Can the Euro be Saved?
Joseph E. Stiglitz
NEW YORK – The Greek financial crisis has put the very survival of the euro at stake. At the euro’s creation, many worried about its long-run viability. When everything went well, these worries were forgotten. But the question of how adjustments would be made if part of the eurozone were hit by a strong adverse shock lingered. Fixing the exchange rate and delegating monetary policy to the European Central Bank eliminated two primary means by which national governments stimulate their economies to avoid recession. What could replace them?
The Nobel Laureate Robert Mundell laid out the conditions under which a single currency could work. Europe didn’t meet those conditions at the time; it still doesn’t. The removal of legal barriers to the movement of workers created a single labor market, but linguistic and cultural differences make American-style labor mobility unachievable.
Moreover, Europe has no way of helping those countries facing severe problems. Consider Spain, which has an unemployment rate of 20% – and more than 40% among young people. It had a fiscal surplus before the crisis; after the crisis, its deficit increased to more than 11% of GDP. But, under European Union rules, Spain must now cut its spending, which will likely exacerbate unemployment. As its economy slows, the improvement in its fiscal position may be minimal.
Some hoped that the Greek tragedy would convince policymakers that the euro cannot succeed without greater cooperation (including fiscal assistance). But Germany (and its Constitutional Court), partly following popular opinion, has opposed giving Greece the help that it needs.
To many, both in and outside of Greece, this stance was peculiar: billions had been spent saving big banks, but evidently saving a country of eleven million people was taboo! It was not even clear that the help Greece needed should be labeled a bailout: while the funds given to financial institutions like AIG were unlikely to be recouped, a loan to Greece at a reasonable interest rate would likely be repaid.
A series of half-offers and vague promises, intended to calm the market, failed. Just as the United States had cobbled together assistance for Mexico 15 years ago by combining help from the International Monetary Fund and the G-7, so, too, the EU put together an assistance program with the IMF. The question was, what conditions would be imposed on Greece? How big would be the adverse impact?
For the EU’s smaller countries, the lesson is clear: if they do not reduce their budget deficits, there is a high risk of a speculative attack, with little hope for adequate assistance from their neighbors, at least not without painful and counterproductive pro-cyclical budgetary restraints. As European countries take these measures, their economies are likely to weaken – with unhappy consequences for the global recovery.
It may be useful to see the euro’s problems from a global perspective. The US has complained about China’s current-account (trade) surpluses; but, as a percentage of GDP, Germany’s surplus is even greater. Assume that the euro was set so that trade in the eurozone as a whole was roughly in balance. In that case, Germany’s surplus means that the rest of Europe is in deficit. And the fact that these countries are importing more than they are exporting contributes to their weak economies.
The US has been complaining about China’s refusal to allow its exchange rate to appreciate relative to the dollar. But the euro system means that Germany’s exchange rate cannot increase relative to other eurozone members. If the exchange rate did increase, Germany would find it more difficult to export, and its economic model, based on strong exports, would face a challenge. At the same time, the rest of Europe would export more, GDP would increase, and unemployment would decrease.
Germany (like China) views its high savings and export prowess as virtues, not vices. But John Maynard Keynes pointed out that surpluses lead to weak global aggregate demand – countries running surpluses exert a “negative externality” on their trading partners. Indeed, Keynes believed that it was surplus countries, far more than deficit countries, that posed a threat to global prosperity; he went so far as to recommend a tax on surplus countries.
The social and economic consequences of the current arrangements should be unacceptable. Those countries whose deficits have soared as a result of the global recession should not be forced into a death spiral – as Argentina was a decade ago.
One proposed solution is for these countries to engineer the equivalent of a devaluation – a uniform decrease in wages. This, I believe, is unachievable, and its distributive consequences are unacceptable. The social tensions would be enormous. It is a fantasy.
There is a second solution: the exit of Germany from the eurozone or the division of the eurozone into two sub-regions. The euro was an interesting experiment, but, like the almost-forgotten exchange-rate mechanism (ERM) that preceded it and fell apart when speculators attacked the British pound in 1992, it lacks the institutional support required to make it work.
There is a third solution, which Europe may come to realize is the most promising for all: implement the institutional reforms, including the necessary fiscal framework, that should have been made when the euro was launched.
