Totnes is a small medieval town, home to a little over eight thousand people, on the mouth of the Dart River in South West England. Walking down high street (main street in British lingo), one would not necessarily be aware of anything unusual. Perhaps a particularly discerning eye would notice the preponderance of small independent cafes, local grocery outlets or shops selling wool. Yet, since becoming the first “Transition Town,” Totnes has sparked the Transition Town movement, serving as an inspiration to towns and communities across the world hoping to regain control of their economic destiny.

The Transition Town Movement was founded in 2005 by Rob Hopkins, a young instructor in ecological design, in response to the threat of peak oil and climate change. It has since spread across the world and attracted the support of several high profile figures, such as former president of the IMF Horst Kohler. The Transition Town movement ambitiously aims to transcend the ideas of “sustainability” and the “green economy,” visions championed by the Paris Climate Conference and post-2015 Sustainable Development Goals (SDGS). The Transition Town Movement calls for profounder changes, questioning the viability of unbridled consumerism and the myth of limitless economic growth.

“Sustainability,” Rob Hopkins told Jon Mooallem of the New York Times in 2009, “is about reducing the impact of what comes out of the tailpipe of industrial society.” Meanwhile, the Transition Town movement, he argues, is seeking to “build resiliency” and create a new system that allows a community to be as self-sufficient as possible in order to withstand shocks as oil becomes astronomically expensive (something that seems far-fetched these days with a barrel of oil at only a little over $50). The movement champions the idea that communities themselves need to reimagine and rebuild a lifestyle that uses dramatically less fossil fuel. The key is to bring people together, create a culture of entrepreneurship, and instill a problem-solving mindset.

Today there are over 480 transition towns or neighborhoods in 35 different countries. While Hopkins issued an informal document that outlines steps, there is no formal blueprint to follow or central authority one is accountable to in order to become an official transition town.
The sole point of the movement, Hopkins told the New York Times, is simply to “unleash the collective genius of a community.” Under this helm, a wide range of new initiatives has cropped up in transition towns across the world.

In many places, new initiatives have tended to promote community membership, organizations and projects owned-and-run by local residents. This ranges from community-owned gardens, orchards and CSA (Community Supported Agriculture) farms, to local renewable energy projects and even local newspapers that are owned by their readers. Transition towns harbor a large number of businesses that use a cooperative model, where workers own and run the enterprises that also serve as social hubs.

Another important aspect of transition towns is a “repair and share” vision which guides many initiatives. Transition towns across the UK now regularly hold events such as seed swap and give-and-take days in which people come together to share or swap clothes, furniture, tools and much more that they have no need for anymore. In Frome, Somerset, a “Share Shop” opened mid-2015 that allows residents to borrow household and leisure items donated by the public for a small fee. The founders, a team of eight 18-30 year olds, say the objective is to save people money and reduce waste. The average electric drill, they point out, is used for a mere 15 minutes in its lifetime. Transition Café in the town of Fishguard runs on a pay-as-you-feel model and offers delicious meals made from out-of-date products.

Simultaneously, there has been a concerted drive to radically transform waste management by minimizing and reusing waste. There has been a host of creative ventures, such as transforming waste wood into fuel or using coffee grounds to grow oyster mushrooms.

Susanna Heisse, appalled with the level of plastic waste around Lake Atitlan in Guatemala, invented the “Eco brick,” which is an insulating, robust and affordable building material made from plastic waste. Some 38 schools in Guatemala have now been built using Eco Bricks.

Greyton, South Africa’s first transition initiative, had been struggling with a non-existent waste management system. On the outskirt of the town, trash would simply be poured into open dumps. Joseph Stodegel, a U.S. artist and entrepreneur who came to Greyton in 2011 to help with the transition town initiative, spearheaded a Trash-to-Treasure Festival. Now held annually, the Trash to Treasure Festival takes place on an open field that was created by reclaiming a dump. Bands play on stages built from reclaimed tires and building are made out of Eco Bricks.

