Is not even an issue of number of jobs, but of quality of labor.
Spain grew economically in the 70s and 80s because it was a developing country, and could provide cheap labor to neighboring countries. The growth in the 2000s came from a massive housing bubble that didn't end well for most involved.
As we became a developed country we didn't know how to reorient our economy. Now we are too expensive for cheap labor, which is relocating elsewhere, neither we are specialized or competitive enough to oppose other strong economies.
Some times I have evaluated the possibility of going back there and try to make a career in tech. It just takes a couple of conversations with locals to erase that idea from my mind. The country is not socially tailored to attract and retain highly skilled specialized workers, and sadly it's an issue that I don't hope to see changed in the future.
Having a single monetary policy for countries as different as Spain and Germany, with no real shared fiscal policy, is a direct contributor to this malaise.
If they had separate currencies, Spain could inflate away a lot of their debt. This would cause a bunch of pain for your average Spaniard, but it would also mean that Spain's currency devaluation could drastically help its exports (and of course one of Southern Europe's most valuable "exports" is tourism). A direct consequence of being on the Euro is exactly what you point out: labor isn't really cheap enough to be competitive.
> If they had separate currencies, Spain could inflate away a lot of their debt.
Which is why Euro is good for Southern European countries: it forces them to concentrate on productivity rather than economic alchemy.
Spanish labor got too expensive? You don't need a government to inflate your currency, you just start lowering your rates.
My fellow Italian workers cannot find a job? Stop talking about "articolo 18", stop looking for assured indefinite term contracts, accept the reality! Enterprises know ups and downs: when thing go well, they'll be happy to pay you good money for your services, but when hell breaks loose your salary will be a burden for them. Either accept that employment contracts can be terminated before your retreat, or keep up the good work... uh, keep up the work... just keep up!
Every time I read histrionics about how the euro is a straightjacket, a trap, an evil German plan to benefit itself at the cost of its neighbours etc I just sigh. I am not even a supporter of the EU, but blaming the euro for low southern productivity is just wrong. The PIGS countries aren't seeing high unemployment and poverty because of the euro. They'd still have high unemployment even if they had their own currencies. The causes are fundamental.
All a floating currency would do is make it easy for them to screw over lenders in the short term by inflating their debts, which would be compensated by the markets charging much higher rates (this already happens because investors fear default instead of inflation). It'd also act as a forcing function to require the people living there charge (foreigners) prices that are reasonable for what they can provide, rather than expect them to accept market realities and actually lower their prices in order to compete.
The Euro has caused their debt to appreciate, so now they owe more money in real terms because the currency doubled in value. Meanwhile, Germany is able to export their goods without any currency risk. And now you have another layer of bureaucracy. The real issue is that when they created the Euro, they failed to consolidate the debt of all the nations. It's only a matter of time before the whole thing collapses.
The Euro took away the single most painful thing still plaguing travel between EU countries. These days an EU citizen can up and leave to a different EU country with very little friction (aside from the language in some places), which was the idea. That goal was achieved.
It is unrealistic to expect that countries will somehow not be able to solve their financial issues just because they lost one tool. That's an excuse, not a reason.
They lost control of their own currency. That's not just "one tool". It doesn't work and without full economic integration it never will. I think I know what I'm talking about as I'm living with this problem, have analysed it thoroughly because I have nothing better to do, know the history of this southern European country and their people, and as a result of all this I can't trivialize it by simply making up the belief that it'll be fine at some undetermined point in the future. It's more like the death by one thousand cuts, in slow motion.
>The Euro took away the single most painful thing still plaguing travel between EU countries.
In other words, it took away one insignificant burden on travelling, something which people do a best a few weeks a year, and in exchange it devastated their jobs and communities, for which they depend on survival (and for having the money to travel) all year long...
>These days an EU citizen can up and leave to a different EU country with very little friction
Yes, and usually with tears in their eyes, because they're forced to leave their country, culture, friends and close family to go work on some country that did better. Often even at 40 years old or later, and after their job in their own country crushed, because (among other things) of the Euro. The saddest songs in most southern countries are about migrating.
The kind of migration you describe is only a good thing (and a chosen option) for more privileged people who chose to do it and can chose to live where they want at a whim -- not for the millions merely forced to go find work elsewhere.
>which was the idea
Yeah, just not an idea that people asked for -- just the dream of the elites that created and pushed for it.
Human migration is not some new 21st century phenomenon. Humanity has been migrating in search of food, peace, and (later) jobs since before civilization. The poorest of the most desperate poor have migrated not even because of those Maslovian needs but for religion: "The Lord had said to Abram, “Go from your country, your people and your father’s household to the land I will show you"" (Genesis 12).
The US suffers from the same problem. The rural interior has dropped out, towns have turned into ghost towns, and instead of picking up and moving for greener pastures, people cling to hope that their livelihoods will return.
They won't. The wheels of capitalism are ruthless. The market forces capital to become more efficient over time, and capital has left in search of higher efficiency. People can stay behind and wither or get with the program and move and thrive.
Freedom of movement in the EU is so precious precisely because it offers the choice to avoid desolation, to not be stuck in a place with no opportunity and no future. A unified currency is precious precisely because it is a store of wealth that transports across the Union without loss or risk of sudden inflation. If people decide not to make these choices that is their fault and theirs alone. It's not easy to pick up and move to a new place with a new language - I've done it myself - but it is very, very much doable, and the world's poorest do it every day, picking up and moving to the US/EU in search of opportunities which were completely absent in their home countries.
>Human migration is not some new 21st century phenomenon. Humanity has been migrating in search of food, peace, and (later) jobs since before civilization.
Well, slavery and poverty aren't new either, but at some point it would be good we'd left them behind.
Migration by reasoned choice is OK -- forced mass migration for man-made causes (war, unemployment, wealth distribution, kleptocracy, ecological disaster, etc) is bad, and we should fix its causes.
>They won't. The wheels of capitalism are ruthless. The market forces capital to become more efficient over time, and capital has left in search of higher efficiency.
Well, I don't believe in bending over to blind forces of nature. That is a regression to primitivism, when we made altars of forces like the thunder or rain that we could not control.
I believe in people actively shaping their future and their societies, and not just by reacting to some "market forces".
Capital would have us all live in slums and lick our master's boots if they could absolutely have its way.
>Freedom of movement in the EU is so precious precisely because it offers the choice to avoid desolation, to not be stuck in a place with no opportunity and no future.