It is not too late for Europe to implement these reforms and thus live up to the ideals, based on solidarity, that underlay the euro’s creation. But if Europe cannot do so, then perhaps it is better to admit failure and move on than to extract a high price in unemployment and human suffering in the name of a flawed economic model.
Joseph E. Stiglitz is University Professor at Columbia University and a Nobel laureate in Economics. His latest book, Freefall: Free Markets and the Sinking of the Global Economy, is now available in French, German, Japanese, and Spanish.
Copyright: Project Syndicate, 2010.
www.project-syndicate.org
For a podcast of this commentary in English, please use this link: http://media.blubrry.com/ps/media.libsyn.com/media/ps/stiglitz125.mp3
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blade4199 05:42 06 May 10
I don't really agree with the claim that countries with a trade surplus contribute to a systemic instability. If some countries have a deficit (eg: States / UK) then some must have a fisical surplus. Balanced accounts are a theoretical possibilty but a practical impossibilty. Deficits and surpluses don't occur naturally. They occur because of free trade and the economic design of a particular country
Hannibal 02:38 07 May 10
Another beautifully written piece.
Currently as it stands, Germany's insistence on fiscal austerity when it has a huge trade surplus at the expense of others is predatory. especially when others cannot devalue to adjust to the real exchange rate.
Knowing Europe and its insitutions, I have no illlusion that it can implement or even take any idea of reform seriously. It is a strictly one-narrative-zone, especially in economics. I predict the crisis will drag on until Spain Crisis (keep in mind that we are not talking about just Greece) surfaces and at that point there will be no other choice but to let Euro disappear. m
SeoKungFu 07:48 07 May 10
You can as well real "Europe's Dominos of Doom" by Janis A. Emmanouilidis.
alexferro 01:15 07 May 10
It might all end up instead with the rest of the Euro-zone gang up on the Germans and boot them out of it.
Hannibal 06:06 07 May 10
alexferro,
Unlikely to happen, Germany is the only European state that can provide the fundings as of this moment; pretty much everybody is running a huge deficit, including France. Think of Berlin as Washington, where the treasury is located.
There are two ways to boot the German out informally: 1) Germans be persuaded to give up their stubborness and willing to go with EU-wide expansionary fiscal and monetary policy; 2) EU commission takes a strong stance agaisnt austerity. Either way it is not gonna happen.
For 1), it is just asking for the impossible. Not only the Germans are stereotypically stubborn, it is that the whole Euro and ECB system is set with German stye of central banking in mind (see Krugman, http://web.mit.edu/krugman/www/euronote.html). What this means is that they need a complete system overhaul.
There is a little leeway for 2), as the EC is the closest thing to a central government (of course it is not) and it has its own parliament, so it can in a sense say that it represents the whole EU, but then the MPs and their consistuencies still think in terms of own nations. Even if it can overcome that, it still does not have the political will and power to suggest any meaningful reform, let alone getting it pass.
Come to think of it, the EU has managed to screw itself up in every possible way. Overly ambitious and too many moving parts, which act against each other in time of crisis, and worse still, there is no way in fixing this mess. The best result for Greece et al. right now seems to be getting out of Euro and never speak of it again. The EU will likely to be another League of Nation.
jnuetzel 02:46 08 May 10
1. wage cuts are no fantasy, but reality
2. bankruptcy does not benefit Greece, but short sellers
3. fiscal responsibility in Euro-land is the agreed upon law,
1. wage cuts are no fantasy, but reality
What Prof. Stiglitz is calling a fantasy, is now reality in at least the third european country (Ireland, Latvia, and Greece), significant wage and pension cuts, therefore de facto devaluation, but keeping the stability of the Euro.
The only opposition to that are the communists (e.g. in Germany "Die Linke").
2. bankruptcy does not benefit Greece, but short sellers
What might be good for short sellers at Wall Street, residing a few subway stations away from Prof. Stiglitz, might not been seen as beneficial for people in Europe, who enjoyed low interest and inflation rates for the last 20 years precisely because of the agreement on stable fiscal policy. The partial violations have to be rectified, and not the good stable Euro be killed.
3. fiscal responsibility in the EU is the agreed upon law, and not some mean german trick
Deficit rules were agreed upon by everybody joining the Euro in the "stability pact" and not only Germany, but most northern Europe countries did fulfil their obligations, often with significant social pains. I do remember the socialists/communists marching through my town demanding excessive spending.
