Take Courage – Remember the MAI?
“Please Mr Gould, what can we do to stop it?” was a question prompted by my article in the Herald a couple of weeks ago about the risks posed to our democracy by the Trans Pacific Partnership.
My first reaction was to reply “I wish I knew!” The government’s readiness to ignore public opinion if it runs counter to the interests of big business, and – as in the case of the deal over pokies with Sky City – to prevent any future government from reviewing such arrangements does not, after all, inspire much confidence that public opposition to a carte blanche for overseas corporations will have any effect.
But I have had second and better thoughts – and those who have followed these issues over a couple of decades or more might understand why. We have, after all, been here before – and on that earlier occasion, governments and big business backed down in the face of public concern.
We should not forget that the TPP is just the latest of the persistent attempts by global corporations (most often American) to establish a regime that allows them to pursue their own interests in any given country, irrespective of the wishes of the citizens of that country and of the policies of their elected governments.
The saga begins with the power conferred on international corporates, as the global economy began to develop, to threaten national governments that, if they didn’t do what they were told, they would lose valuable investment to more compliant regimes. The subsidies demanded from our government by Warner Brothers are just one recent minor example.
But that was not enough for global investors. They feared that once an investment was made, and the country concerned realised what a bad deal had been done, a future government of that country might try to reassert domestic law to ensure that national interests were properly protected.
So they demanded as the price of investment in individual countries a series of Bilateral Investment Treaties whose effect was to limit the ability of both governments and courts in the host country to restrict the freedom of overseas investors to do what they liked.
But even this did not go far enough. Global corporates persuaded the OECD that these bilateral treaties should be brought together in a wide-ranging international treaty which would rationalise and make uniform all such provisions and would establish the primacy of global corporate interests over national democracy right across the globe.
Negotiations for this Multilateral Agreement on Investment (MAI) began within the OECD in 1995. At first sight, there was a cautious welcome for the idea; national governments saw the opportunity to restrain the freedom enjoyed by international investors to ride roughshod over local democratic interests.
As the negotiations proceeded, however, it became increasingly clear that the proposed treaty was really a charter for global investors – a charter that would ensure that their operations could never be challenged either by elected governments or properly constituted national courts.
It was proposed, for example, to establish a compliance regime under which “liberalisation” would always move forward, with no power to wind it back — the so-called “ratchet” effect. This would be enforced by so-called “rollback” and “standstill” provisions, requiring nations to eliminate regulations that were contrary to MAI provisions — either immediately or over a period — and to refrain from passing any such laws in the future.
Compensation would have to be paid for any national rules that caused loss of profit to investors. Disputes arising under the agreement would be settled in a specially constituted tribunal instead of by the national courts of the host state. The intention was that neither governments nor affected communities could challenge the behaviour of investors, who accepted no binding obligations on themselves.
There was little public awareness of these details of these provisions until – crucially – a draft of the agreement was leaked in March 1997. The leaked material prompted a wave of criticism. Opposition to the MAI began to mount – first in the US and then increasingly among other OECD countries. Such was the backlash that first France and then other countries successively withdrew from the negotiations. On 3 December 1998, the OECD announced that “negotiations on the MAI are no longer taking place.”
Does this brief account of the central features of the MAI sound familiar? Of course it does. Not deterred by the failure of their project in 1998, global corporates have now returned to make another attempt. The MAI provisions that were – as soon as they were exposed to “sunlight” – rightly condemned and finally rejected are now central elements of a TPP being peddled as an innocent “free trade” arrangement but being negotiated in secret.
The signs are growing that, like the MAI before it, the TPP is in trouble; as more information is leaked and becomes available, the chances of a secret deal being agreed over the heads of voters are falling fast. Concern is mounting in participant countries, including the US. Even our own government might be forced to think again once we are no longer kept in the dark and realise what is at stake. We still have the chance to make our voices heard.
Bryan Gould
29 November 2013
This article was published in the NZ Herald on 6 December.
Myths, Politicians and Money
My new book, Myths, Politicians and Money, was recently published in London by Palgrave Macmillan to coincide with the Labour Party conference in Brighton. It has been very well received and reviewed, and has attracted a good deal of attention. It is a comprehensive account of what I think has gone wrong for Western democracies over the last three decades; the argument is summarised in a separate posting (called Myths, Politicians and Money) of a piece I wrote for the Yorkshire Post. Find out more here.