Until now, the EU was enforced, and follows the politics, that precisely create this desolation, and turns countries into places "with no opportunity and no future".
Not playing that musical chairs game is the wiser choice.
>The real issue is that when they created the Euro, they failed to consolidate the debt of all the nations.
No one failed, we just didn't want to (for reasons very obvious now, in hindsight).
Also, the countries (Spain, Greece, Portugal...) accumulated most of the debt _after_ they got the Euro precisely because the Euro enabled them to do so.
>Which is why Euro is good for Southern European countries: it forces them to concentrate on productivity rather than economic alchemy.
Yeah, and that experiment has gone very well... /s
What it actually does is cripple them from one of the major tools to control your own economy. It's no "alchemy", it's a tool -- the greatest economies of the world use it whenever they have to.
The single monetary policy hasn't prevented most countries from having growth. The solution is price deflation, which is not as "good" (for variable amounts of good) as inflating your currency, but it works.
Tourism seems to be pretty price inelastic to be honest (as seen by neverending lines and crowds).
> labor isn't really cheap enough to be competitive
>The single monetary policy hasn't prevented most countries from having growth.
Many of these are the counties that are beneficiaries of the policy. Ireland is a more reasonable counter- similar problems to Spain, but a good recovery.
But inflating away the debt simply defers or masks the underlying problems. The use of a consistent currency makes it easier to export your labor or goods, and makes it easier (practically and politically) for other countries to provide aid.
But Spanish tourism industry does not need currency devaluation, it is currently highest it has ever been, measured by number of visitors, and probably by earnings too.
Labor is cheap enough, there are issues with labor law and other structural problems though.
US states enjoy fiscal as well as monetary union. The tax take in New York is used to balance monetary transfers from Tennessee, this is not the case between Greece Italy Spain and Germany.
Fiscal union is no there yet but I think is the fist thing on the EU economic agenda. Before the immigration issue the fiscal union and a EU finance minister were the main subjects. Macron supported this even during his campaign.
Having spent more than a year in Barcelona in/around development & start up circles my biggest take away is that even the best developers I met were more interested in the status of becoming a manager instead of building something great.
Additionally and more concerning is that there is also a very real sense in Barcelona that “innovation happens elsewhere” when you talk to these same smart people. It is strange and it is like they’re looking for permission to do something different. It is almost as if the social contructs support doing things the way they’ve always been done.
Example: Even side projects would never get shipped and when I probed as to why my friend told me he “couldn't justify spending effort on this project to his family because he wasn’t getting paid for the work.” ... he had already built it the entire website and codebase and never shipped. (Surreal)
I like another commenter think about starting my next venture in Spain but my gut and experience says it would be a bad idea if you needed to hire tech talent locally.
> were more interested in the status of becoming a manager instead of building something great.
It is not the status. For long being a manager was the only way of getting a reasonable salary and to get to older age with a job. Developers were young and badly paid. It existed a generation for whom being a developer or just knowing about computer was a high pay job, but that disappeared fast.
Nowadays is changing fast. The main factor is companies that create product instead of consultancy companies that sell labour. For a consultancy, their profit is the difference between what a company pays and what the employee gets a salary. For a company with a product, the product quality, features and development time is important, so they pay and respect developers a lot more.
I have been part of the indie game development scene in Barcelona. I have met several people in their twenties, half my age, with published successful games in mobile stores and Steam.
Barcelona, the city I know, is changing fast for the better. Even that it is going to take time to get rid of the old habits. But I can see myself going back in a decade if they want to hire a developer in his fifties.
Usually engineers aren't that well regarded in Spain, people tend to aim to get into management.
Other than that, salaries are pretty low and work culture is quite intense at most places, with people usually working ~10 hours a day. This is aided by the general lack of options in the market and a quite high degree of conformity which is a byproduct of the rigid educational system in Spain and which most graduates are embued with.
Innovation, aside from a couple startups is lacking as most of the ecosystem is made of big consulting companies which have agreed to set cap on salaries to protect their shrinking margins resulting from years of cranking poor code by replaceable coders working in bad conditions.
However, things are getting better with the arrival of some international companies like Xing or local successes like Cabify.
Spain is a really attractive place for high tech, with most of the Mediterranean coast boasting Californian climate with Richmond house prices, great cuisine, high level of services comparable to Northern Europe and quite open culture. So it's logically pretty undervalued in my eyes.
jxub give a good summary of some of the big issues. Below I write my take on the biggest issues for me:
(1) Favoritism: Knowing or being the right person is quite more important than doing a good job. In small companies usually the boss family and close friends are in the top positions. Usually the best way to move upwards is to kiss your boss ass rather than being a good professional. Pretty much the opposite of a meritocracy.
(2) 'Low level corruption': We all talk about the big scandals, the ones that move millions and fill the news. We talk less about what I call 'low level corruption', or everyday small acts of corruption. Not paying taxes, cheating on the utilities, doing some underhanded businesses. It is quite disheartening when you are trying to be an honest citizen. Feeds a lot on point (1).
(3) Conformism: Most people have little ambition in terms of professional development. Spain is one of those countries where civil servant is a dream job. People look for easy and stable jobs where they can get just enough money to get by, and enjoy their free time. Live is pretty good due to the cost of living and public services, and because of (1) chances are you won't get far no matter how hard you try, so why bother? An extensive support network of family and friends gets you covered in most cases, so people are not really worried about hitting rock bottom.
(4) Envy: Maybe due to (3) society as a whole is full of envy and jealousy. We tend to say that this is a country of 'cainites', in reference to Cain, the biblical character who killed his own brother. We also say 'Nobody is a prophet in their own land', another biblical phrase to signify how hard is to get recognized by your peers. We seem to be happier being mediocre together rather than people sticking out. As one of my friends says, 'if I get screwed, everyone gets screwed', as he would sabotage anything that doesn't go his way. Instead of keeping up with the Joneses, we would try to drag them down to the mud with us.
(5) Bad social and economic status for specialized workers: As I said in Spain a civil servant is a dream job. On the opposite side, most specialized jobs are not really valued in any way. Software Engineers would have good economic and social status in other countries; not so much over there. You would be mocked as a geek and nerd by your peers and your work wouldn't be appreciated. Salaries are much lower than other developed countries, not only because of cost of living, but proportionally too. In some places you would be paid a working class income.
