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This discussion continues with the exchange of Flassbeck & Lapavitsas versus Storm.

My own position is as follows. Holland creates its own unemployment since 1970 by a wrong policy on taxes and premiums. Holland has the entrenched government policy of “solving” this by wage moderation and exporting its own unemployment to other nations. I present my alternative analysis since 1990. Economists at TU Delft have been arguing against this policy of wage moderation for decades too. They overlook the cause in taxes and premiums, and focus on technology. Schumpeterian innovation requires higher wages to get rid of obsolete technology. Now that Germany has had wage moderation too (because of the fall of the Berlin Wall and the Mark = Mark policy) the discussion on wage moderation moves to center stage for the survival of the Euro. Servaas Storm at TU Delft enters the European discussion again with arguments about technology, and again neglecting taxes and premiums, and neglecting the censorship of science by the Dutch government (what this weblog is about). Storm has an innovation in his analysis by including banking, and how international credits drive international trade, yet, he seems to neglect the phenomenon that trade surpluses generate funds that look for opportunities, often by providing credits that generate more surpluses. Thus Dutch and German wage moderation would be causally more important than bank credits.

PM. See also former IMF director Johannes Witteveen’s lecture on the Dutch export surplus and a need for an investment policy. There is also my discussion in 2009 with a chart of the Dutch export surplus in 1971-2010 (forecast). This is already 8 years ago.

Let me restate some basic economics for some readers who lack this.

Basic macro-economics

  • Let real national output (GDP) be y and the price level be p.
  • Let labour input be x and the wage be w.
  • Then labour productivity is λ = y / x and the Labour Income Quote is LIQ = w x / (p y).
  • Let there be a Cobb-Douglas production function: y = β x^α, with β containing capital and technology.
  • When producers maximize their profits π = p y w x subject to labour input x, then we can derive:
  • The first order condition: dπ / dx = 0 gives p β α x^(α – 1) – w = 0.
  • Or the wage can be set at w = p β α x^(α – 1) = p α y / x = p α λ, since the national labour supply is given as x.
  • This w = p α λ is the rule mentioned by Flassbeck & Lapavitsas: let wages grow with labour productivity and the agreed target of inflation of 2%.
  • From w = p α λ we can derive α = w x / (p y) or α = LIQ.
  • Unit labour costs are ULC = w x / y = w / λ = p LIQ. Thus alternatively w = p LIQ λ or w = ULC λ.

The assumption of the Cobb-Douglas function seems somewhat specific, but given the relatively small changes that we are considering the approximation is often so good that we almost seem to have a definition. The LIQ has the character of a structural parameter α, at least for annual changes.

If prices p and wages w and labour input x remain the same from one year to the other, and productivity rises by rate g, so that  =  (1 + g) y[-1], then α = LIQ = w x / (p y) = w x / (p (1 + g) y[-1]) = LIQ[-1] / (1 + g) = α[-1] / (1 + g). For example, if α[-1] = 80% and g = 2% then α ≈ 78%. In this case α would be stable if wages would rise by 2% too.

The w = p α λ condition is not in the EMU rules. The Eurozone countries apparently are less aware of the notion of “national bargaining” (as in the Dutch Polder model) and have been hesitant to include national wage agreements in the EMU and Stability & Growth Pact (SGP) and its updates. (Check for the word “wage” on this wiki page.)

Another possible rule might be a tax of 5% on the three year cumulative trade surplus (which may be seen as 15% for a single year), to be invested in productive capacity in the deficit countries via national investment banks. Such a tax would not be on export items (like a tariff) but levied on the Eurozone member governments of surplus countries. (At this applet, set the color bar to a score of 0, and slide over the years.)

It is unavoidable to think about such rules. Holland has been moderating its wages long before Germany did. The policy put pressure on the exchange rate of the guilder, but this was resolved by joining the Euro. Holland still is a small country and the impact wasn’t much felt. Now, Europe must explain to Germany that a raise of German wages is required, whatever they fear about inflation. It should help Germany to grow aware that my analysis (see DRGTPE) allows full employment at stable prices, not only by exports but also by stimulating the domestic market.

Shifting the blame

Both North and South Europe deviated from w = p α λ. Some Northerners blame the South, and some accept some blame themselves.

  • Sinn and Schäuble argue that Southern Europe should moderate their wages like Germany.
  • Bofinger and Flassbeck & Lapavitsas argue that Germany (and Holland) should raise their wages.

As Storm states:

“Their main point is that there would not have been large unsustainable current account imbalances within the Eurozone, and consequently no sovereign debt crisis in the deficit countries, if all member states had kept their nominal wage growth equal to labor productivity growth plus 2% (the inflation target). Professor Wren-Lewis (2016) has been making the same point. In this account, this delicate equilibrium has been deliberately upset by nominal wage moderation in mercantilist Germany, with a growing German trade surplus just being the flipside of the growing trade deficit in Southern Europe. It is rather ironic, in my opinion, that a similar logic is used by mainstream observers such as Sinn (2014) or even Mr. Schäuble himself, with this difference: Sinn and Schäuble argue that the current account imbalances were caused by a failure of the crisis countries to follow Germany’s successful example in cutting down their unit labor costs.”

Towards a collapse of the Euro

Sinn and Schäuble want to control inflation and they lack instruments to make sure that Southern Europe adheres to the EMU rules. Thus Sinn and Schäuble take the hard line that it is up to Southern Europe to choose themselves:

  • either unemployment because of high wages
  • or internal devaluation, and subsequent unemployment because of deficient internal demand.

Hence we can understand Flassbeck & Lapavitsas:

“Germans ought to know better than all others about the difficulties caused by wage divergences in a currency union. The deviation of East German wages as measured in international currency, following the German Monetary Union of 1990, destroyed East German industry and forced a transfer union. Unfortunately, for the EU and the EMU the option of a transfer union is simply not available. As long as Germany persists with its policy of wage moderation, the only future for the EMU is collapse.”

Check how I criticised Angela Merkel for her deceit at the German elections in 2013. Given German policies on wage moderation, standard economic theory allows her the choice between a transfer union or a breakup, but she kept silent about this. Of course there is my amendment to the theory of the optimal currency area, see MPRA or RWER, but as long as German policy makers do not indicate that they understand his amendment, we must conclude that they disinform their electorate.

How does Storm handle this ?

How does Storm handle this reference to basic economics ? He misstates the argument, and then rejects it.

