Differences in National IQs behind the Eurozone Debt Crisis?

3 Differences in National IQs behind the Eurozone Debt Crisis? Tatu Vanhanen * Department of Political Science, University of Helsinki The purpose of this article is to explore the causes of the European eurozone s serious debt crisis from one particular perspective. The idea is to clarify to what extent the eurocrisis might be causally related to the fact that the average intelligence (national IQ) of the six crisis countries seems to be clearly lower than the average intelligence of the 11 other euro countries. Besides, it does not seem to be an accident that five of the six crisis countries are Mediterranean countries whose populations are biologically partly mixed with immigrants from the Middle East and North Africa. This paper focuses on the role of the Mediterranean countries. It is hypothesized that because of their slightly lower national IQs, the Mediterranean countries have not been able to manage their economic policies as well as the countries with higher national IQs. More intelligent nations have usually been able to manage their affairs better than less intelligent nations. The hypothesis is tested by comparing the relationship between the level of national IQ and several other measures of human conditions both in the group of the 17 eurocountries and in the total world groups of countries. The results of comparisons as well as correlations in the same groups of countries support the hypothesis. Consequently, it is concluded that the clear difference in the national IQs between the six crisis countries and 11 other euro countries is a factor that has contributed to the emergence of eurozone s debt crisis. Key Words: Euro; Debt crisis; Public debt; Budget deficit; National IQ; Mediterranean countries; Human conditions. Introduction The European common currency euro has been in serious crisis since 2010 for the reason that some eurozone countries had built up debts much large than they were able to pay back. Ireland, Greece, Portugal, and Spain were forced to ask help from the other eurozone * Address for correspondence: tatu4@saunalahti.fi

4 Tatu Vanhanen countries. Cyprus is expected to ask help, and Italy staggers on the brink of crisis. The other euro countries have already supported the crisis countries with vast amounts of money, but it is questionable how long they are able and willing to help the weaker members of the eurozone if Italy, too, has to ask for help. The crisis has had farreaching consequences that extend to the world as a whole. Thomas Kenny (2012) notes that this is one of the most important problems facing the world economy, but it is also one of the hardest to understand. The Two Groups of Euro Countries The causes of the eurocrisis have been analyzed from many perspectives. It has been noted that the debt crisis is due to serious mistakes made in economic policies. Some euro countries did not follow the rules made by the eurozone. It is evident that serious mistakes have been made and that crisis countries have not yet been able to correct their mistakes. The eurocrisis emerged when some euro countries attempted to improve the living standards of their citizens by easily available debt money, but were unable to estimate their ability to pay back their debts. Their debt policies were unrealistic. They had to ask assistance from the other euro countries. The problem is why some countries did not follow the eurozone s specific rules which stipulate that each state s deficit must not exceed 3% of GDP and the public debt must not exceed 60% of GDP. Several countries have broken these rules, but all countries did not cross the limits as much. Let us first see to what extent the six crisis countries and 11 other euro countries followed these rules in 2011 (http://en.wikipedia.org/wiki.economy_of-the_european_union). Table 1 shows that the values of both variables vary greatly from country to country, but there is a significant difference between the six crisis countries and the 11 other euro countries. All crisis countries have crossed the public debt and budget deficit limits, and the means for the six crisis countries are extremely high (106.9 and -7.6), whereas less than half of the other euro countries crossed the limits in 2011, and the means for the 11 countries are slightly below the 60% and 3% limits (58.0 and -2.7). The problem is why the six crisis countries The Journal of Social, Political and Economic Studies

Differences in National IQs behind the Eurozone Debt Crisis? 5 Table 1. Data on public debt % of GDP (2011) and budget deficit % of GDP (2011) in six crisis countries and in 11 other euro countries in 2011 Country Public Debt % of GDP 2011 Budget deficit % of GDP 2011 Crisis countries Cyprus 71.6-6.3 Greece 165.3-9.8 Ireland 108.3-13.1 Italy 120.1-3.9 Portugal 107.8-4.2 Spain 68.5-8.5 Mean of the six crisis countries 106.9-7.6 Other 11 euro countries Austria 72.2-2.6 Belgium 98.0-3.7 Estonia 6.0 +1.0 Finland 48.6-0.5 France 85.8-5.2 Germany 81.2-1.0 Luxembourg 18.2-0.6 Malta 72.0-2.7 Netherlands 65.2-4.7 Slovakia 43.3-4.8 Slovenia 47.6-6.4 Mean of the 11 other euro countries 58.0-2.7 Mean of all 27 EU countries 82.5-4.5

