What is with the Czechs
I can't resist commenting on Josh's post from last night, because I don't think Josh analyzed the situation quite correctly.
First, dramatis personae: Mr. Topolanek is the Czech Prime Minister, head of the now-outgoing government; also the current EU president, by virtue of being the leader of the country holding the rotating EU presidency. Mr. Klaus is the president of the Czech Republic, a role which is largely ceremonial; he is known for being a rabid Eurosceptic and a global warming denier. Mr. Havel is the former Czech president and a playwright, now more or less retired, and not relevant to this story (unfortunately, perhaps).
Here is a BBC report on Mr. Topolanek's speech. This was no "outburst". Mr. Topolanek is known for his tendency to say what he really thinks, which admittedly may have been strenghtened by the lost no-confidence vote in the Czech parliament, especially because his government fell for no good reason at the worst possible time (right before a summit with Obama's visit in Prague less than two weeks from now). His remarks about a "road to hell" were undiplomatic, but expressed the current thinking of European leaders (especially Germany, the largest EU member state).
The fundamental issue is that US and European economies have very different structure, and very different problems. Europe has no problem with a housing market bust (there was no bubble, either). There aren't widespread systemic problems in the banking sector. For a small, export-oriented economy like that of the Czech Republic, deficit spending is useless in a global downturn situation. It can run up a huge debt but it won't change the situation. For a large exporter country like Germany, the downsides of large-scale deficit spending are clear, the upsides far less so. That's why European countries (with the notable exception of the UK) are very reluctant to start massive spending.
Which is not to say that stimulus spending won't help in the US - just that Americans shouldn't be telling Europeans what to do, and vice versa. Simply because they rarely understand what's really going on across the pond, and tend to have too insular views.
First, dramatis personae: Mr. Topolanek is the Czech Prime Minister, head of the now-outgoing government; also the current EU president, by virtue of being the leader of the country holding the rotating EU presidency. Mr. Klaus is the president of the Czech Republic, a role which is largely ceremonial; he is known for being a rabid Eurosceptic and a global warming denier. Mr. Havel is the former Czech president and a playwright, now more or less retired, and not relevant to this story (unfortunately, perhaps).
Here is a BBC report on Mr. Topolanek's speech. This was no "outburst". Mr. Topolanek is known for his tendency to say what he really thinks, which admittedly may have been strenghtened by the lost no-confidence vote in the Czech parliament, especially because his government fell for no good reason at the worst possible time (right before a summit with Obama's visit in Prague less than two weeks from now). His remarks about a "road to hell" were undiplomatic, but expressed the current thinking of European leaders (especially Germany, the largest EU member state).
The fundamental issue is that US and European economies have very different structure, and very different problems. Europe has no problem with a housing market bust (there was no bubble, either). There aren't widespread systemic problems in the banking sector. For a small, export-oriented economy like that of the Czech Republic, deficit spending is useless in a global downturn situation. It can run up a huge debt but it won't change the situation. For a large exporter country like Germany, the downsides of large-scale deficit spending are clear, the upsides far less so. That's why European countries (with the notable exception of the UK) are very reluctant to start massive spending.
Which is not to say that stimulus spending won't help in the US - just that Americans shouldn't be telling Europeans what to do, and vice versa. Simply because they rarely understand what's really going on across the pond, and tend to have too insular views.
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Interesting theory, but I blame Codegen86. Oust the zadek klobouk already!
děkuji!
March 26, 2009 9:34 AM | Reply | Permalink
Oust which one? If all of them are ousted, will anyone be left? :)
March 26, 2009 10:15 AM | Reply | Permalink
"just that Americans shouldn't be telling Europeans what to do, and vice versa. Simply because they rarely understand what's really going on across the pond, and tend to have too insular views."
Are you joking? Europeans are ALWAYS telling the US what to do. I lived there. Nobody is quiet when it comes to the US abandoning the Kyoto treaty for instance. And frankly, Germany's refusal to provide and stimulus and its efforts to preven the EU from doing so, is going to hurt everyone.
March 26, 2009 9:48 AM | Reply | Permalink
No, I am not joking. You don't live in Germany, so why do you think you know best how to help the German economy?
Sure, the Europeans will be telling Americans what to do on Kyoto, just like the Americans will be telling Europeans what to do on Iraq or Afghanistan. And there will be plenty of disagreement because everyone wants to follow their own interests. Surprise!
