Tonight I have been rereading the series of brilliant research reports issued in 1997 and 1998 by Byron Wien and the recently-deceased and greatly-missed Barton Biggs.
The series of reports, written for Morgan Stanley clients, addressed Europe’s structural and demographic problems—secular problems that, according to the two great analysts, were destined to create a full-fledged “European Debt Crisis” no later than 2010.
Rarely has a series of research reports been so prescient.
Wien and Biggs, in the late 1990s, described Europe as already having become “A Giant Open-Air Museum”, a description that became one of the most famous catchphrases of the 1990s. Europe had already become irrelevant, argued Wien and Biggs. Nothing worthwhile was being produced there—and everyone worldwide realized this except the Europeans themselves. No longer fighting for relevancy on the world stage, Europe in the late 1990s nonetheless still tried to observe the fiction that it remained a First-World economy—but Wien and Biggs would have none of that, peeling away such nonsense with productivity and output figures aplenty.
According to Wien and Biggs, declining productivity, declining competitiveness and declining investment, coupled with weak European leadership too short-sighted to see the volcano on which it sat, would result in a prolonged series of collapses of debt-impinged European institutions. The collapses would begin with European banks (all but a handful of which today are technically insolvent) and play out over the following fifteen years, spreading first to governments in the Southern European Zone, claiming next the socialist societies of a Scandinavia no longer able to sustain lavish and foolish welfare programs, and ending in Central Europe (“The Last Man Standing”), which would either get its affairs in order in a last-gasp effort or go the way of its European counterparts.
Wien and Biggs noted that, even in the 1990s, Europe was “just getting by” because of tourism from North America and Asia. “If tourism from North America and Asia were to end tomorrow, Europe would implode the following day” was one of the more interesting assessments from the Morgan Stanley analysts.
Without a massive, continuous inflow of foreign funds from tourism, Europe would near-instantly regress to a pre-industrial state similar to Africa—which was precisely why Europe’s status as “A Giant Open-Air Museum” had become not only its defining characteristic by the late 1990s but also its best hope for long-term survival.
Such, at least, was the belief in 1997 and 1998.
Greece, alas, has become proof that “A Giant Open-Air Museum” strategy is not a formula for lasting success.