“(…) that Eurozone imbalances were driven by (exogenous) losses or gains in unit labor cost competitiveness (…) is a myth (…)”

Storm’s problem is on causality: “what drives what”. Yet this is not quite what this discussion is about. What Storm calls a myth are basically accounting rules.

  • Use GDP = Y = p y = C + I + G + X – M, with consumption C, investments I, government G, exports X and imports M.
  • The current account CA = X – M is also the increase in foreign assets FA = X – M (NY FED).
  • National income, employment and wage translate into LIQ and λ. This is mere accounting.
  • Compare two situations for the same country with only a difference in M. In the first situation there is Y1 with a surplus on the current account, or M < X. In the second situation there is Y2 with a deficit or M > X. Thus Y1 > Y2. Assume the same output price p and working force x so that y1 / x > y2 / x, or λ1 > λ2. The productivity with a surplus is higher than with a deficit. For example, in the second case the country worked as hard as usual, but also imported a car by borrowing from abroad. Mere accounting causes that observed productivity drops. Similarly we have w x / y1 < w x / y2 or ULC1 < ULC2, or that the deficit situation has higher unit labour costs.

Economics is about causality and not about accounting, but it is important to be aware of accounting effects. Regressions with statistical data that contain these accounting effects must be judged carefully.

In above example of importing a car, causality seems to run from first importing to secondly a statistical observation on productivity. This is Storm’s view. But this is not the only causal possibility. Sinn and Schäuble might argue that higher productivity might have been feasible if the car hadn’t been imported but e.g. produced in the country itself with a creditor in the country itself. Thus there seems to be more complexity than Storm allows for (though he already makes a complex case). And Sinn and Schäuble might state more clearly that they also plea for the demise of the German car industry.

Storm’s five arguments

Storm has five arguments that we may indicate shortly. Apparently he repeats himself at points, but this is okay since we look at the arguments and not their number.

  1. Banks in Northern Europe lent to customers in Southern Europe, assuming that loans in Euro were safe anywhere. (Comment: True. However, if there hadn’t been surpluses on the Northern current accounts, then these banks would have had less funds. We are not speaking about a single year, but a prolonged period of surplus funds looking for “investment” opportunities.)
  2. German firms, producing high-tech, high value-added, high-priced and mostly very complex manufacturing goods, do not directly compete with Spanish, Portuguese, Greek or even most Italian firms, which are specializing in lower-tech, lower value-added, low-price and less complex goods (Simonazzi et al. 2013).” (Comment: This is not relevant, since differences in quality are corrected by differences in wages, whence we compare w1 / λ1 and w2 / λ2.)
  3. Four empirical “facts”. (a) Elasticities. (b) In Spain imports grew while exports were unaffected. (c) World income explains exports, and national income explains imports. (Costs might have a one-time effect but then are stable.) (d) There were first the imbalances and only later the worse ULCs. (Comment: Basically agreed on (a)-(c). However, this (d) is the same as (1). We are not speaking about a single year, but about a prolonged period of imbalance and funds looking for profit.)
  4. A more theoretical discussion of (3c), with the example of (2). “These asymmetric growth patterns are the direct consequence of structural differences in productive specialization (Simonazzi et al. 2013).” (However, see (2). Obviously, the EMU doesn’t have an exchange rate regime to correct sustained imbalances. Apparently governments must impose what otherwise would have been done by exchange rate markets.)
  5. “Higher Wages and Higher Inflation in Germany Will Not Help.”

Storm on point 5:

“German exports and imports, as I argued above, are not very sensitive to changes in relative unit labor costs, however, and hence there will be only a limited amount of expenditure switching (away from German products and toward foreign goods), as has also been convincingly shown by Schröder (2015). Let me repeat for clarity’s sake that I am strongly in favor of higher nominal wage growth (in excess of labor productivity growth plus 2%) in Germany. It will definitely help Germany. But it will not help the crisis-countries of the Eurozone.”

“The assumption is that German GDP increases by € 100 billion (which means German GDP is growing at 3.7%). Through global production chains, [my emphasis] German growth creates € 29.5 billion of income in the rest of the world and about € 7 billion in the selected European countries listed in Table 1.”

This looks at production chains (Germany, USA, Korea) ! This may well be. But higher German wages would also mean higher German imports for consumption.

Storm’s view on the real issues (again)

Storm repeats what he regards as the real issues:

“(…) the common currency and monetary unification have led to a centrifugal process of structural divergence in terms of structures of production, employment and trade (as explained in my earlier notes).”

“German wage moderation mattered a lot, not through its supposed impact on cost competitiveness, but via its negative impacts on (wage-led) German growth and inflation, which in turn prompted the ECB to lower the interest rate in the first place.” (Comment: This “negative impact” is TU Delft slang for the idea that low wages reduce the need for Schumpeterian innovation.)

“The consequent crisis of the Eurozone is a deep crisis of inadequate aggregate demand in the short run and unmanageable structural divergence between major member states in the long run.”

I wonder. If Germany provided the European industrial zone and Southern Europe provided the European vineyards, olive trees and universities, then this might still work and everyone might be happy, provided that the prices of cars, wine, olive oil and Ph. D. doctorates would be right. Wage levels in Southern Europe might still be lower, but with a purchasing power parity (PPP) living standards might still be quite comparable. Sinn and Schäuble might like an argument that EU support for investments in Southern Europe should not be competitive to the German car industry (see here on the restauration of the Colosseum).

But this is not the full story. The Po valley has fine cars and machinery too. Italy itself has a North-South problem. Spain has the difference between Catalunya and Andalusia. And Germany has Laender who don’t do as well as Bayern.

Closing this review

This exchange started with Bofinger’s argument that German wages should be raised. This argument is fine. It will stimulate Germany’s domestic economy and imports. The obvious ceiling is provided by risks of unemployment and inflation, but the rule of a wage rise with productivity and the target of 2% inflation is fine too. Germany also has some catching up to do.

It is correct that German exports might not be much affected, and thus neither employment in the exporting sector, because the productivity growth in the exporting sector likely is larger than this growth in the domestic sector. But the rise of imports would still help in reducing the surplus on the external account.

Storm’s arguments on competitiveness & wage moderation are a different subject. This is basically the subject of investments and regional development, and the role of banking. Germany is advised to focus on domestic investments.

Economic analysis would be served by having another indicator alongside GDP, namely a correction of GDP for borrowed funds. The X – M correction works fine for foreign assets, but a correction for domestic borrowing would be helpful too. If one buys a domestic car with credit, then this domestic car really has been produced, but it would be indicative to know whether 10% or 25% of GDP would be from credit.

