Schengen, why Americans should care about refugees, part 3.

 

Shengen Area – a reason to care
 
Over the past week I have tried to explain why all Americans should be concerned about the refugee crisis in Europe.  After returning from the Catholic Relief Services trip to the Balkans, I have been blogging and meeting with many people about this important issue.  In short, we should provide aid and revise our thinking and policies for three reasons.

 First, assisting people who are fleeing war and/or persecution is just the right and Christian thing to do.  Second, admitting that our country bears some responsibility for destabilizing the Middle East prompts us to assist our friends and allies who bearing the brunt of the unintended consequences.  Yet, there are people that I know who reject these two rationales for providing aid and assistance to the refugees.  For them, I would suggest another, quite self serving reason for giving direct and indirect aid to the refugees.  That reason can be summed up in one word, Schengen.  This word is quite important so I hope you will read on.

Many Americans don’t know what The Schengen Agreement is and until now probably didn’t care, even though it impacts their 401(k) balances every day.  The agreement established what is called the Schengen Area in Europe.  Schengen is the agreement that 26 European countries entered into, abolishing passport and border controls along their common borders.  The objective was to allow freedom of movement between European countries and to establish a common economic market that would compete with North America.  The Schengen Area has a population of over 417,000 people.  Schengen led to the introduction of the European currency, the Euro and cooperation between the various members.

The lack of assistance the world is giving to both refugees and European countries is leading to an increase in European nationalism and xenophobia.  The pressure on European leaders will certainly increase.  Next year the most important European leader, Germany’s Angela Merkel stands for reelection.  Should Mrs. Merkel succumb to election year pressure, which would not be unheard of either in Germany or the U.S., Germany may impose border controls again.  So what, you might say.  Well, if Germany, the leading country and economy in Europe imposes border controls, it is highly likely all other countries will do so as well.

With new border controls (immigration and customs) in place the concept of a unified European market is dead and along with it, the common currency, the Euro.  So what, you may say.  Well, this is what. The Economist magazine estimates the impact in Europe would be a reduction in economic output of over €110 billion or $124 billion over the next ten years.  The London School of Economics estimates that due to the integrated global economy, a collapse of the Euro would cause a deeper and longer recession in the U.S. than seen in 2007-2008 and that U.S. markets could lose 10%-15% more than in that Great Recession.  The subsequent recovery could be longer and harder than in 2007-2008.  The impact on the U.S. economy and individual investors would be profoundly negative.

Could this all really happen?  Would a politician make a big decision that could cause worldwide problems but ensure reelection?  You tell me if that could happen.  Would smaller countries disadvantaged by a larger one imposing controls match those controls?  You tell me if that could happen. Would the economic crisis that the breakup of the Euro would bring about really impact the U.S. markets?  You tell me, has the China hiccup hurt the markets since January 1st?  I think it all could and likely would happen. This is not my own nightmare.  Leading economists around the world see thus same potential.  A reading of the February 6-13 issue of huge Economist gives many more details and references.

So, if you cannot generate feelings of solidarity and compassion for the suffering refugees fleeing war and persecution, if you cannot see the need to stand by our friends and allies while they shoulder the burden of our collective decisions, at least endorse assistance and increased migration out of the selfish impulse to protect our own markets and your own investments.  We have the opportunity to do what is right for the refugees, given any number of motivations and in the end, that action will benefit us and the rest of the world as well.

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