Put all these points together and you can see why we can't attract talent. Poorly regarded social status and income, in a place that doesn't value you, with very few opportunities and chances to advance your career.
> Spain is one of those countries where civil servant is a dream job
Not any longer, at least not in my circles. Years of neglect by the goverment and bad publicity by all actors have made civil servant's jobs both scarce and not that attractive. If there is any other alternative it's prefered over this.
> 'Low level corruption' [...] doing some underhanded businesses
Unfortunately Spannish economy depends on this. People have a meager salary, self employed people cannot demand the correct price for their services (most of the time) because people cannot pay it, so they don't have enough to pay taxes, that means less money for everyone in a vicious circle.
So we don't have enough jobs for everyone, and the taxes self employed people suffer impose most of them a decision: evade some or close shop. Being that the second option is non-sustainable (not enough jobs, remember?) they tend to do the first.
Spain is probably my favorite country in the world for a number of reasons, and the next time I swing the pendulum away from career, my default plan is get a remote job in the US and live in Spain for as long as is convenient visa-wise.
> The country is not socially tailored to attract and retain highly skilled specialized workers
I recently moved to France and had at one point considered moving to Spain. My wife and I are Canadians and we both wanted a change of pace from North America. Although France's visa scheme is somewhat more difficult and expensive than Spain's appeared to be we ended up going with France because you can get Permanent Residence and/or Citizenship after 5 years. And I can keep my Canadian citizenship. Spain is 10 years and the only way to be a dual citizen is if you're born in Spain or to Spanish parents.
It's pretty decent and more companies are moving here now. I mean occasionally you see ridiculously low salaries but I used to see that in London too.
I think the education system could be improved to help more people learn English and encourage people into fields that offer better prospects - but the latter seems to be a problem in almost all countries.
Wow...about the same level of journalism/fact checking as expected these days....none.
Let's compare the workforce of countries with an ageing population and rapidly dropping net population with countries like Australia that are absorbing 250k immigrants per year into "self employed" (read: rich third worlder's buying a house and a passport) of course you're going come up with a figure like that.
Throw in some countries with massive populations who have also got an ageing population but have 20x the population of Portugal to make them look bad on absolute numbers and you have a winner. Of course a tiny change in employment is going to look amazeballs or on the other hand terrible.
The difference is..being in one of those countries right now but from the greedy nation of Australia is that sustainability is practised. It's not all about greed here. You don't need to destroy the planet to have a family here so seriously a big middle finger to anyone who thinks that Europe not growing is a "problem".
Economic growth = learning to do more with less, and arbitraging profits.
The myth that economic growth means more waste is just wrong. Compared to the early 20th century we use ~90% fewer resources per dollar of GDP created.
I wish TFA had more detail about the conditions within each country. You can’t just treat northern Italy and southern Italy like they’re the same economy.
The (far) north of Italy is a bunch of Germans that happen to speak Italian and wear better-looking clothes. The South of Italy is a bunch of nogoodniks who live on handouts from the north unless they... I'm tired of overblown stereotypes already and can't find a suitable mafia-related slur.
But even though that previous paragraph was overblown there are differences. Maybe because of the Mafia's firm grip, maybe for other reasons. The Italians seem to feel rather strongly about the differences. Google for "italy mezzogiorno" if you want more.
Here come the stereotypes. The Mafia, as all criminal organizations bearing other names (Camorra, Ndrangheta, Sacra Corona Unita, etc.), do their business on all national territory, with huge investments also in the north. They're not anymore a bunch of ridiculously clothed picciotti gathered around a single boss but well organized corporations which launder their money through investment in legit businesses in order to build strong capital to be used for political lobbying.
They're more visible in the south because due to locals cultural differences, they want their presence to be seen over there in order to keep people under control, which is not the case in the north where they stay put for having a completely different way of doing business.
also, it is silly to believe the criminal organizations operate in Italy alone.
For example. 'ndrangheta has been operating in Germany for years (see the Duisburg massacre), and a lot of camorra's drug trafficking goes through Spain.
There have been some very high level cases even recently, such as the killing of Ján Kuciak in Slovakia who was likely murdered because he was investigating the connection between ndrangheta and the Slovakian government.
I was just in Sicily and we managed to get a local to talk to us about the local economics - we're pretty sure he was willing to open because we were the only people around, and basically confirmed this: that the Mafia made it really hard to get (and keep) anything going.
Hm. I think the mafia thing is mostly an excuse. When people- also in Italy- think of the mafia, they think of a vast and powerful criminal organisation- something like an evil multinational- with the power to infiltrate the State and resist to its attacks. The good people of southern Italy then love to depict themselves as the victims of this malignant entity and of the inability of the State to eradicate it.
However I doubt the situation is so simple. First, while the mafia might have some form of primitive organisation, it's probably more akin to a coordination of warlords than a company board. Second, it doesn't exist in as vacuum: in the south of Italy illegal behaviour is widespread: corruption, welfare system frauds, absenteeism of civil servants and public employees, absurd privileges of politicians. Politicians often display a peculiar rhetoric, as sonorous as it is utterly void of any concrete meaning. The predominant culture is drenched in self victimisation and apathy.
So I'd take the "it's the mafia" refrain with a grain of salt.
Well, the impression was less one of "a large organized crime syndicate" and more "wide-spread, pervasive, moderately organized corruption". So, what you described.
The mafia might now be born in today's environment, but it was born, and still exists, even if its power is receding, and it's been strong enough for many decades to hamper the state's infrastructure.
The roads that weren't built or that were poorly built still are poor roads, etc, even if the situation has improved.
Yes, in particular in the poorest areas. The mafia offers very good pays for criminals jobs in areas where basically there are literally no industries and everyone else is living by welfare support.
Yes, and quite visibly too. We aren't even Sicilian, just a humble family preparing our boat for a sabbatical. But we knew which towns not to enter at night, (cough) Gela.
>The USSR satellites were radically better off apart from Soviet Russia.
Well, no. Latvia is experiencing huge population drain and is being called "disappearing nation" [0], Estonia is not much better, and different -stans are slowly going back to the middle ages (I personally visited Uzbekistan for 2 weeks and witnessed it with my own eyes. It's not pretty).
I'm not saying that they were thriving under Soviet Union, obviously not, but you can hardly find a former USSR republic which shows stable growth in GDP per capita, population, and, say, ease of doing business.