Overall I can repeat that my analysis of 1990 is still very relevant for understanding and solving the Great Stagflation since 1970. There are DRGTPE dating before the 2007+ crisis and CSBH after it. DRGTPE already has a chapter on the distinction between the exposed and sheltered sectors, and CSBH has a refinement of that argumentation.

It is unfortunate that our fellow economists at TU Delft have been neglecting that analysis since 1990, whence they still lack the full picture. But every day starts with a new sunrise.

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This is a remarkable exchange of articles:

Storm’s criticism shows some kind of trauma at TU Delft. Like Germany has the trauma of hyperinflation, TU Delft has the trauma of wage moderation. The Dutch government has an entrenched policy of wage moderation, and the research group at Delft TU has been arguing against this for so long, that when they hear the term “wage moderation” then they automatically argue against this. The research group and everyone else better be warned that this hangup better be resolved. Economists in the world are being disinformed.

Readers would be advised to first read the two articles by Bofinger (VoxEU and “Friendly Fire”), then below discussion, and then Storm’s articles to verify that there must be something like this trauma at TU Delft indeed.

Supportive material would be Storm on how Brexit challenges economic thinking, 2016-06-26. Storm indicates that he still is looking for the proper analysis, so that we can infer that his position on wage moderation forms only part of a puzzle.

“We desperately need a new paradigm to reform the system and make it work for the majority (…) Unless there is serious new economic thinking beyond austerity, deregulated finance, and a corporate dominated politics and state, social and political tensions will continue to build up within the E.U.”

Bofinger’s “Friendly fire” response contains a graph that shows the close connection of German productivity per person and per hour. Presuming that this also holds for other countries then this distinction need not confuse the argument.

Storm’s earlier key statement

In July 2015, Storm & Naastepad of TU Delft already presented this key statement:

“Myths, Mix-ups and Mishandlings: What Caused the Eurozone Crisis?

The Eurozone crisis has been wrongly interpreted as either a crisis of fiscal profligacy or of deteriorating unit-labour cost competitiveness (caused by rigid labour markets), or a combination of both.
 
Based on these diagnoses, crisis-countries have been treated with the bitter medicines of fiscal austerity, drastic wage reductions, and far-reaching labour market deregulation—all in the expectation that these would restore cost competitiveness and revive growth (through exports), while at the same time allowing for fiscal consolidation and private-sector debt deleveraging. The medicines did not work and almost killed the patients. The problem lies with the diagnoses: the real cause of the Eurozone crisis resides in unsustainable private sector debt leverage, which was aided and abetted by the liberalization of (integrating) European financial markets and a “global banking glut”.”

Thus, curiously, the TU Delft researchers of productivity repeat the finding by our colleagues who look for restructuring debt and financial markets. In itself I support the diagnosis that 1981-2007 are Keynesian years. I also support notions of restructuring of money and finance, see my paper Money as gold versus money as water. Yet,my point for this current weblog entry is that the TU Delft has a hangup on wage moderation, and that this causes disinformation and needless discussion, in a similar fashion as the German hangup on hyperinflation. Economic advisors might be in need of psychiatrists who help them deal with their anxieties.

Supplementary

Supplementary, there is my own text on the myth on German wage bargaining.

German readers might benefit from this text by Kleinknecht & Kleinknecht (2015) (in German), “The Erosion of “Made in Germany”: What Germans Should (Not) Learn From the Dutch“,  ZBW – Leibniz-Informationszentrum Wirtschaft.

Dutch readers would look at this 1996 discussion of mine on the three approaches: CPB, me, and Kleinknecht. Useful is also Bomhoff, NRC 1994-10-24.

Alfred Kleinknecht and his focus on wage moderation

The TU Delft research group had been started by Alfred Kleinknecht (1951), now emeritus.

Kleinknecht had started originally at VU Amsterdam. His institute got financial support from the Dutch Ministry of Economic Affairs. The Ministry was clearly interested in economic analysis of technological development.

At that time, Dutch economic analysis was dominated by the VINTAF model at the Central Planning Bureau (CPB). This combined a “keynesian” demand side with a capital vintage supply function. There was no direct substitution between capital and labour, but a Leontief technology per vintage that increased the vintage effect. A high wage would cause the elimination of older technologies, and a subsequent reduction of the wage would not be able to restore what had been eliminated.

Kleinknecht has been arguing much of the same during his career: Higher wages will increase productivity, partly by eliminating older techniques and partly by spurring innovation. Kleinknecht’s argument is not always based upon the assumption of vintages, and rather upon Schumpeter’s “creative destruction” and more often upon empirical research that is neutral on assumptions on particular technologies. His recent estimate on 19 OECD countries for 1960-2004 is that 1% wage increase might cause 0.4% increase in productivity (“Erosion”, p 409), for me with some doubt of the causal order. It would be important that other researchers replicate that finding.

One might assume that the Dutch Ministry of Economic Affairs would embrace Kleinknecht. The opposite happened. They withdrew all subsidies, and Kleinknecht had to look for another place to work.

  • From the VINTAF discussion, Dutch policy makers including the labour unions concluded to a policy of wage moderation. Maintaining employment was more important than increase in productivity.
  • Kleinknecht published articles that criticised this policy of wage moderation, for causing lower welfare in the long run. Apparently, the Ministry did not enjoy this criticism.

Eventually, Kleinknecht was able to restart at TU Delft to proceed with his analysis. He also kept singing the same song, and was often ridiculed by other economists for not supporting the conventional wisdom of wage moderation. Yet his work was published in major journals, and we can observe that he has a major track record.

There are people who are critical about the EU austerity after the 2007+ financial and euro crises. Such arguments are often less developed with vague references to say Keynes and demand management. The criticism by Kleinknecht et al. is much more specific, with also strong arguments. For example, the EU encourages labour market flexibility and the abolition of various arrangements, but Kleinknecht points to the importance of stability on the labour market. Companies must make risky investments in new technology, and they require workers who commit themselves. Bomhoff, referred above, argues that new companies entering the market should be able to pay lower wages, but this is an argument rather on wage structure and not on flexibility.

PM. Another positive point about Kleinknecht is that he warned in 2007 about the risk of an “earthquake on financial markets” (see here). There is Dutch Dirk Bezemer (also at INET) who wrote about such warnings by economists, but Bezemer doesn’t mention Kleinknecht, just like Bezemer doesn’t mention my work.

