Yes, Virginia, History Matters: Eurozone Edition

Broadly speaking, there are two ways of viewing the eurozone crisis: it’s a problem of economics or a problem of politics. Neither explanation quite suffices, of course, since it is both but the emphasis you place on economics vs politics plays a part in how you’ll view the situation and how likely you are to think there’s any kind of solution that can satisfy the politics and the economics of the situation.

Which is by way of suggesting that plenty of American commentators seem to think the problem is easy to solve and the main thing lacking in europe is the political will to do something about it. (Exhibit A: James Surowiecki of the New Yorker). This, I must say, reminds me of the complaint, oft-heard from partisans on all sides, that the problem with the Iraq War or the Israeli-Palestinian “peace process” is a Willpower Deficit. Really?

But, hark, here’s my old chum Ezra Klein reporting on what he’s learnt from a trip to Germany this week:

[T]he main thing I’ve noticed is that Germans just do not talk about this crisis the way anyone else does. Here are some of the differences:

They seem serenely confident that it will all work out, and this will end in a stronger, more united, Europe. There’s less panic than you would expect. Less panic, certainly, then there is among American economists and policymakers.

History matters here. A lot. In America, we tend to think of the Eurozone as an economic entity. In Germany, it’s also spoken of as an ideological entity — a political project intended as an answer to centuries of wars and decades of uneasy peace. Giving up on it thus risks much more than mere economic chaos. It risks everything Europe in general, and the Germans in particular, have been working towards since the end of World War II.

In part because history matters, France matters. The Germans are very sensitive to accusations that they’re attempting to dominate Europe through economic means. To calm that fear, they have been very careful to stay in lockstep with France. That’s likely to continue.

History matters? You think? I don’t mean to pick on Ezra especially since he’s scarcely the only stateside offender in this regard (and, despite this, you should read him) but, Jesus, this is slap-inviting stuff. Does appreciating the importance of history – that is, of history and culture and psychology – really require a trip to Germany? Perhaps it does. Perhaps Ezra should be more of a Tory than he is…

But if we know anything we should know that history and culture and psychology are enormously important. They matter to people and to countries! Actually, I’d suggest they’re more important than economics, not least because economics is shaped by these other factors and, indeed, generally dependent upon them. That is, there may well be some Platonic ideal economic approach to this or any other given crisis but, generally speaking, that’s but a theoretical construct the practical application of which is a different matter altogether since, again, politics is a sport of limited possibility not something you can replicate under laboratory conditions.

And while Merkel and Sarkozy recognise something has to happen they also have to consider their own futures. If you’re preferred course of action requires politicians to sacrifice their careers you cannot be surprised if they seem reluctant to follow your advice. Nor is this necessarily a failure of political “leadership”. By their own lights Merkel and Sarkozy have every reason to avoid jeopardising their political futures, not least since, presumably, they’re of the view that their opponents would be Bad News for Germany and France. This is not an unreasonable view to take.

So, no, it isn’t simple no matter how much anyone tries to pretend it is or how everything could be solved if only Persons A, B and C ceased being so silly or so stubborn or so damned unreasonable. And it isn’t simple because history and culture and any number of other human factors are at least as important as any set of numbers.

As Tyler Cowen says, the Germans aren’t daft:

Do not think that Germany has merely to waive a magic wand, or incur a one-time cost, to set things right in the eurozone.  Any “set things right” action on Germany’s part is, one way or another, a form of doubling down.  If it fails it means a bigger eurozone implosion in the future than would happen now, including much higher costs for Germany.  The choice is not “German action vs. doom now,” it is “German action and some chance of even bigger doom later on vs. doom now.”  That’s a tough call.  The Germans understand that one better than do most of the bloggers I’ve been reading on the topic.

Quite. For another good US-take, see another old chum, Megan McArdle. Institutions matter and so does politics and so does culture. If the world were run by disinterested computers it might be different but it ain’t so it isn’t.