemployment has always been pretty high and now it will get bad. Krugman points to the impossibility of devaluing a currency that many economies share.

With the benefit of hindsight, maybe the Lisbon Treaty should have been ratified long ago, so that there would then be enough of a federal presence to make some deals. But this is Europe we're talking about, 23 official languages, 730 million souls, and a justifiable skepticism of bold political leaders.

Charles de Gaulle said about France that it was impossible to have a one-party system in a country that has 246 varieties of cheese. The body politic is too variegated. Maybe, in the long run, it's better that way.