Now the US is telling Europe how to fix the economic crisis that the US caused. Why should Europeans listen, exactly?
Americans feel that everyone should pitch in, which is understandable. Europeans feel that they shouldn't pay for damage caused by runaway US financial markets, which is also understandable. Who is right and who is wrong? Everyone and no one.
March 26, 2009 10:14 AM | Reply | Permalink
Europe should listen because they too will suffer in a prolonged recession/depression.
Stupid nationalism the appropriate response. It's not understandable although I'm not surprised. It's deplorable. It leads to everyone not cooperating to solve a huge GLOBAL crisis. Single countries are absolutely less effective than if everyone coordinated responses.
But the larger point is that the US wants them to pitch in and pay their share of stimulus, like China and Japan and others have done. Europe wants the US to go along with stricter financial rules. So if they want the US to agree to their plans, they need to stop saying "No!" to requests to pitch in.
The era when countries can or would mind their own business is finished. This is a global crisis and demands a global response.
March 26, 2009 4:11 PM | Reply | Permalink
Are you implying that the US doesn't want to go along with stricter financial rules because credit crunches are so much fun, and we should have more of them?
Also keep in mind that a lot of the stimulus spending in the US goes towards unemployment benefits, which in Europe are already built in.
March 26, 2009 6:11 PM | Reply | Permalink
LOL! (on that first question).
Nice post. And keep blogging on what's going on in Europe. Interesting!
I'm with you on most of this, but the German reticence to lead as regards the problems with Eastern Europe, their banks and such, seems stupid to me. And it seems like the German paranoia about inflation is also behind the ECB's pigheadedness.
March 26, 2009 7:56 PM | Reply | Permalink
"Are you implying that the US doesn't want to go along with stricter financial rules because credit crunches are so much fun, and we should have more of them?"
No, I'm all for regulation (although I'd have to see the wacky things they propose). But how can the EU stiff arm the US if it wants our cooperation? Quid pro quo is preferable to Mutual Assured Destruction, no?
"Also keep in mind that a lot of the stimulus spending in the US goes towards unemployment benefits, which in Europe are already built in."
The US stimulus was too small. That much of it just goes to propping up people is too bad. But we did something. Germany's "Nein" to EU wide action is pathetic.
Angela Merkel is a conservative, so her free market dogma is no different than our own "Party of No" in the US. It's unfortunate to have a rightwing asshole like that leading Europe's biggest economy at this moment.
March 26, 2009 11:59 PM | Reply | Permalink
Germany is currently ruled by a grand coalition of conservatives and social democrats, not exactly a right-wing government.
Germans are not opposed to economic stimulus, but I don't think they believe it's all about whose numbers are bigger.
For instance, the "conservative, free market dogma" German government recently started a program where anyone who junks a 9+ y.o. car and buys a new one gets 2,500 Euro (Verschrottungsprämie). That did wonders for getting the new car market into gear again. And it is true stimulus spending because most of the spending is in fact done by private entities... the government just stimulates it.
March 27, 2009 8:41 AM | Reply | Permalink
It's a damn shame that all the American velveeta-spread crackers didn't listen to what Chirac was saying prior to the invasion of Iraq, because his pre-Iraq war assessment turned out to be very close to reality, and foe this, Chirac was vilified, defamed and slandered by cud-chewing ditto-head rightards without even enough sense to look towards who is at the end of the chain welded to the ring in their noses when it gets violently yanked.
Now the President of The Republic is a head-up neocon butt munchkin so vain, that he wears double height elevator shoes so his forehead is able to barely reach up to the shoulders of his trophy wife.
March 26, 2009 8:48 PM | Reply | Permalink
More support for you here including a link to a New Yorker article that says the same thing you do about the different economic approaches.
(Sorry, I did not see your blog before I wrote mine.)
Marshall really is getting it wrong. And getting it wrong is not the way to successfully fight right wing blogs politically in the U.S., if that is what he is attempting to do. (If I had my druthers, I'd prefer he just leave the political activism out of the journalism and go for the analysis, but that's just me, and I know I am in a minority in this virtual world.)
March 26, 2009 10:33 AM | Reply | Permalink
That is a good article; thanks for the link. I'd say this is the key part: "If European and American policymakers seem, in their public statements, to be dealing with two very different financial crises, it’s because, in some sense, they are."
