As Europe goes down, we need to be prepared for consequences

Globe - Prof

The European economic and social crisis is becoming worse with each passing day. One business channel asked me in 2008 how long it might take to recover and I responded saying 40 quarters — they never came back to interview. But now I forecast it may never recover.

Sri Aurobindo said that India will rise on the ashes of western civilisation and it seems to be coming true. It is important to recognise that the dominance of the West has been there only for last 200 odd years. According to Angus Maddison’s pioneering OECD study, India and China had nearly 50 per cent of global GDP as late as the 1820s. Hence India and China are not emerging or rising powers. They are retrieving their original position. In 1990, the share of the G-7 in world GDP (on a purchasing power parity basis) was 51 per cent and that of emerging markets, 36 per cent. But in 2012, it is the reverse. So the dominant west is a myth.

Europe is facing three types of crisis – economic, demographic, civilisational and it is not in a position to come out of these. All three are not recent ones; they were developing over a period and are now culminating into a catastrophe.

The Debt to GDP ratio of most of Europe is at unsustainable levels with our own Britain having above 500 per cent — I say our own since we are going to have to help them run their country sooner than later. There are three major constituents of debt — Government debt, corporate debt and household debt. Of the three, we find household debt has reached nearly 80 to 100 per cent of GDP in most of these countries. The reason is simple — unlike India, households in Europe and USA have forgotten one simple word — savings. They live on debt and are interned by debt.

The situation is made worse by the unemployment situation. Youth unemployment has reached 55 per cent in Spain and hovering above 30 per cent in most of the other countries. Youth is defined as being between the ages of 16 to 24, unlike in India where even a 43-year-old is a ‘youth icon’. The overall unemployment is at more than 25 per cent in most countries and it is creating social turmoil.

Along with this is the demographic crisis. The population of Europe during the First World War was nearly 25 per cent. Today it is around 11 per cent and is expected to become 3 per cent in another 20 years. This is mainly due to low reproductive rates and in some countries is as low as 1 when 2.1 is considered as equilibrating rate. Europe will disappear from the world map unless migrants from Africa and Asia take it over. That is why Europe is being referred to as Eurobia and London as Londonistan.

The root cause of the issue is the attempt in Europe to nationalise families and privatise business. Old age issue/ health issues/ child care issues are all normal family activities that have been taken over by the state and the state is broke. Funded security schemes are facing crisis since not enough numbers are getting in to labour force due to low reproductive rates and unfunded
security system is in difficulty since taxes are not adequate due to low population growth.

Coupled with economic and demographic crisis is the crisis of civilisation in Europe. It has renounced the Church and has become secular. Church attendance has fallen significantly and churches have become tourist attractions rather than places of worship.

Most of the migrants, particularly those doing ‘brown colour work’ – like garbage removal, cleaning plates in restaurant, porter jobs, and grape-picking — are people from Mauritania/ Somalia/ Algeria etc and most are Muslims by faith. Due to a high degree of employment, there is resentment against migrants and this anger is turning into anger against Muslims. Added to this is the new front started by France in Mali to fight Islamic fundamentalists. Africa may become a new Vietnam for Europe.

Europe is sitting on a time bomb and any small spark could ignite it. Remember that all conflicts in the last 2000 years have started in Europe and became ‘world’ conflicts. India has already given $10 billion or Rs 56,000 crore – nearly one per cent of GDP to help Europe. Not a single European paper or leader has thanked us openly. One can only hope that we need not give more of our GDP or become cannon fodder in anglo-saxon conflicts.

We can never be certain about our Government. It may involve us in the emerging conflicts since our foreign policy is generally subservient to the anglo-saxon interests and we muddle along instead of doing strategic thinking. The sooner we evolve a strategy, the better, and it should be de-coupled from conflicts and focus on the eastern front.

Advertisements

19 comments

  1. 1 bn is Rs.5600cr no 56000cr as mentioned

    1. “India has already given $10 billion” is the correct one.
      Thanks for the observation.

