The challenges of Europe. Europe is facing unprecedented challenges and the European people do not seem to have the slightest idea of what is happening.
The sharp, intense Mediterranean sun is shining as I think about what I have seen during the few days I spent in Rome. Colors are everywhere in the dry climate of central Italy. The airplane is now at the end of the runway. The engines are roaring. Everything is shaking. After a few minutes the golden coast of Italy will be below, leaving Rome behind. It seems already so far away.
I spent a few days there visiting my parents, jogging under the majestic pines of Rome, walking through streets totally unknown to tourists. The façade of most buildings have been completely renovated with pastel and earth colors. Some bright, others more subdued. The effect is really exciting. Of course I went to see the exquisite “Fontana delle Tartarughe” (The Fountain of the Turtles). Put it on the your absolutely-to-do list when you are in Rome.
As I walked through the streets of Rome, thoughts began to surface about the people of Italy and Europe. Stories in the magazines had a constant bias, hard to ignore. Somehow the picture was not a pretty one.
The airplane is now heading decisively toward France. Europe seems already so far away, in many respects. There is no doubt Europe is going through a major transition. But I am not sure if this transition has a positive or negative flavor.
The US is definitely the great power the Europeans have to deal with, are afraid of, and are trying desperately to copy. I say “desperately” because they know they have to drastically change their economic and political system. With an unemployment rate of about 10% and unskilled, hungry immigrants flocking in from Albania, Africa, Philippines and other poor Asian countries, Russia, Poland, and Eastern Europe, Europe is under stress.
The markets are blind and they march to their own tune. They are forcing the European power structure to make tough choices, not easy to make after decades of socialism and communism. The bureaucracy does not want to give up the power and prestige it has struggled to achieve. Fascist corporativism (the control of specific sectors of the economy by guilds, government enterprises and large industrial cartels) is too difficult to dismantle when maintaining power is considerably more important than building wealth.
But the markets are slowly and steadily forcing government industries to privatize, not by choice, not because this is what is good for the people. They have to privatize because their finances are in shambles. In the meantime old alliances are crumbling. New ones are forming and more often than not American companies are important players in shaping the outcome. Because of the total lack of direction of what is going on in Europe, American companies have a stupendous opportunity to dominate the continent.
This evolution in the power structure is scaring Brussels, where the un-elected political leaders shaping the future of Europe reside. No one knows who they are, but they are dictating what should or should not be done. These leaders, fearing the possibility of loss of power, are concocting new solutions to the problems they have created as reflected by the sad decline in the value of the Euro since it was introduced in 1999.
The European Monetary Union was supposed to be the solution to all European problems. The collapse of the Euro has proved that the union has created a new set of problems as countries with different cultures and productivity were brought together. The outcome is that average European GDP per capita is 25% below that of the US! And they still believe that in order for Europe to grow faster, governments have to spend more money, rather than creating the climate for innovation and allow a friendlier climate for new companies. Now you understand why a confused Europe is trying to imitate the US. As best as they can. As fast as possible.
European rigidities are well known. They cannot be dismantled easily. But have no fear. The unknown leaders of Brussels are planning new solutions for a sclerotic continent. The issue, they say, is that the economic problems Europe is facing cannot be solved without a political framework. In other words, Europe has to unite not only economically, but also politically. It is the only way for these leaders to maintain and enlarge their sphere of influence and hide their incompetence.
What is even more mind boggling is that, they say, Europe needs to include more countries, by enlarging its reach to a huge concoction of cultures. Since the current 11 country union is creating unmanageable problems, you can imagine what will happen when the union will include Cyprus, Czech Republic, Estonia, Hungary, Malta, Poland, Slovenia, Latvia, Lithuania, Slovakia, Bulgaria, Romania and eventually Turkey.
As I was admiring an old, small, elegant 600 year old building near Piazza Navona, I was asking myself what is the sense of all this. Finally an impertinent thought just flashed through my mind:
The USSR is dead. Long live the EUSR, the European Union of Socialist Republics.
The Soviet Union collapsed under the weight of bureaucracy and central planning. Western Europe is trying to rebuild exactly the same empire and exclude Russia. West Germany is still having problems in absorbing East Germany after more than ten years. You can imagine what will happen to Europe when all these countries are put together.
Who is going to pay the bill? Brussels will make sure there is money for everybody. The bottom line is the socialist idea and state meddling with its citizens is alive and well in Europe. This will create tremendous opportunities for American companies with their advanced level of organization and financial depth. And then you wonder why the Euro is so weak.
By this time I saw the Atlantic Ocean. Going home.
(This
Oservations appeared in the issue 6/20/2000 of
The Peter Dag Portfolio)
George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest
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Interesting day. Very interesting.
