Saving the euro-area: The modernization meme

The argument here is that some countries in Europe are further from the liberal-democratic, social-market end-state than others. Crudely: some states have not reached the ‘end of history’, as Fukuyama put it. When you read about the Greek crisis exposing sub-optimal tax collection, inefficient bureaucracy, state corruption, closed-shop professions, inflexible or under-the-table labour markets, you are reading about the modernization meme. One could cite myriad indicators to illustrate this meme; I’ve used global competitiveness (source: IMD) and corruption perceptions (Transparency International).

The euro crisis is the catalyst through which these economies become modern. It’s a tough row to hoe, but eventually they emerge with more efficient labour markets, better bureaucracies, higher competitiveness, higher employment, and better living standards. Think of it this way: if Greece were to become more German, this is the way to do it. Already, the European Commission has parachuted a crack team of EU civil servants into Athens to help it reform some of the basic functions of state, such as tax collection. While some grumble about their presence (especially about the Teutonic flavour of the squad), others welcome it as a means to modernize.

Another way to think about this process is Germany itself. Only a decade ago, observers wondered what, if anything, would reduce German unemployment and restore growth? It appeared as if the European ‘core’ were condemned to sluggish growth and low utilization of labour (high unemployment). Well, Germany set about reforming its labour markets and clawed back global competitiveness through wage restraint (in part), emerging as a stronger exporter and a high-growth economy, well placed to benefit from the emergence of the BRICs.

As the modernization meme goes: What’s wrong with making Greece (or Italy or France for that matter) a little more German?

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