It was very expensive, but IMHO still the right choice. What were they supposed to do? The east is still weak (except maybe Berlin), mainly due to a lack of big corporations, chased away into the western parts by the soviets. At least the gap is not widening, but its also not really closing either. It will take many decades.
Luckily we have some federalism to counteract some of Big Country malaise (unlike FR or UK).
It was a mistake not just for Germany, but for Europe in general. Frankly, the unification of Germany in 1871 was a mistake. Prussia, Prussianism, and its antecedent Teutonic Order are some of the worst things inflicted on that part of Europe, including Germany.
> at the same time, a bigger country is always better
Why so? And for whom, exactly?
Do you think the US would fare better overall if they joined with southern countries like Mexico, Guatemala, Nicaragua, Venezuela and Colombia?
Also, Italy is inside the EU. I'm not sure that inside a supra-national entity as the EU the reasons for building bigger nation-states- reasons that were surely valid in the 19th century- still stand.
Induction gives a hood answer. Would your country be better off balkanized with many small territories feuding and redundant administration on every new level? While there are occasional scaling issues there is a synergistic effect to larger unified territories - as opposed to actively occupied ones.
Joining together would be a long term investment for the US. Given how well trade matches as size of neighbors attenuated by distance roughly it would pay off long term. Short term at least a significant minority would probably be discontent about it given what happened just with German reunification and they weren't even apart for a century.
Language and culture both matter when dlooking at a country - the US joining with several countries with a culture of corruption and massive distrust of the government would not likely end up well for the US.
Redundant administration? By that logic, you might as well create a one world government, but it's a piss poor idea.
Consider that redundancy is good in that it creates multiple points of failure. Consider that bureaucracy will scale with the size of the country and not necessarily in the efficient way you think it would. Consider that regional needs and cultures vary dramatically. Even in individual countries, subsidiarian governance is good in that it best matches law and policy with the particularities of each region because local authorities have better grasp of local issues (and where matters are escalated only as necessary). Blanket statements about bigger being better are flatly wrong. And where the US is concerned, the US benefits greatly from a very fortuitous combination of geopolitical factors. Russia, on the other hand, expanded eastward with no such commensurate benefits.
As I said, Italy is already in the EU. Why would the small territories of Italy be "feuding" if they were all part of the EU? And I'm not sure that the administration would be much more redundant than it is now.
On the other hand, you seem to be taking in account only the economic aspects of a unification. Yes, a unification process with poorer countries would be expensive, but maybe that's not the major issue with it. The issue I'm more worried about is that in a democracy the prevalent culture shapes the administration and, of course, the society. Unifying the US with, say, Venezuela, doesn't mean turning 31 million Venezuelans into Americans; it means making the US 10% more like Venezuela. It changes the identity of the country, and you might like the current identity better than the new one.
Re: differences between Northern and Southern Italy: Robert Putnam's 'Making Democracy Work' covers differences between the regions in great detail. I read it three years ago so I can't give a better summary than its wikipedia page [0]:
"Around 1000 A.D. Northern Italy and Central Italy had a more active civil society,[2] with many citizens taking part in politics and social gatherings in their communities. Northern-Central Italians had a mutual trust for their fellow citizen, governing horizontally. Politics was less hierarchical in their region. Southern Italy, however, was very different from its Northern-Central counterpart; a group of Norman Mercenaries created order in the area. The governing structure was much more vertical: the peasants were controlled by the knights and the knights were controlled by the kings. Northern and Central Italy created a democratic-type system for their citizens. Conversely, Southern Italy created a feudal and autocratic system of governing. Putnam concludes that these long-standing differences still help to explain North-South differences in governance, many centuries later...The civic nature of Northern Italy and Central Italy dating back to medieval times has caused the region to be prosperous in modern times. Southern Italy, however, with its more feudal nature in medieval times has caused the region to be the origin of the Mafia and has created a less successful region. The Mafia's hierarchical structure is very similar to Southern Italy's feudal roots, according to Putnam."
Add the unification process to that, which was in part welcomed by people and in part forced by an army from the North. It was like when two companies merge: the people from the company that leads the merge end up in better positions than the ones from the weaker company. The South kind of lost a war and perhaps they didn't realize it, even now.
Northern Italy (think Turin, Milan, etc) is highly industrialized and has a robust modern economy, with global exports from fashion and finance and major brands like Fiat and Ferrari.
Southern Italy (generally seen as being south of Rome or Lazio, the state Rome is in), has far less industry and mostly relies on agricultural products. I have family in southern Italy and it is very hard for young people because there are few to no opportunities. Many young people leave for better opportunities in the northern part of the country or they leave Italy entirely, which further deepens southern Italy’s economic rut.
You see wide variances in most every country. In Scandinavia, the population centers are drastically wealthier, with far higher GDP per capitas, than the rural areas.
In the US, New York and Massachusetts have 2x the GDP per capita of Mississippi (or, eg Connecticut has a 70% higher GDP per capita than Arizona; and that's despite Arizona's GDP per capita being as high as Germany) -
This is a very big oversimplification, mainly because the mafia is everywhere, probably these days they have even far more interests and investments in the rich north.
The problem is the industry presence and the type of those (south was mainly low-skilled manufacturing and agricolture, both of which are being heavily delocalized by globalization leaving almost no well paying jobs in those regions)
I am every time astonished by the low level of analysis of this kind of situation and how dogmatic is the explanation : too high taxes, too much regulation.
First of all taxes can seen as an investment of the citizens for better life. So the problem is not the high level of taxes, but how they are used and in what purposes. Certainly, PIGS should optimize many processes and promote initiatives ( business but also social....).
Remember that PIGS are the most impacted by migration now.
Remember that most were dictatorships many decades ago and have not the same foundations of democracy and economic prosperity than other countries.
Remember that many young people that could create jobs just moved in others countries and didn't come back.
Remember that you don't have the same impact when you are poor than when you rich. We you are poor you look for more immediate results because it is a matter of life.
Remember the role that play mafia/corruption/ criminality, especially the white collar one!!
I don't think the Euro has a so big impact and there are plenty to doin order to reach a good growth.
However the growth is the result of wise and pragmatic moves which can reach a 2% per year in long term ( according to Angus maddisson from OECD). But it is the good decisions and actions that provides efficiency and so growth, not stupid and blind cut in budget.
For OECD , the top down approach of spending money is always bad ( Keynesian approach), but the top down of saving money is ever good. What an hypocrisy which can influence a policy that can destro many life's.