Also, the Czech PM is not some kind of extreme right winger. While his party is rightist in the Czech political spectrum, it's hardly to the right of the US Democratic Party. The European objections to massive stimulus spending are far more practical than ideological.
March 26, 2009 11:31 AM | Reply | Permalink
One thing that struck me like a bolt of light about the piece is his reference to difference in economic psychology because of the historic experience of hyper-inflation, especially for Germany.
I had a client in Munich in the late 80's and early 90's, he was a classic bourgeois burgomeister type. He ran a firm that did something with computers where he had made enough money to retire to pretending to be an art dealer (somewhat badly.) He just loved America and American capitalism, even down to adoring Manhattan skyscrapers and American folk art duck decoys. (He had tried to immigrate as a youngin after WWII but didn't get lucky on that front.) The things he used to bitch about to me about Germany gave some sense of the competing dynamics.
Of course, growing up in Milwaukee, once know as "little Munich," I already knew something about German cultural thrift et. al.
March 26, 2009 11:51 AM | Reply | Permalink
Milwaukee the "Little Munich?" Did Neville Chamberlain retire there? Was there a neighborhood called the "Little Sudetenland?" ;)
March 26, 2009 12:30 PM | Reply | Permalink
Nah, from what I recall from volunteering at the Milwaukee Historical Society, the Munich uber alles theme was sort of tempered starting with U.S. entry into WWI. :-)
March 26, 2009 12:40 PM | Reply | Permalink
Marshall is not getting it wrong. The New Yorker article is bullshit. Europe is getting worse, and Eastern Europe, with which they are increasingly tied, is a disaster.
I think people don't understand that these are conservatives in power over there who refuse to intervene in markets. It's nothing different than listening to Mitch McConnell and Bohner say "no" all the time.
March 27, 2009 12:11 AM | Reply | Permalink
Americans have the absolute right to tell Europeans how to behave and you better do what we say. Who gave you McDonalds? That's the first question. Why did you take it? That's the second. Answer both questions right and you can shop at Target. That's a French store in case you didn't know.
March 26, 2009 10:35 AM | Reply | Permalink
Who gave you McDonalds?
Or Jerry Lewis!
March 26, 2009 11:43 AM | Reply | Permalink
We gave them the Three Stooges and the Terminator too. Now they want Seinfeld. WTF.
March 26, 2009 12:09 PM | Reply | Permalink
The real question for the ages: why is French rock n' roll so pitiful?
March 26, 2009 12:44 PM | Reply | Permalink
(1)It's in French.( 2)They use French Musicians. (3)Édith Piaf is dead.
Someone tried to wake up the French with German Techno but they thought they were under cultural attack. That's when they asked Wilt Chamberlain to give away Normandy to the Scots. They didn't want any trouble from Mel Gibson. They noticed that Wilt and Stilt rhymed with Kilt. Checked with Descarte and they all agreed that things that rhymed but weren't in French were dangerous. Better to give up Normandy than listen to Paul McCartney.
March 26, 2009 1:02 PM | Reply | Permalink
Wir fahren fahren fahren auf der Autobahn...(sp)
Wir fahren fahren fahren auf der Autobahn...(sp)
Wir fahren fahren fahren auf der Autobahn...(sp)
http://www.youtube.com/watch?v=68C-r9kSLNE
March 27, 2009 12:28 AM | Reply | Permalink
Retro synths and VW's. I weep for the ancients.
March 27, 2009 3:22 AM | Reply | Permalink
Air? Daft Punk?
Ok, maybe they're too electronic to count as "rock," but surely Phoenix counts:
http://www.seeqpod.com/search/?plid=16bcb54920
March 26, 2009 6:31 PM | Reply | Permalink
Oh, and of course (slaps head) Justice!!!!
March 26, 2009 6:35 PM | Reply | Permalink
Puzzled. More choices?
March 27, 2009 3:19 AM | Reply | Permalink
You forgot cowboys & injuns! I was thinking that the German travel industry might have a nefarious interest in returning us to a more laissez-faire frontier state. Those Wild West tours that used to sell out for them have probably grown tiresome (remember Dieter on SNL?)
