Personally, as a baby-boomer, I can identify with John Boehner’s argument that opportunities were there for the taking. I can cite numerous examples of people that I know, from very ordinary backgrounds, who have risen to the challenge and been enormously successful in different walks of life. My colleague and co-blogger, John Gelmini and myself are examples of people who believed in education, hard-work, and risk taking. But we grew up when the American Dream was alive and well.
Sadly, for millennials today, the challenges are different and Paul Krugman is right to cite the evidence. Competition is not really open any more, in the same way. The children of the privileged and wealthy slide through doors that are obstacles for the majority. In countries like the UK, independent professionals are discouraged by government policy that favors the big players in recruitment, outsourcing and technology. Competition is no longer fair and open. Some of the difficulty in Europe arises from the European Commission which has unnecessarily bureaucratic procurement rules. Actually, Europe is now virtually dysfunctional. Southern European governments are no longer autonomous. Proud countries like Greece, Spain, Portugal, Italy, Cyprus and now France must bow to the dictates of Germany, administered through the ECB, the European Commission and the IMF. The ECB is not a real central bank and a lender of last resort; it too must bow to Germany. However, the ECB has recently gone to enormous lengths to ask German to reflate her economy – this is in both Germany’s and Europe’s best interests. Even a famous German magazine, like Spiegel, is citing leading German evidence that Germany is crumbling.
But from the German Government’s perspective, it expects Southern Europe to honor commitments to the 3% fiscal compact – everybody signed up to this with the Euro; but it was not clear at the time how this would be so strongly in Germany’s favor in the early years and so painful for Southern Europe in recent years. Before Germany will relent and reflate, she wants to see real reform in countries like France and Italy. The reality is likely to be anarchy in France before there is comprehensive reform, especially in the bloated public sector.
There is room for compromise though. Governments need to articulate robust strategies for dealing with youth unemployment. This must start with a new set of priorities for the European Commission (EC). The EC seems to give priority to green issues and regulation but subordinates effective strategy. For example, where is the EU’s properly risk-assessed, energy strategy?
When Krugman wrote his blog, he was no doubt focusing primary on the US. But matters are much worse in Europe, especially the Eurozone, which is conceptually flawed and propped up by misguided policies of a fiscal compact.
Let me ask an open question:
So will Germany reflate or France and Italy reform, or perhaps both?