It's funny how Germany is called out here again and again.
The EUR was forced on Germany by France (Mitterrand) as a precondition for reunification. Germany was dragging its feet with a common currency and needed be dragged towards a EUR.
The French intention was to controll a unified Germany with a common currency.
I searched for "underground", "black" (market/economy) and "undeclared" in the article, but it yielded no results. I am surprised given that (1) the rise of the underground economy is common knowledge for people knowing a bit about the region and (2) measuring its size is a mainstream academic question.
Same reason that watching pirated movies/shows is not counted in viewership statistics. It's illegal, you don't get credit for it. Taxes exist for a reason.
Viewership statistics of movies do not take into account pirated movies mostly because it's difficult to count. Tax offices might only care about movies sold, but producers regularly try to estimate their losses due to pirate channels, and I am sure that people who measure viewership as a proxy for impact on the popular culture would love to have to be able to count everyone.
The article's author makes some observation on employment volumes in Southern Europe, then decries "the Eurozone's failure to implement meaningful pro-growth reforms".
In that context, It makes sense to try to estimate how much of the economic activity has simply been reclassified. The fact that it isn't taxed makes it, once again, more difficult to measure (if that's what you meant by your "Taxes exist for a reason" truism) but not irrelevant.
I wonder how much of that is gray economy. Greece has massive underreporting of anything tax and business related, because they don’t verify it. Farms and businesses don’t report actual sales, earnings, probably even employees (anecdotally from locals reporting of income is less than 10% of actual).
Spain has a problem with permanent labor given to senior employees with most youth being excluded from full time jobs. There is also some type of earn-in system to get to a full time job. If a lot of local industry is tourism, those can be filled with temporary work as well, that is probably not accounted for in these statistics.
>anecdotally from locals reporting of income is less than 10% of actual
Factually this is BS. While there's underreporting in Greece, way more than "10% of actual" income is reported -- closer to 70% or 80% [1].
And one of the reasons it's not higher it's that there are quite high taxes (including a 24% VAT on most purchases) for little to no return from the state (no good healthcare, no money for schools, no road maintenance, etc). It's like sinking money down the drain.
([1] In fact a study by the Applied Economic Research at the University of Tübingen in Germany puts the whole Greek "shadow economy" to 20% of the GDP -- for comparison Germany's is around 10% and USA's around 5%: https://www.forbes.com/sites/niallmccarthy/2017/02/09/where-... ).
I'm sorry, what? The WHO puts the Greek healthcare system at #14. The UK is at #18, Sweden at #23, Germany's healthcare system is at #25, and Canada, Finland and the US are at #31, #31, and #37, repsectively [1][2]
And a more recent paper from The Lancet[3] puts Greece at #19. Sweden, Finland, and Canada have usurped Greece coming in at #4, #7, and #17, repsectively. That means that your healthcare system is still objective scoring better than Germany, the UK, and the US (the last of which is arguably a low, low goalpost, I admit).
>I'm sorry, what? The WHO puts the Greek healthcare system at #14.
Statistics are not necessarily the same as "ground truth".
- Hospitals are under-stuffed,
- doctors make a pittance and ask for side-money to take care of patients (what is known as the "envelope" system, from small mail envelopes where such money are customarily handed over in),
- rooms are full and patients are stuffed in beds in the hospital corridors (called "camp beds")
- waiting times are horrid
- lack of modern clinical equipment
- hospital workers are overworked
- drugs are often lacking or late
- doctors and nurses are underpaid horribly (think McDonalds level money at public hospitals)
- lack of ambulances and people dying after waiting for 2-3 hours to be taken to a hospital
and so on.
Now, despite that, there are a few things that make the Greek healthcare system still rank high: good doctors (some of the best in Europe), and a legacy of free access to healthcare for working people (who are mandatory insured) -- that is increasingly corroded and people are asked to pay ever more of medical expenses, drugs, etc.
Still better than the US, of course, but that, as you said is a pretty low bar.
Here are some more modern sources for the current (last 5-10 years situation, although some of the above issues are much older):
The WHO report was about efficiency, i.e. life years gained per euro. In that respect, we rank very high, but that might just be because there's so little money in the healthcare system that doctors have to stretch it to go a long way.
Just trying to think what the comment you're replying may have been saying - is it possible that in some of the more rural areas funding for healthcare was a victim of "austerity" and so it's lower quality than the average?
Also it seems that the WHO paper seems pretty old - I scanned it for a publishing date but couldn't see one, but all the papers it references are from 2000 or older. After the financial crisis quite a lot of public services suffered pretty badly from spending cuts. Furthermore the Lancet paper seems purely focussed on mortality over a pretty broad span of time (1990-2015), which is of course pretty important ... but is only one part of what you want to measure when talking about healthcare ("did the patient die from their knee operation" doesn't answer questions of wait times, quality or cost).
The spending cuts after austerity noted by a more recent study (Euro Health Consumer Index - https://healthpowerhouse.com/media/EHCI-2017/EHCI-2017-repor..., performed yearly) which assesses Greece a bit lower, 32nd out of 34. It seems to suggest that the cuts have a pretty significant impact:
"
Greece was reporting a dramatic decline in healthcare spend per capita: down 28 % between 2009 and 2011, but a 1% increase in 2012! This is a totally unique number for Europe; also in countries which are recognized as having been hit by the financial crisis, such as Portugal, Ireland, Spain, Italy, Estonia, Latvia, Lithuania etc, no other country has reported a more severe decrease in healthcare spend than a temporary setback in the order of < 10 % (see Appendix 2). There is probably a certain risk that the 28% decrease is as accurate as the budget numbers, which got Greece into the Euro.
"
I'm not Greek and have never experienced their healthcare system so I have no idea which of these is the most correct, and even then relying on a ranking system might not give us an accurate assessment. However I would be extremely surprised if Greece was able to continue providing healthcare of a higher standard than Germany, Sweden and such.
You’re referencing indexes of various health systems metrics, not perception of health systems, which would be the salient facet here (and might not change anything about your point).
No, it's more like the people who create the garbage and the people who should do the cleaning are not the same, and when you clean a part of the house, somebody will come over and immediately throw garbage on it.
It's larger than that. 20% of the Italian economy is shadow, something around $400 billion, according to a recent study by the Institute for Applied Economic Research at the University of Tübingen in Germany (IAW).
