June 22nd, 2012
Europe is moving into a time of incredible transformation. The financial and leadership crises in Europe need to be looked at from a historically high level. The media coverage and commentary concerning the Euro crisis is completely “in the weeds”. The coverage and discussion of the issues in Europe now are about austerity versus growth, Germany versus the rest of Europe, Greek politics and whether Greece will leave the Euro zone or not. Focusing on the treatment of the symptoms rather than the generic reason for the disease. The football metaphor for this level of analysis is the analysis of the blocking and tackling going on in one quarter of one game to determine what the season will be.
So, let’s look at Europe in the larger context necessary to understand the way things are the way they are and where they are going.
On 01-01-10 I wrote a column entitled “The Transformation Decade”. The dictionary definition of transformation is “ a change in nature, form, character or shape”. The point is that during this decade much of humanity’s institutions will go through this transformation. We see this all around us. Think of the Arab Spring. Think about how much computing, media and communications are changing. So one large context for the mess in Europe is that it is simply going through what is to be expected this decade.
Another way to look at Europe – and much of humanity, particularly politics and government- is that it has powered into the 21st century holding onto 20th century thinking. I call this Legacy Thinking. The obvious problem with legacy thinking is that it forces one to see the present through the filter of concepts from the past. Take a moment to think about your own thoughts, how you use them to evaluate and see the world around you. Are you looking at what is going on in 2012 through the filter of concepts or thoughts that you accepted as valid for the first time decades or even years ago? Most people like to have an organized way to look at the world. They appropriate these organized thought structures through experience, reading, being told them by people they respect. Once in the brain they become fixed as one’s “valid” view of the world.
Well the clear problem with this is that the only constant in the universe is change. So if one looks at change with a fixed point of view of reality, there will, sooner on later, be a disconnect. That is why people get so upset by change as it threatens their point of view or worldview.
Therefore it is instructive to look at the current crisis in Europe through the filter of the legacy thoughts that created the Euro zone.
In the 1960s the Cold War was at its’ height. There was the Eastern Bloc and the Western Bloc. In the Western Bloc, the U.S. was clearly the dominant player in most categories but certainly economically. This led the countries of Europe to think about creating a Common Market that would provide an aggregated economic might to counter that of the U.S. This concept took root and continued to develop up until the collapse of the Soviet Union in the early 1990s. So the first underlying concept of the Euro zone was the Cold War idea of the Common Market. The Cold War has been over for 20 years.
Then, as the global economy took off in the 1990s, the countries of the Common Market moved to the idea of a common currency. This led to the introduction of the Euro toward the end of the decade. Economists immediately pointed out that all currencies were national and that each was backed by a national central bank. As subsequent histories have pointed out, the political leaders of the time chose to stop listening to this fundamental fact and those that spoke it and launched the Euro. They did come up with rules and financial regulations and laws that all countries converting to the Euro had to follow. Then they looked the other way and let countries in even if they were not compliant with the rules. Intention and commitment to a single currency therefore blinded the governments of the time to economic realities.
This was a classic case of holding a doctrinaire point of view instead of looking at reality. Is it any wonder there is a crisis with the Euro? Legacy thinking from the Cold War was later layered by a point of view that defied reality.
The dilemma now is thus a simple one. Will Europe truly relinquish economic nation state sovereignty for the sake of a truly flawed vision of monetary union?
As long time readers know, I have been speaking and writing about this Euro crisis for almost two years. Starting in late 2010 I suggested that the “Greek Debt Crisis” might perhaps be the “death rattle of the Euro” . I wrote that here, here and here. In one of these columns I injected a bit of levity with this clip; funny but painfully true
So, what is the future of the Euro and of Europe between now and 2020? We will look at that in the next column.