Summary: Five years of crisis in Europe, yet its streets remain mostly calm. What accounts for this? How long will it continue?
“At the heart of the crisis, there is the challenge of redefining the social contract to safeguard the sustainability of Europe’s social model.”
— Speech by Benoit Coeure (Executive Board of the ECB), 2 March 2013
“Spot on, Benoit. The trouble is European leaders and institutions seem to want to redefine the contract in ways that at least half of European citizens don’t approve, or trust them to carry out. So underneath the three-headed crisis of austerity, banking and sovereign debt, we have one of legitimacy and trust, which is feeding social unrest.”
— George Magnus, Economic Advisor, UBS, 20 March 2013
- Why is Europe still stable?
- What comes next?
- Compare with China
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(1) Why is Europe still stable?
The stability in Europe since the second downturn began in March 2010 has surprised many observers (eg, me). Three years of depressionary conditions in the periphery have produced no large, severe outbreaks of social unrest. Elections have produced majorities in favor of the European Union and the austerity it mandates (we’ll soon see if February’s election in Italy broke this record).
What produces this stability? The usual supports for incumbent systems are human inertia and people’s dislike of radical change. Hence the failure of the frequently made forecasts of regime change in developed nations. But those explanations seem in adequate, as does embrace of the EU from fear of war.
History provides a possible answer: the lack of an alternative. Thomas Kuhn in his The Structure of Scientific Revolutions (1962) says that scientific paradigms die not when they are disproven, but when they are replaced by a superior alternative. In much the same way revolutions (peaceful or otherwise) require a new political or economic ideology that can substitute for the old.
Without an alternative, accumulated stress breaks out in futile forms, such as protests and riots. These are a commonplace of history, such as the peasants’ protests (Wikipedia) and race riots (Wikipedia). These can produce incremental reforms (although they usually didn’t), but participants seldom had a vision of a realistic better system. Although recognized as defective, other systems were considered less attractive or unworkable (eg, plutocracy in Holland, city-states in Switzerland). For centuries this provided a buttress for European monarchies.
(2) What comes next in Europe?