Myths, Politicians and Money
In 1989, the American political philosopher Francis Fukuyama published a famous essay which he called “The End of History”. In celebrating what he believed to be the more or less permanent triumph of liberal democracy, he saw the “free market” and democracy as not only compatible but as mutually supportive. The market was in his view the equivalent in economic terms of political democracy, achieving the same dispersal of economic power throughout society as democracy achieved in political terms. He saw no need for democracy to act as a restraint on “free-market” outcomes, and he saw no danger that the “free market” might in some ways prove inimical to effective democracy.
He was confident that the rest of the world would flock to the democratic banner. Just over twenty years later, that expectation has been confounded. Confidence in democratic processes – both here and abroad – is at a low ebb. So, what has gone wrong?
The seeds of the problem had already been sown by the time Fukuyama published his essay. The received wisdom of the immediate post-war years – that full employment should be the prime goal of economic policy, that collective public provision was needed to guarantee basic standards of essential services, and that market excesses would have to be restrained by careful regulation – had been replaced by new ideas.
The individual, rather than society, was seen as the pivotal point of human endeavour and progress; writers like Hayek and Nozick questioned the need for or appropriateness of an extended role for government or the acceptability of meddling in “free” market solutions; redistributive taxation, the provision of taxpayer-funded benefits to the disadvantaged, and the power of organised labour came to be seen as obstacles to economic growth rather than as guarantees of an equitable distribution of wealth; economists like Milton Friedman questioned the efficacy in peacetime of Keynesian intervention and promoted the idea that macro-economic policy was really just a simple matter of controlling the money supply in order to restrain inflation; while global developments such as the oil-price shock of the early 1970s meant that inflation rather than full employment was seen as the primary issue for economic policy.
Many of these ideas had been carried into government by Ronald Reagan in the United States and Margaret Thatcher in the United Kingdom. The two leaders made common cause at the beginning of the 1980s in taking a step whose significance perhaps even they did not fully grasp at the time. The portentous decision was taken in the United States and in the United Kingdom to float their currencies and to remove exchange controls. The way was now clear not only for an explosion in international trade and foreign investment, but for a determined assault by international capital on the political power of democratically elected governments across the globe.
The ability to move capital at will across national boundaries not only meant that international investors could bypass national governments but also enabled them to threaten such governments that they would lose essential investment if they did not comply with the investors’ demands. This shifted the balance of power dramatically back in the direction of capital, and set the seal on the triumph of those “free-market” principles of economic policy that became known as the “Washington consensus”.
It became accepted that the “free market” was infallible and that its outcomes should not be challenged. Any attempt to second-guess the market would inevitably produce worse results. Everyone – it was thought – would be better off if the rich and powerful were subject to no restraint in manipulating the market to suit their own interests.
But the whole point of democracy – that the legitimacy enjoyed by elected governments allowed them to defend the interests of ordinary people against the otherwise overwhelming economic power of those who dominated the market – was thereby lost.
We see the outcomes of this shift all too clearly. Virtually the whole of the increased wealth of the last three decades has gone to the richest people in our society; poverty, even in the “rich” countries, has risen while inequality, with its attendant social ills, has widened; the rights of working people at work have been weakened; joblessness is endemic; and the “free market” free-for-all achieved its culmination in the global financial crisis.
A “Europe” imposed by an elite and constructed in the image and to suit the interests of international capital has come unstuck and flounders in recession and unemployment. The austerity demanded by Europe’s leaders makes a bad situation worse. Popular support for the European Union has nosedived. Major decisions continue to be made by big corporations and not by elected governments. Faith in government and the democratic process is at a low ebb and attempts to consult the people on Europe’s future continue to be resisted.
“History”, in other words, has continued to unfold. Very few seem to realise how thoroughly our civilisation has been transformed by the triumph of the “free-market” ideology. They do not see that western liberalism, which has informed, supported and extended human progress for perhaps 700 years, has now been supplanted by an aggressive self-interested doctrine of the individual which leaves no room for community and cooperation. Even the victims of this comprehensive and fundamental change seem hardly aware of what has happened.
Fukuyama failed to recognise, in other words, that the threat to western democracy came from within those democracies themselves. It came from the greed and self-interest of the rich and powerful and their ability to manipulate the “free” market to their own advantage, but also from the quiescence and apathy of that much greater number who fail to understand that democracy is necessarily sidelined if the market cannot be challenged. The substance of democracy has been hollowed out, so that only the shell, the forms, remain, because we have not cherished and made a reality of what was our most valuable protection and greatest achievement.
Bryan Gould
19 September 2013
This article is based on my new book, Myths, Politicians and Money and was published in the Yorkshire Post on 20 September
The Inequality Machine
The widening gap between rich and poor that has disfigured and weakened our society over recent decades is widely deplored, but there is surprisingly little understanding of how that growing inequality has been brought about.
