Europe is geographically a long ways from Michigan. At the moment though, economically, it seems right next door.  As a small business owner who, like many others in this state, has experienced directly or indirectly the financial ill effects of the housing collapse, the erosion of manufacturing companies and jobs, the debacle on Wall Street, the near death of General Motors and Chrysler, the loss of several auto parts suppliers, and the lengthy recession, I’ve been waiting and anticipating that glimpse of light at the end of the tunnel.

     Like those other Main Street businessmen and women, I have learned that events outside my immediate domain and far beyond any personal control can impact me as much as any decisions, good or bad that, I make.

     The economic forecasters have predicted a modest improvement. For some operations modest may be too little, too late. For others any illumination within that tunnel, even a dim one, is a welcome sight. Still, before we uncork the champagne and celebrate, we’ll have to see if the light survives the well-publicized crisis in Europe over its currency (the Euro) and over its ability to stabilize the economics of Portugal, Greece, and Italy.

     In this flat world, the term used by New York Times columnist Thomas Friedman to describe our increasingly integrated global economy, what happens in the Parliaments of Athens and Rome, the office of the European Central Bank, in the European Union headquarters in Brussels, and most vitally in the German and French halls of power can cause substantial effects for Michigan businesses.

     There are 27 countries in the Union with 17 of them in the Euro Zone. A dire outcome, we’re warned, could plunge the world into another recession. At the very least, the uncertainty has caused wild fluctuations in the stock markets. And, of course, those warnings and the ensuing uncertainly give pause to both business and consumer confidence.

     THE INITIAL COMMON MARKET, which has evolved into the larger European Union and the implementation of a common currency, had a two-fold purpose. One was to fashion a more co-operative and robust economy that could hold its own on the world stage. Back in the 1960s the landscape was comprised of three economic powerhouses: The United States, the Soviet Union, and American business in Western Europe. Japan emerged as a player in the 1970s, the Soviet Union (now Russia) faded after its breakup but appears to be posed for a comeback, the smaller Asian nations took their place on center stage, but now two large economic participants have arrive,  China and India.

      The other purpose of the Common Market was to stitch together a shared fabric of trade, manufacturing, and business exchanges that would hopefully end a long history of warfare. First tribalism and then nationalism have resulted in neighbors constantly at each others’ throats. Such bloodletting is not unique to Europe; still any study of that continent’s history, from ancient Greece forward, is a weary tale of war after war after war.

     I won’t claim any large knowledge or expertise on the underlying causes of the current crisis nor am I able to provide a telling glimpse at the structure and operations of the European Union. What I find instructive is the potential and probable outcome and its ramifications. An article in the Nov. 19, 20011 issue of The Economist discusses the use of ‘technocrats’ to operate government. Leaders in both Greece and Italy were forced to resign with a good deal of the pressure coming from European Union officials and from Germany and France. They were replaced by two men, described as ‘economic technocrats’.

     The article weighs the pros and cons of turning over the levers of government to these so-called experts; in this situation to men with an expertise is in economics and finances. The writer notes that the decision usually comes in the face of a crisis. In the opening paragraph, he wrote:

“Even before Plato conceived the philosopher-king, people yearned for clever, dispassionate and principled government. When the usual run of rulers proves cowardly, indecisive or discredited, the turning to the wisdom and expertise of a technocrat, as both Italy and Greece have done in recent days, is particularly tempting.”

     The writer suggests that such a solution can be prudent, “especially in a crisis” as the one now occurring in Europe, noting “it can work, but brief stints have the best chances.”… “When political power is not publicly contested at all, electability is irrelevant and expertise can give the ambitious an edge.”

     The article also offers this interesting conclusion: “History suggests that technocrats do best when blitzing the mess made by incompetent and squabbling politicians. But the problem for the new leaders of Greece and Italy is that the source of their woes, the euro zone’s design flaws, stems from mistakes made in Brussels (the headquarters of the European Union)—not least by other unelected experts. Remedying that will take many years, far longer than technocrats’ usual political lifespan. And it will need more than just brains and integrity.”

     This statement about “design flaws” in the structure is a much different scenario of the underlying cause of the crisis than what’s being portrayed. It also casts a different light on the solution that appears to be forthcoming. What has been presented for public consumption is another version of the old fable about The Grasshopper and the Ant. In this case Germany and its citizens have worked hard, lived frugally, and used wisely its resources wisely. As a result, the nation and its citizens enjoy a stable and prosperous economy. To lesser extent the story holds true for France and some other nations.

     The grasshoppers in this version, starting with Ireland and Portugal and now Greece and Italy, are portrayed as wayward societies that have spent beyond their means, have not made prudent budgetary decisions, and have not been able or willing to make difficult political decisions, including cutting spending and raising taxes. Each of these countries, in order to receive outside financial assistance (a rescue package) has had to or will have to implement severe austerity measures. This hard medicine has no “spoonful of sugar” to help it go down. The ordinary citizens of those countries, as is often the case, will suffer the most from the fraying of social safety nets and limited future economic prospects. Many are understandably not happy. Like the small business owners in Michigan, they are impacted by forces beyond their control.

