The Euro Zone [Warning: Long, philosophical musings]

Political rhetoric in the U.S. has recently turned anti-European. A Gingrich spot prior to the Iowa caucuses derided Romney for being able to speak French. Romney, in a debate, accused President Obama of trying to make the U.S. "more European." The fact is, all societies have problems -- including the U.S. But European countries are far from dismal failures. We've just spent a month traveling on the European continent, so that makes us political and economic experts, right? OK, not so much. But here are some observations:

Italy and Spain are on the critical list of the Euro crisis. You wouldn't know it from the street. Both countries appear to be just as happy and prosperous as the Netherlands, or England, which are considered "healthy." For that matter, they seem as well off as the U.S.

Businesses seem to be thriving. Yes, we saw some boarded up factories, but fewer vacant storefronts than at home. Public employees, and people whose jobs are tied closely to government, such as railway workers, are striking because governments often economize on the backs of their workers. Unemployment, however, tends to be invisible. There are no more beggars in the streets than in big cities anywhere -- and they are usually targeting tourists.

Food is comparably priced, though some things are much more expensive and other things are cheaper. (We got great cappuccino anywhere in Italy for about $1.75. How much does Starbucks charge at home?) The stores are well-stocked and people seem to be doing lots of shopping. The tourist shops weren't doing much business, but that's because in the off season there are so few tourists.

Spain invested in infrastructure, and now has to pay the bill.

What we noticed has changed from our first trip to Europe in 1976 is that the infrastructure is much improved. When we were in Italy then, it wasn't even safe to drink the tap water. It was like a Third World country. We weren't in Spain on that trip, but our understanding is that it was similar. Things in Europe then looked a lot like some parts of China look today.

Today, Madrid has a Metro system that puts the London Tube to shame (watch for the horror stories about London transportation when the Olympics start this summer). Madrid's system is clean, modern, and easy to navigate. It's also a lot cheaper to ride than in England. Rome's Metro is so limited (only two lines and one intersection between them) that it's hard to compare, but what there is of it is clean and cheap.

Italian trains run on time (except when rail workers are on strike over pay cuts)

Trains and busses in both countries are clean, efficient, and run on time. They are also a bargain. British trains and busses are usually clean and efficient, and generally run on time, but are quite expensive. People in America (except in a few urban areas) haven't had passenger rail of any kind, at any price, for decades. Intercity busses in the U.S. are rare, and have reputation for filth.

Super highways in all of these countries are on par with the best Interstate highways in the U.S., usually with fewer pot holes. Fuel is expensive (equivalent to around $8.50 per U.S. gallon in most of Europe, a bit cheaper in UK, but still over $8), so cars tend to be smaller and more fuel-efficient, but people still drive. And there are affordable public transport alternatives.

Spanish superhighways are as good as U.S. interstates, but without the potholes.

[Aside: I was walking along the street in Nottingham the other day and saw a car with a Toyota logo on the grill, and thought to myself, "Wow, that's a really huge Toyota!" When I got closer, I saw that it was a Corolla. It's all in what we get used to.]

So what's the problem? Countries like Spain and Italy (and Greece, probably, but we'll withhold judgement until we've been there later this spring) invested heavily in new infrastructure during the good times. Their governments put people to work and built roads and railways and urban transit systems that put them on par with, or ahead of, their northern European neighbors. Their governments went heavily into debt to do this, assuming that good times would continue and the investments would pay off.

But then the greedy U.S. banking system popped the real estate bubble they had created and brought a large economic house of cards crashing down around the world. No one saw this coming -- not the Fed, or the regulators, or the European Central Bank, or anyone else.

Because the Euro separates fiscal control from monetary control, the governments who went out on a limb were left holding the bag. And now it's that same greedy banking system that is holding their feet to the fire to pay up in a recession. If they still had their own currencies they could do what our U.S. government does and, essentially, print more money (I know it's not quite that simple in reality, but essentially). But because they are in the Euro, they can't, and they're getting squeezed.

In the long run, these infrastructure investments will probably pay dividends and be good choices. They already have improved life and the business climate for common citizens. But the larger pay-off will now be far down the road.

True, we saw a great many Italians getting on and off busses without ever bothering to punch a ticket, and no one seemed to be enforcing. The work day, especially in Spain, seems incredibly short for many businesses. And from what we read, tax evasion is huge in most of these countries (but then Mitt only pays 15%, too). So there are some things that need to be done on the revenue side.

But generally, these countries are in trouble for having done the right thing for their people. And their people are legitimately angry for now being asked to pay for, in few years, what they expected to pay for over a few decades. No good deed goes unpunished.