For most people, it simply reflects the natural order; the rich have each individually taken their chance, as anyone would, to inflate the rewards of various kinds – profits, salaries, bonuses, share issues, golden handshakes – that they are able to command. Their riches are regarded, as a general proposition, as a reward for their success.
But those huge advantages – on a scale so outrageous that it is hard to comprehend – have not so much come about by good fortune or because the rich have individually discovered the path to great wealth through their own hard work, cleverness or luck, but because the whole operation of the modern economy has been deliberately geared to favour them as a class. The statistics are incontrovertible; the rich have claimed virtually the whole of the additional wealth that has been produced over the past thirty years. They have been able to do so because they were already rich. It is beyond doubt that the best way to become seriously wealthy is to start off wealthy in the first place.
The rich have, in other words, been the beneficiaries of a complex and comprehensive interlocking set of policies that have been deliberately put in place to ensure that their wealth just keeps on growing. Those policies have formed the bedrock of the neo-liberal consensus adhered to by governments in most western countries over the last three decades. That consensus has been peddled as benefiting us all, but it has been in reality a huge machine designed to increase the advantages that the rich enjoy over the rest of us.
The merits of globalisation, the virtues of monetarism, the over-riding importance of restraining inflation while taking a relaxed attitude to unemployment, the primacy of banks in making decisions about our economy, the superiority – indeed, infallibility – of the market as opposed to the supposedly stultifying effect of government intervention, austerity as the correct response to recession, have all been articles of faith for governments of various political colours; indeed, in the British case, New Labour was among the most enthusiastic proponents of all of these nostrums.
How have these policies – supported on the face of it because they are supposed to produce a more efficient and productive economy – actually contributed to widening inequality? Let us take, for example, the widely accepted view that the only goal of macro-economic policy should be the control of inflation, and that that is best done by restraining the growth in the money supply – a task that should be entrusted to unelected and unaccountable bankers and is therefore immune from scrutiny by democratic agencies.
But monetarism takes an essentially static view of the economy’s capacity to grow and create new jobs. The priority given to inflation ensures that as soon as there is any sign of growth, the brakes – in the form of higher interest rates – are slammed on, with the intention that that the value of existing assets should be protected; but, at the same time, a high unemployment rate is also guaranteed and becomes endemic. Continuing high unemployment, of course, suits the interests of employers, by holding down any threatened growth in real wages – and unemployment remains the single most important factor in creating avoidable poverty. Monetarism, in other words, is a mechanism for protecting the interests of the rich but sacrificing those of the majority.
The same inbuilt bias in favour of the rich can be seen in many other aspects of policy. The propensity to raise interest rates as the principal instrument of what remains of macro-economic policy has the effect of favouring the holders of assets – those who are already wealthy and who operate in the financial economy, at the expense of those wishing to borrow for productive investment – those who live and work in the real economy and are the creators of new wealth.
And the primacy accorded to the banks in deciding economic policy places the alcoholic in charge of the brewery. The astonishing monopoly allowed to the commercial banks – the power to create money out of nothing by the stroke of a computer key and then to use the proceeds for the purposes that they alone decide – delivers to them immensely more power than that of elected government.
They have not been slow to use that power to shift the balance of advantage further in favour of the “haves”. Their enthusiasm, for example, to lend for non-productive purposes, such as housing, inflates the value of housing, (and, incidentally, diverts investment from the productive sector), so that there is a massive transfer of wealth to home-owners at the expense of those who can’t afford to buy their own homes.
Globalisation has also played its part. Our ability to defend and promote our own interests – to decide the direction of our own economy -has been steadily eroded by the increasing dominance of the global economy by an ever more concentrated group of super-rich. The freedom of international investors to move capital at will around the globe, and the vast sums at their disposal, have meant that democratic governments have found themselves compelled to comply – for fear of losing investment if they do not – with the wishes of those investors, rather than securing social, environmental or political outcomes that are more congenial to their electorates.
And it is of course a curious aspect of the global economy that it apparently requires top executives to be paid at the highest international level – a level that is constantly being bid up – to ensure, we are told, that we attract the best talent; but, at the same time, it demands that wages – treated as just another production cost – must be held down to match the lowest levels in competing low-wage economies.
