Monday, April 22, 2013

The value of civil society

Civil Society, broadly defined as all entities that are outside of the realm of government (businesses, charities, religious organizations, etc), is invaluable to a national economy in the creation and distribution of wealth. If all the wealth in a country is sitting under mattresses instead of being put to better use, then a country will not prosper economically in the long run. The citizens themselves might retain wealth, but growth will be very limited as money is not moving around to more productive uses. Neighboring countries, who do invest their financial resources, will pass them by.

This is exactly what is happening in Europe right now. Look at these charts provided by the European Central Bank (2013).

Figure 1. Net wealth of median households (1000€)

Figure 2. Total capital stock per capita (euro)

The difference in household wealth to captial stock can loosely be seen as the relationship between how much wealth is in the hands of individuals versus how much wealth is in the hands of civil society. Germany and Austria have some of the lowest household wealth in the Eurozone, while one of the highest capital stocks per capita. Italy, Greece, and Spain have much higher household wealth then they do capital stock. The prior group of countries are growing more  (or at least have a weaker recession) than those in the latter group. 

For Europe to recover, the wealth of the southern Europe economies needs to be reinvested instead of sat on. For this to happen, the people of these nations need to be sure that their money is in safe hands. 

Figuring out the problem is the easy part. Actually solving it is much more difficult.

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