  2. […] reason is simple — unlike India, households in Europe and USA have forgotten one simple word — savings. They live on debt and are interned by […]

  3. Manikfan · · Reply

    Let us tighten our belts and get ready to go.

  4. Must follow simple Indian culture, tradition & customs.
    Keep money pocket.Gold in vault. Buy on term cash.no credit mayajal.Thats economy.
    Next fly.: stay close with own.carry baby in arm.not in carry bags.pray together stay together.
    Last but imp.LET GOVT.SURVIVE THRU PEOPLE.NOT SOCIETY.BE INDEPENDANT.ON UR OWN.PROBLEM IS THEY HAVE GOOD GOVT BUT BAD POLICY.WE HAVE BAD GOVT. & CORRUPT POLICY.BUT WE MABAGE TO PULL ON.HERE WE FACE UPHILL TASK.THERE GOVT IS VICTIM OF ODD SUSTAIN n Survive dictum.

  5. pp_chn (@pp_chn) · · Reply

    The root cause is not the attempt to nationalise families,its the attempt to get women out of home freeing them from their responsibilities.This in turn made it easier for the state to take over family responsibilities. This has to be told again and again, else no amount of warning will help Hindus avoid the fate of Europe.

  6. Prabhakar reddy · · Reply

    Living and working in the UK i agree with your views of eurpoe. I work as a doctor. I am no econmist but from my own expreince of living here & my gut instinct tells me your prediction about europe will probably come true. There are all the ingredients for combustion .This is a stressed up nation sustaining on money flow.

    Here there is big time incentive to do all the wrong things . For example being single mother or to kick children out of house ( aged 16 & above),being jobless, not marrying etc
    Infact people will be penalised for marryng ,having child out of wedlock or working hard or looking after elderly parents… I agree ‘nationlisation of the family ‘ is apt word to describe unique & peculiar circumstances which prevail here. Unique in the view of Indian looking at english circumstances.

    I heard many actually many make a career out of social security benefits.

    To be honest ,I see very little medical illness & vast majority of patients are ill with stress ,mainly family,financial, life in general…
    Does India have a startergy if europe goes belly up ?

    I doubt if there is a plan nor will ever be one until we have euopeans/ Italians at helm of affairs.

  7. Your blog’s style is easy and fresh and I like it. Your websites are superb.

  8. abhinav · · Reply

    You should have been invited at Wharton IEF

  9. The history of Europe also shows that it is resilient and come back out of crisis very fast. The impact of reducing population will take decades to be seen, by which time the current economic crisis may have passed. Lets keep our fingers crossed and hope we don’t need to face ‘consequences’ for evolved strategies.

  10. The history of Europe shows that it is resilient and has changed its fortunes many times. The effect of reducing population will take many decades to be seen, by which time the current economic crisis may be well over. Lets keep our fingers crossed and hope that a nation that just muddles along doesn’t need to face ‘consequences’ from a continent that has evolved strategies.

  11. This is clearly ludicrous view I think you are more paranoid than reality. You need to have more understanding and in-depth knowledge of reality. It is us who needs help with horrendous corruption and population explosion we are surely committing suicide you will see in next decade or two. I read in Toronto star of January 2000 that we reached 1 billion population mark and now in 2013 it is over 1.22 billion that is 220 million in 13 years. People here are UN-educated even educated (with degrees) are stupid and UN-educated, so what to say about really UN-educated. And to become no.1 country in this world with these idiots and with population and with this corruption, you are certainly dreaming. I am sorry but I cannot agree with you even in my dreams.