Finally, many transition towns have created their own local currency. The “Localization” movement had never been very good at talking about economics, Rob Hopkins told the Guardian. Therefore, in order to change this, Totnes decided to try and map the local economy and put a value on it. They found that, in Totnes for example, people spend 30 million British pounds on food every year, 73 percent of which goes to large corporate-owned supermarkets. They realized that even if the purchase of local foods increased by only 10 percent, the town would have 2.2 million more pounds staying in the local economy. Consequently, the first local currency, the Totnes pound, emerged. The basic premise is that a local currency would make people think more closely about their local economy, inquiring where money goes when purchases are made and finding ways to spend more money locally.

In a day and age when it is easy to be all gloom and doom, Rob Hopkins and the Transition movement offer a refreshingly upbeat message. Sweeping changes in history, he argues, are not made by “big people” doing big things but rather by ordinary people doing small things together.

“There is no cavalry coming to the rescue,” he told the Guardian, but rather it is about what people can create with each other in their streets, neighborhoods and towns. “If enough people do it, it can lead to real impact, to real jobs and real transformation of the places we live, and beyond.”

The economies of the European Economic and Monetary Union (EMU) have continued to recover since the financial crisis, albeit at an acutely slow rate. According to Eurostat, EMU’s GDP during the second quarter of 2016 rose by 0.3 percent relative to the previous quarter. Compared to a year ago, EMU’s economies grew 1.6 percent.

Despite modest growth, as of August 2016, EMU’s unemployment rate remains high at 10.1 percent, which is more than double that of the United States, while Spain and Greece have rates as high as 20 percent and 23 percent, respectively. Furthermore, the EMU experienced zero percent inflation in 2015, a sign of economic stagnation.

Unable to conduct independent monetary policies, countries in the EMU relied on fiscal measures to stimulate their economies during the recession, particularly since the European Central Bank focuses more on price stability rather than unemployment. Excessive fiscal spending has thus caused several countries, namely Greece, Italy, and Portugal, to accumulate a large amount of debt.

Skeptics of the EMU, such as Columbia University economist Joseph Stiglitz, have argued that the EMU is doomed to failure since it possesses inherent problems. Other scholars such as University of California, Berkeley professor Barry Eichengreen point out that the EMU did not meet the criteria for an optimal currency area, which include labor mobility, capital mobility, fiscal transfer mechanisms and similar business cycles among member states.

While there is free flow of capital in the EMU, there is limited labor mobility, no fiscal transfer mechanisms and no co-movement of business cycles (even though there is high synchrony among the “core” countries, such as Germany, France, and the Netherlands). This difference in business cycles prevents the European Central Bank from developing an effective monetary policy that is appropriate for the economic conditions of all member states.

Does this mean then that currency unions that do not satisfy the criteria of an optimal currency area are doomed to failure? The case of the Eastern Caribbean Currency Union (ECCU) may provide closer insight into currency unions and the EMU.

The ECCU comprises eight members, including Anguilla, Antigua and Barbuda, Commonwealth of Dominica, Grenada, Montserrat, St. Kitts and Nevis, St. Lucia and St. Vincent and the Grenadines. The union created and adopted the Eastern Caribbean dollar in 1965, and it has been pegged to the U.S. dollar at a rate of $1.00 US to $2.70 EC since 1976. The EC dollar is pegged to the US dollar because the United States is the ECCU’s largest external trading partner, so this peg would eliminate price uncertainty for a substantial number of imports and exports, thus promoting stability and predictability in the economy.

In contrast with the EMU, where both a central bank and national banks exist, the Eastern Caribbean Central Bank (ECCB) is the currency union’s sole central bank and is responsible for regulating the region’s money supply, maintaining the dollar’s stability, managing a common pool of foreign exchange reserves and coordinating a monetary policy conducive to economic growth.