     THE POTENTIAL SOLUTION that appears to be emerging, one that was unveiled last week by German Chancellor Angela Merkel and French President Nicolas Sarkozy and would require treaty changes and a long ratification process by member nations, is a further financial integration of Europe that goes beyond shared currency and free trade. With this integration will come a shift of power and decision making, further away from the individual national capitals and more towards the centralized authority of the European Union. The executive arm of the Union’s Council, the European Commission, along with the European Bank and in the background German economic might will more and more call the shots. There will be new, more enforceable laws and regulations, a more confining parameter of operations allowed, with the likelihood that unelected technocrats will have some oversight or veto powers over national budgets and the budget-making process.

     The failure to resolve the crisis could result in the break-up of the euro zone and the return to individual national currencies and perhaps a more restrictive, protectionist economic and financial interaction between European countries. Who knows where that rabbit hole would lead? European stability, both economically and politically, is desirable. The goal of encouraging this group of nations, previously spilling each others’ blood, to live peacefully and prosperously beside each other, remains a vital one. Certainly Americans have a stake in such a long term outcome.

      Still we celebrate sovereignty, in Europe and here in these United States. We are protective of our right to self-determination including how and where we spend our money. Large, overarching governmental power, while having benefits, is also viewed as a threat; an erosion of individual and shared liberties.

     SIMILARITIES TO WHAT’S OCCURRING in Europe and its possible ramifications can be found in this country and in this state. The budgetary and political stalemate in our nation’s capital has been portrayed as another version of The Grasshopper and the Ant, but (like the euro zone) perhaps part of the underlying problem is the result of financial and economic structural problems, including a fairer and more balanced taxation policy and the priorities of governmental services. The Congressional Super Committee, although a failed effort, was a stab at using a technocratic solution.

      In Michigan the enhanced ‘Emergency Manager’ legislation passed earlier this year is a more telling example. Opponents to the changes that were made to the old law claim the enhancement is draconian, while supporters, including Gov. Rick Snyder, describe it as more effective. Under its provisions, control of a local municipality or school district is taken over by the state and given to an expert appointed by the governor.

     The manager possesses control over the budget and the day-to-day operations. The law allows the manager to go to such extremes as dissolving a city charter and changing collective bargaining agreements with public employees. Local councils or school boards become irrelevant, and for all practical purposes local self-determination is null and void. The cities of Flint, Pontiac, Ecorse, and Benton Harbor and the Detroit Public Schools are now operated by such managers.  The City of Detroit may be next in line.

     A city or school district going bankrupt is, of course, not a good situation either for its residents or for this state. When such dire financial circumstances occur, extraordinary measures-- including turning control over to a technocrat-- might be advisable. The question that needs to be asked though, is this a ‘grasshopper and ant’ scenario? Were these local municipalities entirely to blame for their plight? Or are there also underlying structural problems?

     The two main sources of income for cities are property taxes and state shared revenues. In the case of our largest city, since World War II both population and property values have declined. The departure of white residents as well as many businesses and manufacturing plants from Detroit has had its damaging impact on revenues

      If blame is to be assigned for Detroit’s financial difficulties, certainly part of it can be placed on the mismanagement and cronyism of previous city administrations, including the illegal activities of former Mayor Kwame Kilpatrick and some of his staff.  However, this ‘white flight’ and the relocation of wealth and the engines of economic growth to the neighboring suburbs and outlying rural areas is also a significant cause.
     The other, more recent problem has been the state’s decade-long recession that resulted in across-the-board cuts in revenue given back to the local municipalities and school districts is an important contributing factor. Here, too, Detroit has seen a loss in revenues. The original notion of state-share revenues was that the state would collect most of the taxes and ‘share’ it, rather than have all of the individual local entities trying to generate all of their own income. Local self-determination was sacrificed to a more centralized authority. The hard reality for local governments is that the state legislature and the governor decide how much to share. 

     If there is a goal of a more integrated and co-operative sharing of governmental services, as championed by Governor Snyder and others, then perhaps the collection and distribution of property taxes also needs to be regionalized. Instead of having a ‘rich man, poor man’ checkerboard of cities and towns in our metropolitan areas, especially metro Detroit, a better paradigm would be the one created with the European Common Market; one that sought common ground and a shared destiny rather than continued adversity.

     If what happens in Europe impacts myself and other small businesses in Michigan, either for good or ill, then what happens in Detroit, Flint, Pontiac, Ecorse, Benton Harbor and other cities and school districts would be of even larger significance. If the world is flat, as Thomas Friedman tells us, so is our state.

     Yet, while I understand and accept the need for larger governmental authority along with the use of an all-powerful, unelected technocrat to come to the rescue, whether over there in Italy and Greece or here in Flint and Detroit, the loss of self-determination and the possible erosion of individual and shared liberties is bothersome. That, too, has a potential impact.

I’d rather see an effort made to correct the structural causes, thus hopefully avoiding future occurrences, rather than to simply and reflexively send in the technocrats