Steven Pearlstein writes that “The global financial system teeters on the edge of collapse because European politicians refused to tell citizens of their crumbling economies that they could no longer guarantee them ‘la dolce vita’ — the sweet life — they had come to expect.”
There’s something to this, but consider how rich Italy is after ten years of stagnation followed by a severe recession and a non-recovery:
If we’re literal about it, Italy in 2011 can afford more than Italy in 1998 could. And it can afford a lot more than Italy could afford in 1988 or 1978. There’s a real fall in Italy’s ability to afford stuff relative to where it was five years ago, but insofar as by “la dolce vita” we mean something Italians have traditionally enjoyed, it’s as affordable today as ever. The economic problems we’re seeing — in Europe and the United States — are about the rate of change, not the absolute level of living standards.