Prof Stiglitz might be seen as despicable in suggesting that violators should gang up on the contract keepers, like Germany, and the vast majority of Euro members
http://www.economist.com/markets/indicators/displaystory.cfm?story_id=16064148
Joulie 06:58 08 May 10
L'erreur fondamentale de l'analyse de Stiglitz et de croire que les problèmes économiques peuvent se régler, notamment, avec des dévaluations.
La création de l'Euro a d'abord et avant tout été motivée pour supprimer les dévaluations répétées des différents pays européens et avoir les avantages d'une monnaie unique au lieu d'une manipulation de l'économie par des artifices que sont les dévaluations.
L'Euro nous a apporté beaucoup d'avantages : des taux bas, une croissance économique supérieure liée à une circulation plus intense des capitaux, à une concurrence plus forte et à un marché unique plus important. Il a constitué un bouclier efficace contre la crise du subprime de 2008.
En fait la crise actuelle de l'Euro n'est que le résultat de la réponse donné à la crise de 2008 : pour revenir, et c'est là l'erreur, à la situation antérieure, les pouvoirs publiques des différents pays Européens ont aggravé fortement les déficits publiques sans prendre de mesure énergique sur la dépense publique et dans le cas de la Grèce, la corruption généralisée a fini par inquiété les détenteurs de la dette publique qui sont essentiellement étrangers, ils ont tout naturellement retiré leurs capitaux pour les sécuriser.
L'Europe, ce jour, met en place une réforme institutionnelle qui assure une solidarité renforcée mais l'avantage de cette crise c'est qu'elle permet aux opinions publiques de prendre conscience de la nécessité de s'attaquer sérieusement à la dépense publique. Différents gouvernements Européens annoncent déjà un tour de vis inimaginable il y a quelques mois. On ne peut pas dépenser plus que ce que l'on gagne.
Reste que les sociétés Européennes ont une mentalité moins entreprenante que les USA, nous aurons donc plus de souffrance, plus de difficultés, en Europe pour limiter la dépense publique faute de croissance suffisante. L'Euro devrait donc s'affaiblir dans les prochains semestre. Finalement les crises ne sont que le résultat de nos turpitudes.
benoit.
Hannibal 08:45 09 May 10
jnuetzel,
Law and contract are funny ideas. Suppose the law and contract are predatory and do you still want to follow that? Well, it depends whether you are the receiving end of them. If law has to be upheld at all cost, one can also make a case for Sharia law, in which the penalty of apostasy is death, is that something you want to follow and not question?
Even if you argue Sharia law is not agreed upon by all the members of the society, then there are predatory, exploitative contracts, which are deemed invalid in any respectable court of law, even if they are agreed upon by both parties.
In the real world, we have imperfect information, we could not have thought of everything and we make bad decisions. The EU made plenty of bad decisions based on one single neo-liberal narrative and made them into law, and you don't want others to question them because they are law?
And there is the social contract, in Greece and other countries, which are suffering from high unemployment. 20% in Spain, this is a scary number and it is going to scar the whole generation (40% youth!) and prevent human development. This is where your law breaks, you law is not made based on real situation but on a complete imaginary ideal. Stiglitz is not despicable, the law is.
Joulie,
"L'erreur fondamentale de l'analyse de Stiglitz et de croire que les problèmes économiques peuvent se régler, notamment, avec des dévaluations"
Non, des dévaluations, ce n'est pas tous (my Frech is not good enough, allow me to guess a bit). Devaluation is only one part of the solution; the main idea is the spend out of the trouble, to invest in real development and let growth solving the debt. Without devaluation, Greek ( Spain et al) products will find a hard time to be exported to other countries, where German products enjoy a huge advantage with its undervalue exchange rate. That export sector is one important part of the growth plan. Even if there is no austerity measures and Euro allows expansionary fiscal and monetary policies, which it doesn't, the investment in development will find no return if there is no consumption. When there is a local demand slump it means that the consumption will have to be overseas. Devaluation is just part of the growth plan.