6 Tatu Vanhanen broke the rules so greatly and contributed to the emergence of the European debt crisis. Do they have some common characteristics which could explain their deviations from the rules? Yes, they have one common characteristic: all of them except Ireland are Mediterranean countries. But how could this geographic factor explain their getting deeper and deeper into debt? I think that Lynn and Vanhanen s data on the impact of national IQ on the quality of human conditions provide a noteworthy answer to this question. Richard Lynn and Tatu Vanhanen s studies on the relationship between national IQ and various measures of human conditions have disclosed that more intelligent nations tend to manage their affairs better than less intelligent nations (see Lynn and Vanhanen, 2012). Consequently, it is reasonable to assume that the national IQs of the 11 other euro countries are higher than the national IQs of the six crisis countries. This is indeed true. Data on national IQs are from Lynn and Vanhanen s 2012 book Intelligence: A Unifying Construct for the Social Sciences (Table 2.1). The mean of the national IQs of the six crisis countries is 94.5 (Cyprus 91.8, Greece 93.2, Ireland 94.9, Italy 96.1, Portugal 94.4, and Spain 96.6) and the mean of the 11 other euro countries is 98.4 (Austria 99.0, Belgium 99.3, Estonia 99.7, Finland 100.9, France 98.1, Germany 98.9, Luxembourg 95.0, Malta 95.3, Netherlands 100.4, Slovakia 98.0, and Slovenia 97.6). The difference between the means of the two groups of countries is 3.9 IQ index points. It is not much, but it seems to be enough to cause differences in various measures of human conditions, not only in economic policies. The correlation between national IQ and Public Debt % of GDP was -0.434 and between national IQ and Budget Deficit % of GDP - 0.509 in this group of 17 euro countries in 2011. The correlations are negative as hypothesized but relatively weak. In other words, national IQ explains 19 percent of the variation in Public Debt % of GDP and 26 percent of the variation in Budget Deficit % of GDP. The explained parts of variation in dependent variables are low, but noteworthy for the reason that national IQ varies only from 91.8 to 100.9 in this small sample of 17 countries. The Journal of Social, Political and Economic Studies

Differences in National IQs behind the Eurozone Debt Crisis? 7 However, it is clear that the major part of the variation in the two dependent variables is due to some other factors. I do not try to find out what those other explanatory factors might be. I focus on the role of the small differences in average national IQs. One could ask why national IQs for the Mediterranean countries are systematically slightly lower than for most of the other euro countries. We can derive an answer to this question from the population history of the Mediterranean countries. During thousands of years the populations of Cyprus, Greece, South Italy, Portugal, and South Spain have become to a significant extent biologically mixed with immigrants from the Middle East and North Africa. Because the average intelligence of those immigrants may have been significantly lower than those of Europeans, the national IQs of the Mediterranean countries are now somewhat lower than of most of the other European countries. However, the national IQs of Italy and Spain are only two IQ index points lower than the mean of the 11 other euro countries. The explanation for Italy s and Spain s somewhat higher national IQs is in the fact that national IQs for the populations of North Italy and North Spain are approximately at the same level as in the more northern parts of Europe. The assumption that the average intelligence of those immigrants from the Middle East and North Africa may have been lower than the average intelligence of Europeans is based on the fact that the contemporary national IQs of the Middle East and North African nations vary from approximately 80 (Saudi Arabia) to 89 (Turkey) (see Lynn and Vanhanen, 2012, Table 2.1). We do not know what those national IQs may have been thousands of years ago when there were high civilizations in the Middle East. Impact of National IQ on Other Measures of the Human Condition Table 1 shows that differences in Public Debt % of GDP and in Budget Deficit % of GDP between the two groups of euro countries are clearly related to the differences in national IQs. They may be related also to some other explanatory factors, but I do not know them. According to my interpretation, the countries of higher national IQs have succeeded in their economic policies better than

