Monday, June 4, 2012

The Eurozone Crisis Is NOT an Economic one (part 1)

At least not in an authentic economic sense. Not when we define economics for what it actually is, as the production and distribution of goods and services.

I'll be clear.

All we keep hearing from the chorus that includes everyone from the highest chamber of government ot the lowest of the punditry class is that the Eurozone faces a deep, intractible problem that that is the reason so many Europeans must remain unemployed, fiscal austerity must continue, Germany must keep forking over more bailout funds, ect. But in a real sense, there is nothing different about Europe then there was before the crisis.

A few quick questions.

Have Greece, Italy, Spain, and Ireland experienced a massive destruction of their physical capital stock over the past five years? No.

Have their labor supplies been cut by a pandemic or have their workers suffered a collective bout of amnesia that has robbed them of their technical skills or business knowledge?

Has the level of technology drastically reverted in a Dark-Age style atrohpy of productivty? No.

Then Y = f(A,K,L) has not changed in any meaningful sense. If anything, technology, and the potential labor supply have only continued to grow over the course of the crisis. So in a real sense, there is no economic problem, if we understand an economic problem to be a failure of a country's ability to produce goods and services.

To be continued...

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