What will it mean in human terms if Italy "collapses"? (debt, buy)
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Location: where you sip the tea of the breasts of the spinsters of Utica
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Or Greece. Default on debts or whatever it is that's about to happen (I don't know much about economics). What will happen to the people ..... what will the unemployed do (would any form of unemployment benefits or even basic food/shelter assistance stop?). Of course there will be riots and probably the blame will be properly placed on the business and finance elites, but they'll be hiding behind private security forces.
I understand the idea is that these collapsing economies will default and start printing their own money, resulting in expulsion from the EU. Their own money might be almost worthless in trading with other countries, but can they stay afloat (bare survival for ordinary people) on internal resources? Maybe the lira will be worthless outside, but it could buy pasta produced inside the country? I think they were occasionally in that situation past WW2 and before EU membership, I remember tourists laughing when I was young about how they could exchange a $20 bill for a huge wad of 10,000 lira notes, or something like that.
I understand the idea is that these collapsing economies will default and start printing their own money, resulting in expulsion from the EU.
If the currency inflates the local cost of commodities skyrockets because the commodities have REAL value, they can be sold elsewhere around the world where there is demand at a much higher price so they don't inflate as well. Conditions become extremely tough for the locals...but these socialist countries have had it good for far too long, now it's time to pay the bill. Countries like Germany are socialist but within their means since their economies are strong they can afford to be, the Southern bloc EU countries are socialist but cannot afford to be so generous yet they are.
BTW, we're heading down that very same road.... if we can't see Europe exploding on the horizon and press the brakes and turn around then we will join them.
The short answer is a significant reduction in consumption, especially of imported goods. The hardest hit will be the globally uncompetitive, as has already been the case over the past 10-15 years, but the decline in the material standard of living would broaden throughout the population and the pace accelerate.
In Greece, that means just about everybody: with very few exceptions, the country has no major globally competitive industries. Since the 1990s, the Greeks have enjoyed consumption as if it were an advanced industrialized country on the back of EU (German and French) subsidies. Without such subsidies, the standard of living would revert to something like 1960s-1970s levels; even now, major swathes of the population are just getting by with basic housing and food, in some cases with help from relatives who still own agriculturally productive land.
But Greece would certainly still need outside help to feed its population and/or suffer a major reduction in population through emigration and/or starvation, disease, violent death, etc.
Italy is a major industrialized country, with a significant domestic market and globally competitive firms in almost every key industry and in some very highly specialized niche sectors, exporting throughout the world. Nonetheless, around 60%-70% of the population is dead weight. So about 1/3 of the society would remain prosperous in the advanced industrial sense, while about 1/3 would slide into relatively austere levels of consumption, and 1/3 has probably already declined to that level over the past 10-15 years anyway.
Italy could probably produce enough food to feeds its population. And, as mentioned, it has enough globally competitive industry to generate foreign exchange: though indeed its import prices for industrial inputs would soar, its most competitive firms could probably withstand it; on the contrary, the best of the best might even increase their competitiveness and prosperity.
You should be careful when you blame "business": a major problem with these countries is that economic policy is anti-business, and the environment does not allow for the development of enough globally competitive businesses among those who are not well connected politically, in Greece almost none whatsoever.
You say that you don't know much about economics, but you ask some very astute questions. Good for you!
Maybe the lira will be worthless outside, but it could buy pasta produced inside the country?
Hmmnn....ironic to think of a local monetary system after all the big promises of the Euro....not so long ago.... Maybe trading local pasta for local shoes...or a handbag?
Orlov has done good modeling of the Soviet Collapse that is a worthy review. Here is some of his early work. Good place to start on him, and then search for more as he as improved and updated >>>
From an economic modeling on a human level I thought FerFAL did an excellent explanation.
A sample --
Quote:
It’s 1:06 AM over here. I just finished showering and my wife and son are asleep. I was putting shampoo on my hair, thinking about what I wrote today on this post, and remembered the exact moment when I realized along with several other people, not only that TSHTF (that we all knew) but that the world we once new no longer existed, and that this was not a hurricane, this was an ice age period, it wouldn’t just go away.