How a focus causes a blind spot

As I already explained in 1996 (Dutch article) Kleinknecht wasn’t aware back then of my alternative analysis and criticism of the policy of wage moderation. Given my analysis, Kleinknecht’s analysis on technology is supportive but not crucial.

Apparently, Kleinknecht has never wanted to study my analysis. Part of his reluctance can be understood, since my analysis has also been hit by censorship so that there are key parts that are not available yet. Part may be that Kleinknecht didn’t want to have another clash with the establishment. He already had his own struggle and didn’t need another one for someone else. Yet the censorship by the directorate of CPB exists since 1990 and Kleinknecht had his inaugural lecture at VU only in 1994.

I can only speculate what his motivation might be, since he hasn’t been willing to discuss this with me, and there is no need for speculation. It suffices to observe, and check above ZBW 2015:

  • Kleinknecht has his focus on technology and wage moderation
  • he doesn’t refer to my work on the Great Stagflation in the OECD, including the Dutch policy of wage moderation
  • and he doesn’t inform other scientists about the censorship of science since 1990 by the directorate of the Dutch CPB.

The TU Delft research group

In the past I sent an occasional update email to Kleinknecht, since he was the director of the TU Delft research group. I did not communicate with his co-authors. It is unclear to me to what extent Kleinknecht has communicated to others about my work. Thus, now that he has retired, and when I see that Servaas Storm repeats some of the arguments, I wonder whether this might mean that there is scope for a fresh restart, or that the hangup on wage moderation has become part of the TU Delft paradigm.

A note on VINTAF

For the record: The VINTAF model died a soft death at CPB and was replaced by models without vintages. The major industrial effect in the Dutch economy was the demise of the industry of clothing and textiles. Once this had happened, there wasn’t cause to presume a major vintage effect. In my own analysis, the demise of the clothing and textile industry can also be explained by a wrong management of the wage structure. My criticism on VINTAF is also my criticism on Kleinknecht et al. They neglect the impact of taxation and social premiums on the wage structure. Low tax exemption causes high minimum wages, while this industry might have adapted better with lower wage costs and thus high tax exemption. Holland would be served by differential management of wages and taxes. The domestic market requires lower taxes and thus lower wage costs (for barbers and gardeners) and the export market can allow for higher taxes and higher wages (for high tech industry and agriculture). This can be regulated by high exemption for taxes and premiums, and a VAT at 1%. This alternative analysis started at CPB itself by Marein van Schaaijk and Anton Bakhoven. I supplemented this with the analysis of the tax void, dynamic marginal tax rate, shift of the Phillipscurve, and the need for an Economic Supreme Court, see DRGTPE.

Return to the beginning

The reader may now return to the beginning of this weblog entry. One may check what the exchange is all about.

My take on this

Let me also give you my take on this. In my perception, Storm is fighting Kleinknecht’s Dutch ghosts from the past.

Storm 2016-01-08 states:

“The sad truth, however, is that Bofinger and Wren-Lewis are right for the wrong reason—hence their interventions are less than helpful, because rather than knocking out the remaining errors in the “consensus diagnosis”, they help perpetuate a mistaken doctrine: that relative unit-labor-costs matter [?] are the prime determinant of a country’s international competitiveness, current account balance, and foreign indebtedness. “

This confuses description and cause. Statistics show such differences. If Southern Europe doesn’t invest in technology as Germany does, then we can observe such relative unit labour costs (ULC). The cause would be investments.

“Rising relative unit labor costs supposedly killed Southern Europe’s export growth, raised current account deficits, created unsustainable external debts and reduced fiscal policy space, and hence, when the crisis broke, these countries lacked the resilience to absorb the shock. It follows in this story that the only escape from recession is for the Southern European countries rebuild their cost competitiveness—cutting wage costs (because Eurozone members cannot devalue their currency) by as much as 30% (as proposed by Sinn 2014), which requires in turn that their labor markets be thoroughly deregulated.”

This looks like a chicken-egg problem. Who would invest in Southern Europe if wage costs are so high ? If there is wage restraint, then investments would not be so large to generate sufficiently low unit labour costs.

“Secondly, of course it is true that Germany and German wage moderation bear part of the responsibility for bringing about the Eurozone crisis. Bofinger and Wren-Lewis have the best intentions while making this point (alas, the road to hell is paved with good intentions ….), but their single-minded emphasis on the importance of relative unit labor cost competitiveness is misguided for at least the following three reasons.”

When Bofinger and Wren-Lewis point to a particular factor, one cannot call this “single-mindedness”. The model is obviously larger than a single variable. First Storm grants part of their argument and then denies all of it.

(1) “Unit labor costs make up less than 25% of the gross output price, while a second reason is that firms in general do not pass on all (but mostly only half of) unit labor cost increases onto market prices.  (…) Germany excels in non-price (technology-based) competitiveness and does not engage (much) in price competition.” It may be doubted that Germany could simply raise the prices of its quality export products without a dent in their exports. Thus the prices and labour costs matter. 

(2) “It was German engineering ingenuity, not nominal wage restraint or the Hartz “reforms”, which reduced its unit labor costs. Any talk of Germany deliberately undercutting its Eurozone neighbors is therefore beside the point. ” The point was that wage moderation had an important contribution, and this is not negated by pointing to something else.

(3) “The only rational explanation for the observed time-sequence is that Southern Europe first experienced a debt-led growth boom, which then led to higher imports and higher capital inflows leading only after a lag of many quarters to lower unemployment and higher wage growth in excess of labor productivity growth (see Storm and Naastepad 2015c).” He might have mentioned that low domestic demand in Germany also reduced the scope for exports by Southern Europe to Germany (like holidays). The German balance of payment surplus had to be invested abroad, simply because of accounting rules. Thus if Germany had targeted for a external balance, Southern Europe would have faced a different situation.

According to Storm German wage moderation would be a factor but not the key one:

“In a nutshell, since the mid-1990s, Germany has become stronger and more productive in high-value-added, higher-tech manufacturing (in conjunction with outsourcing to Eastern European countries), while Southern European countries became more strongly locked into lower-tech, lower value-added and, often, non-tradable activities (Storm and Naastepad 2015c).”

“Cheap credit in the South created unsustainable asset bubbles and facilitated untenable debt accumulation which fed into higher growth, lower unemployment and higher wages—but all concentrated in the non-dynamic and often non-tradable sectors of their economies.”

