Roland Dürre
Tuesday May 11th, 2010

Poverty & THE EURO

I will try to give a definition of the term “poverty in the EU”, before explaining how the Euro promoted said poverty. To be sure, at first sight this might sound heretical – but do not judge before you have read!

In this country, you are poor if

  • your increase in “prosperity” is less than average,
  • your possibility to participate in social life is reduced,
  • you can only start a family if you are prepared to forego a considerable amount of consumption and
  • if your chances of a good education are poor (permeability of educational classes).

There is a huge increase of this kind of poverty in all EU countries. If you see it under this aspect, Greece is probably not the poorest country in Europe. Real poverty, as defined by homelessness, hunger and misery, is (still) more the exception than the rule in the EU countries.

One of the problems of increasing poverty in Germany (Europe) is probably the fact that our CO2 footprint is too big. For reasons of comfort, however, we are not prepared to reduce our CO2 footprint. Instead, we continue to live blissfully happy on borrowed property. We are even willing to sacrifice the quality of our prosperity to this life-style. We promote an unreasonable amount of waste, but it does not really make us happy.

Due to wrong structures, labour also gets more and more expensive all around the world. Doing simple work basically is not profitable anywhere in the EU (that is also true for Greece, where the “lowly” work is done by immigrant workers who partly work illegally). That, too, leads to a lack of political freedom, illegal work, or slumping into the social security systems, which consequently get more and more expensive (everywhere).

If you see it like this, the Germans and other Europeans are not an iota “better” than the Greeks. There is probably a correlation between our too big “CO2 footprints” and our per-capito debt.

We block out reality by generating specious prosperities, always on borrowed money. During the last few years, the Euro caused an economic dynamics that seemed to justify our wasteful life-style. It seemed to help increase prosperity, yet in reality it only polarised.

Thus, the Euro prosperity after 2001 was just as much a specious prosperity as was the growth caused by the re-unification around 1990. The same is true for the so-called disproof of the growth limits by the “new technology” until the year 2000. All and everything happened on borrowed money. That is how these many hundreds of billions of Euros debt the inconceivable volume of which now confuses us were generated.

The Euro served to camouflage the problems of our system during several years after it was introduced. It was beneficial for the “strong” nations with lots of industry and banks, while it was detrimental for the “weak” ones.  And it made the “privileged” classes richer while making the “underprivileged” ones poorer.

Unfortunately, the growth on borrowed money also increased the exploitation of resources. And it promoted the belief that “there is nothing that is impossible”. The necessary change towards a sustainable policy was hampered, although we have been well aware of the necessity since at least the 1960ies (Club of Rome).

Now all that remains is the hope that we will not continue to generate specious prosperity and destroy our environment at the expense of future generations. It would be doubly detrimental, but it is exactly what politics cause with the current debts and the prayer-like incantation of growth that is allegedly necessary for paying back our debts.

This is absurd. The crisis started a long time ago; it only gets more and more tiresome to camouflage it. The growth formula no longer sounds credible. We have to finally accept the crisis and draw the social consequences.

RMD
(Translated by EG)

P.S.
In former times, situations like these sometimes caused wars.

P.S.1
I was inspired to write this article by Enno’s comment on MATE:

Which country do you mean when you say the Euro caused poverty for a huge part of the population?    
At least among the EU countries, I see none except Greece that suffered disadvantages through the Euro.

5 Kommentare zu “Poverty & THE EURO”

  1. Chris Wood (Tuesday May 11th, 2010)

    Dear Roland, this posting like the curates egg is “partly good”. My comments (of course) mainly concern the bad parts.
    In your very wide definition of poverty, you do not indicate whether all four problems are needed to be poor, or only one. Either way, all when carefully considered are dubious or wrong:
    1. Bill Gates is not poor if his fortune slowly declines.
    2. A millionaire who loses his driving licence is not poor.
    3. Starting a family has always changed the consumption profile for almost every family, (e.g. more nappies, less of various other things). Who decides whether this is “wesentlich”? The survival of every species has always depended on acceptance of the direct disadvantages of reproduction.
    4. People who are stupid have poor chances of good education, even when rich. Did Paris Hilton have good chances of education?

