How do less economically wealthy states help institutions like the European Union and why are they needed?
Edit: apologise for the awfully written title
In: 12
Very broadly speaking, and specifically about the economics, there is not a lot of benefits to the EU bringing on poorer states. The EU, today, isn’t solely about the economics, though.
There are some economic benefits – bigger market, more aligned labor standards, simpler regulatory processes, less trade friction. But it will also mean additional transfer costs, more subsidies etc.
It can help to boost trade and economic growth within the EU, as poorer states may have access to resources or markets that wealthier states do not. Also, the EU can expand their military strategies by having other countries join, even if they are poor.
**”The Miracle of Trade” and Comparative Advantage**
It is beneficial to trade, even with less capable countries.
Suppose we model countries as individuals on a desert island. There is the powerful, wealthy, capable country that we symbolize as Henry Cavill and the weak, incapable country we symbolize as… Alex Jones. In order to survive on the desert island they need to obtain food and water, so the more food and water the better. Food is found in the form of gathering scorpions and water found in the form of squeezing out cactus plants.
Cavill is better at everything than Jones. Cavill can gather 40 scorpions or squeeze out 20 cactus in a day. Jones on the other hand can only squeeze 6 cactus or gather 2 scorpions. The aim for both is to have some of both scorpions and squeezed cactus.
Now for Cavill he can gather scorpions at twice times the rate he can squeeze cactus. Deciding to squeeze a cactus in essence costs him 2 scorpions he could otherwise catch. For Jones he stinks at everything but slightly less at gathering cactus than catching scorpions. For him gathering a scorpion costs him 3 squeezed cactus. It would therefore benefit Jones to trade a cactus to Cavill for a scorpion; Jones is getting a scorpion for a third the cost of doing it himself! Similarly it benefits Cavill to accept such a trade because he would need to give up catching 2 scorpions to get a cactus himself, so trading one for one is great!
Instead of trying to gather both cactus and scorpions, Cavill can go for scorpions all day and then trade 3 scorpions to Jones for 3 squeezed cactus! Instead of having 34 scorpions and 3 squeezed cactus he has 37 scorpions and 3 squeezed cactus, a 3 scorpion gain!
Similarly Jones can go straight to squeezing cactus and trade the 3 cactus to Cavill. Jones couldn’t get 3 scorpions even if he tried all day, but with this trade he gets 3 scorpions plus 3 squeezed cactus left over!
So you see trading with less capable countries can be an overall benefit for both parties even if one is just better at making stuff in general.
poorer, less stable nations using the euro can depress the currency value.
in doing so, stronger countries exports become more competitive because they are relatively less expensive.
not sure this is the reason for it though, its more likely about influence and strategy to increase influence in the region.
Poor countries are ones that most urgently need to make expensive investments in their economy and infrastructure. If those poor countries are in the EU, French and German and Dutch companies will be much more likely to be the ones selling them the products and services they need— at the expense of Russian, American, Chinese, or Japanese companies.
And if the EU is good at raising countries out of poverty (the jury’s still out on this one, but many people are optimistic), you sidestep the issue of, *but the thing about being a poor country is that you can’t* ***afford*** *those expensive goods and services to improve your economy and infrastructure.* You can just *lend* them the money, and by the time the loans come due, the country won’t be poor anymore! (Okay, yeah, I’m really zooming out and fuzzing some details there) And, bonus, it was your country’s banks that got to float the loans, so the interest comes back to you!
You’re a rich household.
The value of your house is high.
You have 5 uneducated noisy neighbors which decrease the value of houses in your neighborhood, implicitly yours as well.
You educate these neighbors, give them some money, have them follow better laws, support them to be less corrupt, etc.
Them becoming more like you increases the value of every other household in the vicinity as well
It’s many things. Politically, it’s wise to have influence and move them away from a potential Rusian block. Economically, it’s both easier trade and manpower. Cheaper countries have cheaper labour, who can be enticed to work in the more powerful countries. Within the EU, there are very few limitations to travel and work anywhere, so this benefits companies looking for staff tremendously.
Those poor countries are strategically located near countries that form a threat to the NATO. To have them join, means you can control them from within or outside. Have military posts and control the economy. What do you think is happening in the Ukraine? This is neither a conspiracy, nor speculation or an opinion. You can find proof of these things being done throughout our whole history. Congo, Rwanda, Afghanistan, Irak, Libya… let alone the ones I’m missing out. Sorry if this was not the answer you were expecting and thought these countries have if any benefit at all, apart from command & conquer.
I have no inside knowledge about this, but I learned more about it than I ever knew from Youtubes by Mark Blyth, a former Scotsman and now political economist at Brown University. That’s where I would go first.
Its a political issue. You don’t want your neighbors aligning with enemy powers such as China/Russia.
Also, they work as a buffer zone. Like for example, inmigration. You don’t want the bad press of Germany erecting walls and sending inmigrants back. But that’s the perfect job for Greece.
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