Another significant difference between the EMU and the ECCU regards business cycles, which is an important criterion of the optimal currency area theory. The Eastern Caribbean members share a similar business cycle, and individual economies within the union experience peaks and troughs at similar times. Local economies have similar industries and structural conditions, namely service-based economies heavily dependent on tourism.

This co-movement of business cycles in the ECCU theoretically allows the central bank to better coordinate monetary policies to control inflation during economic expansions and stimulate the economy during recessions.

However, even though the central bank is theoretically able to create policies that would be appropriate for the economic conditions of all member states, it nevertheless could not use currency devaluation to attenuate the dips in both exports and tourism during the financial crisis due to the fixed peg with the dollar. Thus, like their European counterparts, ECCU governments tried to offset lower external demand through increased public spending, which caused the accumulation of high levels of debt. The gross public debt of the eight ECCU members reached 89.8 percent of total regional GDP (2012). Each member is also ranked among the 15 most indebted emerging countries.

Evidently, without overall monetary independence (the ECCU’s monetary policy is limited by its fixed exchange rate), even currency unions with a synchrony of business cycles would face significant fiscal pressure during recessions. Unless the ECCU achieves monetary flexibility by, for example, revaluating the EC dollar, ECCU countries can only use fiscal measures to stimulate growth, which further exposes them to debt problems.

One potential solution to high amounts of debt is the fiscal transfer mechanism, where taxes are collected from countries during times of economic expansion and distributed to members experiencing a recession at some point in the future. Such a transfer mechanism would moderate the economic burden for member states and allow the asymmetric negative economic shocks to be mitigated. Although some may worry about potential moral hazards, IMF research economists have concluded through simulations that specific countries would not always be net recipients and that assistance would be mutual.

The transfer mechanism would be a better solution than financing the output gap through government spending, because the government would have to pay back the debt through collecting higher taxes or lower spending at some point in the future, essentially postponing the current economic burden to the future. The transfer mechanism would enable EMU and ECCU member states to better respond to asymmetric country-specific economic shocks without dramatically increasing public spending and accumulating high levels of national debt.

The recent financial crisis has revealed the necessity for further fiscal integration and risk-sharing between member states of each currency union. Implementing the fiscal transfer mechanism, an important criterion of the optimal currency area theory, would strengthen the currency unions’ sustainability, overall credibility and ability to respond to future economic crises.

Syria’s recent refugee crisis has instigated debates about the economic effects of refugees seeking asylum in foreign countries. While some countries, such as Hungary, are deploying armies to prevent refugees from entering, others such as Germany are openly embracing them in the hopes that they will bring economic benefits. The stark disparity in reactions naturally begs the question: what really are the economic effects of accepting refugees?

Since October, millions of Syrians have been racing across international borders to seek asylum from their war-ravaged country. Syrian refugees now account for one in five people in Lebanon and one in ten in Jordan. Both the World Health Organization (WHO) and the United Nations High Commissioner for Refugees (UNHCR) fear that these countries’ fragile infrastructures and limited resources may be approaching their breaking points, and that the mass exodus is altering the social, cultural and economic climate of Syria’s neighbors.

The notion that refugees pose an economic burden still remains prevalent. Many countries point to the initial costs of building temporary housing, feeding refugees, and paying for jobs and skills training. In order to prevent Syrian refugees from entering, some countries have even constructed barriers, and Hungary has gone so far as to deploy armed forces.

Refugees have also begun seeking asylum throughout all of Europe. Yet Europe, similarly to Syria’s neighbors, is providing little refuge, fearing that letting some refugees in will encourage more to come, and that these refugees are destined to become an economic burden.

An article earlier this month in the International Business Times reported that three hundred UK judges in an open letter criticized government officials over their repose to the migrant crisis saying it is “too low, slow and narrow.” In a September news release, Amnesty International cited key facts on resettlement efforts of Syrian refugees, noting that Germany and Sweden have received 47 percent of Syrian asylum applications while the remaining 26 European Union countries have pledged around 8,700 resettlement places, well under one percent of the refugees. Gulf countries, like Qatar, Saudi Arabia and Kuwait have offered zero resettlement places to Syrian refugees, as is also the case with other high-income counties, such as Japan.

