The European Union has a common market. This would seem to be news to The Wall Street Journal, at least back in 2010. This is not to say that the E.U. is a common market, for the E.U. is much more than an economic market. For instance, the Union has governmental institutions, including a parliament, a senate (i.e., the European Council), an executive branch (i.e., the Commission), and a supreme court (i.e., the ECJ). So it is surprising when journalists forget that the E.U. even has a common market by treating each of the States as having its own economy. To be sure, regions of the E.U. perform differently economically. In the U.S., the States in New England, as well as New York, and California tend to have much higher GDPs than say South Carolina, Wyoming, and Iowa. Therefore, I contend that The Wall Street Journal erred in applying the concept of contagion to the E.U. financial crisis of 2010.
A contagion occurs “when a loss of market confidence in one economy transmits to others.” It can occur through trade connections, economic similarities, and financial linkages. There are no “trade connections” within the E.U. because there is a common market within its borders. Economic similarities and financial linkages naturally exist within an economy; they need not evince contagion.
In terms of the E.U. States that were variously suffering from budget deficits, high government debt and low growth in 2010, both the problems and solutions can be viewed in systemic terms with respect not only to the state governments, but also to the EU in terms of its common market and governance. Reducing the E.U. to its States misses this point and, frankly, is rather antiquated.
Beyond the financial matters in the E.U., the reporting itself has been excessively rooted in “the same old, same old” at the expense of a changing world. In other words, perspectives seem to have a nasty habit of being too sticky or rigid, and this is a problem that may dwarf those facing the E.U., as it has existed only since 1993, much less than the U.S., where in its first century it was common to view the member states as countries in themselves. Though I do not think contagion was much applied to the effects of one economy on another--perhaps because less denial existed on the political nature of the U.S.
Source: Tom Lauricella, “Fears of Domino Effect Pervade Europe,” The Wall Street Journal, November 24, 2010, pp. C1-2