We understood it the same way a kid understands photosynthesis: Because a teacher coldly explained it to us, even used graphics. I slept 5 hours yesterday, 2 hours the day before yesterday. Saturday night I didn’t sleep at all. I’m already used to it. Deadlines at the University, staying late at night, drawing in CAD 3D, waiting until Renders are ready. It’s a competitive world out there, and no one sympathizes with what you are going through, they just want you to perform as expected, and the standard is always high. It happened 4 years ago, almost a year after the December 2001 crisis. It was a social studies class and this teacher, don’t remember if it was a he or a she, was explaining the different kinds of social pyramids. God! Now I remember more! We even had a text book with those darn, cruel pyramids! The first pyramid explained the basic society. A pyramid with two horizontal lines, dividing those on top (high social class) those in the middle (middle class) and the bottom of the pyramid (the poor, proletarian). The teacher explained that the middle of the pyramid, the middle class, acted as a cushion between the rich and the poor, taking care of the social stress. The second pyramid had a big middle section, this was the pyramid that represents 1st world countries. I which the bottom is very thin and arrows show that there is a possibility to go from low to middle class, and from middle to the top of the social pyramid. Our teacher explained that this was the classic, democratic capitalist society, and that on countries such as Europeans one, socialists, the pyramid was very similar but a little more flat, meaning that here is a big middle section, middle class, and small high and low class. There is little difference between the three of them.
The third pyramid showed the communist society. Where arrows from the low and middle class tried to reach the top but they bounced off the line. A small high society and one big low society, cushioned by a minimal middle class section of pyramid. Then we turned the page and saw the darned fourth pyramid. This one had arrows from the middle class dropping to the low, poor class.
“What is this?” Some of us asked.
The teacher looked at us. “This is us”
“It’s the collapsed country, a country that turns into 3rd world country like in pyramid five where there is almost no middle class to speak, one huge low, poor class , and a very small, very rich, top class.”
“What are those arrows that go from the middle to the bottom of the pyramid?” Someone asked.
You could hear a pin drop. “That is middle class turning into poor”.
I won’t lie, no one cried, though people rubbed their faces, held their heads and their breath.
No one cried, but we all knew at that very moment that all we thought, all we took for granted, simply was not going to happen.
“You see, the income from the middle class is not enough to function as middle class any more. Some from the top class fall to middle class, but the vast majority of the middle class turns into poor” Said the teacher.
I don’t know how many people in that room suddenly understood that he/she was poor.
The teacher continued “You see, we have a middle class that suddenly turns to poor, creating a society of basically poor people, there is no more middle class to cushion tensions any more. Middle class suddenly discovers that they are overqualified for the jobs they can find and have to settle for anything they can obtain, there for unemployment sky rockets, too much to offer, too little demand. You see they prepare, study for a job they are not going to get. You kids, you are studying Architecture because you simply wish to do so. Only 3 or 4 percent of you will actually find a job related to architecture.”
We all sat there, letting it all sink in. After a few months, it all proved to be true. Even the amount of students that dropped out of college increased to at least 50%. They either so no point in studying something that would not make much of a difference in their future salaries, had no money to keep themselves in college, or simply had to drop college to work and support their families.
The teacher continued “You see, we have a middle class that suddenly turns to poor, creating a society of basically poor people, there is no more middle class to cushion tensions any more. Middle class suddenly discovers that they are overqualified for the jobs they can find and have to settle for anything they can obtain, there for unemployment sky rockets, too much to offer, too little demand...
I have been saying this all along on the forums, with no takers: The pyramid is now sunk (contracted) in the middle, the middle classes squeezed down into the lower base (i.e., poverty) with the 1% at the very top. If we cannot "get" this picture and attempt to do something about it (the early attempts of OWS), we are in trouble for a long time. There are many who are still well off who refuse to see it.
Orlov has done good modeling of the Soviet Collapse that is a worthy review. Here is some of his early work. Good place to start on him, and then search for more as he as improved and updated >>>
If I was a Greek I would move to Germany or Finland.
They are already going to Germany. They are also going back to the land in droves, apparently...even former professionals....hoping to find a way to survive.
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Maybe trading local pasta for local shoes...or a handbag?
