James Surowiecki's column on why Europe is refusing to intervene more aggressively in the financial crisis is quite good. He writes, correctly, that Europeans are haunted by the specter of hyperinflation (which is the sort of thing that follows massive stimulus), that the European social safety net means that "a recession has a less dramatic impact on people’s daily lives," and that Europeans believe America will carry much of the load and that they can free ride on our largesse. That last point is sadly true. America, after all, has no choice but to intervene aggressively. The absence of a robust social safety net means year-to-year growth is the only way to avoid prolonged economic misery. "The U.S. economy, much more than Europe’s, is like the proverbial shark," writes Surowiecki. "If it doesn’t keep moving forward, it dies (or at least creates a lot of misery). In some sense, we need economic growth more than Europe does. It’s not surprising that we’re going to be the ones who end up paying for it." Europe, though, may come to regret this stance. The increasing size of the Eurozone and the fall of the Soviet Union means they're much more dependent on both nearby economies and the global economy. If Poland falls -- and Poland, along with much of the post-Soviet bloc, may well fall -- Germany and England and France will pay. That's probably why the German Finance Minister has already said that Germany would bail out any European country that was on the brink of collapse. "Don't underestimate the importance of that claim," Martin Wolf warned at a dinner panel earlier this week. And don't underestimate the importance of Germany. People are saying that "Europe" is reluctant to act, but it's really Germany holding tight to the reins. They live in constant fear of the hyperinflation that birthed the Weimar Republic and they're extremely loathe to take a leadership role in European economy. "They will act," predicted Wolf, "bur only on the doorstep of Armageddon. Not a second before."