This repeats point (3) above, and is the common critique about irresponsible banks, who did not take proper account of the creditworthiness of their customers (or the system of central banks, that did not take account of these systemic effects).

Storm is a student of the economics of technology, but arrives at issues of finance:

“What is the appropriate interest rate for the structurally divergent “core” and “periphery” in a one-size-fits-all monetary union? And how can banks, the financial sector and capital flows be made to contribute to a process of convergence (rather than divergence)”

“(…) ditch the dangerous myth that unit labor cost competitiveness is the prime problem”

In reply:

  • Nobody put the notion of “primacy” on the table. The model has more variables. Storm seems to fear such primacy because of the TU Delft research group hangup on wage moderation.
  • He overlooks the observation by Keynes, and repeated by Bofinger, that surplus countries have a responsibility too. Bofinger explicitly argues for a rise of wages in Germany while those in Southern Europe are restrained. Bofinger’s analysis is targeted at explaining that German wages should rise, and the argument is sound.
  • Does Storm really imagine a banking system that facilitates investments in Southern Europe even when unit labour costs guarantee a capital loss ? (Though levels are important rather than changes. E.g. compare hourly wage costs in Germany about 34 and Spain about 22 EUR per hour, which then must be met with productivity.)

Political fall-out

Dutch Wikipedia reports that Kleinknecht in 2007-2008 was member of a committee that advised the GreenLeft political party about its programme principles. Potentially one might understand Kleinknecht’s hesitance as a scientist to study my analysis and join the protest against the censorship of science since 1990 by the directorate of the CPB, yet such hesitation also affects such advise in such political environments. The first is worse, since the second is politics only, and the GreenLeft might be deluded anyway, yet it overall makes one wary about the anatomy of Holland and the spillover effects on Europe and the world.

On Flassbeck and Lapavitsas later on.

President Obama can do little other than teach, in the last year of his presidency and with a majority opposition. Obama just advised the British to vote for the EU on the Brexit referendum. He is at risk of infringing upon national sovereignty, the very thing that the referendum is about.

The Brexit referendum stay / leave question is, and let me include the FT poll score,

Should the United Kingdom remain a member of the European Union or leave the European Union?
Remain a member of the European Union [  ] (44%)
Leave the European Union [  ] (42%)

Leaving the EU still allows various alternatives. If the vote would split over those options, perhaps one better stays. There is no way of knowing. Referenda tend to be silly and dangerous.

  • Referenda work only well when there are two options only, with a clear-cut Yes / No answer. This kind of question occurs only by exception.
  • Normal issues have more options and grades of grey. With at least three options, there arises the Condorcet paradox. For such issues, there better be representative government, with a Parliament selected by proportional representation (PR), and which Parliaments uses more complex methods for bargaining and voting – see Voting Theory for Democracy.
  • The pitfall is that a question might seem to have a clear-cut Yes / No answer while it actually has other options and such grades. Check how the Brexit question masks the other options. It often is an issue of political manipulation to reduce a complex issue to seeming simplicity, and to create a situation such that the political leader who drafts the question might argue to have the backing of the people.
  • Referenda belong to populism and not to democracy.

In this case, UK prime minister David Cameron has to overcome a rebellion in his own party and the threat of defection to UKIP. Check this report on Cameron’s bargaining with the EU. Given this bargaining result Cameron now argues for the EU and he hopes to secure peace in his party. It is somewhat curious that the whole of the UK is called to the ballot box to resolve such internal strife, but the same happened in 1975 with Harold Wilson and the Labour Party.

An advantage of the Brexit referendum is that the BBC now had two broadcasts “Europe: Them or Us“, that review the relation of the UK to the EU. It has been awfully nice to see the ghosts of the pasts perform their part in this drama. See also here and youtube. Some key points that struck me were:

  • Churchill argued for a united Europe.
  • The UK 1975 referendum caused people to complain a decade later: “We voted for a Common Market and later we got something else.”
  • Margaret Thatcher started out as a European, supported Europe in 1975, actually initiated and signed the 1986 Single European Act, with the change from a Common Market (with veto power by country) to the (Europe 1992) Single Market (replacing veto power by qualified majority), and whisked it through the UK Parliament without proper discussion about this abolition of national sovereignty. Only later came the 1988 Bruges speech.

The key point for Cameron has been to restore a shadow of that veto power. Britain cannot block others from having an ever closer union, but it has an opt-out:

“Assessment: Mr Cameron has secured a commitment to exempt Britain from “ever closer union” to be written into the treaties. He has also negotiated the inclusion of a “red-card” mechanism, a new power. If 55% of national parliaments agree, they could effectively block or veto a commission proposal. The question is how likely is this “red card” system to be used. A much weaker “yellow card” was only used twice. The red-card mechanism depends crucially on building alliances. The sceptics say it does not come close to winning the UK back control of its own affairs – and Mr Cameron is set to announce further measures which he claims will put the sovereignty of the Westminster Parliament “beyond doubt”.” (BBC Feb 20 2016)

Some points that I missed in these two “Europe: Them or Us” broadcasts:

  • There is no recognition for Bernard Connolly whose The Rotten Heart of Europe helped the British to stay out of the euro and to keep the pound. There is still room for a better approach to the notion of an optimal currency area.
  • There is little clarity about what the economic discussion really has been about. “Economic union” and “political union” are vague words, and it seems relatively easy to make a political speech or TV broadcast with these. Details matter however. Details help to keep out the ideologues. It is said that Britain has the best economists (Marshall, Keynes, Hicks) but Germany the best economy. Margaret Thatcher would have been much more effective when she had proposed good economics rather than banging the handbag. The relation of the UK to the EU would have been far better had the UK shown better economic analysis and an economy to prove it. Thatcher came to power during a time of stagflation when economists were in disarray and neoliberalism seemed the only way out. This neoliberalism however contributed to the global financial crisis and the economic crisis of 2007+. See my analysis since 1990. Of the core issue, a recent turn is the myth about German decentralised labour market bargaining. Britain has an impact on the European economy via the City and its banks (a fair reason to stay in), but why doesn’t Britain have more impact ?
  • Democracy in the UK suffers from district representation (DR), and it would be better to have proportional representation (PR). There is too little awareness in the UK that much of their political mayhem is caused by their rather unresponsive electoral system. See the comparison of Holland and the UK, and see how Nick Clegg shot his own foot (and destroyed the LibDems).

