Joseph E. Stiglitz — Europe’s Lapse of Reason

A voice of reason on a ship of fools.

Yes, America mismanaged its economy; but, no, the US did not somehow manage to impose the brunt of the global fallout on Europe. The EU’s malaise is self-inflicted, owing to an unprecedented succession of bad economic decisions, beginning with the creation of the euro. Though intended to unite Europe, in the end the euro has divided it; and, in the absence of the political will to create the institutions that would enable a single currency to work, the damage is not being undone.

The current mess stems partly from adherence to a long-discredited belief in well-functioning markets without imperfections of information and competition. Hubris has also played a role. How else to explain the fact that, year after year, European officials’ forecasts of their policies’ consequences have been consistently wrong? 

These forecasts have been wrong not because EU countries failed to implement the prescribed policies, but because the models upon which those policies relied were so badly flawed.…

Project Syndicate
Europe’s Lapse of Reason
Joseph E. Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, was Chairman of President Bill Clinton’s Council of Economic Advisers and served as Senior Vice President and Chief Economist of the World Bank