The US has a $1 trillion shadow economy, around 5% +/-. Canada has a 10% shadow economy. Norway is up at 12%.
Farms and businesses don’t report actual sales, earnings, probably even employees
Sure they do, and since capital controls were enforced it's even harder for businesses to evade taxes because usage of plastic money has increased a lot. The largest percentage of tax evading in Greece comes from self-employed people and not from businesses.
For the same reason jobs are not created as much in Wyoming or Vermont so much as they are in LA or NYC ... the jobs are being created, it's just that they're in Germany and the UK and not Spain.
Part of the issue is that Spain & periphery tend to have fewer 'large industrial conglomerates' that enable profitable
things to be done at scale (i.e. making cars etc.). % people employed at companies with >1000 people is much bigger in Northern Europe - which makes it more difficult to compete in the periphery.
But really, this is what can be expected with a true Union in Europe, and it's why Germany is so keen on it, and of course the Lib Dem (i.e. business types) are super keen on it in the UK, despite populist upset over Brexit.
The short run advantages of common market and supposed common risk of the Euro (which never happened), the downside is that skilled people are flooding out of the mediocre areas into the competitive areas.
Portugal is turning into a nation-sized retirement home, sadly.
In an odd way, this might actually be a 'net good thing' economically, because Germany might be better at putting people to productive use in industry ... which is why the Lib Dem types like it (i.e. they see the economics) ... but really this speaks to an existential challenge to the very nature of European nations and peoples.
Portugal seems to be very attractive to northern European tech and media freelancer types, know a couple of guys who live and enjoy Portugal and work for German companies remotely. Pretty attractive, would do it myself if it wasn‘t for the kids.
Those guys are more likely to expand, build startups and employ people, who knows what it might lead to.
I too am excited by what's happening in Portugal. Safe place, good food, great weather, internet is improving. These things get noticed by mobile professionals. I'd not be surprised to find myself there next year.
Thanks for embellishing Portugal. As a local, I'm not as bullish as you.
Portugal is nowadays a paradox: it has 2 contrarian political systems. One for locals (pro-socialist) and another (raw liberal) to attract foreign money.
E.g: Foreign pensionists don't have to pay taxes, €500k 'investment' (buying an house is enough) will grant you citizenship, Websummit (and consequently raw capitalism) was seen as the Truth by government. All this done while rising taxes for local middle class (freelancer's taxes are a joke), advocating a rigid job market and other ideologic measures that promoted a brain drain like never before.
Yes, Portugal is a great contry for hollydays and retirement, but, sadly, it stops there. However, if you afford to live as a semi-retired (like many remote devs) it might worth it: sun, sea, food and safety (on the places where you'll be at least).
Yes, Portugal seems the more exciting for tech of the south eu countries. I think a big reason for that is also because in PT people speak (better) English; I live in Spain but have a company in PT for that reason. Our clients are not Spanish so English is a must, for everyone.
Portugal is popular with the digital nomads because it's cheap. It's a similar situation in the canary islands. But knowing these types well, they tend to focus on lifestyle businesses / business with small markets so it's a long-shot that they will materially increase employment locally.
Being from(ish) vermont, there are lots of companies in diverse fields and there are a number of jobs available, the only issue is that the market is rather illiquid and slow to respond to sudden shifts. If you want to grow a company at a reasonable (not silicon valley reasonable) speed it's a great area to find employees with low cost-of-living overhead and a pretty high median skill rate. The issue is more that if your company does really well and needs to hire 200 people to keep up with demand then you're going to be waiting a long time for people to filter into the market.
This also sadly relates to the skill chafe that happens with new graduates from universities every year, a bunch of people are competing for moderately few open positions in the spring/summer, then companies have trouble hiring if they need people in the fall/winter.
But hey, VT is pretty sweet, so thanks for standing up for us!
Vermont and Wyoming are highly functional stasis economies.
They are not growing leaps and bounds and don't have vast concentrations of power and industry.
But yes, they are not good examples.
As you point out - Vermont and Wyoming are more like Scandiavian countries - small, well managed, not growing.
I don't know what a Spain analogy would be in the US? Maybe a Souther State like Mississipi? i.e. very traditional, not hugely functional, talent leaves, but they're stable enough ...
Yes, Scandi economies are growing, much like Wyoming in terms of GDP.
But NYC and SF/Valley etc. are expanding in bodies and industries and by virtue of that, 'adding more jobs', and 'integrating many newcomers' from places like Wyoming.
I admit Spain/Wyoming is not a hugely good example other than to say people are more likely to egress in search of good jobs than ingress.
Germany has massive geographical advantages compared to nearly every other country in Europe, especially compared to Portugal. East-west and north-south navigatable rivers, few mountains, very fertile soils, located in the center of Europe covering two seas... Italy has a similarly spiderwebby location, but a much more difficult topography.
And those advantages matter not at all for successful IT ventures. Sweden does not have any of those advantages, and are still even way more successful than Germany (on a per capita basis).
Which is what I emphasise below. But it mattered when it came to the development of trade routes, knowledge centers, the industrial revolution and the emergence of large corporations.
If you want to lay Italy’s economic problems on geography you probably have to explain why it wasn’t a problem for the Roman Empire or Renaissance city states.
Hmm? No, that‘s definitely not what I said. Geography is one factor that can influence population density and interconnectedness, among other things, but these parameters have different effects in different times. Rivers are much less important today than in the middle ages.
Geography is one historical factor in the multiparametric space shaping the wellbeing of a nation. Political culture is another one.
Yes, the geopolitical situation with the Cold War helped Northern Europe. But don't underestimate the vast amounts of money the EU has invested in Spain and Portugal since the 1970s.
Lots of money yes, but not that well invested. Scratch the surface of EU funding and you find a long procession of malinvestment and wasted opportunity. Airports being a famous case in point:
Well, Portugal and Spain were not really affected by the war. They were, however, affected by the isolationist dictatorships that they had to suffer under for another 30 years.
I’ve not seen the Lib Dems described as pro-business in that way before. In my experience they tend to be ideologically in favour of the EU as they support closer cooperation in pretty much all things.
Lib Dems are the most pro-business of all political parties. They are basically Europe's 'Libertarians' or 'Classical Liberals'.
They are ideologically for 'freedom', but pragmatically they are the party of business.
The EU is, at least on the books 'good for business'. Open borders, free trade, free movement of people and labour - it's all theoretically very good for business.