PM. After writing this, I discovered this review of “Europe: Them or Us” by Sean O’Grady and he says much of the same thing.

The recent Dutch referendum on the Association treaty with the Ukraine is another example of how referenda can be silly and dangerous. I voted against that treaty because of the military section hat would involve the EU in helping secure the Ukrainian borders, which would effectively move NATO’s borders eastward. Government propaganda did not pay much attention to the military section and emphasized the section on free trade. Even there the propaganda didn’t draw the parallel with the economic collapse in East Germany (DDR) when it was merged with West Germany (BRD). In this case, representative democracy failed, for it created this Association treaty, and the Dutch referendum was a freak event that might actually do some good. It still confirms that referenda tend to be silly and dangerous, since the proper answer would have been a better informed discussion in Parliament, notably by having (a) an Economic Supreme Court, (b) annual elections.

Reproduced with permission by Jos Collignon

Thanks to Jos Collignon for permission to reproduce this

Listening to Roefie Huetng with Jamie’s Blues

 

Roefie Hueting (1929) is an economist and jazz piano player, or a jazz piano player and an economist, who cannot decide which of the two is most important to him. See this earlier report on his double talent.

Hueting’s first public performance was on stage on liberation day May 5 1945 at the end of World War 2, when he was dragged out of his home to play for the people dancing in the streets. He still performs and thus he has been 55+15=70 years on stage.

With the Down Town Jazzband (DTJB) Hueting recorded 250 songs, played on all major Dutch stages, five times at the North Sea Jazzfestival, while the 50th DTJB anniversity of 1999 was together with the Residence Orchestra in a sold-out The Hague Philips Hall.

Hueting was one of the founders of the Dutch Jazzclub from which sprouted The Hague Jazz Club. This HJC has its current performances at the Crowne Plaza Hotel, formerly known as the “Promenade”. This hotel is at the Scheveningseweg, the first modern road in Holland, created by Constantijn Huygens in 1653, connecting the area of the Peace Palace – the area where also Grand Duchess Anna Paulowna of Russia (1795-1865) had her Summer palace – to the sea. See also these pictures of the German Atlantik Wall – to stay with the WW 2 theme.

At the celebration last Sunday September 27 other performers were Joy Misa (youtube), Machteld Cambridge, Erik Doelman (youtube) and Enno Spaanderman.

The Hague Alderman Joris Wijsmuller (urban development, housing, sustainability and culture) came to present Roefie Hueting with a book containing a picture of Mondriaan‘s Victory Boogie-Woogie – also celebrating the end of WW 2. Wijsmuller observed the erosion of “sustainability” that in the opinion of Hueting rather should be “environmental sustainability”.

Roefie Hueting and alderman Joris Wijsmuller at Crowne Plaza Hotel 2015-09-27

Roefie Hueting and alderman Joris Wijsmuller at Crowne Plaza Hotel 2015-09-27

Roefie Hueting solo at the piano, 2015-09-27

Roefie Hueting solo at the piano, 2015-09-27

Hueting introducing a jam session 2015-09-27

Hueting introducing a jam session 2015-09-27

"Victory Boogie-Woogie" by Piet Mondriaan (Source: Wikimedia Commons)

“Victory Boogie-Woogie” by Piet Mondriaan (Source: Wikimedia Commons)

Listening to Ο Διγενής (Ριζίτικο) – Ν. Ξυλούρης, Γ. Μαρκόπουλος

 

Some economists signed below letter in the Financial Times, June 5, on the final hour. When I do my petitions then I try to make a point. Let us read this open letter and identify its holes.

Title: In the final hour, a plea for economic sanity and humanity

The suggestion of a final hour is scare mongering. It is not true either, because it is a safe bet that there will be another hour after that. Subsequently it is insulting to Angela Merkel: as if she has not been working hard on economic sanity and humanity. If you want her to read something then find an appealing title, something like: “How to get Putin pay attention and listen”.

Signatures

Groucho Marx didn’t want to join a club who wanted him as a member. One can look at the signatures for a long while and wonder why one would want to be on that list. If these would be 100,000 economists from Europe, well, perhaps. A single European Nobel Prize winning economist might be sufficient, but there isn’t one on the list. I need to ask Hillary Wainwright from Amsterdam what she thinks about the censorship of economic science in Holland. (After Greek Statistics we also have Dutch Economics.)

Prof Joseph Stiglitz, Columbia University; Nobel Prize winner of Economics, Prof Thomas Piketty, Paris School of Economics, Massimo D’Alema Former prime minister of Italy; president of FEPS (Foundation of European Progressive Studies) Prof Stephany Griffith-Jones IPD Columbia University Prof Mary Kaldor London School of Economics Hilary Wainwright Transnational Institute, Amsterdam Prof Marcus Miller Warwick University Prof John Grahl Middlesex University, London Michael Burke Economists Against Austerity Prof Panicos Demetriadis University of Leicester Prof Trevor Evans Berlin School of Economics and Law Prof Jamie Galbraith Dept of Government, University of Texas Prof Gustav A Horn Macroeconomic Policy Institute (IMK) Prof Andras Inotai Emeritus and former Director, Institute for World Economics, Budapest Sir Richard Jolly Honorary Professor, IDS, Sussex University Prof Inge Kaul Adjunct professor, Hertie School of Governance, Berlin Neil MacKinnon VTB Capital Prof Jacques Mazier University of Paris Dr Robin Murray London School of Economics Prof Jose Antonio Ocampo Columbia University Prof Dominique Plihon University of Paris Avinash Persaud Peterson Institute for International Economics Prof Mario Pianta University of Urbino Helmut Reisen Shifting Wealth Consultancy Dr Ernst Stetter Secretary General, FEPS (Foundation fro European Progressive Studies) Prof Simon Wren-Lewis Merton College Oxford

Copyright

The copyright of the open letter has been transferred to the Financial Times:

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don’t cut articles from FT.com and redistribute by email or post to the web.” (Financial Times website)

This is not handy. If you want to distribute your open letter to all kinds of newsmedia, you should not transfer the rights to a single newspaper. See why I don’t blog at the Financial Times.

It actually means that I am also handicapped in deconstructing this open letter. I can quote, of course, but deconstructing everything becomes less inviting. I intended to deconstruct it all, but now, seeing that awkward copyright statement, I lose my enthusiasm.