And on the subject of our international competitiveness or lack of it, the deep-seated and long-term opposition to ensuring that our exchange rate is at a competitive level and the refusal even to consider the issue (dating back at least to Harold Wilson’s futile battle against devaluation and Denis Healey’s rejection of the IMF’s advice to frame monetary policy in terms of Domestic Credit Expansion), are a further reflection of the power of the wealthy to set the agenda. A lower exchange rate would of course stimulate the economy and create more jobs, and is by far the fairest and most immediately effective and comprehensive means of improving competitiveness in a global economy in which others are becoming constantly more efficient; but it would also reduce the international value of assets held by the wealthy, who have managed to dominate such limited debate as there has been by constantly asserting, in defiance of the evidence, that a lower exchange rate would erode any initial gain in competitiveness by increasing inflation.
As a result, we have placed the whole burden of maintaining or improving competitiveness on wage-earners; we are constantly told that we can’t afford higher wages, and that improvements in competitiveness must come from cutting costs – and essentially labour costs. The preferred instruments have accordingly been measures to reduce the bargaining power of workers, weaken trade unions, make it easier for employers to pay low wages, and make life tougher for the unemployed and other beneficiaries so as to force them back into the labour market to compete for low-paid jobs.
Our unacknowledged problems with competitiveness have meant the sacrifice of manufacturing, where working people are best able to earn a living and whose decline has reduced any prospect of new jobs, innovation and productivity improvements, in favour of a financial services sector which delivers its benefits uniquely to those who have access to capital.
The otherwise incomprehensible insistence that austerity is the correct response to recession is to be explained in the same way. Recession has always been seen as an opportunity to weaken labour, ever since Andrew Mellon, the multimillionaire US treasury secretary, issued the rallying call to employers after the 1929 crash, to “liquidate labour”. The high rates of unemployment engendered by recession have always meant a reduction in the bargaining power of workers – an opportunity to swing the balance of advantage further in favour of employers that has been too good to miss.
Recession has also meant that government spending has become an easy, if irrational, target. The constant impetus to privatisation, already powerful as an element in neo-liberal doctrine, has received a further fillip from the supposed need to “cut the deficit” by slashing government spending. So, the support provided by public services is weakened when the disadvantaged most need it, and the opportunities for profit-making and profit-taking by private commerce are enlarged. Again, the rich emerge from adversity with their advantage over the rest of us enhanced.
Underpinning all of these developments is the article of faith that the “free” or unregulated market can be accurately predicted on the basis of mathematical models and that it is self-correcting and infallible. The acceptance of this doctrine has been a sure-fire recipe for allowing the rich to entrench and intensify their existing advantage. If intervention in the market is to be eschewed, and market outcomes are not to be challenged, the way is clear for those who are already dominant to use their power to grab what they can, all the while proclaiming that no one should complain because that is what the market ordains.
None of this should be a cause for surprise. These elements have been present, if not overt, in the policies pursued for over three decades by successive governments. While attention has focused on the huge incomes and low tax rates organised for themselves by the rich, it may not have been fully recognised how far their gains are the result of policies that have been part of a coordinated and self-reinforcing pattern, that has had as its deliberate aim the reinforcement of the power of the wealthy to dominate our economy and the weakening of the power of workers to protect themselves. The destructive gap between rich and poor has widened, in other words, because the rich have been able to bend governments to their will and have used their power to ensure that it is so.
Bryan Gould
28 March 2013
Ending The Euro Crisis
The Spanish bailout last week was initially greeted as evidence of the determination to protect the euro and as a step towards much-needed European economic stability. Yet, as subsequent events have quickly shown, what really happened was merely a further staging post in a slow-motion and ultimately inevitable disintegration of the eurozone as we currently know it.
The first signal that the bailout was not the triumph proclaimed by the Spanish Prime Minister is that the need for it was repeatedly denied, right up till the last minute – and denied largely because it was recognised that it represented a defeat for the policies pursued both by the Spanish government and by the European authorities. The attempt to argue that the bailout vindicated those policies must be regarded as simply putting a brave face on a serious reverse.
There are, however, much more substantial reasons for reservations about the bailout. Once again, the measures put in place in order to avert disaster have done nothing to recognise, let alone address or remedy, the underlying issues. Those issues, for as long as they remain unresolved, will continue to throw up crises which seem increasingly likely to drive the European economy into recession and the eurozone into a failure that will threaten the whole European project.
What are those underlying issues? There are probably two that warrant particular attention. The first is what might be described as a fundamental flaw in the initial design of the euro which made it unlikely that it could ever succeed; and the second is the determination to continue with economic policies, particularly in response to the global financial crisis, that have made recovery from that crisis more difficult than it should be.
