PAUL KRUGMAN writes to explain why current-account imbalances between American states aren't as dangerous a matter as those between European states. Basically, there are three reasons: Americans can move to booming states easily to find work when other states slump; the US federal government reaps the benefits no matter where the boom occurs, and can transfer tax revenues to slumping states; and an integrated banking system with a single lender of last resort helps keep panic anywhere from turning into successive panics everywhere. So the fact that Alabama runs a current-account deficit with New Jersey doesn't turn into a massive national debt crisis.

This is a side note to Mr Krugman's widely-read post earlier in the day drawing off of Gavyn Davies's column on thinking about the euro-zone mess as a product of current-account balances. Basically, the point is that inside the euro zone, Germany and the northern countries are running huge current-account surpluses, and Greece, Italy, Portugal, Spain and so forth have been running very large current-account deficits. Under those circumstances, the southern countries are going to end up heavily indebted to the northern countries. The reasons for the current-account balances had much to do with the German export powerhouse, and in the pre-2008 period with property investment in Ireland and Spain which attract investment flows. In the Greek case, they were also heavily related to government borrowing. But as Mr Davies and Mr Krugman say, the current-account flows had a great deal to do with the introduction of the euro, and it's going to be very hard to get rid of them while these economies remain inside a common currency. In this view, the received narrative about the euro-zone crisis (southern Europeans are lazy, their governments are irresponsible, they borrowed too much money) is to a great extent a German-influenced moral fable. Mr Krugman provides this rather striking graph showing the divergence in current-account balances between Germany and the southerners (Greece, Italy, Portugal and Spain):

This looks almost too good to be true, and one immediately wonders whether 1999 might not have been an exceptional year somehow. Surely in the longer run the industrious Germans must have been running surpluses, while the southerners were enjoying themselves on the beach, retiring early and living on credit? Well, no. Mr Krugman's graph may emphasise things a bit starkly, but the current-accounts picture was certainly very different before the introduction of the euro. Here's what I got from OECD data; apologies, again, for my awful Excel skills. (The OECD data don't include Portugal. Also, for France and Greece, I had to fill in the years 1995-2000 using GDP data from Eurostat, as the OECD didn't have it.)

What you see here is Europe's economies, which were supposed to converge as a result of the introduction of the euro, instead diverging. Italy and Ireland were running substantial current-account surpluses in the late 1990s, while Germany ran a deficit. The 2003-07 recovery saw dramatic deterioration in the current-account balances of Greece, Italy, Ireland and Spain (and to a lesser extent France), while the balances of Germany and the Netherlands shot up. It certainly looks like there are some euro effects going on there.

These are total current-account balances with the entire world, rather than internal ones inside the euro zone, so they don't entirely reflect the picture of money flowing between Europe's north and south. But most of European countries' trade is with other European countries. I realise that, as a smart guy wrote last week, we liberals may be more inclined to support non-moralistic economic narratives that assign less of a role to individual responsibility. But this non-moralistic way of looking at the euro-zone crisis seems pretty convincing to me.

What I find really fascinating here, though, to get back to Mr Krugman's post, is that it doesn't occur to anyone to create a moralistic fable around the current-account balance disparities between American states. And this points to an arbitrary element in the way our concept of guilt works. When functions are assigned to two different entities, and there's a persistent disparity between the two, we may begin to introduce attributions of blame. When these functions take place inside one entity, we just think of it as part of the entity's normal flow of operations. Beyond this, there are clearly cultural elements involved in Americans' historically high tolerance for debt and default. Other countries' business cultures have more moralistic attitudes towards bankruptcy. Notably, as Mike Konczal wrote the other day, a famous philosopher made much of the tendency of Germanic peoples to conflate "debt" with "guilt", visible in the fact that they're the same root in German (schuld):

Have these genealogists of morality up to now allowed themselves to dream, even remotely, that, for instance, that major moral principle “guilt” [Schuld] derived its origin from the very materialistic idea “debt” [Schulden]?… By means of the “punishment” of the debtor, the creditor participates in a right belonging to the masters. Finally he also for once comes to the lofty feeling of despising a being as someone “beneath him,” as someone he is entitled to mistreat—or at least, in the event that the real force of punishment, of executing punishment, has already been transferred to the “authorities,” the feeling of seeing the debtor despised and mistreated. The compensation thus consists of an order for and a right to cruelty.

They're both "schuld" in Dutch, too. To say that the Greeks and Italians are in debt (schuldig) is already to say that they're guilty. And I'm going to take this opportunity to annoy a lot of Dutch and Germans by saying that I think this may be related to their self-defeatingly punitive anti-Mediterranean attitudes in euro-zone rescue negotiations. Fortunately, England was conquered by the French in 1066, and the long period of French-language hegemony in the English ruling class left us Americans with a healthy conceptual distinction between debt and guilt that still usually places us on Paris's side of the monetary-policy divide in Europe.