Monday, 20 July 2015

Who benefits?

Some people thought the euro was a bad idea from the beginning.

A gloomy but interesting column by Paul Krugman in today's New York Times has some of the details:

That is, [the euro] sounded forward-looking, European-minded, exactly the kind of thing that appeals to the kind of people who give speeches at Davos. Such people didn’t want nerdy economists telling them that their glamorous vision was a bad idea. 
Indeed, within Europe’s elite it quickly became very hard to raise objections to the currency project. I remember the atmosphere of the early 1990s very well: anyone who questioned the desirability of the euro was effectively shut out of the discussion.

I've seen people blaming "the bankers" for the economic catastrophe in Greece, and by extension for creating the euro in the first place.

It sounds sort of plausible. It's always useful to ask cui bono -- who benefits? The bankers benefited, therefore they must have had a hand in it.

The trouble is, the beneficiary is not always the instigator. If someone wins the National Lottery, we don't assume he somehow influenced the lottery draw or was responsible for the lottery existing in the first place. He's just a lucky guy who was in the right place at the right time. He won the lottery because somebody always wins the lottery.

Similarly, it is a mistake to assume the euro was the creation of some sinister banking conspiracy, pulling the puppet strings of European politicians for the last thirty years. Instead, it sounds more like a case of naive political groupthink. There wasn't an evil plan, just a lot of mostly well-intentioned people who weren't interested in criticism of their exciting new idea. The wolves of Wall Street are making money out of the resulting crisis, because they always do.

In a way, the groupthink explanation is more disturbing than the conspiracy. The euro crisis was not orchestrated by some cackling supervillain; it grew out of public servants trying to do the right thing.

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