    Please give statistics about this increasing poverty in the EU. I do not see it. My daughters have a life richer in many ways than I did when young, despite the fact that my father had a master-degree, despite GB emerging from WW2 in better shape than other parts of Europe.

    Our high CO2 production has not damaged us yet, (but it will). The world has ignored this problem to such an extent that those who reacted sensibly have suffered by starting too soon. Germany and Europe will anyway be less affected than places like Bangladesh.

    “Work becoming more expensive” is a common complaint from industry bosses. They really mean the extra costs such as tax and insurance (health, etc.). The cost of the work to produce a good car has reduced steadily for decades; even more so with a PC. If work were really becoming more expensive, this would surely benefit the workers? But I agree that there are two problems in this area:
    1. The proportion of state involvement is too high. The state is often protected from competition and then tends to work inefficiently. The state is hardly involved in export where there is direct competition. Germany is better here than the rest of Europe. Note that highly paid lobbyists and firms depending on state contracts are often part of the problem, although not regarding themselves as state employees.
    2. Europe, particularly Germany, has the demographic problem. Pensioners are financed partly by those still working. (Partly they are financed from savings and from return on investment).

    The states debts are too high, but compared with the turnover of the state, are not as dramatic as you imply. Certainly they should be reduced, and this will be done by organising inflation, (which is also unpleasant). Various non-Euro countries are worse than Germany. For instance Rumania and GB are similar to Greece, regarding too much state debt. As each has its own currency, the traditional remedies are available. But for the Euro countries, new mechanisms are needed.

    I do not believe that the Euro damaged the weak nations. They were eager to have it, and it made business and tourism simpler. Countries damage themselves, when they elect governments that waste money, (whether the money comes from taxes or borrowing).

    The need for sustainable economy was recognised by Robert Malthus (http://de.wikipedia.org/wiki/Thomas_Robert_Malthus). He sadly decided (about 1800) that the only solution was to let the poor starve, (or to get them killed in wars). Politic has generally followed this policy since then, (see how little is spent to help the third world). Meanwhile, scientists have made a gentler solution possible, by developing contraceptives and new agriculture. But without better politics, the nasty solution will prevail. Malthus later advocated that education of the poor would reduce the problem by reducing population growth.

    Despite all that Roland, I like your posting.

  2. Chris Wood (Tuesday May 11th, 2010)

    P.S. By the way, Germany leaves countries like Greece, Italy and Spain to cope with illegal immigrants, with little or no help.

  3. rd (Tuesday May 11th, 2010)

    Lieber Chris,

    ob meine Bedingungen für “Armut in Europa” hinreichend, notwendig oder nur nützlich sind, überlasse ich den Leser und (auch Dir).

    Interessant finde ich, dass Deine Kommentare oft länger sind, als meine Posts.

    Auch darüber freue ich mich, genauso wie das Dir dieses Posting gefällt.

  4. Enno (Tuesday May 11th, 2010)

    Ihr verwischt die Grenzen zwischen Real- und Finanzmarkt. Ersteres ist die Produktion von Gütern und das Erbringen von Dienstleistungen. Zweiteres ist die Höhe von Schulden, Inflation.
    Chris, du sagt, Rentner würden zu Teilen von der Arbeit anderer leben und zu Teilen von der Kapitalrendite. Ich bin mir nicht sicher, wie du das hier meinst. Man spricht zwar davon, dass man Geld für sich arbeiten lasse (auf dem Sparbuch, als Lebensversicherung), tatsächlich tut es gar nichts.