Governments who refuse refugees typically emphasize the negative impacts that refugees might bring. They cite that the costs of strained public welfare budgets will hinder economic growth, reduce jobs, drive down wages and waste tax dollars. The UNHCR issued a report on the impacts of large refugee populations in January 1997, in which it cited how refugees in Zaire were receiving services and entitlements that were not available to the local poor populations.

But until recently, quantitative methods and empirical data that tell a very different story have been noticeably missing, as economists focused only on the “costs” of refugees on their hosts. Today, new evidence appears to defy public perceptions that refugees are a burden.

According to Alexander Betts, the Director of the Refugee Studies Centre (RSC) at the University of Oxford, refugees bring measurable economic benefits and development potential. They are a younger population with new skills and expand the consumption of food and commodities, which stimulates growth of the host economy.

“The RSC’s research has shown that, with socioeconomic rights, refugees can make an enormous contribution,” writes Bett in a June 2014 report entitled “Refugee Economies: Rethinking Popular Assumptions.”

Betts’s research shows that the economic impact of accepting refugees is generally positive, especially if immigrants are well-educated, as most Syrians are. Recent figures released from the U.N. and other aid organizations have shown that the majority of Syrians seeking asylum in Europe come from upper-middle class, and well-educated backgrounds. From an international trade standpoint, accepting Syrian refugees is a policy decision that could potentially lead to economic benefits.

In a recent report issued by the World Bank examining the impacts of Syrian refugees on Lebanese trade, a one-percent increase in Syrian refugees increased Lebanese services exports by about 1.5 percent, after just two months.

The main impacts, according to Roger Zetter of the Refugees Study Centre at Oxford University, “are seen in investment and capital formation – for example, in additions to the housing stock or to infrastructure, or in the start-up of new businesses.”

He cites the Eastleigh area of Nairobi, where many Somali refugees settled, as a textbook example. It can best be described as “a country within a country with its own economy,” according to the Norwegian Council for Africa, on account of its robust business sector.

Likewise, Afghan refugees expanded Pakistan’s trucking business, creating new markets for transport and adding to the productivity of the host country as well as international trade. Similar stories are found in the surprisingly resilient economies of Lebanon, Jordan and Turkey, despite the large inflows of refugees. According to the World Bank, Lebanon is predicted to grow 2.5 percent, which is remarkable considering the spillover from the war in neighboring Syria. Jordan and Turkey have also seen economic growth throughout the inflow of refugees.

Germany’s Chancellor Angela Merkel recognizes the opportunity Syria’s refugees provide because she is wary that Germany will soon suffer from the effects of an aging economy. Moreover, a study commissioned by the German government showed that migrants actually pay more taxes than they take out in public benefits, leaving a net surplus.

Last year, according to the International Business Times, Germany invested $2.7 billion for its 203,000 migrants, or just under $14,000 per refugee. This year Germany expects to accept 800,000 at an estimated cost of $11 billion.

Yet, many European countries, particularly Great Britain, continue to oppose accepting refugees, despite recent research that suggests refugees can actually benefit economies.

“A lot of politics is relatively fact-free in this arena, and we need to much better understand what drives migration before we can form the right policies,” Hein de Haas told The WorldPost. In general, “migration has a relatively small – rather than radical or negative – effect on economies,” Hein de Haas said.

The reality remains that more refugees are staged to flee Syria as the war escalates with Russia’s involvement. More Syrians are willing to risk the perilous journey, even for temporary asylum, to escape deplorable living conditions.

In light of new facts and research, political leaders need to see beyond the near-term costs of accommodating a new work force. If the international community allows itself to remain burdened by timeworn dogmatic thinking, then it stands to risk sacrificing the benefits of accepting refugees.

