Why The Euro May Be Destined To Fail

Published: Sept. 7, 2016, 1:45 p.m.

b"With\\xa0Mark Blyth, Consultant on International Political Economy, Eastman Professor of Political Economy at the Watson Institute of International and Public Affairs at Brown University, and author of\\xa0\\xa0Austerity: The History of a Dangerous Idea, & Great Transformations

Mark Blyth is a consultant on International Political Economy, the Eastman Professor of Political Economy at the Watson Institute of International and Public Affairs at Brown University, and the author of Austerity: The History of a Dangerous Idea, & Great Transformations.
Mark has spent years studying and writing about the European economy where recently the focus has been placed on the weakening of the EU and its difficulty finding its way back to prosperity. One of the premises in Mark\\u2019s book is that austerity programs do not work when all states do it simultaneously, which is what is happening in Europe now. He explains that when both the government and the private sectors are saving, the only way for the underlying economy to go is down. This he calls the paradox of thrift.\\xa0 Greece, which can\\u2019t seem to come out from under its blanket of economic gloom, is perhaps the best example of a stalled austerity program. The two sectors, private and government, simply can not both be saving at one time.
A fundamental difference between the European Union and the US\\u2014and the reason we were able to survive the last financial crisis\\u2014is that we have our own currency, which allowed the Federal Reserve and Congress to stimulate the economy by propping up the financial sector and, ultimately, giving the economy room to grow.
The EU, on the other hand, shares a common currency, over which the individual countries have no control\\u2014 they can\\u2019t print it, devalue it, or inflate it. Austerity programs have been imposed, the UK has voted for Brexit, and how this plays out will have to be seen.
There has been much discussion during our presidential campaign season about how high taxes are in the US.\\xa0 And as for the opposing views of our two candidates, simplistically stated, Trump wants to lower them and Clinton want to raise them.
Mark cites statistics from OECD (the Organization for Economic Cooperation and Development) showing that the United States is one of the least taxed societies in the world.\\xa0 \\u201cThe problem in the United States,\\u201d says Mark, \\u201cisn't a taxation problem that's too high.\\xa0 It's actually too low relative to the amount the government is spending, so you constantly run structural deficits which accumulate debts.\\u201d
He also says that the majority of households in the highest income tax brackets are actually upper middle class, and not the super wealthy, and if you burden this group with higher taxes, it would yield no financial benefit at all.\\xa0 As it stands now, the super wealthy pay a lower nominal tax rate because of the way tax law is structured. Mark believes this is unfair and is the reason that people are angry and feeling disenfranchised.
That some of this discontent can be attributed to the changes brought about by globalization and technology can\\u2019t be denied, a subject covered in depth in Mark\\u2019s book, Austerity: The History of a Dangerous Idea, & Great Transformations, along with some interesting positions on the Reagan/Thatcher years.
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