Year: 2011

Economists like us are not just funny people. We actually have a lot to say. And unlike politicians and engineers, economists don’t engage in daydreaming. We don’t do free lunches.

As it turns out, there is not much in the German manufacturing example that Australia should copy. We would be much better advised to make the best of our own comparative advantages of being a resource-rich economy in close proximity to the fastest growing part of the world economy.

Australia is one of the most multicultural countries in the world. Almost a quarter of the population was born abroad; almost half have at least one parent born overseas. It is remarkable that this high degree of diversity has not led to social segregation. On the contrary, Australia’s migrants are extremely well-integrated by international standards.

All in all, we are looking at a system of enormous complexity in which no single institution or person is in charge of dealing with the euro crisis. This chaos, although fascinating armchair entertainment, makes it difficult to predict the future of Europe.

The treaty to establish the new European Stability Mechanism is the best example of this fundamentally undemocratic approach. Even its name is misleading.

Vielleicht ist es den vom starken Franken geplagten Schweizern ein kleiner Trost, dass auf sie Schnäppchenpreise nur einen Steinwurf hinter der Grenze warten. Ein Sydneysider muss dafür drei Stunden nach Neuseeland fliegen.

If Europe and America are bent on committing suicide, there is nothing Australia can do to stop them. But we can decide not to join them.

As it turns out, the euro is not only an unworkable currency. It actually started as a French insurance policy against German power. But even as an insurance policy it has failed. Against their will, it has turned the Germans into the new rulers of Europe. And it has consigned France to be the weaker partner in the Franco-German relationship.