The different political strategies of adjustment being pursued in America and Europe reflect two very different institutional and policy regimes; neoliberalism and monetarism.
The USA is neoliberal in orientation with the political capacity to be Keynesian. Europe, given that it is single market governed by independent nation states, lacks this political capacity. It is monetarist in orientation and can only generate the political capacity for austerity.
The politics of adjustment being pursued in response to the Eurozone crisis is closer to Thatcher in the late 1980’s. This reflects the institutional constraints of pursuing a common fiscal and labour policy for 17 diverse political economies operating under a fixed exchange rate regime. But, it also reflects the political preference of conservative monetarist elites in Germany.
If America decided to pursue an austerity driven politics of adjustment the Eurozone would be pushed further into crisis. If China, Brazil, India and every other country did the same, the global labour market would be pushed into a depression. It is a classic collective action problem. A strategy that works for one, when pursued by all, leads to chaos.
A monetarist Europe, it would appear, is far more economically conservative than neoliberal America.
To revive economic growth, employment and reduce public debt is a political rather than an economic challenge. It is highly questionably whether member states of the EMU can pursue all three of these simultaneously.
Germany has a domestic institutional architecture that combines high end export manufacturing with coordinated labour markets. Since the crisis, the policy response was not fiscal stimulus but active measures to sustain employment. The same occurred in the Netherlands, Austria and Finland.
Growth was sustained by exports in non-euro markets and employment secured through job subsidies.
The transnational preference and policy prescriptions of Europe, on the other hand, is to revive economic growth through structural reforms aimed at reducing wage costs, increasing employment through labour market flexibilisation and reducing public debt through fiscal austerity.
This begs the question; would a federal neoliberal Europe be more or less conservative than a fragmented monetary union governed by the national interests of Germany and France?