REALITYCHEX

David Brooks Manages the Euro-Crisis

June 1, 2012   ·   2 Comments

Source: NYTX

By Marie Burns:

In his New York Times column today, David Brooks laments “The Segmentation Century,” which he pegs as the cause of the current economic crisis in Europe. It is hard to tell when Brooks claims the segmentation century begins. Brooks cites a 1949 book by Reinhold Niebuhr, who “noticed a secular religion that was especially strong in the years after World War II. It was the faith that historical forces were gradually bringing about ‘the unification of mankind.’” It was this notion, Brooks writes, that “was at the heart of many postwar projects, first the United Nations and then the European Union.” The U.N. charter was finalized in 1945, but the E.U. was not created until 1993, making it mighty post post-war. Brooks, who is uniquely adept at mangling history, probably is actually referring to the formation of the Council of Europe in 1949 and/or the various treaties that created the European Commission, the European Parliament and other European cooperative ventures during the decade-plus following World War II.

Niebuhr was regarded as a liberal theologian (a favorite of Jimmy Carter and Barack Obama!), so don’t expect his predictions to work out. Sure enough, sayeth Brooks, “… this moral, cultural and political convergence never happened. In the decades since, people in different nations, even people within nations, have become less alike in at least as many ways as they have become more alike.”

To prove his point, Brooks turns to statistics. For instance, an M.I.T. study published this year which found that “95 percent of news consumed by American Internet users is published within the United States, and people in many other countries consume even less foreign news than we do.” You parochial dimwits must really start reading La Repubblica and Le Figaro. Also on Brooks menu: a “European Values” study that identified “stark values differences across the Continent [of Europe].” And a “World Values Survey” which Brooks says determined “that people in most Western nations are becoming more distrustful of their neighbors, not less. There are huge variations across nations, but levels of social and political trust have been declining almost everywhere except the Nordic countries.”

The links Brooks provides to the “Values” studies are to massive data files. It’s a safe bet Brooks didn’t actually analyze these data, and I won’t either. Luckily, the Wiki entry on the World Values Survey – the first of which was taken in developed countries in 1981 – gives us a broad picture:

 … analysis of data from the World Values Survey demonstrate that mass values have not been converging over the past three decades. Norms concerning marriage, family, gender and sexual orientation show dramatic changes but virtually all advanced industrial societies have been moving in the same direction, at roughly similar speeds. This has brought a parallel movement, without convergence. Moreover, while economically advanced societies have been changing rather rapidly, countries that remained economically stagnant showed little value change. As a result, there has been a growing divergence between the values prevailing values in low-income countries and high-income countries. (Emphasis added.)

In other words, the results are pretty much what common sense would lead you to expect: an advanced country that starts at Point A on a particular cultural value continuum moves along to Point B, but it doesn’t catch up with views in another advanced country that started at Point B, because values in that second country are concurrently moving to Point C. This does not, as Brooks implies, represent a growing divergence or “segmentation”; rather, it means that people in, say, Ireland, remain on one track that is headed in the same direction as people in, say, Denmark. But the Irish will not catch up with the Danes because the values in each country are changing at more-or-less the same speed. Ireland and Denmark are no closer together on this hypothetical cultural value than they were a decade ago, but they are no farther apart, either. They have neither converged nor diverged.

Brooks hopes he has dazzled you with the facts, because his real purpose in reciting them was to lull you into thinking that his central thesis is based on fact — on huge academic studies, in this case. So, Part 1 completed, Brooks moves to Part 2. As he is wont to do, Brooks uses (a misinterpretation of) the facts he laid out in Part 1 as the “explanation” for Part 2 — the circumstances that brought about the European economic crisis. “Today’s European economic crisis grows directly out of this segmentation.” This is Brooks’ central hypothesis, but he sort of slips it in as just another in the string of facts in Part 1.

A more accurate hypothesis would be, “Today’s European economic crisis grows directly out of the flawed implementation of a single European currency.” The structure of the European currency system has little or nothing to do with disparate cultural values. It was and still is a creation of high-level financial “experts,” bureaucrats and policymakers. While these big guns may not have had perfectly shared ideologies, it is safe to say they were not, for the most part, a bunch of hidebound backwoods bumpkins. To a large extent, these sophisticated movers and shakers did “share cultural values.” (What they apparently did not share was a vision of what could possibly go wrong. Well, they know now.)

In the World according to Brooks, the system’s designers and managers have nothing to do with the success or failure of the system. Instead, Brooks concludes that “.. we should prepare for a crackup because the underlying sense of shared identity required for the euro’s survival is not there.” No, we should prepare for a crackup because the underlying single-currency system does not allow individual European countries to paper their way out of recessions. That is, individual countries can’t “print” their own euros. And the European Central Bank can’t/won’t manipulate the flow of money to help countries hardest hit by local or regional recessions. Just yesterday, “European Central Bank President Mario Draghi warned in Brussels … that he considered the euro zone’s current structure ‘unsustainable,’ and said the region’s governments must surrender far more budget and regulatory power to a central authority if the currency union is to be saved.” Funny, he didn’t say a word about France’s cultural values vis-a-vis those of Greece or Portugal. Rather, Draghi and others – including President Obama – are begging Europe’s political leaders to restructure the system. (Good luck with that.) Paul Krugman, an expert on European monetary policy, wrote a New York Times column a few weeks ago urging European leaders to “stop moralizing and deal with reality.” Here is Krugman’s brief history lesson and his prescription for dealing with the current crisis:

When the euro came into existence, there was a great wave of optimism in Europe – and that, it turned out, was the worst thing that could have happened. Money poured into Spain and other nations, which were now seen as safe investments; this flood of capital fueled huge housing bubbles and huge trade deficits. Then, with the financial crisis of 2008, the flood dried up, causing severe slumps in the very nations that had boomed before….

