Are We Doing Well with the Euro?13. February 2013 by Herman Brodie
The title of this post was one of the questions an economist from a major French banking group asked the audience during a lecture to Franco-German business group yesterday evening. His answer was a resounding “no”. On two measures, he argued, employment and consumption, eurozone citizens have fared far worse than their counterparts in the US, UK or Japan.
The unemployment record of the eurozone was particularly damning. Joblessness in the countries that make up the EMU (Economic and Monetary Union) was higher than that in the other global regions even before the single-currency was introduced. Although the financial crisis brought job losses across the world, Japan, the US and the UK have all started to repair the damage done; the eurozone, in the meantime has continued to shed jobs, and unemployment currently stands at record highs. Work, especially meaningful work, is an important contributor to our sense of well-being. Although studies have shown that a bad job is worse than no job at all, it is very difficult to argue that Europeans have not suffered during the euro era.
On the second measure, a graphic revealed that consumption per head across the EMU, and in the UK, had fallen back to the levels that prevailed ten years ago, following a debt-fuelled boom that ended abruptly in 2009. In contrast, US consumption has been relatively steady, and Japanese consumption was near all-time highs. Here, he concluded, Europeans had undoubtedly fared worse. But, this conclusion is perhaps not so easy to draw as in the case of unemployment, because much depends on what is being consumed. For an economist it makes no difference whether one ‘consumes’ a doctor to do a hip operation or an abortion; a candlelit dinner has the same economic value as a session with the psychiatrist; and a patent lawyer brings as much social welfare as a divorce lawyer. For ordinary people, however, what money is spent on is more important for well-being than how much is spent.
The most recent figures from the Organisation for Economic Co-operation and Development (OECD) give some insight into how consumption patterns have changed over the ten years to 2010 for the countries that make up the Group of Seven. For instance, one category on which consumers spent less in real terms over the past decade was alcohol and tobacco; on a GDP-weighted average, this decline was in the order of 11 percent. Transport spending also fell 4 percent in real terms. For the health and the nerves of these populations, these are surely ‘good’ reductions in spending. The UK was unique in being the only country to have increased its consumption in both of these categories. Healthcare was a category that saw a 29 percent average increase in spending across the seven nations. Similarly, recreation and culture saw a bumper 52 percent average increase, albeit with significant cross-sectional variation (Japan was 84 percent, but Germany only 14 percent). Education accounted for an average growth in consumption of 7 percent. Once again, the UK was notable in having consumed less education, one third less, over the decade, compared to a 52 percent increase in Germany.
The conclusion that we are worse off is not so clear-cut if one thinks in terms of well-being rather than in crude economic measures. Even the economist, when pushed, conceded that he wouldn’t leave Europe for anything in the world.
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