The public debt crisis in Europe has shaken the confidence not just
in the Euro, but in the European model. Aging and uneconomical
Europeans are being squeezed between innovative Americans and efficient
Asians, it is said. With debt and demographics dragging down them down,
one hears that European economies will not grow much unless radically
new ways are discovered. The end of complacency in Europe is a good
thing, but this loss of confidence could be dangerous. The danger is
that in a rush to rejuvenate growth, the attractive attributes of the
European development model could be abandoned along with the weak. In
fact, the European growth model has many strong points and enviable
accomplishments.
One can say without exaggeration that Europe had invented a
'convergence machine', taking in poor countries and helping
them become high income economies. World Bank research has identified
27 countries that have grown from middle-income to high income since
1987: a few thanks to the discovery and exploitation of massive natural
resources (e.g.: oil in Oman and Trinidad and Tobago), several others
like Japan, Hong Kong, Singapore, Taiwan, and South Korea, embracing
aggressive export-led strategies which involved working and saving a
lot, postponing political liberties, and looking out only for
themselves. But half of the countries that have grown from middle
income to high income-Croatia, Cyprus, Czech Republic, Estonia, Greece,
Hungary, Latvia, Malta, Poland, Portugal, Slovak Republic, and
Slovenia-are actually in Europe. This is why the European model was so
attractive and unique, and why with some well designed efforts it ought
to be made right again.
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