The 24% unemployment reached at the depths of the Great Depression was no picnic.
Southern Europe has not done enough to enhance its competitiveness, while northern Europe has not done enough to boost demand. Debt burdens remain crushing, and Europe’s economy remains unable to grow.
Across the continent, political divisions are deepening. For all of these reasons, the specter of a euro zone collapse has not been dispatched.
The consequences of a collapse would not be pretty. Whichever country precipitated it – Germany by threatening to abandon the euro, or Greece or Spain by actually doing so – would trigger economic chaos and incur its neighbours’ wrath.
As for the single market, the E.U.’s landmark achievement, there is no question that a euro zone breakup would severely disrupt its operation in the short run.
Every day it seems more likely that we are destined – or should one say doomed? – to replay the disastrous economic history of the 1930s.
Political union means transferring the prerogatives of national legislatures to the European parliament, which would then decide how to structure Europe’s fiscal, banking, and monetary union.
The 1992 crisis proved that the existing system was unstable. Not moving forward to the euro would have set up Europe for even more disruptive crises.
This crisis of long-term unemployment is having a profoundly damaging impact on the lives of those bearing the brunt of it. We know this thanks to a series of careful studies of the problem conducted in the depths of the 1930s Great Depression.
For those unfortunate enough to experience it, long-term unemployment – now, as in the 1930s – is a tragedy. And, for society as a whole, there is the danger that the productive capacity of a significant portion of the labour force will be impaired.
Why was there so much work-sharing in the 1930s? One reason is that government pushed for it. In his memoirs, President Herbert Hoover estimated that as many as two million workers avoided unemployment as a result of his efforts to promote work-sharing.