Europe’s answer has been austerity: savage spending cuts in an attempt to reassure bond markets. Yet as any sensible economist could have told you (and we did, we did), these cuts deepened the depression in Europe’s troubled economies, which both further undermined investor confidence and led to growing political instability….

Italy and, in particular, Spain must be offered hope – an economic environment in which they have some reasonable prospect of emerging from austerity and depression. Realistically, the only way to provide such an environment would be for the central bank to drop its obsession with price stability, to accept and indeed encourage several years of 3 percent or 4 percent inflation in Europe (and more than that in Germany).

Brooks’ pretense that a flawed currency structure is a result of cultural value divergence is as laughable as his notion that “Debt burdens are divergent across nations, and Europeans with one set of habits and values do not want to bail out Europeans with other habits and values.” Yes, debt burdens are divergent across nations, but “divergent debt burdens” were not the cause of the current crisis. Spain, which is one of the countries hardest hit by the euro-crisis, had a surplus, not a deficit, when its housing bubble burst in 2008. Spain was not in debt. Ireland also had little public debt until it decided to bail out its spectacularly speculative bankers. (Meanwhile, against Krugman’s advice, the Irish are expected to vote today in favor of “a referendum on a fiscal compact that is designed to impose discipline in government finances”; i.e., more austerity.) The truth is that the people who are doing the bailing are ordinary Europeans – taxpayers – and the people they are bailing out are – for the most part – bankers and other investors who made very bad bets. Ordinary people who play by the rules don’t like to pay for the bad judgments of millionaire speculators: now, that is a cultural value Brooks can take to the bank.

Jack Mahoney, a contributor to my Website, wrote that “Brooks’s [column today] sounds like a desultory cantata composed for castrati and irrelevant statistics. A lack of effort is its most striking feature. Perhaps fixing up the new house is sapping Mr. Brooks’s energy these days.” Pretty funny, but I think the problem is more fundamental than transitory fatigue or depression triggered by mansion-buyer’s remorse. In fact, Brooks’ column today is really a pretty representative example of David Brooks doing what he does best. Allow me to explain.

As a card-carrying “austerian,” Brooks cannot possibly admit that austerity is exacerbating — not improving — Europe’s economic crisis. To do so would undermine Brooks’ conservative conception of the role of government, which – as he wrote in his last column – should be “sharply limited.” Paul Krugman is in England this week, and in discussions with members in good standing of the British chapter of the Austerian Club, Krugman finds that “they almost always retreat to assertions along the lines of: ‘But it’s essential that we shrink the size of the state.’” Yes, these misguided British austerians and David Brooks are on the same page and singing the same verse. And, like Brooks and other American conservatives, these European “belt-tighteners” will use any economic crisis as an excuse to curb government programs, even when economic theory, history and current conditions prove them wrong. I expect most of these bright lights – including David Brooks – know they are wrong on the facts, but they may think they are right on the philosophy. Brooks is quite an important cog in this wheel of bad fortune: it is his job to dream up fake causes for the dreadful effects of policy mistakes, so the policymakers don’t have to admit their mistakes. Brooks’ charter is to find some other culprit and point the finger of blame away from “the real killers.” Ever resourceful, Brooks thumbs through stats and studies to lend a science-y aura to his amazing “findings.”

So we have his column today, a column in which Brooks blames the cultural views of ordinary Europeans for a crisis caused by the policy decisions of their leaders. To really get his friends in high places off the hook, Brooks concludes that the underlying problem is virtually insoluble: “There are too many nations in too small a space…. When you jam nations with diverging values together, you only end up propelling them apart.”

According to Brooks, the liberal kumbaya moment has passed for Europe. It turns out people cannot get along after all. And the solution, or “The first step, surely, is abandoning the illusions of convergence and the schemes based upon them.” As far as I can tell, Brooks is recommending the abolition of the United Nations and other international bodies. That’s quite a leap from “Americans don’t often read foreign newspapers.” Brooks can do anything with statistics.

Marie Burns blogs at RealityChex.com

By marieburns

Readers Comments (2)

1. alphonsegaston says:

   Wow. Reminds me of a text we used years ago, How to Lie with Statistics.

   Brooks seems determined to blame cultural values for everything that is going wrong. Merely a sophisticated tea-bagger.

   2:51 pm on June 1, 2012

    Reply
2. alphonsegaston says:

   Let me revise that–sophisticated, not. Educated, perhaps.

   3:13 pm on June 1, 2012

    Reply

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