    Ihr beide wollt Wohlstand und/oder Armut bemessen, indem ihr Lebensstandard (in Realgütern) und Schulden (in Geldeinheiten) voneinander abzieht. Die Rechnung geht nicht auf, weil unser wirtschaftlich erworbenes Glück davon abhängt, wie viel wir konsumieren, und nicht, wie der Konsum finanziert wird. Zurückgezahlt werden müssen die Staatsschulden ohnehin nicht, und Schulden die irgendwann zurückgezahlt werden, betreffen zwar den Zahlenden negativ, aber den Empfänger positiv.
    Daher halte ich eine Betrachtung NUR der Realwirtschaft für sinnvoller.
    Aber da sind die von Roland erwähnten Schulden in Form von CO2-Ausstößen wirklich enorm. Leider auch enorm schwer kalkulierbar.

    Durch den Euro, spätestens aber durch das Europäische Subventionsregime haben die Länder der Peripherie zumindest am BIP gemessen bisher profitiert. Die sich weiter öffnende Einkommensschere dagegen ist auch außerhalb der EU zu beobachten, dass der Euro hier ursächlich wäre, würde ich nicht schließen.
    Die klassische Erklärung ist ein Anstieg der Nachfrage nach qualifizierter Arbeit mit einem gleichzeitigen Rückgang der Nachfrage nach unqualifizierter Arbeit. Von einer solchen Verschiebung profitiert die kleine Gruppe ersterer Anbieter.
    Verschiedene alternative Erklärungen kommen da noch in Betracht: Die Deindustrialisierungshypothese, die Globalisierungshypothese (Arbeit in der Dritten Welt ersetzt unqualifizierte Arbeit in der ersten – das könnte noch am ehesten mit dem Euro geschehen sein, deckt sich aber nicht mit dem Befund, dass die Einkommensschere in fast allen EU-Staaten weiter geöffnet ist als vor 10 Jahren) und die Hypothese organisatorischen Wandels.
    Leider beschreibst du nicht die Wirkungskanäle, über die der Euro die Armut befördert haben soll. Vermutlich sind sie für dich, nachdem du dich ja die letzten Wochen intensiv mit dem Thema beschäftigt hast, schon zu offensichtlich. Für mich sind sie allerdings nicht erkennbar.

    Die hohen Lohnnebenkosten (ich denke, du spielst darauf an, wenn du sagst, dass Arbeit sich nicht mehr lohne) liegen an unserem Sozialstaat und lassen sich nur durch eine Verschlankung (oder in geringem Maße durch eine effizientere Gestaltung) des Staates mindern. Fänd ich nicht gut, betrifft aber fast alle Euro-Staaten gleichermaßen.

  5. Chris Wood (Wednesday May 12th, 2010)

    Dear Roland, I think the average reader will find your criteria for poverty unhelpful.
    Relative poverty matters; (for instance less than half the average earnings). It tends to affect how happy people are. But, what average? Here, a global view is helpful; one can be happy to be better off than the world average. Note that a general increase in wealth does not change the extent of relative poverty.
    Absolute poverty is roughly when lack of money prevents a healthy interesting life. I say “roughly”, because somebody may be fairly rich, but not able to afford an enormously expensive life-saving treatment.

    Dear Enno, mostly I agree with you, but where do I mix the real and financial markets? Anyway, neither production, nor the size of debts is a market.
    I meant “return on investment” very generally. For instance having a house reduces living costs. One can even regard improved infrastructure (physical and intellectual) as resulting from investment by my generation. And this contributes to the earnings of those paying for our pensions. Of course one can say that there was no real improvement, and we are all living beyond our means (unsustainably). See my piece on “ruining our world” http://if-blog.de/cw/wie-wir-unsere-welt-zerstoren/#more-18035 and consider the intellectual infrastructure in the light of the “triumph of irrationality” http://if-blog.de/rd/brandeins-im-mai-%e2%80%93-dieses-heft-macht-sexy/#more-18043. With luck, having children also brings a return on the investment.
    I agree with you Enno that it is very difficult these days to invest money with a positive return on it, after allowing for taxes and inflation.
    I did not write that state debt directly affects my living standard. But it does affect it indirectly. It leads to higher taxes, or reduced state spending, or destabilised currency.

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