Opening paragraph

“Sir, The future of the EU is at stake in the negotiations between Greece and its creditor institutions, now close to a climax. To avoid failure, concessions will be needed from both sides. From the EU, forbearance and finance to promote structural reform and economic recovery, and to preserve the integrity of the Eurozone. From Greece, credible commitment to show that, while it is against austerity, it is in favour of reform and wants to play a positive role in the EU.” (Letter by Stiglitz et al. FT June 5 2015)

  • Please don’t address Angela Merkel as “Sir”.
  • Why is it a concession from the EU to exercise forbearance and finance, which they have been doing all the time ?
  • Why is it a concession from Greece to present a credible commitment ? Don’t they claim that they have been doing so all the time ? Or, are Greece’s “best friends” now back-stabbing the Greeks ?
Are these impartial economists or members of Syriza ?

“Syriza is the only hope for legitimacy in Greece. Failure to reach a compromise would undermine democracy in [sic] and result in much more radical and dysfunctional challenges, fundamentally hostile to the EU.” (Letter by Stiglitz et al. FT June 5 2015)

  • Are these impartial economists ?
  • Aren’t there other political parties who have some views on reform and such ?
  • Shouldn’t economists be highly critical of incompetent Yanis Varoufakis, the Syriza minister of finance ? See my earlier criticism, or discussion of Angela riding this minotaur.
A new Marshall Plan ?

“Consider, on the other hand, a rapid move to a positive programme for recovery in Greece (and in the EU as a whole), using the massive financial strength of the Eurozone to promote investment, rescuing young Europeans from mass unemployment with measures that would increase employment today and growth in the future”  (Letter by Stiglitz et al. FT June 5 2015)

  • Yes, of course, see for example my Economic Plan for Europe, and this short text in eKathimerini 2011. Was there one single response from a Greek economist – such as Yanis Varoufakis ? No. See actually my list of papers on the crisis.
  • There is one crucial difference between the rosy view by Stiglitz & Piketty & friends and my more mundane analysis: they assume that the Eurozone will forget about the past, and for the future believe Greece again in whatever Greece promises, while I adopt the more realistic position that there has been a break-down of confidence already. 

Compare: Berlusconi did not ask for a bail-out but Tsipras does. Why would Tsipras think that the Eurozone loves him more than Berlusconi ? Earlier I indicated the link between Russia and Greece – the orthodox church – but why does Tsipras make a solo trip to Russia without taking account of sentiments in the rest of Europe on the Ukraine, or like in Holland on MH17 ?

Berlusconi did not ask for a bail-out but Tsipras does

Berlusconi did not ask for a bail-out but Tsipras does (2008, Source: wikimedia commons)

Thus, a new Marshall Plan is not going to work, unless there are firm regulations in place.

  • It boggles my mind that Greek policy makers do not understand this.
  • It boggles my mind that a political party like Syriza performs such populism, to promise relief without actually presenting a credible plan to achieve this. Surely, populism gets you elected, but does one not have a grain of responsibility ?
  • It boggles my mind that above supposedly serious economists support such populism instead of developing a plan that would actually work. James Galbraith is partly excused for presenting the “Modest Propopsal” jointly with Yanis Varoufakis and Stuart Holland. But he should know about my criticism. Obviously Angela Merkel will not be easily convinced either (e.g. on eurozone bonds).
Conclusion

Economic scientists must observe impartiality. Economic proposals should be backed-up with a minimum of a plan. Analyses should clearly indicate where parties are in error, and otherwise allow for a “core” (see the Edgeworth diagram) with a range of possible compromises. None of these are provided by Stiglitz & Piketty et al. The letter is a miserable failure.

Philippe Legrain (1973) is a British economist who worked as an advisor for former communist and later EU commission president José Manuel Durão Barroso in 2011-2014. Legrain has now written a book on a European Spring, something that Manny tried hard to achieve, as readers of this weblog know, as I tried to advise Manny too.

The real news from Brussels is that Manny’s successor Jean-Claude Juncker doesn’t want a Spring but a Hot Summer. A showdown with Putin should unite the peoples of the EU, and also force Greece to choose sides, JCJ thinks.  Philippe Legrain’s book is old hat. I am still waiting for approval by JCJ to spill some of the beans of our luncheons, dinner parties and fire-side chats. The big secret in Europe is that Angela, François, Jean-Claude and me were all born in 1954, and that we share an obligation to make it all work, though I am for peace-with-strength and they are hopelessly confused.

This Sunday, Philippe Legrain allowed Dutch television to interview him on his Spring eulogy. Legrain is unaware that Dutch TV journalists are hypocrites by profession, and that he is sucked dry like in those vampire movies.

The interview is in English with Dutch undertitles, and you can check how interviewer Marcia Luyten (1971) takes Legrain for a walk in the woods, guts him, and leaves his body somewhere in a ditch.

About a key moment in the economic crisis:

“There was a panic across the Eurozone, and people thought that governments could not pay their debts. And actually it was a panic that ultimately the ECB was able to solve. In the case of the Netherlands it wasn’t even a panic. This was just a mistake made by this government, under pressure from Brussels, and Berlin.” (Philippe Legrain, minute 35).

It is absurd to portray Holland as a victim of Brussels. It is the other way around. Europe is a victim of Holland:

  • It were rather speculators who saw an opportunity to make a killing. It wasn’t a panic but a real threat, caused by wrong legal rules.
  • The solution provided by the ECB still is an improvisation, and we still need a new treaty, see my piece on the two Mario’s.
  • It were Dutch hawks who joined with Germany and imposed austerity on the rest of Europe, also using Brussels as a front for the Dutch electorate.

Other major errors in the interview are:

  • Legrain apparently never really studied Holland. For him it is a small country that falls under his radar. For hm, Holland is not a perpetrator but a victim. For him, these are nice people, and not hypocrites. Apparently he regards Holland as a free, tolerant, open-minded country, that just happens to have made some policy errors, without kids delving into the trash as now happens in Greece. He can’t make himself see Marcia Luyten as co-responsible for making kids in Greece do so. But she is a hypocrite and co-responsible. She never properly informed the Dutch viewers.
  • Legrain just answers the questions that Marcia asks. He doesn’t expose Holland as a major perpetrator. He does not expose Marcia as belonging to the hypocrites who helped cause the problems. He joins Marcia in her “frame” that it are politicians who do not want to lose face, while a major part of the story is that it are journalists who have been misreporting and misrepresenting.
  • Legrain doesn’t expose Jeroen Dijsselbloem as a major stumbling block: an agricultural economist who got into politics too quickly and who apparently isn’t able to deal with these issues properly. (Dijsselbloem already failed on the policy w.r.t. the education on mathematics.) (See Dijsselbloem on Dutch exports.)
Marcia Luyten reads the English book title "European Spring", by Philippe Legrain

Marcia Luyten reads the English book title “European Spring”, by Philippe Legrain (minutes 22-40)

Thus, Philippe, the next time that you visit Holland, first consider my books DRGTPE and CSBH, and let us discuss those, before you face Dutch journalism.