  12. Vanakkam.
    I can only laugh at the previous reader’s comment on ‘resilience of Europe’. The ‘mercy’ religion (read Christianity) & ‘peace’ religion (read Islam’) were hugging each other. Blood was flowing on streets. They were called ‘crusades’. Does that reader remember a period in European history called ‘dark ages’. Europe wiped out civilizations from rest of the world under colonization. In addition to their own Europeans and major number of human population under 2 world wars. Thousands of Jews wiped out under Holocaust. Where is resilience?
    Also, please ignore the comments of previous reader like Bharat. They have distorted view of reality. I have been living outside Bharat for almost 10 years now (about half of it in US and other half in UK). I completely agree with you have said. Especially liked the quote by Sri Aurobindo.
    In simple terms, the course of the present day version of ‘Capitalism’ in the West is unsustainable because they are spending the money that they don’t have. Not only that, they are spending the money that we have. 🙂
    I don’t know why India had to put $10 billon of hard earned money that might never return. The money might not only return but did not get us anything in return.
    Look at China, what they did was they talked ‘sweet’ throughout the crisis. China did not throw a dollar on the table. Their promised aid to Spain got lost in translation. Told boldly that in turn for any monetary aid to Eurozone that ‘China should be treated as a free market economy’ by EU. I am not a communist any means, but I did like their negotiating style. That was too good. We need to elect leaders with backbone for that. But what we have as rubber stamp prime minister called ‘Panneer Singh’ (He is similar to Panneer Selvan, who was appointed as cheif minister by Jayalalitha.) . People often read his resume as his credentials, that’s non-sense. I my humble opinion ‘he did not exhibit any leadership’ while he was in office.
    Coming back to Europe, these western central bankers will not stop printing money unless they run out of trees. Its like Central bankers have become ‘Sharia’ bankers with near zero interest rates.
    In addition, ‘to Debt to GDP ratio’ that you mentioned, another statistic to look at it ‘Per Capita Debt’. If we look at the amount of ‘per capita Debt’, there is NO WAY they will repay it in real terms, unless there is a demographic shift as in indicated in my blog.
    http://4mythoughts.blogspot.co.uk/2012/01/letter-to-soros.html
    The ‘Keynesian Crap’ is being exported as remedy for every world economy. Japan imitated it 10 years ago and lost a decade. It’s trying again bigger way now and might lose the next 20 years. (I mean it). If we look at their last spending spree, they build the roads and bridges they did not need, even had negative interest rates and nothing changed. I don’t know Japan’s course will change this time.
    Please continue your good work . Our country needs more sensible thinkers like you.

  13. Very interesting post. I agree with many arguments put forward. I, being European and having spent most of my youth in India, am constantly comparing Europe and India whether it comes to the economical or social situation. I do think that Europe is still strong but to be able to survive in a globalized world, Europe has to rethink and reinvent itself which it struggles to do. India is better at adjusting to the new world and is a successful player while Europe seems to be melancholically stuck in its past. Letting go is just not our strength!

  14. Adhiraj Singh · · Reply

    Very well written article as long as the facts are supported with data!
    Painted the whole picture very aptly and in a extremely concise manner!

    If we pull our socks up, massive, sustainable & long lasting gains cain be achieved for the upliftment of Indians!

    Regards,
    Adhiraj Singh

  15. Governance problem is not been pointed out in your write up. Yes we as Indian or as Asian will certainly have an upper edge but “Governance” is going to let us not take the big leap as you said. That’s my view…

  16. Thanks, Professor for this eye-opener of an article.

    1. Abhinav Dwivedi · · Reply

      Dear Dr. R. Vaidyanathan ji:

      Thanks for sending me the copy of your 2013 article. I very well remember your article about “40 quarters”. It was nice to read it again.

      Yes, things are unravelling in Europe, and makes the whole world jittery. Rash movements, selfish cleverness will rise more and more, which will further complicate economic and political relationships. What you quote on Sri Aurobindo is quite correct. He also mentions the rise of India only if she hangs to its true spiritual currents and fountains. That is the true source of her resilience and strength.

      with high regards,

      Abhinav Dwivedi

  17. […] root cause of the issue is the attempt in Europe to nationalise families and privatise business. Old age issue/ health issues/ child care issues are all normal family activities that have been […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: