The ABCs of the Euro Crisis
Taking a fresh look at an old issue, Megan McArdle explores the role demographics play in the on-going Euro crisis for The Atlantic. But explaining demographics doesn’t itself illuminate a solution. McCardle does a decent job of showing the role an aging population has played in Europe's decline, but she fails to offer any real remedies for the economic slump.
McArdle paints a clear picture: The faster Europe’s economy expands, the more manageable its debt will become. Economic growth is dependent largely on having more workers and higher worker productivity. Yet fewer and fewer Europeans are having the children necessary to replace them in the workforce. And they are becoming less productive as the population ages. Hence the debt becomes increasingly difficult to bear.
McArdle’s analogies are often apt. For example, she compares the crippling effects of a $10,000 credit card balance to one person who makes $30,000 a year and another who makes $300,000. We get it. Italy and other European countries in trouble need to start growing their economies in order to better manage their debt.
That said, McArdle loses our attention when she begins making airplane noises and spoon-feeding us stories of fictional communities—“Morningburg,” “Afternoonsville” and “Twilight City”—in order to compare demographic sets’ strengths and weaknesses in their respective imaginary economies. The teaching tool is complete with the young Morningburgers ill-conceived “Fur-bearing-trout farms,” which were good in theory but cause periodic economic busts. Apparently we’ve all just been chewing bubble gum while Megan has figured this out.
The long story short: If you’re stuck in a ditch with someone, you can only listen to him wax poetic about all the reasons you are there for so long. Eventually, you need to think strategically about getting out. McArdle has a lot of good reasons why Europe is in this financial crisis, but at a certain stage we can’t even hear her anymore. A mixed bag.