And one more thing, any economic system is as good as it withstanding shocks. The prior gaining in wealth in Euro zone means nothing if it cannot be sustained in face of economic fluations; not only it is unsustainable, it also means that the wealthy gain more in good times and the poor suffer more in the bad time. The advantages of Euro you speak of are merely illusions, and it does not allow any growth-base solution that makes economic sense, and that's what putting Europe into crisis.
aussiereader4 08:49 09 May 10
I think the real issue is that most Political Leaders no longer have a vision to see the potential future challenges of a single currency. This imbalance was predictable, there was simply no mechanism to deal with it. Its really a story of human behaviour, as humans we usually wait until disaster strikes. The same behaviour is a feature of the Global Warming debate.
jnuetzel 02:27 09 May 10
Hannibal,
you said it best in your own words: law and contract are just funny ideas to you.
http://en.wikipedia.org/wiki/Universal_Declaration_of_Human_Rights
Article 18 Everyone has the right to freedom of thought, conscience and religion; this right includes freedom to change his religion or belief
To compare plain muslim murderers in Sharia apostasy cases with the European monetary Union, is just completely outrageous.
Nobody was forced into the Euro Club, nobody is forced to stay.
UK did not join, Denmark with just half the population of Greece neither.
To even suggest that one rotten apple, habitual violator of voluntary contracts and criminal book forger should be entitled to spoil the whole bag, just shows the moral nihilism, Prof Stiglitz is preaching
intrinsicfactors 03:44 09 May 10
Euro has been contained intrinsic factors of demise. In at all reason, it has unvailed them to the world.
As long as I comtemplate this issue, optimal option for EU might be to admit failure to minimize humansuffering.
jnuetzel 11:13 10 May 10
Hannibal,
Your saying I still have to show that sharia apostasy murder is not good, after I gave you the human rights declaration, reflects just a lot on your moral fabric.
Your strange claim, that the EMU contract is exploitative in any way, shape or form, is from the table with the fact, I told you, that it was voluntarily and late joined by Greece and that they can leave as well. It has benefited Greece extremely in bringing their interest rates down tremendously and together with the huge subsidizes from Germany via the EU enabling strong economic growth over the 20 years.
That they just have to dial back their overconsumption to levels they had just 5 or 6 years ago is hardly "ruin". the only public retirement cuts they have done so far are for above 2500 Euro. Nobody in Germany gets as much, and maybe some 1 % in the US get more than 3500 $. so please spare me the "ruin their lives" claim. German retirerees, who get on average about 1050 Euro, are rightfully mad as hell, that they have to finance such luxuries, when they were not given increases over many years, resulting in a real 10 % cut.
Most other (northern) european countries have done this in the last 15 years at some point as well, and Ireland and Lavia are doing it right now, without making much fuss about it or asking others to finance it.
The only people exploited here are the german (and other disciplined EURO) taxpayers, again and again. And I already wrote here that all Germans, but the communists and the socialist fraction of the SPD are solidaric and voted for more credits for Greece, to give them another chance. In fact, last night, we already payed again the largest part of a 1 trillion Dollar rescue package.
And you call this worse than religious murder, and it is only you here around, who insults our southern european friends and allies as "PIGS". I leave the rest of your wild fantasies about "pressuring", "Euro Salemen", and "alimony rights" as straw men.
Hannibal 03:05 10 May 10
jnuetzel,
If Sharia is bad does that automatically mean EU law is good? The onus is on you to show that EU law is good, not to show Sharia is bad, and you still haven't done that.
Greece can leave Euro but do you know how costly it will be? See Eichengreen http://www.voxeu.org/index.php?q=node/729
Were you living under a rock or something? There were bubbles in Greece Spain, Ireland et al, supported by unchecked capital and lack of overight by ECB; the crisis of 2008 is still pretty much happening. It is the shock that causes the Euro crisis. You want to argue that problem is all because of Greek overspending, and we, the economists, say is it the same thing in all those countries. Spain had a better track record than Germany prior, and it is also it crisis now, you need to explain that. The same is happening in UK and France, with the latter running a debt of ~85% of GDP, and 7.5% deficit currently, way exceeded Maastricht, where is the outcry, do you want to punish France too? Even if Greeks cut back on that it is still not going to slove the crisis due to the amount. Besides, austerity is not going to help the demand slump and unemployment. You either willfully ignore the data and reality or are completely ignorant of that.
Germans being exploited? Do you know Germany currently run a huge trade surplus, thanks to the undervalued Euro for them and over overvalued Euro for others. Ones surplus is alway the others' deficit. In fact, economists'd argue that Germans should spend more, one way is to buy out the Greek debt. Yes the German pensioners should get more money too, so they can buy more products from say Spain.
Austerity has been proven over and over that it does not help solving economic crises, only worsening them: austerity measures brought the Great Depression, Mexico 1995, Asia 1997, Argentina 2001 and other crises.
