Tuesday, August 25, 2015

Migrants Overwhelming Europe: Unfairness Impeding the E.U.

More than 100,000 migrants, many of them refugees from conflicts in the Middle East and Africa, entered Hungary from January to August 2015, the vast majority en route to the more affluent northwestern E.U. states. A record 50,000, many of them Syrians, reached Greece by boat from Turkey in July alone. Meanwhile, Hungary was building a fence along the state’s border with Serbia, where 8,000 migrants were staying in parks, to keep more migrants from entering.[1] 

I contend that the disproportionate power of the state governments relative to that of the federal government accounts in part for the difficulty that the E.U. has faced in coming to grips with the tremendous influx. This case suggests why redressing the imbalance in the federal system has been plagued with difficulty.

At the time, Jean-Claude Juncker, president of the E.U. Commission—the federal executive branch—criticized state officials for “finger pointing” instead of coming up with viable public policies. He deputy, Frans Timmermans, said in an interview, “Europe has failed. Europe has to get moving. . . . So far, many member states have thought they can go it alone. That doesn’t work. We have to do it together.”[2] In other words, leaving the problem to the states was not working, yet something was impeding united action. I submit that the want of sufficient competencies (i.e., enumerated powers) at the federal level was the main obstacle.

Police disperse migrants at a registration place in Kos, Greece. Should the E.U. leave it to the state governments to handle the crisis? (Yorgos Karahalis/AP)

To be sure, for the E.U.’s general government to warrant additional competencies, it’s governmental machinery must be viewed as fair—that is to say, impartial regarding the various states. In taking sides in favor of creditor states as Greeks were heading to the polls to vote on a referendum in July on whether to accept additional austerity as part of a proposed debt “bailout,” E.U. officials compromised the legitimacy of their respective institutions, and thus of the federal government itself.

The unfairness may have manifested as well in the case of border protection funds. Hungary’s prime minister, Vikto Orban, claimed, “The European Union distributes border protection funds in a humiliating way.”[3] More power states to the west had been able to take the money from the eastern states. He went on to say that the E.U. institutions had failed to offer a coherent solution. I submit that the perception of unfairness and the failure to come up with a viable solution are linked, for granting institutions thought to be unfair additional authority is understandably difficult for the state governments on the “outside.” In other words, to the extent that E.U. institutions are pliable enough to be manipulated by the wealthiest, most powerful states, efforts to move toward a state-federal balance-of-power will face resistance.



[1] Reuters, “As Migrants Head North, Hungary Decries ‘Humiliating’ EU Policy,” The World Post, August 25, 2015.
[2] Ibid.
[3] Ibid.

Sunday, August 23, 2015

American Consumers Using Gas-Savings to Reduce Debt: Frugality or Responsibility?

The steep drop in the price of oil in July 2015 was a concern for traders. Drillers and other energy companies comprise a significant portion of the S&P 500 index. “The upside to falling oil is that all the money that drivers are saving at the gas pump should mean more spending by them at stores — and a faster-growing U.S. economy. But Americans are choosing to pay off debt instead of going shopping.”[1] Is this a bad thing? In reckoning it as such, Wall Street analysts are missing the big picture, even financially.

Gasoline at a station in January 2015. (ABC News)

To go on a shopping spree when in significant consumer debt is, I submit, foolish and perhaps even reckless. The mentality erroneously treats debt as permanent rather than something to be paid back. In this respect, the U.S. Government has been a terrible role model, as Bill Clinton dedicated only half of the surpluses in the late 1990s to paying down the debt. After his presidency, the wars and occupations in Iraq and Afghanistan added more than $4 trillion to the government’s debt.

To urge consumers in debt to spend what they save on gas implies the same mentality. Tim Courtney at Exencial Wealth Advisors, for example, says "Household finances are growing more healthy ... but you want to see a pick-up in spending, too."[2] I submit that such additional spending at the expense of reducing debt is detrimental to a person’s financial position. Not only is the debt not reduced, but also the habit of spending while ignoring the debt is reinforced. Consumers regaining their pre-debt position is good for Wall Street, moreover, because the financially solid position puts the consumers in a better position to spend beyond the short term.

Even so, using discretionary income to reduce household debt is said to be frugality. The following passage from The Associated Press is a case in point, and even makes explicit the interests behind the perspective. “The new frugality helps explain why the biggest long-term driver of stock prices — corporate earnings — have been so disappointing lately. In the second quarter [of 2015], companies in the S&P 500 grew earnings per share just 0.07 percent from a year ago, according to research firm S&P Capital IQ.”[3] That which is behind disappointment can be expected to be treated harshly rhetorically. Hence, responsible efforts to reduce debt is “frugality,” which has the negative connotation of cheapness.

I submit that debtless consumers are worth more societally than are continuously increasing corporate earnings (and consumer debt). The Associated Press could have reported that consumers were being responsible while over-reaching corporate expectations were taking a hit. How the media decide to report a story does indeed have an impact not only on consumers and company managers, but also the society as a whole—even in how it votes. In the case of the U.S., especially relative to the E.U., business interests can be said to have a disproportionate influence societally.




[1] Bernard Condon and Ken Sweet, “Why Stocks Are Tumbling 6 Years into the Bull Market,” The Associated Press, August 23, 2015.
[2] Ibid.
[3] Ibid.