The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
) -- The creation of the European Union, including Economic and Monetary Union, represents one the grandest social experiments of all time.
Twenty-seven nations with distinct cultural, economic and political systems have foregone some sovereignty to band together to promote peace and encourage economic and social progress and stability -- particularly against an American economic giant that has managed its currency erratically.
An eclectic group striving to achieve very ambitious objectives was bound to create conflict and crisis. And now it finds itself grappling with a sovereign-debt crisis.
Portugal, Ireland, Greece and Spain -- the so-called PIGS countries -- have been hogging the eurozone headlines. There has even been speculation that one or more of these countries will seek a solution by abandoning the euro.
That would allow them to again control their own monetary policy and devalue their currencies, making their exports cheaper and stimulating economic growth.
Such an option probably seems more attractive than taking the castor oil offered by the IMF and EU: privatizing assets, increasing tax revenue and reducing spending.
Is it really possible that a country would exit the EMU/eurozone? Before the Lisbon Treaty of 2009 the EU had never officially contemplated a country voluntarily exiting the EU or the EMU. Expulsion remains officially unthinkable. The consequences would be too severe.
If a country exited the EU, it would also exit the EMU, because participation in monetary union is required for EU membership unless an exemption has been negotiated, as in the cases of Denmark and the U.K.
It is, however, conceivable that a member could exit only the EMU, but it would have to return at some point to satisfy EU membership requirements. An exemption like Denmark's? That seems inconceivable for countries with a record of economic mismanagement.
Exiting the euro would require conversion to a new currency, which would take time. But the havoc accompanying the exit would be immediate: unfriendlier credit markets and abandonment by trading partners. The ensuing social unrest would make today's protests seem puny in comparison. "Economic growth" would remain an oxymoron for some time.
An exit from the EU would be devastating, too. Gone would be the free movement of people, goods, services and capital among 500 million consumers in 27 countries. EU funds that are available to member countries with a per capita GDP less than 90% of the EU27 average would also disappear.
The PIGS were the EU15's original "cohesion" fund countries. They have received billions of euros to stimulate economic growth and increase per capita income.
This appears to have worked. In Greece, per capita income based on purchasing power parity increased from $6,726 in 1984 to $28,434 in 2010. That's a 323% increase.
Portugal, Spain and Ireland all achieved increases of more than 200%. By comparison, gains in the U.S. for a similar period were 186%.
Greece, Portugal and Spain (GPS) are still major cohesion fund recipients, although Ireland isn't. In fact, Ireland doesn't really belong in the PIGS acronym. Although it's highly indebted and has received a bailout, Ireland's other problems and available solutions are different.
Spain hasn't yet required a bailout, but its problems are similar to Greece's and Portugal's.
Participation in the EMU, however, isn't the real problem for the GPS countries. High debt and high government spending are only symptoms of something else: Their economies are stuck in a time warp.
In life-cycle language, these economies are mature or in decline, making an economic comeback as difficult as trying to save a company that sells handmade typewriters.
Even with a strong euro, Germany's economy is doing well, because it has evolved with the times. Germany has a skilled workforce producing technologically superior goods and services.
The GPS countries, on the other hand, haven't kept up, because they haven't taken the steps necessary to compete in high-margin, growth industries. (Ireland has, by the way.)
Greece and Portugal derive more than 10% of their respective GDPs from agriculture. Industry, which represents another 20%-30% of the GPS economies, is focused on textiles, food and other low-skilled industries, which puts these countries in direct competition with low-cost suppliers in Asia.
Meanwhile, powerful, economically illiterate labor unions in the GPS countries, whose members have fared wonderfully from EU membership, aren't helping their countries trim spending or stimulate growth. Worse, they are a deterrent to the foreign direct investment that could introduce more innovative industries and processes and create good-quality jobs.
Subpar education hurts growth, too. Within the EU27, Greece, Portugal and Spain have the lowest math scores and are among the four lowest-scoring countries in science and literacy rates. Greece is dead last in each category.
When it comes to the World Bank's Ease of Doing Business Index, Greece also ranks last in the EU27. Spain and Greece score particularly low on the ease of starting a business. By contrast, Ireland ranks fourth.
On the World Economic Forums Competitiveness Index, Greece is again dead last in the EU27.
Another bad omen for the GPS countries is that their labor-market efficiency scores are as low as many countries in Africa and South Asia.
Lastly, Greece ranks No. 1 in the EU27 for corruption, according to Transparency International's Corruption Index.
Let's put Greece's situation in perspective. The country entered the EU in 1981 and has remained a major cohesion fund recipient.
Lativia, Lithuania, Estonia, the Czech and Slovak Republics, Romania, Bulgaria and Poland entered the EU more than 20 years later. Yet they score better than Greece on all of the measures I've cited -- even though they were stifled for decades by being part of the Soviet communist experiment. (Their positive education performance may be the only redeeming remnant of that experiment.)
Will one of the PIGS decide that exiting the euro is the ticket to resolving its debt crisis? A rational mind would conclude that this was not a solution and that it would invite only more crises. Further, the advantages of EU/EMU membership for the GPS countries clearly outweigh any disadvantages,
Social unrest, however, has been known to inspire people to make irrational decisions. For the PIGS sake, let's hope rational minds prevail.
The EMU could probably survive one country leaving the euro, so long as it doesn't prompt a mass exodus, which is unlikely.
It's time for politicians and bankers to give additional thought to how to make these countries' economies competitive in skilled industries.
If they don't, the grand experiment that is the EU will continue to find itself mired in crisis.