March 26, 2009 1:18 PM | Reply | Permalink
I heard that Geithner (suspiciously German sounding name?) has a plan for the next installment of his giveaway America fast deals. Detroit goes to the Germans. In that part of the deal the Germans pay 1 mil five for GM and Ford. The French get Chrysler gratis. In return, all our auto workers collect unemployment checks and get medical insurance from a joint German/French consortium. England gets the Empire State Building. Italy gets the last three Concordes. Japan gets California and China gets Japan. Russia gets Alaska but only if they build a bridge that connects Siberia to Anchorage. Cuba gets Florida or does that go the other way?
March 26, 2009 1:33 PM | Reply | Permalink
I like your last line because the Europeans had colonized SE Florida not that long ago, but fled like it had the plague. Spain's enough trouble for them, thank you very much.
March 26, 2009 1:47 PM | Reply | Permalink
I like your last line because the Europeans had colonized SE Florida not that long ago, but fled like it had the plague. Spain's enough trouble for them, thank you very much.
March 26, 2009 1:49 PM | Reply | Permalink
Codee, thanks for this well-written point of view. Nice to see you posting again.
March 26, 2009 12:22 PM | Reply | Permalink
After what I read hear and in artappraiser's post, it makes sense to me that we shouldn't be telling the Europeans to stimulate. OTOH, I hope we listen to them when they tell us to regulate.
March 26, 2009 3:41 PM | Reply | Permalink
What really gets me is when people - for instance the Czech president, Mr. Klaus - claim that the whole crisis was caused by excessive regulation and too much government interference with the free market...
March 26, 2009 4:00 PM | Reply | Permalink
Can you expand on this? It's clear that you really have the various issues under control. I, for one, would like to hear a lot more in specifics. Imagine that we know nothing.
March 26, 2009 4:58 PM | Reply | Permalink
If I knew exactly what to do, I'd be running the world right now...
I'm not sure either the EU or the US should be doing things differently, I think they're doing things generally right. But they should do more about examining of their banking systems and figuring out exactly how far in the hole the banks are (or not). The uncertainty is likely worse than the worst possible reality.
In general, the first order of business is restoring confidence in the economy. That means not panicking and not spreading hysteria. This time is probably crucial in determining whether we're in for a prolonged recession/depression or not, and it mostly depends on people's perception of the situation.
March 26, 2009 7:22 PM | Reply | Permalink
Does the words Keynes mean anything to you??
March 26, 2009 4:18 PM | Reply | Permalink
The "European" situation is oversimplified in the mainstream media. Besides the interests of the individual countries, there are at least three distinct blocs:
- The Eurozone and the old EC core countries, especially Germany, France, Italy, The Netherlands, Belgium, and Luxembourg. While socially most progressive, they are the most conservative fiscally and economically, and the abhorrence of inflation is most pronounced here.
- The United Kingdom, which depends on the Sterling and has distinct interests due to the size of its London financial businesses. This has been the center of unfettered financial innovation since the Thatcher years, in order to boost the service economy, since the UK no longer has an effective manufacturing sector. They are also abivalent about being European, and wish to occupy a middle ground between Europe and the United State (the "special relationship").
- The Eastern Europeans, newly admitted to the EU and not in the Eurozone. They have borrowed vast sums in Euros and dollars to modernize their economies. They are just waking up to the fact than in a depression, all the equity assets wind up in the hands of the debt holders, a rude introduction to free market capitalism.
March 26, 2009 4:38 PM | Reply | Permalink
Thanks. This is helping.
March 26, 2009 5:23 PM | Reply | Permalink
Yes and no. Some new EU members borrowed a lot in foreign denominations (Latvia, Hungary), some didn't (Poland, Czech Republic). Careful with oversimplifying!
March 26, 2009 6:07 PM | Reply | Permalink
How would you summarize the general issues in the broadest terms? What would you want either the US or the EU do differently?
March 26, 2009 6:35 PM | Reply | Permalink
Careful with oversimplifying!
Slavs! So emotional; so childlike. And anyway, it's impossible to tell them apart; they all look the same.
March 26, 2009 9:12 PM | Reply | Permalink
One possible factor restraining EU countries' expenditures -- whether rightly or wrongly -- that I haven't seen mentioned anywhere yet, is the debt ceiling imposed upon all members. Germany, along with some others, has spent the last several years pulling itself out of being officially "on reprimand" for its too-high debt. Even if some in EU leadership positions thought following the US's lead would be a good idea, internal rules would prevent it (as I understand it, at least).