Since the start of the 21st century, the European Union (EU) has experienced a migrant problem. According to Eurostat, asylum applications from non-EU countries to members of the EU have steadily risen from 200,000 in 2008 to over 600,000 in 2014. Only a little under a half of these applications were approved in 2014, and these are just the documented numbers. The International Organization for Migration estimates that, as of Oct. 6, in 2015 alone about half a million migrants have entered the Mediterranean region by sea. The United Nations even predicts that from 2015 to 2050, net migration in a moderate scenario will account for 82 percent of population growth in these high-income European countries. With ongoing difficulties of integration and assimilation, the response by the public to this crisis has not been positive.

Is this wave of irregular migration simply a curse or a blessing in disguise? Historically, periods of unusually high immigration have also been periods of strong innovation and economic progress, especially in the United States. For example, the Industrial Revolution in the United States during the 19th century was a period of rapid increase in immigration. From 1850 to 1930, the population of foreign-born citizens in the United States increased from 2.2 million to 14.2 million according to the Census Bureau. This flow of immigrants into the labor force of the United States greatly influenced production in the United States. Expanding industries such as the railroad industry and the creation of the intercontinental railroad were largely driven by the extreme low cost of labor of immigrants. Likewise, at the beginning of the 20th century the steel industry expanded rapidly due to an availability of labor provided mostly by European immigrants. These two instances of economic growth demonstrate the meeting of demand for labor by supply through immigration.

The large influx of immigrants in the United States during the 20th century boosted the U.S. economy because there was a growing demand for labor amongst expanding industries such as the steel and railroad industry. Applying this reasoning to the movement of migrants into Europe, one needs to determine if there is a demand for labor in Europe to decide whether or not this migration could strengthen the economies of countries in the European Union. Eurostat’s statistics suggest that a demand for labor is currently opening up in Europe due to Europe’s age distributions. According to Eurostat, the median age of population in the European Union has increased steadily from 38 year old in 2001 to 42 years old in 2014. With an average retirement age of about 64 years old amongst the countries in the European Union, Eurostat estimates that in 2014, about 18.5 percent of the population in the European Union aged 64 years old and above is therefore retired; it also projects that that percentage will steadily increase to about 28.7 percent in 2080. Consequently, Eurostat also predicts that the age group of 15 to 64 years old, the labor force, as a percentage of the population will decrease from 65.9 percent to 56.2 percent by 2080. To meet hypothetical constant demand for labor in the future, countries in the European Union would presumably have to increase the retirement age. The integration of migrants can fill the potential gap in the labor force in the future. The Organization for Economic Co-operation and Development (OECD) stated that migrants accounted for 70 percent of the increase in the workforce in Europe from 2004 to 2014. With a native population steadily increasing in age, the migrant population is an economic opportunity for Europe to boost its declining labor force.

Figure 3. Projection of EU Population Structure by Age Group
Figure 1. Projection of EU Population Structure by Age Group

The greatest fear of this migration’s effect on the labor market in Europe is the idea that this sudden availability of cheap, foreign labor will either lower the wages or take the jobs of native workers through competition. Data gathered by the Institute for the Study of Labor (IZA) demonstrates this fear to be irrational. IZA research is unable to account for any significant correlation between migrant immigration and changes in native wages; whereby immigrants are not lowering the wages of native workers. Furthermore, there were no EU OECD nations that experienced a significantly negative effect of immigration on native employment. With the two key facts that immigration affects neither the wage of native workers nor their employment rate, integration of migrants into the labor force of Europe is likely uncorrelated to the position of native European workers already in the labor force.

