What this passage makes me wonder is: Has anyone ever written about European integration in the light of German unification in the late 19th century? The claim in the Reichsbank pamphlet that customs union was the easy first step, and that monetary union followed only later and with difficulty, certainly suggests some parallels. So does the suggestion that monetary union was the biggest economic benefit of political union. It would be interesting to ask, what were the concrete problems that monetary union was understood to be solving? And how did it fit into the larger political agenda of German unification?
Of course there are fundamental differences -- most importantly that German unification took place under the aegis of a sovereign political authority, whereas the central political-economic fact about Europe is that the monetary authority stands above the various national governments. But it still seems like the comparison could be illuminating.The US faced a similar situation in the process of going from colonies, to a confederation, to a federation, which was then organized financially under the aegis of Alexander Hamilton as the first Secretary of the Treasury of the United States.
There were controversies during those times that are long forgotten by most other than scholars of the period. But had it not been for acceptance of Hamilton's plan for centralization, things might have gone differently, and in different periods the US operated sometimes under a central bank and at other times under free banking, at times under a gold standard and at times under a fait system. The US was even operated under a money-financed system at the time of the Civil War instead of the debt-financed system that Hamilton has established initially, even through there was no specific provision for a particular financial system and arguing for which Hamilton proposed the doctrine of implied powers that became accepted instead of enumerated powers based on the necessary and proper clause.
So what the EZ is going through now is not uncharacteristic. But they seem to be having difficulty from learning from the past. The eurocrats need to get more creative before their experiment implodes with potentially dire results not only for Europe but the world.
The Slack Wire
3 comments:
There is a lot of differences between different EU nations compared to those of the early USA or Germany.
Not comparable.
Ignacio, the US and Germany made it through the transition, although not exactly "gracefully."
Do you think that the EZ will make it, albeit in fits and starts, or is this group of nations so disparate as to make a functioning union, either currency or political, impossible in the foreseeable future?
MMT economists seem to be pessimistic by and large, and this is my view that this point owing to the disparate background that you cite.
It seems to me that the union cannot work one the terms that now exist, and there seems to be no capacity to change those terms. I'm skeptical about going forward with a political union, which is what it will take in the end.
Nationalism and history create hysteresis and path-dependence that are difficult to overcome. In fact, it could provoke a reaction that strengthens those reactionary forces that the union was designed to overcome.
I believe that the lack of common language is a major barrier. Even today the young generations do not have a common language, not everybody speaks English is a fluent way etc.
There is also a distinct lack of identity, it's all manufactured by the politicians. In the case of USA or Germany there was some sort of identity created by circumstances that pushed unity, even if it was (specially if it was!) a fight against an external power.
We would need some strong political-ideological stimulus lacking in the EU right now (conspiracy theory about Russia being the enemy? maybe the Islam soon?), but it's the other way around: the EU is seen as the enemy more each day that passes in each nation in Europe, a source of trouble instead of well-being.
And as you point out, is probable that we get reactionary movements that we were trying to avoid when the whole thing was designed.
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