Abstract
Reviewed by: Edelgard Mahant, Glendon College, York University
In Europe in Crisis, Hungarian historian Ivan Berend explains the causes of the euro currency crisis and makes some recommendations about how to resolve it. His viewpoint is that of a convinced European federalist, and his conclusion is that the euro will survive (131).
Berend begins with three case studies. He explains how the Icelandic, Irish, and Greek economies fell into serious economic crises over the four years from 2008 to 2012. The following chapter includes three further case studies—Portugal, Italy, and Spain. This time the case studies aim to show how the effects of the 2008 financial crisis in the US, together with mistakes made in Europe by both the EU and national governments, combined to cause a fiscal and financial crisis in the latter three countries. All six case studies are informative, even if one does not agree with Berend’s view that the crises were to a large extent caused by the movement of the European economies away from industrial production to what he terms financialization.
What Berend ignores is the fact that most of the world’s successful economies have progressed from a reliance on the production of things to a reliance on the production of services, which, of course, includes financial services. The economies of all of the wealthy industrialized countries now derive a majority of their wealth from tertiary industries. Germany is unique in that it has preserved a significant manufacturing sector, but even Germany derives the majority of its wealth from service industries. Along with Poland, Germany is one of the more successful European economies, but it is not logical to derive prescriptions from a sample of one. That said, Berend does have a point when he ascribes some of the Western economies’ financial problems to the creation of ever more refined financial instruments, derivatives of derivatives, that make it all but impossible to determine the creditworthiness of the original products.
Having diagnosed the problem, Berend suggests possible solutions. These include a more federal Europe with direct European supervision of the banking sector and a European Central Bank that could raise money in the bond markets. But, he writes, if the euro survives, as he predicts, then the Union may have to allow some “irresponsible or peripheral” (134) or “totally bankrupt countries” (136) to leave.
The above statements point to one unfortunate aspect of this book. The author has a tendency to be judgmental and stereotypical toward some people and countries. Writing about Greece, Spain, and other countries he terms peripheral, he claims that “clientelism, networking, corruption, a different work ethic and lifestyle … looking down on thrifty living” are characteristics that “are deeply embedded in those societies” (84). Later he denounces the expanding number of car owners, when public transport is readily available (104), and the fact that nearly every family has a colour television and every person appears to own a cell phone (97). These denunciations of material acquisitions come from someone who has just advocated the maintenance of the manufacturing sector.
The book also includes a number of factual errors, some of them due to the author’s tendency to overstate his case by generalizing. It is, for example, not true that “throughout history monetary unions have always been combined with a sovereign fiscal policy” (86); the Belgian–Luxembourg monetary union of the twentieth century, which preceded the Economic and Monetary Union (EMU); the nineteenth-century Scandinavian monetary union; the US–Panama monetary union; and the South Africa–Namibia monetary union all functioned without a common fiscal policy, to mention only a few examples. There are other errors: the Single European Act was signed in 1986, not in 1987 (81). At one point, the author refers to the European Council as the Council of Europe (128); the latter is a separate organization, different from the EU and with its own treaty and membership.
One other stylistic feature that renders the book difficult to read is the fact that much useful information that should have been included in the text is consigned to the endnotes. So the endnotes include several lengthy paragraphs about the origins of the idea of European integration (156), a discussion of the problems facing the Roma minority (159), and a paragraph about income inequalities in Europe (156). On the other hand, the text itself includes many statistics and direct quotations that are not referenced. This, for example, is the case with statistics of capital outflows from Eastern Europe (41) and Hungary’s trade deficit (43); and there is a quotation from Joseph Joffe, the source of which is not given (131).
Most unfortunate of all is the fact that the book was not edited to a standard that one might expect from a publisher such as Routledge. There are passages where the vocabulary is plain wrong, as when the author uses the word “punctual” when he means “timely” (5), or the word “household” when he obviously means “budget” (16) (in German the word for budget is Haushalt). And what are we to make of a sentence such as “Meanwhile long-term structural changes were forced to progress toward further integration …” (122)?
The first three chapters of the book are quite informative; the rest not so much, and the stylistic problems mentioned above make it a difficult read.