Figure 2. Percentage effects of non-OECD immigrants on average native wages
Figure 2. Percentage effects of non-OECD immigrants on average native wages

 

Figure 3. Percentage effects of total immigration on employment of all natives
Figure 3. Percentage effects of total immigration on employment of all natives

The migrant problem in Europe is not necessarily a problem of invasion or a threat to the native population; it is a problem of resettlement, assimilation and human rights. If kept under control, these waves of migrant immigration could prove to benefit the economy of the EU at a time where, in terms of demographics, the nations are in their “darkest hours.”

Five years after the financial crisis, the European Union has continued to struggle. Plagued with high unemployment rate, rising suicide rates, high government debts, and rising prices, the European Union has continued to suffer financially since 2008. In recent surveys conducted by the European Commission, less than one third of people trust the European Union (Public 23). The greatest concern of these people is the high unemployment rates – as high as 27.6% in Greece (Greece 1).

However, not every country in the European Union has been struggling to the extent of Greece. Germany, which is truly a diamond in the rough, faces an entirely different economic position. The export-heavy industrial superpower has continued to expand its economy despite the negative effects it has faced from its surrounding nations. Due to this positive trend, members of the European Union have looked to Germany as the new leader of the European Union. However, after the recent elections, many people are left wondering whether the German Bundestag will be able to command Europe. In September, Germany held its elections, in which the CDU party of Angela Merkel reigned supreme for the third time in a row. Over the course of the next 4 years, the CDU hopes to increase employment, lower taxes for the country, and defend exports with hopes to pay back its national debt. The rest of the world can only wonder if this will be enough to stabilize the financial market in the other countries that make up the European union and the Eurozone.

Even though Germany’s current unemployment rate is 5.2%, which is already below what Americans consider to be the natural rate of unemployment, the country still hopes to improve (Germany Unemployment 1). Currently, the average unemployment rate in the European Union is 11% and has been rising since early 2011(Unemployment 1). Due to the disparity between the unemployment rates, it is no surprise that the other countries have been looking to Germany as the new leader.

Unemployment Rates of Germany and European Union (Eurostats)

If the Germans are able to continue their progress in lowering the unemployment rate, it can only help the overall economic stability of Europe. As unemployment rate drops, there will be an increase in the average standard of life for the nation. The German people, who are known for their abnormally high saving rates, will hopefully expand their spending into neighboring countries. As we have seen in the past, increased spending is beneficial to the economy and thus the entire European Union.

The CDU party also hopes to increase the average German income by lowering the taxes on it rather than through a minimum wage, which is associated with unemployment (CDU 1). Disposable income, which is the amount of income that a person has after taxes, can also be used to show the response of consumption to a change in taxes. Historically, a decrease taxes has led to an increase in long-term consumption. While the increased German consumption of goods may take time to show effects on surrounding countries, history has shown that the increase in consumption should cause the European Union to finally recover from its low point in 2008.

In the final major piece of their platform, the CDUasserts that Germany must defend and improve its exports in order to pay off its national debt (CDU 1). Germany has always been “the world’s biggest exporter of goods, with particular strengths in machinery, chemical, and auto sectors.”(Merkel 1) In 2009, economists warned that Germany was in a vulnerable position due to a decrease in global demand for goods. However, four years later, Germany still holds a powerful global position that continues to grow in power. Angela Merkel, the Chancellor of Germany since 2005, stated, “I believe there is no alternative to being a country with strong exports.”(Merkel 2) The CDU party plans to encourage exports over the next few years in a hope to pay off its national debt. They hope to set an example for its neighboring countries. Most countries in the EU can no longer raise taxes to combat the major problem of growing national debt, as they already have high tax rates.

Over the next few years, the world will have to wait and see if Germany can take on a leadership position in the European Union and help the European economy recover. In the past few weeks, the European equity markets have been showing signs of recovery, with a record high of 8,981 index points in October 2013(Germany Stock 1). Regardless of the recent economic improvements for the EU, a country must step into the leadership position. Currently the most likely candidate for the position seems to be Germany, due to its current economic success. Germany must use its political policies at home in order to attempt to influence the great European economic problems, if the European Union hopes to survive.