Daryl wrote:Good point PeterZ, in that corruption destroys efficiency. If a contractor gets the business because he is either your brother in law or has paid the biggest bribe ahead of the best value tenderer then naturally things are going to be worse. Our western democracies do have some corruption (campaign funds spring to mind along with free fact finding tours) but no where near as much as elsewhere. Plus in the societies that tend to shoot the messenger the warning bells don't ring in time.
Regarding Europe there are essentially three zones; Greece, Italy and so who have long regarded taxes as being optional, others like Germany and the Scandinavian countries that are in good shape, and France/UK that are in between.
Not sure which would be the last country standing in a full meltdown, and am not eager to learn. I've got solar power, my own water supply, a vegetable garden, can do most things, and plenty of ammunition; so I may be the last standing.
In isolation, most countries will survive. Rather the citizens in most countries will survive. I was commenting on capital flight. Where will people's saving flee to? India and Russia are not the primary options. Neither are the scandinavian countries for the very reason of unavoidable high tax rates. Let's face it, the owners of foreign capital don't enjoy what those high taxes buy the residents of the country. So why pay for it?
My concern with the Cipriote solution is that Europe has been much more dependent on banks as a source of capital than the US. If the threat of confiscating deposits becomes a true concern for some significant number of europeans, they will send their savings elsewhere or keep what they save out of the banking system. That means european banks will be starved for the funds they will need to fuel their economy. Without the funds the economy shrinks. I believe that's what economists call a depression.