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The Kapali Carsi

Why Europe Still Has a Chance (wonkish a la Krugman)

Guest blogger Ali G. (not the rapper) is back from vacation, and it seems driving around in Western Europe had made him more optimistic about the Eurozone’s chances:

I drove around Western Europe for vacation and although the decline of the West (Europe in particular) and rise of emerging economies has been a very hot topic in the last couple of years, based on my limited and naïve observations, I would like to offer an alternative perspective.  I am aware that the a lot of economic facts and figures point at the validity of the above argument; I don’t plan to argue against that. This is just food for thought.

At a lot of popular holiday destinations in Turkey, even a vacation may become a power struggle (I am not talking about the all-inclusive resorts). First of all, you have to pay for everything and everything is unjustifiably expensive as if everyone is just trying to extract the maximum out of you. Moreover, you never know how much you’re going to pay exactly and there are always surprises. You have to act like a VIP everywhere you go just to get the attention of the waiter and you feel that everyone around is constantly weighing you. There are a lot of private beaches that are run like nightclubs, most of which don’t offer anything extra. This is mainly because they generally only present a relief from public beaches, which are crowded and not well taken care of and are considered vulgar even among the white collar working class. This makes these holiday spots “exclusive”. We are basically talking about the sand and the sea by the way.

In France and Italy and things seem to work quite differently. First of all everything is more transparent. Even in upscale restaurants, you get to look at the menu before you sit, and if you choose to sit you are treated just the same as the guys who jumped off from the 40-meter yacht (who only mind their own business). There are private beaches (which are reasonably priced) and public beaches that are as nice but not that luxurious. Generally you pay for an umbrella and a deck chair. So when you go to a private beach you know what you’re paying for and you have an alternative that is just a little less classy. I don’t know if that’s the case everywhere, but I had a similar experience in Spain last year.

This may sound shallow, but you could generalize this to a lot of aspects of life. There is a certain subtle wisdom about humanity and society that comes from centuries of war, revolutions, reforms, colonization and economic cycles.  Although they have had their own such struggles, most emerging countries had their first experience with free markets, liberalism and even democracy only a couple of decades ago. Although a lot factors seem to favor these economies, their lack of experience in self-governance and free trade poses important social and political hurdles in the not so long run.  Especially fundamental wealth distribution and civil rights issues that are taken for granted in the West could prove to be more challenging than the standard market economists predict. These economies need to digest their growth stories so to speak before they can actually lead the world.

We are living in a society where things change rather quickly, so we expect social and personal change to be the same way. I have a lot of people around me who are easily able to lose 15% of their bodyweight in two months. However most gain them back in another two, as neither they nor their surroundings are able to permanently adapt to this new state rapidly. I don’t want to sound like an old-school Marxist development economist that is stuck on the historical approach, but one has to recognize that it takes time for humans and thus societies to evolve.  That is why Europe still has a chance and the emerging countries still need some time.

By the way, I recently finished “Why Nations Fail?” by Daron Acemoğlu and James Robinson. One of the main points in the book is that the economic prosperity, and even the existence of an economy, depends on having inclusive, rather than extractive institutions in the economy. The other important point I took out is that as in humans, a lot of issues (good or bad) in most societies have their roots deep in their past. If you have not read it, please do as what I say will probably be clearer and it is such a good read anyway.

Ali Gökhan is the acting economist at a Turkish conglomerate. The views expressed here are his personal views only and do not represent the views of his company.

OK, no comment on this one!:) Really, I just want to offer a different perspective to the Turkish phenomenon Ali G. is referring to. For one thing, it is not that prevalent in all parts of the country, just in Cesme and Bodrum where rich Turks spend their vacation. Go to Datca, where I was on Sunday for the day, and it is a totally different experience. This variety challenges Ali’s explanation, IMHO, so I would like to offer an alternative one: The pretentiousness Ali is referring to is also prevalent in other places in Turkey, such as exotic restaurants (sushi), gyms or ski vacations. These seemingly-different goods share a common trait: They are all luxury goods in Turkey, so as price increases, so does demand:). But I like Ali’s take as well…

3 Responses to “Why Europe Still Has a Chance (wonkish a la Krugman)”

Emre Deliveli edeliveliJuly 17th, 2012 at 1:56 pm

In Krugman's terminology, yes… He uses the word a bit differently, to refer to funny things as well as geeky ones, and for the lack of a better word, I stuck with his version…

rower32July 18th, 2012 at 5:55 pm

Good observations, I read the book when it first came out and it has a dangerously contagious effect on ones intellectual thinking. M. Friedman once said "everything reminds me of sex, but I keep it out of the paper." Hell, I say everything reminds me of inclusive and extractive institutions after I finished the book. But I found the book too long and in many ways inconsistent (about reasons for success and failures in different countries) And it was unnecessarily long. I'm not as pessimistic as the authors that developing countries will never be able to reach the 1st world prosperity levels due to the lack of institutions. I think internet is the main catalyst in this transition period. It's the great equalizer that will end the information/knowledge poverty for the 3rd world. Slow? yes, impossible? No.

I think it was Serdar Turgut who tried to explain that pretentiousness bec of a non-existent bourgeoisie in Turkey. Can't find it now but was a really good piece.

Btw, NYT had two really nice articles in the past couple months about weight gain/loss. They provide really good insight on that topic. http://www.nytimes.com/2012/07/01/opinion/sunday/http://www.nytimes.com/2012/01/01/magazine/tara-p

Hope to read more from Ali G. in the future.

PS: have to agree with rdow, at least add an equation, table, graph etc if you call the post wonkish LOL