What if Europe’s current crisis was actually the best opportunity yet for Europe to become the strongest economy it has ever been?
It’s not as far fetched as it initially sounds, since, as The Economist points out, Europe has had its crises before, with the most comparable being back in the 1980’s.
Back then, the continent was struck by low growth and high unemployment, whose resultant economic pain generated support for sweeping economic reforms, reforms which aimed to create one European market. Essentially, glaring evidence of an economic problem energized free market policies, which post-1992 brought down barriers between European nations.
This led to one of ‘the most dynamic periods in EU history’ says The Economist, ie. the 1990’s.
Yet even now, the goal of one European market remains far from complete, even if the situation is much better than before. Barriers to economic activity are still large between countries, making it hard to scale good ideas. Interest groups still block change in each country.
Thus a major positive outcome of the current crisis is that it has laid bare Europe’s underlying structural problems. Whether related to spending, labour markets, you name it — it all looks ugly — but current disgust for Europe’s economic model is part of the long-term reform process. This crisis is necessary, else nothing would change.
If so, then to view the current European crisis as a disaster, which we admit we’ve been guilty of, might miss the larger point — maybe we’re actually witnessing an important inflection point for Europe, one which could easily lead to the most dynamic Europe we’ve ever seen, especially if European leaders look to lessons from 1992 says The Economist.
What does this mean? Push for freer markets, within Europe. Why? Because support for such reforms has never been stronger:
The crisis has shifted the political landscape in Europe. The euro was supposed to spur reform by preventing governments from restoring competitiveness by devaluing their currencies. And it did. Not at first, when Greece, Spain and the others used the euro’s low interest rates as an excuse to party. But now they have woken up hung-over, to find that reform can be put off no longer.
There are signs that Europeans understand this better than their timid leaders. Asked if they were better off in a free-market economy, 73% of Germans and 67% of French said yes, according to a survey released in June by Pew Research Centre. That compares with 65% and 56% respectively at the height of the boom in 2007 and it rivals America, with 68%, and eclipses Britain, with 64%, where support for free markets has fallen.
Yes, it’s hard to imagine right now, but what if, in 20 years, Europeans look back on this crisis as a positive catalyst which drove much-needed change? It’s a huge challenge, and could take many ugly years before coming to fruition, but reform rarely happens in the absence of problems.