It comes down to this: you have no idea about the economy; no idea of how the crisis happened; completely lack of knowledge in any data, let alone analyzing it; clueless in exchange rate mechanism; ignorant in how to bring sustainable growth; and most importantly relying on one single narrative/ideology to make policy choice. And you want to argue that you know the EU law is good?
Let's take a look at UK to put it into prespective. It was in deep trobule in 2008, the time Greece didn't even surface. What is difference is that it has its own currency, thus able to spending its way out and invest more in growth, then it was on its way to recovery. Take a look at the US too, it too was living beyond its mean, but if spending it cut, it is going to leave a lot of people unemployed. Hell, look at Germany too, it has been spending its way out fo the crisis too, (http://www.forumfed.org/en/products/magazine/vol8_num2/germany-fights-back.php; http://www.spiegel.de/international/business/0,1518,598207,00.html)
So Germany can spend out of crisis but others cannot? What hypocrisy!
jnuetzel 05:58 10 May 10
Hannibal,
you are not listening, I argued already twice that the European Monetary Union was and is extremely beneficial for countries like Greece. Otherwise they would be bankrupt by now. The stability of low interest rates, derived from the promise of fiscal disipline, thats why they joined, but did not keep the promise for many years now. Without the EMU they would not get the kid glove treatment but the iron fist of the IMF, as people with a confucian ethics did not fail to observe with considerable consternation http://www.bloomberg.com/apps/news?pid=20601039&sid=afdn_5ntvsr4
I also already wrote twice, that most european countries did have the same problems with overspending and performed austerity measures and balanced their budget, as did the US, UK, Canada, basically everybody in the last quarter century.
Beyond not listening, again and again, you add a lot of wild new claims, especially about my knowledge or ability to analyzise, which are completely unfounded and insulting. Beyond that, it is amusing.
This has nothing to do with the article of Prof. Stiglitz anymore, which claimed falsely that austerity measures are a fantasy, but were in fact reality in most european countries and are in Ireland, Latvia, and Greece. It just has to do with Hannibal, the self-appointed "we, the economists"
You said it in your own words, that "Law and contract are funny ideas" to you. You claimed that religious murder is better than paying your bills, and asked me to argue, whether religious murder is a good or bad thing. There is simply no point for further discussion on such a basis.
I leave it to the other readers, to make their own judgement. What I said about you, the readers can check on what was said in this comments section.
Hannibal 08:17 10 May 10
jnuetzel,
If you are a deficit hawks, you are forever a deficit hawks. It means that you can't see beyond what you want to see.
1) Without Euro and EMU, Greece have way more options, it can default, it can devalue, it can print money etc. There is not technical limit with a fiat currency. The reason it is unthinkable to default? Reconvert it back to drachma. With devaluation it can get out of recession. You mentioned the US, UK, Canada, but do you know what is the one common thing among them? Fiat currency with flexibe exchange rate. That's why I said you have no clue on the exchange rate mechanism, and you just proved me right. Furthermore, the is the normal debt financing in ordinary times, and then we are talking about spending out of recession, invest in growth and development here. Completely two different things. It is well-known that debt is not a problem when there is growth.
And IMF? Here is what Stiglitz above says "so, too, the EU put together an assistance program with the IMF. The question was, what conditions would be imposed on Greece". Once you ignore reality there seems to be no turning point. First, IMF is already there; second, IMF style draconian austerity aka condition is already demanded by Germany. Again, austerity does not help recession.
2) Law and contract are funny ideas because of people like you. You won't even question whether the law and contract are just and expect other to follow them at all cost even when reality suggests/demands otherwise. Your original reponse was just a knee-jerk reaction of "the law says so and so, so we do so and so" without even giving any thoughts about whether it makes sense. You still haven't proved that EU law is a good law or that it has mechanism flexible enough to help countries that are in need of devaluation to get out of deflationary slump. What you are following is an unquestioned set of ideology, just like Islam fundamentalists who demand Sharia on others: mere mental self-pleasing.
Besides, I am still waiting to see your response on exploitative, unjust contract deemed invalid by law.