8 Tatu Vanhanen the Mediterranean countries with somewhat lower national IQs. Therefore it is plausible to assume that the same difference applies also to various other measures of human conditions. Lynn and Vanhanen s global studies have indicated that national IQ is moderately or strongly correlated with many kinds of indicators of human conditions (see Lynn and Vanhanen, 2012). The differences of national IQs between the two groups of euro countries are small, but are they enough to be reflected in the values of some other measures of human conditions? If it can be shown that the values of different other indicators of human conditions are systematically lower for the group of crisis countries than for the group of the 11 other euro countries, it would support the argument on the causal impact of differences in national IQs on differences in economic policies of the two groups of euro countries. I test this hypothesis by empirical evidence on six indicators of human conditions: 1. UNDP s Human Development Index (HDI-08), 2. gross tertiary enrolment ratio (% of tertiary school-age population) (Tertiary-09), 3. life expectancy at birth (Life-08), 4. Gini index (Gini- 08), 5. per capita income (PPP/GNI-08), and 6. Corruption Perception Index (CPI-09). These variables are defined in greater detail and documented in our book (Lynn and Vanhanen, 2012). They were selected for the reason that they illustrate the differences in human conditions from various perspectives. I want to emphasize that these variables are only examples of numerous other indicators of human conditions used in our study. Any one of them could be replaced by some other indicator. It should be noted that the timing of observations is not the same for national IQs and for the six indicators of human conditions used in this study. Most national IQs are based on intelligence tests made in the period from the 1980s to 2011 as has been documented in Appendix 1 of Lynn and Vanhanen s 2012 book. In some cases even older intelligence tests have been taken into account. When data on more than one intelligence test have been reported, the mean of the two studies is given, while where there are three or more studies, median IQs are given in the last row for each nation as the best The Journal of Social, Political and Economic Studies

Differences in National IQs behind the Eurozone Debt Crisis? 9 Table 2. The values of six measures of human conditions for the two groups of euro countries Country HDI-08 Tertiary-09 Life-08 Gini-08 PPP/GNI CPI-09 p.c. 2008 Crisis countries Cyprus.810 36 78-24,980 6.6 Greece.855 91 80 34.3 28,300 3.8 Ireland.895 61 80 34.3 35,710 8.0 Italy.854 67 82 36,0 30,800 4.3 Portugal.795 57 79 38.5 22,330 5.8 Spain.863 68 81 34.7 30,830 6.1 Mean of the six countries.845 63.3 80 35.6 28,825 5.8 Other 11 euro countries Austria.851 50 80 29.1 37,360 7.9 Belgium.867 62 80 33.0 35,380 7.1 Estonia.812 65 74 36.0 19,320 6.6 Finland.871 94 80 26.9 35,940 8.9 France.872 55 82 32.7 33,280 6.9 Germany.885 71 80 28.3 35,950 8.0 Luxembourg.852 71 79-52,770 8.2 Malta.815 33 79-20,580 5.2 Netherlands.890 60 80 30.9 40,620 8.9 Slovakia.818 50 75 25.8 21,460 4.5 Slovenia.828 86 79 31.2 27,160 6.6 Mean of the 11 countries.851 63.4 78.9 30.4 32,710 7.2 Mean of 27 EU countries.835 64.1 77.9 31.7 28,150 6.4