Incidently, we appear to agree with a lot. For example, that the surplus on the Dutch or German exports account was invested abroad, and basically was squandered when investments failed, is a key feature in my analysis since 1990. See also Johannes Witteveen, a former executive director of the IMF.  But the hypocrites on Dutch television will not allow viewers to hear this from home grown economists. They will welcome people like you, Philippe, who criticize Germany and France, instead of the local Dutch incrowd hawks and perpetrators, and their messenger prime minister Mark Rutte, who has a degree in history and who does not know much about economics but still is zealot about Margaret Thatcher, and who got the Rathenau prize on freedom while he censors economic science in Holland.

But, you also state that you have a proposal how a currency union would work with decentralised decision making. I wonder how you could achieve that. My suggestion has been that each nation adopts an Economic Supreme Court. I wonder whether your ideas are the same. Apparently those are behind a pay wall. This will not work.  Even a crisis should not force people to buy into books that might be scientifically unwarranted.

PM. This hypocritical Buitenhof TV broadcast also contains a discussion with Nikos Koulousios, six minutes before Philippe Legrain. This is somewhat amusing, but not really so.

  • The suggestion is that when Greece and Germany collaborate on jokes, and the Germans admit that they don’t have a sense of humour, then we see a proper collaboration in Europe: and all is fine, and people should feel satisfied that the notion of a unified Europe might work. I am afraid that this only confirms national stereotypes and isn’t real humour.
  • Koulousios calls it typical that a letter signed by economists like Joseph Stiglitz and Thomas Piketty did appear in the Greek paper efsyn.gr but not in other papers, except in the Financial Times in which it appeared originally. He seems to suggest some kind of conspiracy, in which the Greek readership is manipulated and not given the right information. However, it may just be that the FT expects royalties. Check why I don’t blog at the FT. Thus the proper diagnosis is that journalists can be quite hypocritical, not only in Holland but even in Greece.

There is one real conclusion from all this. I will discuss it with JCJ the next time I see him. Rather than joining Putin in a hot Summer war on the Ukraine, the EU should pay Russian journalists more money for accurate reporting about the state of the world.

Listening to Theodorakis, The struggles of the Greek people

 

Last weblog referred to Pseudo Erasmus who referred to Graig Willy who referred to Thierry Medynski who referred to Emmanuel Todd.

Medynski uses a colour scheme for Todd’s categories that I find hard to remember. It also appears that Willy has given a colour to Russia while this is not available from Medynski. Thus, let me return to Medynski’s map and propose a colour coding that seems easier to remember (updated May 18).

My suggstion is: Green will be the authoritarian stem family structure that can live with inequality.  Gray blue will be the authoritarian family structure that wishes to see equality except for the patriarch. Red allows for inequality but because of liberal tendencies. Blue combines liberalism and equality. The blue-ish area identifies the region in which equality dominates.

“Todd identifies four premodern European family types according to two major criteria: Is an individual free upon adulthood or does he continue to live with, and under the authority of, his parents? Are brothers equal, notably in terms of inheritance, or are they unequal.” (Craig Willy’s summary of Todd)

My colour proposal Authoritarian Liberal (free from parents)
Unequal Stem (green) Nuclear (red)
Equal (inheritance)
Communitarian (gray blue)
Nuclear egalitarian (photon) (blue)

This gives the following map – in which the legend is also sorted from blue to red.

Traditional family systems of Europe (1500-1900) (Source: Todd - Medynski)

Traditional family systems of Europe (1500-1900) (Source: Todd – Medynski)

There is more cohesion between Germany and Norway and Sweden than commonly perceived.

Relation to the USA

My suggestion is based upon the USA Red and Blue, for the Republican versus Democratic states.

USA Red and Blue States, for Republican and Democratic party outcomes, purple mixtures (Source: Wikipedia)

USA Red and Blue States, for Republican and Democratic Party outcomes at Presidential elections. Purple: mixtures over elections (Source: Wikipedia)

The differences between red and blue states may not be quite comparable to Todd’s scheme, but it helps to develop the idea and identification. Still, the clue is that the USA apparently has been shaped predominantly because of the nuclear family structure.

“Les États-Unis et l’Europe n’ont pas le même projet de société du fait de leurs structures familiales. Structurés sur la famille nucléaire absolue, les États-Unis expriment une dérive du fondamentalisme protestant avec cette vision messianique et civilisatrice pour diriger le monde selon leurs propres intérêts. Du fait de sa mosaïque de structures familiales, l’Europe devrait favoriser l’émergence d’un monde polycentrique. Cependant, depuis l’Acte Unique, tout se passe comme si l’identité européenne était réduite aux valeurs véhiculées par la famille nucléaire absolue, à savoir la pensée unique du néo-libéralisme. D’où l’échec de cette conception de l’Europe.” (Medynski, my emphasis)

The differences between Republicans and Democrats thus may be linked to the differences between England and the Ile de France.

Consequences for Europe and the euro

Check out Todd’s 2013 Harper’s video on the euro – with thanks to Pseudo Erasmus for alerting us to this. See also Jamie Galbraith and perhaps also not so strong John Gray. And then see my paper Money as gold versus money as water.

PM

PM 1. For completeness and comparison, this is the colour scheme of Medynski’s image. We changed only red and yellow but it still makes a difference in reading.

Thierry Medynski Authoritarian Liberal
Unequal Stem (green) Nuclear (yellow)
Equal Communitarian (red) Nuclear egalitarian (blue)

PM 2. Never forget about the Heineken Eurotopia map.

PM 3. Check whether there is a relation with the other French intellectual, Thomas Piketty.

PM 4. Russia would have the gray blue too, which confirms Willy’s adaptation of Medynski’s image.

“Cette mosaïque de systèmes familiaux distingue l’Europe des Etats-Unis (structurés sur la famille nucléaire absolue) et de la Russie (structurée sur la famille communautaire exogame) où seul un des termes, l’individualisme ou le système communautaire, est privilégié.” (Medynski, my emphasis)