10.14.11

No half measures

Posted in Society at 16:14 by RjZ

I lived in Europe right before the turn of the Euro. Travelling all around the continent and doing business with several nations it was pretty clear to see what some of the advantages of a single European currency, the Euro, would be. After speaking to people from each different country, however, it was almost as clear how difficult it would be to manage. A single currency unifies a group of people in ways that aren’t easy to see immediately. European policy makers weren’t blind; there were examples from the past.

Over two-hundred years ago another group of countries started their economic experiment. They would sacrifice some of their own sovereignty in exchange for economic security. It wasn’t an easy sell, but the countries had a common language, mostly; a common enemy, maybe; and fairly similar backgrounds. During the treaty period they were very reticent to give up very much of that sovereignty to some central government so they wrote a document that would limit the powers of the government and ensure certain rights always remained their own.

We can argue about how successful this United States of America experiment was, but this concept of exchanging control for economic security was tried again more than a decade ago. This second Euro experiment is facing the a real possibility of failure.

To be fair, the United States had it easier, especially when it comes to giving up rights, but it’s doubtful that the 13 original colonies saw it that way at the time. They had much more in common with each other and dramatically less personal history than European nations have, but they were each struggling, fledgling economies and each was concerned with its personal future more than some United States ideal. Industry, farming, urban vs. rural lifestyle, slavery, and religion, divided these early nations-to-be. Somehow, they chose to sacrifice their individual futures and join the union.

What today’s U.S. citizens fail to notice as we look on at the Euro-meltdown is that we would face the exact same problems as Europe if the colonies hadn’t submitted to as much federal control as they did. Where the big difference between the United States and Europe lies is not so much our history, but in the, quite understandable, reticence of the European nations to give up control over their own policies for the sake of the Euro.

When a disastrous hurricane hits New Orleans, the economic damage is felt throughout the nation. Colorado will never suffer from a hurricane but it has to pay its share just the same. When banks on Wall Street fail, the pain ripples across the plains. That’s OK, every year, New Yorker’s pay taxes to subsidize farmers. U.S. citizens are not given a choice about bailing out one state or another, regardless about how we may feel about the logic of building houses in a flood plain, making risky loans to corporations, or planting yet another field of corn. The majority of our tax dollars are spent for federal programs, which spread the wealth to states that suffer from disaster or poor decisions. You may wish for reduced federal spending, or wonder if we really should be part of a union of states, but this share-the-wealth/share-the-pain strategy has been key to the survival of the country.

People living richer northern European countries, on the other hand, are a little less clear on just why, and how much, they have to spend on their profligate neighbors to the south. If Greece couldn’t manage their money, why are Germans forced to pay? The European experiment faces this tough choice and as long as it actually is a choice, the financial markets will reel. If Europe cannot hold the experiment together, they will surely face a recession which will affect the world economy, but the richer nations won’t have to foot the bill for mistakes they had nothing to do with. If they share the suffering for the failures of some nations, they will also have to face a terrible lesson about how much individual sovereignty they can afford without going through this again a decade hence. The data is in and it shows one cannot expect to manage a single currency, without strictly enforceable rules about how money can be spent. Like the 13 U.S. colonies, there will be no middle ground.

1 Comment »

  1. Traveling Hypothesis » Europe comes closer together said,

    December 9, 2011 at 14:08

    [...] the post “No Half Measures I suggested that Europe must choose to break apart or come closer together, but that, regardless, [...]

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