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Well, the European set-up is heavenly at least in the sense the Germans are unquestionably the engineers. In this celestial world we occupy, the cars are German, the washing machines are German, the fibre optics are German and the machine tools are German. The only thing is that the result is very far from heavenly for most of the economies of Europe.
The newspapers are full of gut-wrenching accounts of the suffering of Europe's young unemployed. In Spain they total 50 per cent of the 18- to 24-year-old workforce. We are looking at the massacre of hope and talent, a generation that may never recover its confidence. The same is true, to a greater or lesser extent, across the periphery countries of the euro zone.
But then look at Germany. Here we are in what has been described as the worst global crisis for 50 years, and yet Germany is posting record employment figures. Was passiert, meine Freunde? There must be something about the present situation that is wonderful for Germany, and a nightmare for others. That something is the euro.
Over the past few years, we have become familiar with the fiscal analysis of the problem. We are told that it was all about the failure to uphold the Maastricht Treaty, and the profligate spending and borrowing of Portugal, Spain, Italy and Greece. But that debt problem is at least partly a function of the way the euro works, as a monetary union in which devaluation is impossible. It all boils down to unit labour costs - and unit labour costs are determined, I am afraid, by national stereotypes that have an unfortunate grain of truth.
Let us imagine that there are two factories, producing similar cars, in Germany and Italy. Let us suppose that to assemble and spray each unit costs €1000 in both factories - at least to begin with. Over time, however, history teaches us the German factory will start to find ways of speeding the process up without compromising quality or reliability. By investing in the skills of the workforce and in high-tech capital equipment they will find a way of reducing the unit labour cost to €900. At which point the Italian factory can cut costs themselves, but without the gains in productivity - and face the risk the car will be correspondingly shoddier and they will be rumbled by the consumer. Or else let the more efficiently produced
German machine devour their market.
Before the euro, there was a simple solution. It was devaluation, and if you look at the postwar career of the lira (and just about every European currency) against the deutschmark, you can see how it worked. As the mark appreciated it was more expensive for Italians to buy a German car; and as the Italian currency fell, Italian cars remained a good buy in Germany. The tragedy now is that this option is closed off for the euro zone members - and look at the Italian car industry.
Manufacturers can no longer use the lira to compete on price, and they are being utterly stuffed. Italian car sales fell 15.3 per cent in December, while sales of German cars grew 8.8 per cent. The Italians now produce fewer cars than the British do, and their markets are being relentlessly gobbled by Audis and Beemers. None of this is in any way to disparage the German achievement after the war; indeed, it can be taken as an argument that other European countries should have learnt to be much more like Germany.
Other European countries should have invested in skills and education, and in capital equipment, and in all the things that make the Germans so productive. And in an ideal world the fierce teutonic discipline would now force the rest of Europe to shape up, in the way that Angela Merkel described in her bracing speech in Davos. Over a few decades, that is indeed what might happen. The trouble is that this extra pressure is being placed on the euro zone periphery countries, at exactly the moment when Europe as a whole is facing a massive double squeeze.
The challenge of Asia means that European welfare, pensions and employment standards will be increasingly hard to sustain, and the straitjacket of the euro is preventing the periphery countries from devaluing and going for growth; so more people are thrown out of work, welfare bills rise, debts grow - and Brussels demands more austerity, in a vicious circle of pain. All the while, German exports power ahead. The price of splitting up the euro may indeed be tremendous. But what is the long-term cost of keeping it together?
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