09 November 2011

A linguistic interpretation of the moralism thread in the Euro crisis

There's a thread going around about the Euro crisis suggesting that rather than a lazy-south vs. industrious-north problem, it's more informative to look at it as a balance of payments problem. Basically, the Portugal-Italy-Greece-Spain group of countries are running a balance of trade deficit with the Holland-Germany group. Check out Paul Krugman's writeup on the NYT for the basic idea.

There are two reasons it's useful to think of the problem this way. One, as Krugman points out, is that the balance of payments problem is quite recent. It's not true that Spain, Portugal, or Greece had historically In particular, the creation of the Euro in 1999 is directly correllated with the beginning of the balance of payments problem, as this graph from Krugman's post points out:

Correlation is not causality, but it's hard to avoid the conclusion that something about the creation of the Euro is actually what gave rise to a problem that didn't previously exist. Germans like to blame Greece's rigid labour markets, leaky tax systems, and large public sector for the Euro crisis, but somehow those things didn't cause a crisis before 1999.

And that leads directly to the second observation, best described in the Economists' follow-up to Krugman's article. If two American states have an asymmetric balance of payments, we think of it as something that exists; not as a moral failing. While a balance of payments problem has to be corrected long-term, it doesn't lead to moral approbation. Why then is Germany so insistent on condemning Greece?

The easiest answer is political: Germans want the pain of fixing the crisis to mostly be assigned to Greece and as a negotiating tactic paints the other side as lazy/evil. However, in the Economist post referenced above and you see a more intriguing cause: in German (and Dutch), the word for "debt" and the world for "guilt" are both "schuld". In those languages (or more precisely, in those cultures), to say someone is in debt is to say they're to blame. While it's easy to overstate the influence of language, it's easy to think that the subtle influence of the linguistics are keeping the two sides even farther apart.

This gets more important given the likelihood that Germany continuing on the current course will lead to a severe recession in the debtor states. See the post which started the thread, which strongly suggests that a continuation of the de-facto transfer union would be the only way to avoid a serious recession.

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