Myths in the time of cholera

The economist Tomáš Sedláček discusses the public's view of the European Union


"I will give Europe a year! A maximum of two ... ", perhaps these might be uttered in contempt by characters in a tragicomedy about this moment of European crisis. This disgusting feeling still lingers in our mouths due to the unfulfilled promises from our last swallow of bad medicine and yet it seems like it is time for another ... "Feel". Is the glass half empty or half full? Or just say that the volume of its contents is 250 ml? How does this view affect our behavior and how does the situation affect this view?

From our ancestors, the need for crisis management can also be "inspired". In the Europe of the Dark Middle Ages, following the ravages of the black-death, we learned to wash our hands better.  The French philosopher and historian, René Girard, notes that in times of crisis (cholera, plague, political instability) when the stink of chaos is insufferable and the rules are collapsing, look not for causes, but for an (in)nocent to blame instead. The ideal candidate is a stranger, or at least someone quite "different", who will emerge from or connect with the society in the role of a scapegoat. In short, a figure, who merely stands as a single symbol of what we all oppose. The real reasons, arguments, or facts do not play such an important role because the majority decides what to believe.

Could Jews be responsible for the plague? Could the Euro be responsible for the crisis? Or are we just in the middle of chaos, where we can nicely "fit" that in our wallets where Bozena Nemcova and daddy Masaryk still happily lie. We may feel that in time dominated by science and facts, the era of the myths is a distant past. But is that not just the greatest triumph of myth: When we do not know about it, or its influence? Is the the World Bank economist, Indermit Gill, working on the European economic model, speaking about the five myths, as we are prone to believe?

The myth that Europe is falling down could be easily accepted. If we look at the development of Europe since 2000, we find that it has maintained a stable 30% share of world production, while the U.S. has decreased from 31% to 23%. Another favorite indicator of analysts is also GDP, which in the last twenty years has grown about 2% per year. In Europe, we have created something like a "convergence machine" says Gill, in which the poorer states upon entering the union, strengthen their economic position and through regional trade catch the stronger trade-winds, which propel them forward.

Are European finances the worst in the world? And who is the best? Money should flow from the rich to the poor, or at least that is what the ideal situation should be according to economists. Throughout the world, we see just the opposite however, in actuality (e.g. the China Syndrome, as indicated by Gill). Naturally, media attention criticizes those, whose investments were misused in their countries, but for most the landscapes of Europe, as soil in which foreign investment was planted, have helped millions break out of poverty.

European companies lose their ability to compete. It seems that again the numbers are telling us something different than "emotion". Greece, Italy and Spain are passing crisis, but in the history of similar crisis there can be found many inspirations for Europe. Let's take a look at Germany and Eastern Europe; not only the Czech companies and industries, but also Romania’s development of their businesses through collaboration with more experienced countries.

It seems to us that European governments are too big. European countries maintain the core model of social care, which costs 10% of GDP more than colleagues outside Europe. Also, the fact is that developed European countries are currently doing much better than at any time in history. The French, for example, work nine years less than in the 1960s and live six years longer. Of course, this coin has another face. How to motivate people to support, not abuse this system, and help maintain it as a model worthy of replication elsewhere? The answer may be in the north. The Scandinavian model of government provides a possible solution, or at least encouraging evidence that even large governments can operate effectively.

And finally, it is necessary to forget the whole model and begin again. In such a mood, it is no wonder that it is hard to find enthusiasm to continue to persevere through tough times. But if we realize that while it rains outside, we have a waterproof coat and no one forgot the umbrella, then hopefully we will also remember the reasons why we are in this situation in the first place and that we should walk on despite the gloomy weather towards our destination. The main problem is not the crisis itself, but what brought us to her. We have seen several cases (e.g. Germany, early 2000), which prove that the crisis can be overcome and subsequently motivate others (Slovakia) to do the same. On this count, Europe's rich inventory of experience in dealing with the crisis is available as testimony of what is possible. Or we can simply think up a suitable story, one which we choose to believe and simply explain away the "plague" as a natural disaster.  Although the crisis will eventually end for whichever reason: one due to deliberate action that gives us a sense of accomplishment, or contrarily, a period of  tormenting sleep, which eventually rids us of something we just don't like by passively waiting out the storm.  “All things shall pass”, but why not actively engage the situation to improve our fate or quicken its pace?

About the Author: Tomáš Sedláček (1977) is a Chief Macro-economic Strategist at ČSOB. He served as a non-political expert advisor to the First Deputy Prime Minister and Minister of Finance of the Czech Republic, with special responsibility over fiscal consolidation and the reform of the tax, pension, and healthcare systems. He also served as an economic advisor then-president of the Czech Republic, Václav Havel.


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