3) Have you even read and most importantly understand the above article? No one, certainly not Stiglitz, is saying austerity measures are fantasy as in imarginary. He is saying there needs not austerity for it will only make things worse and there will be consequences, namely rampant unemployement leading to under human development and social unrest, which is already happening. The word fantasy used above is to describe the feasibility of having a uniform, cross-Europe wage cut to achieve devaluation. I will say it one more time in case you still don't understand, it means the measures can exist but that does not make them feasible and viable in achieving anything. There would be social and economic consequences and since such a cut will be unfair to many, especially to the people who did not gain anything during the good time, the distribution aspect of such a measure will be horrible. That again means that the measures will be unfair to most, especially those 40% unemployed/underemployed youth, thus the measures are unjust.
marquesdetalamanca 03:43 11 May 10
Si Europa no posee en su modelo EURO un único Ministerio de Hacienda que pueda ser controlado, de modo que no gaste más allá de lo que las reglas estipulan, no se va a resolver el problema cíclico del endeudamiento de Grecia, España y Portugal, muy sencillo, esos hermanos les mienten a sus otros parientes...Ahora queda que los demás miembros de la familia [Alemania] saquen adelante a sus gastones e indisciplinados familiares, pagándoles las cuentas, prestándoles dinero y me pregunto ¿a cambio de qué? Como dice un dicho por aquí: "el amor y el dinero se fueron al campo un día, pero pudo más el interés que el amor que le tenía"...
SeoKungFu 08:50 11 May 10
Take a look as well on "A more perfect monetary union" by Leszek Balcerowicz, it somewhat continues the topic.
Hannibal 09:32 12 May 10
See also http://www.project-syndicate.org/commentary/rodrik43/English's piece.
Boardly speaking there are 2 lines of thought: 1) any currency union requires political center and fiscal transfer (Stiglitz, Rodrik, Krugman); 2) currency union with political center can work but only work with strict fiscal displine (Balcerowicz, Sinns et al).
It is revealing that Balcerowitcz compares the Euro to the gold standard, and in a sense it is the EU gold standard. Nonetheless, as history has shown, thee gold standard only worked to bring tremendous prosperity for a limited period and to a few who already have the wealth to afford the expensive currency. As Rodrik argues and Karl Polanyi has shown, the society will always be in conflict with this kind of unfair fiscal discipline.
The bottom line is thus: if EU wants sustainable growth it needs to abandon the gold standard mentality; regulations to check volatile capital alone is not enough because imbalance is embedded in the system. Otherwise the crisis will not be solved; it will be merely covered and it will explode again given time.
cheeheongquah 08:56 19 May 10
Saving is bad? Then who created the saying "Saving for the rainy days?"
Your argument that a devaluation would fix the problem would only work when at least the following 3 dimensions were not present:
1) Open capital account - When currencies are devalued, expectations would set in hence triggering even more runs on the currencies, and would deprive the countries from foreign capital flows and FDIs.
2) Preference for real value of repayments - If exchange rates were devalued, the real value of the debt repayment will be less. Foreign lenders are not that gullible to fall for this.
3) Real value of money - A devalued currency would mean increased price levels from higher prices of importables and exportables unless in a closed economy. Expectations of inflation would drive the economy down the slippery slope without real gains in employment.
The Greek crisis is a blessing to the Greeks in disguise. In relation to Americans and other workers in advanced economies, the people in PIGS have been working little and depending too much on welfare benefits from the governement and remember in a world where there's no free lunch, verything needs to be paid!
Regardless of euro, the day of awakening will come one day. Fiscal help from robust countries would just contribute to moral hazard and too big too fail syndrome.
jhimmelreich 10:07 01 Jun 10
I understand the perspective of claiming that the economically most feasible policy decision should be recommended. However, concerning the Euro this never happened – if fact, the Euro itself would have never happened – and I don’t see this happening in the future.
Even if drachma 2.0 were the economically best solution, its political cost to decision-makers is still higher than bailout solutions, revision of the stability and growth pact, both at the risk of moral hazard.
I believe that any debate on the Euro that is merely framed and couched in economical terms misses important, namely: political, parts of the game.
amar 01:26 06 May 10
There was / is nothing wrong in experimenting. The agenda was and is: to facilitate more jobs and spread wealth. But it hurts the citizens in the long run, (sacrifice today for a better tomorrow, mentality never ends) and is already hurting in the short run, so your recommendation of moving on, in a neat idea. Some times, it is just the embarrassment that becomes a hurdle in moving on. Let me add a commonsense thing in my below average English: "Embarrassment is better than SHAME"