10 Tatu Vanhanen estimates of the national IQs derived from intelligence tests (Lynn and Vanhanen, 2012, p. 391). In the cases of the six indicators of human conditions, the times of measurements are quite recent as indicated in the names of variables: year 2008 in the cases of Human Development Index (HDI), life expectancy at birth (Life), Gini index, and per capita income (PPP/GNI); and year 2009 in the cases of gross tertiary enrolment ratio % (Tertiary) and Corruption Perception Index (CPI). In other words, data on national IQs are from earlier periods than data on the six indicators of human conditions According to the research hypothesis, the means of these variables should be clearly lower for the six crisis countries than for the 11 other euro countries, except in the case of Gini-08. Its value is expected to rise higher for a lower level of national IQ. Consequently, the mean of Gini-08 should be clearly higher for the group of crisis countries than for the group of 11 other euro countries. Empirical data needed for this comparison are presented in Table 2. Table 2 shows that empirical evidence supports the hypothesis clearly in the cases of the three last variables but not in the cases of the three first variables. The means of HDI-08 and Tertiary-09 are practically the same for both groups of euro countries, whereas the mean of Life-08, contrary to the hypothesis, is slightly higher for the group of six crisis countries than for the 11 other euro countries. The means of Gini-08, PPP/GNI per capita 2008, and CPI-09 support strongly the hypothesis. The distribution of income (or consumption) is clearly more equal in the group of 11 other euro countries than in the group of crisis countries. The difference between the group means is 5.2 Gini index points. The level of per capita income is clearly higher in the group of 11 other euro countries than in the group of crisis countries. The difference between the group means was 3,885 euros in 2008. Finally, the level of corruption seems to be significantly higher in the group of crisis countries than in the group of 11 other euro countries. The difference between the group means is 1.4 CPI-09 index points. It is remarkable that the relatively small difference in the group means of national IQs (3.9 IQ points) has been enough to produce clear differences in the group means of the three indicators The Journal of Social, Political and Economic Studies

Differences in National IQs behind the Eurozone Debt Crisis? 11 of human conditions. Correlations between national IQ and these six indicators of human conditions in the group of seventeen euro countries correspond approximately the group differences between the two groups of euro countries. The correlation between national IQ and HDI-08 is 0.358, between national IQ and Tertiary-09 it is 0.252, between national IQ and Life-08 it is -0.057, between national IQ and Gini-08 it is -0.593, between national IQ and PPP/GNI per capita 2008 it is 0.200, and between national IQ and CPI-09 it is 0.496. Most correlations are weak, but they are positive or negative (Gini- 08) as hypothesized in all cases, except in the case of Life-08. Its slightly negative correlation contradicts the hypothesis. The strongest correlations are in the cases of Gini-08 and CPI-09. One could assume that differences in the group means of variables would increase when the difference of group means of national IQs becomes larger. It should be noted that in the total group of 199 countries national IQ varies from 107,1 to 60,1 index points: the range is 47 IQ index points (see Lynn and Vanhanen, 2012, Table 2.1). Global Comparison If the observed impact of national IQ on the measures of human conditions were limited to the two small groups of euro countries, one could argue that it is only accidental, and may not apply to other countries of the world. However, the question does not seem to turn on a coincidence. It is reasonable to hypothesize that the similar relationship between national IQ and the level of various measures of human conditions extends to all countries of the world. This hypothesis can be tested, for example, by dividing the total group of 199 countries into five subcategories on the basis of the level of national IQ and by calculating the means of the six measures of human conditions for each subcategory. The five subcategories of countries on the basis of national IQ are in this study: (1) national IQ 96 and over, (2) national IQ 90-95.9, (3) national IQ 80-89.9, (4) national IQ 70-79.9, and (5) national IQ below 70. The means of the measures of human conditions are expected to decrease or rise (Gini- 08) systematically from the first subcategory to the last one. Empirical

12 Tatu Vanhanen Table 3. The means of the six measures of human conditions in the five national IQ subcategories of 199 countries National IQ HDI-10 Tertiary-09 Life-08 Gini-08 PPP/GNI CPI-09 p.c. 2008 National IQ 96 and over.845 62.2 78.4 32.9 30,697 6.8 N = 37 N = 34 N = 37 N = 37 N = 31 N = 37 N = 34 National IQ 90-95.9.748 51.5 74.5 36.3 18,402 4.4 N = 25 N = 23 N = 23 N = 19 N = 20 N = 24 N = 23 National IQ 80-89.9.653 24.4 71.2 42.4 10,857 3.4 N = 75 N = 59 N = 70 N = 74 N = 45 N = 74 N = 65 National IQ 70-79.9.469 9.3 58.8 47.2 4,509 3.0 N = 41 N = 34 N = 41 N = 41 N = 32 N = 41 N = 37 National IQ below 70.380 6.1 55.6 44.1 3,306 2.9 N = 21 N = 19 N = 21 N = 21 N = 19 N = 21 N = 21 All 199 countries.637 29.7 68.7 40.8 13,376 4.0 N 169 192 197 147 197 180 The Journal of Social, Political and Economic Studies

