Posted by: Terri | May 22, 2012

Euro Crisis — end of the social contract?

The focus of much of my research is European politics, although as an American political scientist and activist, I follow my local, state and national politics very closely.  It is often difficult to see the linkages between the U.S. and Europe beyond NATO and foreign policy, but there are very good reasons for Americans to be concerned about the ongoing fiscal crisis in Europe.

I post news regularly on my Europe blog (http://givenseurope.blogspot.com), but for this post I want to focus less on the news and more on my personal observations of the impact of Europe.  In the U.S. we tend to focus on China, given its size and relative economic strength as it grows into a market economy.  However, our most important trading partner continues to be Europe.  It’s where we sell most of our goods, and where we still get many of our more important imports.  If Europe crashes, it will take the U.S. and much of the rest of the world with it. The European Union has been a critical development for peace and growth in post-war Europe and regardless of what happens to the Euro zone, will continue to be a major player in world trade.  However,it is important that we as Americans understand the implications of what is happening in Europe now.  For example, youth unemployment is at least 50% in countries like Spain and Greece.

The spring of 2012 has been a season of protests and riots in Greece, Spain and Italy in the wake of fiscal austerity measures which are only another step in a process that began in the early 1990s.  The end of the Cold War was the beginning of the end of Europe’s social contract, a promise that each generation would live better, have better benefits, health, and a shorter working career than the previous generation.  European countries had entered into this contract at the end of World War II, when the war-torn countries faced the massive task of rebuilding.  The U.S. saw the benefit in helping these countries rebuild, thus creating markets for our own goods.  The Cold War with the Soviet Union also gave the U.S. incentive to go beyond the Marshall plan and provide for Europe’s defense via NATO and the maintenance of bases in Europe, which could also act as forward operations bases for action in other parts of the world, like the Middle East. All of these measures by the U.S. allowed Europe to focus on rebuilding, and focus its economy on manufacturing, education, etc…and not on defense.

When the fiscal crisis hit the U.S. in 2007-2008, initially Europe appeared to escape much of the upheaval.  The crisis switched into high gear in the Fall of 2009 when the newly elected Greek government admitted that much of the data related to the country’s debt had been manufactured.  The country was, in fact, nearly bankrupt.  It soon became clear that Greece was not alone – Ireland and Portugal were the next shoes to drop.  When Spain and Italy began to show signs of strain, it was clear that the crisis would be neither short-lived nor easy to resolve.

In the long run, Europe as a continent has shown its ability to adjust and rebound from major upheavals, whether it be war, disease or cultural shifts (e.g., 1968).  However, this time it’s a much more long term shift that is leading to major cultural impacts.  Discontent is likely to rise, as people realize that the cuts and changes in benefits are not merely temporary measures, but part of a major shift that is the end of the era of the strong welfare state. It is not clear to me yet what the implications of these developments might be for welfare spending in the U.S., but it certainly signals a shift.  If the U.S. is negatively impacted by events in Europe, then the push for more cuts to our own social safety net, and critical areas like education, will continue, negatively impacting all youth, but in particular our growing Latino populations and other marginalized minority groups.


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