The European debt crisis, dependency theory and trying to make lists

GDP per capita: EU 2007, wikipedia

All this talk lately about fission in the EU and the creation of a “two-speed” Europe has got me thinking back on Immanuel Wallerstein, dependence theory and what it means to be a core, peripheral or semi-peripheral country.

One of Wallerstein’s insights into the functioning of the global capitalist system is the unequal exchange that occurs between members of the core and those on the periphery. Basically core, i.e., financially complex and industrially strong, counties establish trade relations with poorer, less-developed counties in order to take advantage of resource supplies and access to cheap labor. Rich, core countries get richer while poor, peripheral countries either get exploited, on a cynical reading, or get to stand in the line of development, on a more sanguine reading. (To be sure, Wallerstein acknowledges a certain amount of fluidity in a country’s core/peripheral status. Before industrializing, northern Europe would have a been a peripheral or at best semi-peripheral region.)

When the EU created the common market in 1986 and then enhanced various labor and other requirements continually up through the most recent Lisbon Treaty, it basically abolished the divide between its core and semi-peripheral markets. Economic, labor, environmental and other laws were more or less harmonized so as to create a more cohesive political unit.

Now obviously some of these semi-peripheral markets were inefficiently governed. That’s one of the symptoms of being in the semi-periphery –  there are no independent ombudsmen, infrastructure is retarded, the party system is corrupt and other things. But granted membership in the club of the core, the new core members were able to hide these things, borrow money cheaply and take advantage of other aspects of their core membership.

And the old core countries started to resent them for this. No longer could they exploit these new cores the way they used to. Suddenly, all sorts of labor, environmental and other bothersome regulations emerged that core countries don’t like bothering with when they’re doing business in the periphery. Whereas the old cores started accusing the new cores of social dumping, or taking advantage of their labor and welfare systems, in reality, the issue for the old cores was that they weren’t able to buy goods as cheaply anymore, weren’t able to exploit resources as easily as before and, and here’s the kicker, they actually had to start subsidizing these new core members in order for them to stay in the core. And cores really can only stand subsidizing themselves.

The cores have grown tired of this. All the old Shuman-esque talk of cohesion and solidarity and open markets has only led to subsidies, bailouts and tighter and tighter tight-rope walking. And though it appears they might be willing to set up a firewall around some of their new core friends, the rest of the lot apparently should just go back to eating cake in the semi-periphery.

NB: Clearly the situation in Europe is more complicated than the one I’ve described here. A full analysis would involve shady securities deals, American bankers, cultural differences, nationalism, protectionism, stricter capital requirements forcing banks to hold onto what are turning out to be really risky government bonds, austerity likely making things worse, pathetic tax enforcement, counter-productive immigration policies, the fact that it’s way to hot to really work in some countries, why certain countries were even allowed into the eurozone to begin with, lack of true supra-nationalism in the EU, a totally cumbersome legislative process, religion, bureaucracy, history, WWII, so many different languages… Just making a list of all the things a comprehensive analysis would have to include would be like trying to make a list of all the words in all the languages that have ever existed.

Or maybe the ECB could just print a bunch of money and tell Germany to get over it.

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One Response to The European debt crisis, dependency theory and trying to make lists

  1. Josh B says:

    Brilliant looking into the smaller county levels of the states. What I’d like to see, is a comparison of your sovereign debt problem and how America’s own dissolution will occur. You see, some states in America have high debt per capita ratios, massive unfunded liabilities for pension funds, and rising debt levels in their futures. Some states will keep raising taxes, while others try to get rid of them. Some states will cut taxes too much, and will make a lot of public sector workers very angry. Then, we will have an issue where the federal government is left trying to bail out some states, and may let others fail. Finally, outside players could even become involved in the American debt crisis, choosing to bail out some states and not others. This will all play out in a very interesting manner, we are watching our friends across the pond in Europe to try to get some kind of idea about what we here in Amerika will soon be facing.

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