Lib Dems tend to be leftish on the social front, i.e. things like gay marriage because it's mostly a freedom/personal issue.
They tend to have an educated, business oriented backing, and are inherently globalist.
In the states we have a similar branch of the democratic party that is primarily pro-business and voted left on social issues - see Blue Dog democrats [0]
You’ve got blue dogs precisely backwards. They were culturally right wing and economically liberal for the most part— southern leftovers from the new deal.
I think perhaps before the massive realignment of the parties that started in the 60s, the Republican Party was somewhat akin to the liberal democrats. Back then it was the northern, pro-business, more socially liberal party.
But then the Democrats supported civil rights and Nixon, Goldwater, Reagan, and co pursued the Southern strategy, and the Republican Party became socially conservative while remaining pro-business.
Idaho’s GDP is two orders of magnitude below California’s. The fact that they’re growing at roughly the same percentage is an indication that they aren’t that hot.
The ECB should just do more QE. Monetary policy solved all the US’s problems following 2008 - should work for Europe too. Printing money to buy bonds definitey doesn’t cause inflation in asset prices or real estate. Furthermore, buying bonds is totally different than simply buying stocks. Additionally, I think people really like when the interest they’re paid on their savings is below the rate of inflation. In fact, they should follow Japan’s lead and start printing money to buy ETFs! This will definitely incentivize the creation of high quality jobs.
To be fair, the ECB has been saying as much. Portugal, Spain, Italy and Greece have needed to make structural changes to their labor markets, pension benefits, and tax and regulatory systems for years. Unfortunately, their voters prefer things like screaming at Macedonia about what it calls itself [1].
Those "structural changes" are called austerity and they have not worked well where they have been tried. There is a very strong argument that the Euro currency is deflationary and is causing many of the various issues like unemployment, government debt crises, etc. See Stiglitz's book The Euro for an in depth argument.
Or just look at the unemployment statistics. https://www.statista.com/statistics/268830/unemployment-rate... The countries outside of northern Europe that are on the Euro or pegged to it have much higher jobless rates than those with their own currency. Czechia, Romania, Poland, Hungary are not pegged while Bulgaria, Lithuania, Estonia are. Similarly outside the EU, Bosnia is pegged and doing poorly, Iceland is not and doing fine even though they were very hard hit by financial crisis.
It's exactly analogous to the way the fixed gold exchange rate was deflationary during the Great Depression and as soon as countries dropped the gold standard they started recovering.
These terms have wildly different meanings depending on the context. In my use, structural change refers to revenue-neutral economic rule making. Austerity means deficit reduction.
Making it easier to hire and fire employees is a structural change. Making it cheaper to form a new business, or increasing funding to courts, is also structural change. Removing requirements that e.g. hairdressers be licensed [1] is another. Some of these measures may actually increase deficits, at least in the short term.
If Finland had controlled their own currency, they could have made adjustments based on their unique circumstances. Instead they were left to suffer through a miserable near decade long rolling recession.
It's not so much that adjustments are made. It's more that when exports fall, the currency falls with it automatically, which helps for exports. In short, a floating currency helps regulate the import/export balance. Not having a floating currency means you need wage renegotiation and a lot of manual processes to achieve the same.
Note that in the time period there's also Nokia mobile dying, which impacts the numbers a bit.
Currency control is good to have, but I think it's also a kind of patch, not a fix.
As a Southerner, I think we do need structural changes; unfortunately, as you write, these are usually a code for austerity and job precariousness, whereas the changes we need are at the top level, not bottom. In government, major companies and even many small ones. We have hard-working and qualified people, who are wasted by the corrupt and incompetent.
It certainly solved a lot of problems, the US is at full employment now. It took over a decade for interest rates to start ticking up with the exception of the housing market and stocks. The money supply is only one factor in inflation, velocity is the other and it has been extremely low for a long time.
Some EU countries are at more or less full employment too. I wonder how long that will last.
What the article does not mention is that of course many people from Southern Europe have migrated north to find work. We now see for example young people from Spain coming to Eastern Central Europe (V4 countries), I think that's happening for the first time in history.
Inflation is rampant in many areas right now. It’s dishonest to claim inflation is low because TVs are still cheap when house prices, healthcare, and education are exploding. Furthermore, if the unemployment rate was as low as is advertised we would be seeing wage growth. The fact that wages are not rising is evidence that the unemployment numbers are fudged. The fact that Trump was elected is evidence that the majority of people are unhappy with the “recovery”.
> if the unemployment rate was as low as is advertised we would be seeing wage growth
Median usual weekly real earnings for Americans 16 and over were 5% higher in Q1 2018 then they were Q4 of 2007 [1]. From Q1 2014 to Q1 2018, we've seen that statistic grow at about 1% per year (CAGR).
> that increase in wages does not seem to be keeping up with inflation
In economics, the "real value of a good or other entity has been adjusted for inflation" [1]. The statistic above is thus inflation adjusted. Nominal wages (i.e. those not adjusted for inflation) are up close to 30% between May 2007 and May 2018 [2], or 2.3% per year [3].
> Are housing, healthcare and education costs included in the inflation numbers?
Yes, CPI includes housing, healthcare and education. The only measures commonly stripped out are food and energy, to exclude commodity volatility; that measure is presented as "core inflation" and is more useful when considering things like interest rates than real wages.
You’re wrong. House prices aren’t included anymore in CPI. Imputed rents are. These are very different things.
Anyways, I’m sure all this falls on deaf ears. If you used the same calculation the Fed used in the 80s to measure inflation we’d currently be at 10%. You can pick and choose and weight whats in the cpi basket to get any number you want and the government is incentivized to make it appear lower.
> House prices aren’t included anymore in CPI. Imputed rents are
CPI calculates something called "owners’ equivalent rent of residences" [1]. This is reasonable as nobody purchases a new house every year; instead, one "uses" a portion of the home value over time. When house prices go up, this measure goes up by a similar measure.
Housing was put into CPI in 1954, when it was included as a user-cost item. It was replaced in the early 1980s because user-cost methods include "ex ante expected gain" while usage pricing "includes actual ex post realized capital gains on the house" [1].
> If you used the same calculation the Fed used in the 80s to measure inflation we’d currently be at 10%
Well, yes. You'd be excluding everything invented since 1980, e.g. all modern technology. We don't spend the same fraction of our budget on hams and eggs, as the 1980 definition measured, and most people have health insurance costs now.
