Introduction

The European periphery – from Greece to Spain and the Baltic States – is hard hit by economic crises in the form of unemployment and falling real wages. The immediate reasons for these crises, ‘the straw that broke the nations’ back’ so to say, are not the same. The countries in crisis may have had irresponsible budget deficits or irresponsible housing and property booms, but– as this article argues – the present underlying problems in the European Union can partly be attributed to ignoring previously well-understood economic insights and wisdom based on the interplay between geography, technology, and economic structure. This ignored knowledge abounds in the German-speaking literature, in this chapter represented by three economists: Heinrich von Thünen, Friedrich List, and Joseph Schumpeter, whose collective lives span from 1783 to 1950. Although all three worked in the periphery of what is normally referred to as The German Historical School of Economics, they all centered their analysis on a qualitative understanding of economic phenomena which disappeared from ruling economic theory, and consequently also from the understanding of politicians.

It is argued that the European Union was initially built on principles emanating from a type of geography-based economic understanding with old roots, but that the formalization of economics has led to the fact that this previous knowledge has been lost both to economists and policy-makers. This loss occurred in two overlapping stages: after World War II when German economic theory spanning from The Thirty Years’ War to World War II was thrown out with the proverbial bathing water of the Hitler regime, and it reached its final blow with the neoliberal ‘triumphalism’ starting with the Fall of the Berlin Wall.

The type of economic understanding represented by this qualitative economic tradition, as opposed to the incoming neoclassical tradition, continued to be applied in actual economic policy until and including the slow integration of Spain into the European Union in the 1980s, thus saving and strengthening Spain's industrial sector. Neoclassical principles only entered policy-making after the Fall of the Berlin Wall in 1989, and – we shall argue – with very negative outcomes: a shock therapy resulting in deindustrialization and ultimately depopulation.