Europe without Greece is like Main Street without Wall Street. Difficult to fathom, even if Goldman, Sachs & Co. has been naughty. For now, Greece can stay; but it skittered perilously close to getting voted off the Continent, mostly by Germany, which seems to control the votes. There's a tangle of macroeconomics that makes relations between Greece and Germany fraught (including the threat of infecting Portugal, Spain, Ireland, the U.K.) and the euro-zone situation dire. The crisis is exacerbated by Europe's uneven evolution, which remains more an economic than political construct, as if the United States consulted the Constitution for economic matters and the Articles of Confederation for politics. That said, the nub of the dispute comes down to matters no treaties, directives or decrees can bury: history, tradition, emotion, perception. In the end, Germany can't understand why Greeks aren't, well, German (Greeks disagree): orderly, tax paying, thrifty, export-oriented, resistant to inflationary temptations. And, even stranger, German intellectual tradition has long had deep affinities with the Greeks -- unfortunately, the Greece of Pericles and Plato, not Papandreou and his minions. It's like some alien race dropped into Greece, with a weakness for deficit spending and creative accounting.
How will this end? Who knows. Even if you succeed in comprehending Europe's deepening economic woes (good luck), it's devilishly more difficult to track deeper emotional currents of a Europe that, socially and culturally, has resisted amalgamation in Brussels' technocratic melting pot. This raises an issue exposed by the financial crisis: the shaky apotheosis of economics or economic thinking. The crisis left the efficient-market hypothesis, with its engine of rational expectations, less a universal explanation for economic behavior (meaning, ipso facto, any behavior) and more, at best, a tendency. Bailouts and backlashes provoked panic, then frenzy, behavior the theory once defined out of existence. That, in turn, ushered in a remarkable conclusion: folks act for many reasons, rational, irrational, hinged, unhinged. Individuals, groups, societies are not necessarily consistent, logical, informed or coherent. They can, for instance, demand bankers lend while pelting them with rotten fruit. They can admire Greece but not Greeks. They can engage in bouts of world domination led by madmen.
Meanwhile, the fissuring of economic hegemony also threatens another set of ideas: theories of global convergence and of determinism, otherwise known as flat-earthism (danke, Thomas Friedman). Indeed, the EMH long ago produced its doppelgänger: economic determinism, that is, the primacy of processes that optimize economic efficiency (including free trade). The demands of efficiency and competitiveness, the theory goes, produce market economies, open societies, liberal democracies, give or take a right or two; this is the end-of-history meme. Economic thinking, lashed to globalization, would roll over local customs, religions, prejudices, idiosyncrasies, cuisine; it is so powerful that even with the EMH reeling, economists remain go-to pundits. Globalization would plane off differences, drive convergence, integration and interdependence: Greeks are simply Germans who can dance. Certainly, there would be holdouts, refuseniks, reactionaries like the lunatic in North Korea; but, eventually, ordinary folks would crave iPads, Google, sweet-running automobiles and a bungalow in a suburb named La Casa Nostra. They would demand peace and Mexican vacations and worry about heaven and hell later. This was progress. This was flat-earthism.
This was as much a crock as ultra EMH. The two hypotheses are symbiotic; undermine one, threaten the other. Sept. 11 was a great blow to flat-earthism, but it was also a dramatically presented gesture that economics wasn't everything. We thought Sept. 11 was about terrorism, religion, power, but it was also a spectacularly staged attack on economic manifest destiny. The financial crisis was more overt, if less focused: Technocrats were as blind to the future as Greeks, mortgage holders and lords of Wall Street. If the future is again uncertain, inevitability is not inevitable. Still, it's easy to get carried away. Most folks pick flat-panel televisions over jihad. Democracy and consumerism may sway in rhythm for long stretches. Wealth is generally more appealing than poverty. The EMH has its uses; and convergence persists. But the great dream of determinism has been shattered. We are stuck with fallible us. Judging and discriminating (in both senses) re-emerge; differences matter. We no longer fully believe in world-historical forces driving us toward integration, modernity, the freedom to browse. As Jagdish Bhagwati allows, there's a difference between free trade in finance and in goods. Greeks aren't Germans. You aren't me. Free agency creeps back into the equation. It's harder that way, and lacks utopian éclat, but what's the choice? After all, the Greeks invented tragedy.
Robert Teitelman is Editor In Chief of The Deal