If someone insists on living like it's 1980, I suppose observing the old metric would be perfectly valid.
> When house prices go up, this measure goes up by a similar measure.
That’s only true if you assume interest rates aren’t falling. Artificially low interest rates have inflated the actual price of housing while keeping monthly payments fairly steady.
The Fed is then able to say “look, no inflation!” despite actual prices rising very rapidly.
> Artificially low interest rates have inflated the actual price of housing while keeping monthly payments fairly steady
There's a case to be made for each approach. Given we have excellent ways of measuring house prices, but no great ones for cost of living, having CPI measure the latter and thus usage--instead of user costs--seems reasonable. (We don't include stock appreciations and declines in inflation, for example.)
Those interest rates didn’t fall over the past decade, they stayed very consistently low, so the rise in house costs caused a rise in mortgage payments and imputed rents.
It does not seem necessary to ascribe racism as a motivation to a very large group of people who you don't know. Especially when the second sentence of your second point is spot on and can easily stand on it's own.
What outcome? You think enforcing border security and enacting a travel ban on countries identified by the Obama administration as terrorist threats somehow shows racism was a significant part of Trump's election?
Those are common sense policies for most people and have nothing to do with racism. Law, order and regimented immigration processes are not racist, though people who want open borders for the express purpose of "making America brown" most definitely are racist. You should check your biases.
Maybe Clinton was just a terrible candidate and Trump was on the right side of many policy issues? No, that couldn't be the case at all. Must be the racism.
Governments always fudge employment figures and inflation lol
You just define your inflation metric to suit normally by ignoring things that have gone up more eg housing and including things that are deflating like say TV's and white goods.
> Governments always fudge employment figures and inflation lol
Some governments might, but governments actually need this information for planning, so ones with even modest levels of transparency are unlikely to do much of it, because it would be too easy to detect if it wasn't the only count, and because it would foul their own planning if it was.
> You just define your inflation metric to suit normally by ignoring things that have gone up more eg housing and including things that are deflating like say TV's and white goods.
Yes, one could in theory do that, but what country specifically does that (with citations to specific supporting information)? Many countries report many different inflation indicators some designed to isolate particular contributions that add noise (either because of high seasonality or high-but-irregular volatility), but they tend to also have measures which include those figures, which tend to be the main figure.
> Monetary policy solved all the US’s problems following 2008
I think "all the US's problems" is a pretty extreme stretch. Monetary policy may have prevented a worst case depression scenario but the economy is still wildly unbalanced. Assets re-inflated but wages did not and there's still far too much private debt.
> Monetary policy may have prevented a worst case depression
I vehemently disagree with this claim. The central banks of the world have merely masked a massive default on debt by inflating it away in a coordinated manner. The owners of that debt made out like bandits while the rest of us paid for it through the devaluation of our savings and wages.
There always are people who vehemently disagree. Read Tim Geithner's memoir "Stress test" and his fights with the "fundamentalists". Luckily he won enough of the arguments and the bail outs meant that the US recovered more quickly than those economies who kicked the can down the road.
The alternative is allowing everything to crash. The rich bankers wouldn't have had a problem, but millions more everyday workers would have paid a far higher price in terms of unemployment.
If you are rich you have a number of advantages in a crisis of any sort, global or personal. If you are rich you can diversify your assets away from property and cash - into commodities, stocks, bonds, art, luxury goods, gold and so on. If you are rich you can loose significant percentages, even the majority of your net worth and not worry. This allows you to have liquidity when assets are very cheap, at the bottom, and then you can get those assets! In a crisis there is more bad luck about, poor people are wiped out by a drip of bad luck, rich people need a big dollop, only a few people get a big dollop of bad luck. Only the tail of the distribution of rich people are wiped out, the tail of poor people don't.
Sure, but if you go from a net work of 7 million to a net worth of 3 million, that's a different type of loss than going from a net worth of ~250,000 to a net worth of ~0 because you lost your house and are in debt up to your eyeballs.
Actual rich people benefit. Highly leveraged “rich” suffer.
I have an acquaintance who is a big landlord. The housing crash was literally the best thing that ever happened to him. He literally bought dozens of properties all of the place because he sits on big piles of cash and has generous credit lines backed by his cash flow.
My guess is that he spent about $10M and netted at least 3x from the 2008 crash.
Depends on their reserves vs active business investments and if stability can be maintained. Recessions are good for people with liquid reserves and sufficiently unaffected supporting ability as they can acquire assets at fire sale prices and then reap profits once recovery comes. It sounds exploitative but serves a useful function as without them the liquidating party would be extra screwed.
The rich win in either scenario. In the bailout scenario they pocket most of the froth. In the crash scenario hyper-deflation causes cash to increase vastly in real value, allowing the rich to swoop in and buy up everything that isn't nailed down at a massive discount. They then get to ride everything back up as the recovery takes hold and pocket most recovery gains.
What the EU is actually proposing is to encourage more migration within the EU. The EU has very abysmal levels of intra-EU migration, around 1/10th of that of the US. Because of this, you have areas with a lack of jobs and other areas with a lack of labour.
I would imagine part of the difference is explained by the fact that if you move within the US you'll still encounter the same language and similar culture. If you move from one EU country to another, odds are you'll encounter a different language and culture, so moving intra-EU is a much more difficult proposition.
Very true. The Netherlands needs a TON of healthcare workers right now. But you can't just hire someone from Greece or Spain who doesn't speak the language.
It depends I guess. Does a surgeon or anesthesiologist have to know Dutch to be successful? Or even a dentist? Btw the Netherlands has quite a few people who don't speak Dutch at all..
Well yes they do. My English is pretty decent, but I think most people would have problems having technical discussions about their health in English. Imagine a 70 year old with dementia in a nursing home. Miscommunication in healthcare costs lives.
We also have a severe lack of housing in Germany right now mostly due to this intra-EU migration. It's good they all found jobs here, but if you are in the market to rent right now it sucks hard, especially at the lower end. This needs better management.
It's bad for the customers who are not being served something they require to live normally. If my company was the only one making food and we had too many customers, that would suck hard, no?
The market is too slow too and hindered by many things (which make sense otherwise but are a problem here).
The problem is not some kind of financial malaise or shock that requires 'confidence' to recover - ergo - a financial solution to a non-financial problem is not likely optimal.