Differences in National IQs behind the Eurozone Debt Crisis? 13 data on the number of countries in each subcategory and on the means of the variables are presented in Table 3. The empirical evidence given in Table 3 supports the hypothesis strongly. The means of the six measures of human conditions decrease or rise (Gini-08) systematically from the first subcategory to the last one with one small exception. In the case of Gini-08, its group mean should be higher for the subcategory 5 than for the subcategory 4, but, contrary to the hypothesis, the mean of the IQ category 5 (44.1) is slightly lower than the mean of the IQ category 4 (47.2). In all other cases, the means of the measures of human conditions decrease or rise (Gini-08) from one subcategory to the next one as hypothesized. In the case of HDI-10, the difference in the means between the first and the last subcategory is.465 HDI-10 index points; in the case of Tertiary-09 variable 56.1 percentage points; in the case of Life-08 variable 22.8 years; in the case of Gini-08 variable -11.2 Gini index points; in the case of PPP/GNI per capita 27,739 dollars, and in the case of CPI-09 variable 3.9 index points. These are large differences, which, according to my interpretation, are causally related to the level of national IQ. The correlations between national IQ and the six indicators of human conditions in the total world groups support the hypothesis and the results based on the five IQ subcategories. The correlation between national IQ and HDI-10 is 0.838 (N=169), between national IQ and Tertiary-09 it is 0.773 (N=192), between national IQ and Life- 08 it is 0.759 (N=197), between national IQ and Gini index it is -0.466 (N=147), between national IQ and PPP/GNI per capita 2008 it is 0.598 (N=197), and between national IQ and CPI-09 it is 0.586 (N=180) (see Lynn and Vanhanen, 2012). The correlation between national IQ and Life-08 was slightly negative in the group of 17 euro countries, whereas in the total world group it is strongly positive as hypothesized. It is remarkable that the correlation between national IQ and Gini index (-0.466) in the total world group is slightly lower than in the group of 17 euro countries (.0.593), and that the correlation between national IQ and CPI-09 in the total world group is only slightly stronger than in the group of 17 euro countries.

14 Tatu Vanhanen The fact that there is a systematic causal relationship between the level of national IQ and the level of variables measuring human conditions from different perspectives supports the assumption that the relatively small difference in the means of national IQs between the six crisis countries and the 11 other euro countries has been a factor that has contributed to the emergence of far-reaching mistakes in the economic policies of these countries and serious problems for the world economy. The common rules of the euro area regulating economic policies were based on the idea that all countries would be able to follow the same rules. The possibility was not taken into account that there might be significant differences in the average intelligence of these nations and that these differences might affect economic policies through elections, parliaments and governments. Voters and parties of less intelligent nations seem to have been less responsible and more unrealistic in their selection of policies. Because the difference in national IQs is more or less permanent, it will be extremely difficult to solve the problem of the debt crisis and to force the crisis countries to follow the common rules in their economic policies. It may become necessary for EU to increase the powers of the common institutions and to tighten the control of the economic policies of the crisis countries. Some steps to this direction have already been taken. Of course, there are various other causes behind the eurocrisis, but I do not know them and my purpose has not been to seek a complete explanation for the emergence of the eurozone s debt crisis. I have focused on the impact of the relatively small difference in the group means of national IQ between the six crisis countries and 11 other euro countries and on the fact that all crisis countries, except Ireland, are Mediterranean countries. On the basis of the empirical evidence given in this paper, I have come to the conclusion that differences in national IQs provide a partial explanation for the emergence of the debt crisis, but the importance of this explanation remains an open question. The Journal of Social, Political and Economic Studies

Differences in National IQs behind the Eurozone Debt Crisis? 15 References Economy of the European Union. Available at http://en.wikipedia.org/wiki/economy_of_the_european_union Kenny, T. (2012). What is the European Debt Crisis?. Available at: http://bonds.about.com/od/advancedbonds/a/what_is_the_european _Dept Crisis.htm Lynn, R. and Vanhanen, T. (2012). Intelligence: A Unifying Construct for the Social Sciences. London: Ulster Institute for Social Research.