Nobel laureate sees ‘much worse’ EU economy from refugee crisis
Europe’s economic prospects are worsening as the region struggles to absorb the wave of asylum seekers coming from the Middle East, according to Angus Deaton, the winner of this year’s Nobel economics prize.
With the refugee crisis following so soon after Europe’s debt crisis, the development “could certainly make the economic situation very much worse,” Deaton said in an interview on Monday in Stockholm, where he’s officially being awarded his Nobel this week. “There is obviously a very severe danger” that the European Union will buckle under the pressure, he said.
Though Europe’s debt and migrant crises are similar in scope, the demographic challenges posed by the sudden influx of people is potentially worse because “no one really has any idea how to solve” the situation, Deaton said. At least with the debt crisis, “people knew how to solve it,” they just “couldn’t agree with each other,” he said.
The 70-year-old Princeton University professor, who won the Nobel for his analysis of consumption, poverty and welfare, says the demographic development combined with sluggish economic growth is a dangerous cocktail.
“You get this growing inequality, which is combined with slowing growth, and that’s a really terrible thing because it puts people at war with each other,” he said.
The euro area is set to grow a full percentage point less than the U.S. this year, or 1.6 percent, the European Commission said last month. Greece, still struggling to stay afloat with the aid of international loans, will see its economy shrink 1.4 percent, a particularly bleak outlook for a nation that has become a first point of entry for many of the hundreds of thousands of migrants entering Europe from Syria, Iraq and northern Africa.
In Europe, the political consequences are already visible, with anti-immigration parties gaining support and mainstream parties being punished by their electorates.
The situation has led to the political rise of “crazy people on the fringes,” Deaton said.
Deaton’s research has focused on health in both rich and poor countries, as well as on measuring poverty in India and around the world. Born in Scotland, and a citizen of both the U.S. and the U.K., Deaton obtained his Ph.D. from the University of Cambridge. His 2013 book, “The Great Escape,” maps the origins of inequality and its fallout spanning 250 years of economic history.
For Europe, the immediate outlook “doesn’t look very positive,” Deaton said. But he’s less worried about the longer term.
“People really do have enormous interest in solving problems and making the world a better place,” he said. “That’s happened over hundreds of years, but there certainly have been terrible setbacks.”
[Bloomberg]