What really boggles my mind is the disparity of opinions on each side of the Atlantic about the severity of the economic crisis in Europe. Whereas I've read several, obviously very intelligent analyses on US blogs about the impending catastrophe facing the EU (even higher leveraging of investments in eastern European countries than in the US, amongst other convincing-sounding reasons), I have yet to hear or read anything about this in Europe. I wish I knew whether this should comfort me or frighten me...
March 26, 2009 6:19 PM | Reply | Permalink
Doesn't it suggest that no one has any real idea about what is going on or what may happen? The economic machine is running wild and no one knows what to do.
March 26, 2009 7:43 PM | Reply | Permalink
Code, it's simple. Buy American, lots and lots and lots.
=D
March 26, 2009 7:43 PM | Reply | Permalink
Excellent post, with even better follow up commentary: but something is missing, and not just a solid reference to Karl May. The comparisons between the various cultures (social, economic and political) are balderdash: Left and Right do not mean the same thing over here.
Speaking broadly while conceding the absurdity of doing so . . . European nations are built on centers (both real and imagined). The high tolerance for unemployment and slower GDP growth emerges out of the same consensus that pays for health care and free university education while largely (overwhelmingly) excluding the Roma population from the social contract. (In the CZ, 3 of 4 Roma children attend schools for the "socially" retarded - google it!) And it is very often the "Left" of Europe who write that apologia. Yet also the "Right" of Europe has long discarded (most) of its association with the Fascistic dingleberries that still wax nostalgic for Third Reich. (The exception here being the high numbers of racist assaults carried out by uniformed police officers - a voting bloc which trends distinctly authoritarian - here, back home, and also pretty much every where.(
The thing is, that over here one finds a broad general consensus on what it means to be whatever one knows one is - be it German burgermeister, Czech factory worker, Gypsy gutterpunk, etc. etc. etc. And one knows what one is. There is practically none of that funny idea of moving 1 or 2 thousand miles from home to "discover yourself". This has consequences: Less divorce, and a shockingly low murder rate (in comparison to the US anyway though high compared to places even more centrocentric than here, e.g. Japan), fewer midlife crises and far far fewer pregnant teenagers, little overarching worry about pensions and retirement (again, in comparison to the US - I in no way mean to belittle the very real disasters that have happened here, esp The Utterly Brilliant Job done in Italy where they DID largely privatize social security), and yes, a flawed (of course) but functional sense of responsibility that is written throughout the society - and expressed economic policy! ah but I could go on and on.
But what, you might be asking, is the point? Those who say that the larger Eurozone nations do not grok Keynes do not know what they are talking about. The center of the center here is Keynes. The governments do regulate, heavily: they intervene in business decisions, heavily. And the purpose of such action is to maintain social stability. There are costs associated with this. they include mildly lower GDP growth (but not lower standards of living) and fewer skyboxes in smaller stadiums. The consensus here is that social stability is worth far more than such trifles. While Friedman did get a little traction within the EU, (especially in the British Islands as Thatcherism and in some parts of the former East Bloc as bad, truly bad, renderings of Ronnie Raygun, aka, Klaus, et. al.), casino driven economics has long been seen as socially untenable by the vast majority of both the Left and the Right of Europe. Again, I know, there are countless exceptions and Klaus and Topolanek do evidence the contrary. I would love to start ranting in that direction, but, you know, well, if you are still reading then maybe you are thinking that I ought to stick to the point and wrap it up, I know I would be. And so I shall, with pointed reference toward anything written by Tony Judt, as well as this tidbit that touches on the some of the history of the america/europe conundrum.
http://www.andymarkovits.com/docs/chronicle-article.pdf
Finally, a few bona fides: I read this blog relentlessly, but not for information on what is going on in Europe . . . for the record, I am a long term expat, currently teaching (not english) at Karlova Univerzita, Praha, This is my fifth nation abroad (living, not traveling). Though for the record, while the fact that I live in Prague does not qualify as proof that I know what I am talking about, it does mean that I will be able to see Obama speak here on the fifth.
Goodie.
March 27, 2009 11:56 AM | Reply | Permalink
Topolanek isn't a Thatcherite or Reaganite... Klaus is, and a rabid one. But then Mr. Klaus is more or less insane, in my opinion.
It is curious (but perhaps easy to explain for a psychologist) how some people who grew up in communism are so ready to embrace the most extreme forms of capitalism, without (or because of) knowing capitalism very well.
March 27, 2009 2:25 PM | Reply | Permalink