As to the first issue, I was not alone in arguing from the outset (as I had argued about the euro’s two predecessors – the European Monetary System and the Exchange Rate Mechanism) that the euro could not possibly work. I argued this because it seemed clear to me that in a hugely diverse European economy, (and that diversity has surely now been demonstrated beyond doubt), it was beyond belief that all parts of that economy could be equally well served by the single monetary policy which a single currency would require.
In particular, it seemed inevitable that that single monetary policy would be dictated by and would serve the needs of the most powerful parts of the European economy, which inevitably meant Germany. A monetary policy that was congenial to the Germans would almost certainly be less appropriate for weaker parts of the European economy – and today we can see that those weaker parts would necessarily include countries like Greece.
The Greeks were of course misled into believing that their membership of the eurozone was the entry ticket to the prosperity that the stronger members enjoyed. They were encouraged by the apparent guarantee of support from those stronger members – the sense that “we’re all in this together” – to take advantage of the asset inflation (what can now be seen to have been a “bubble”) created by easy Europe-wide credit, and were allowed not to worry too much about the potentially damaging concentration of productive capacity in Europe’s industrial heartland that a single economy made inevitable.
It was not just Greece, of course, whose interests were put at risk in this way. Other stronger economies – Spain springs to mind – also suffered in due course from the same combination of apparently risk-free expansion and consumption on the one hand and the weakening of their productive base on the other – both the inevitable consequences of throwing in their lot with much stronger core economies in the wider Europe.
In due course, even those stronger countries – Germany and its more or less satellite economies – which were the immediate beneficiaries of the single currency and the single monetary policy began to suffer a downside. In the longer term, when the periphery of the wider European economy began to slow down – even to close down – this was inevitably bad news even for the central core, whose markets would be less buoyant and whose obligations to weaker members would be likely to increase.
It was precisely because the euro would eventually handicap the whole European economy, as well as individual potential members like Britain, that I opposed it so strongly. Sadly, any such stance was dismissed at the time by most commentators as being simply “anti-Europe”.
The adverse impact of the euro on the European economy began to come to a head, as luck would have it, just as the global financial crisis burst upon us. We need not pause to dissect the global causes of the GFC, other than to observe that they included factors that were already at work in Europe. What has mattered, however, is the response that has been made by the eurozone to the difficulties created by the GFC.
In line with, and illustrative of, the economic dominance of Germany in the eurozone, the measures adopted to help Europe escape from recession have been largely dictated from Berlin and reflect a particularly German view of what is required. Those measures focused on the suddenly revealed vulnerability of governments in weaker countries to rapidly increasing public sector deficits – deficits made inevitable by the constraints imposed by euro membership and by the impact of the GFC on the relatively loose policies pursued by those countries within the apparent comfort of the eurozone.
The reduction of those deficits became the main and essentially short-term goal of German policy. The Germans were increasingly nervous that they would be required to finance any rescues that might be needed; and the German government’s own domestic political and ideological preferences (themselves now increasingly challenged within Germany itself) pointed strongly to austerity as the correct response to recession. The consequence has been that the travails of eurozone, and particularly of its weaker members, have been exacerbated by the inevitable consequences of austerity.
In most circumstances, an economy that discovers that it has become uncompetitive, as evidenced by a trade or public sector deficit, or in the longer term by falling comparative living standards, will respond with a range of measures that will usually include the devaluation of the currency. A devaluation will have the merit of improving competitiveness across the board and doing so in a fair and impartial way, so that everyone bears some share of the short-term burden of the necessary adjustment. It also has the advantage of underpinning and launching an obvious and well-tested strategy for overcoming problems of lack of demand by promoting growth and expansion.
The devaluation option was not of course open to eurozone members. Without it, they could grow themselves out of recession – which by definition occurs because of a deficiency in demand – only with the aid of a policy framework, in terms of both monetary and fiscal policy, that would encourage greater rather than less economic activity.
That, however, is precisely what has been denied them by the proponents of austerity. The insistence that Greece and Ireland, Portugal and Spain, and perhaps eventually Italy as well, should cut spending and reduce demand in order to eliminate deficits has ensured that recession becomes persistent and almost impossible to shake off. As the experience of Spain shows most recently, slamming on the brakes means immediately higher unemployment, falling production, a slump in living standards, decimated public services, social unrest and – most significantly for the proponents of austerity – larger, not smaller, public deficits off the back of lower tax revenues. The Spanish bailout is the price being paid by the Spanish people for that mistake.
Even within in its own terms, the policy is doomed to failure. Austerity is meant to provide an escape route from debt; but it has ensured instead that the bailouts provided to Greece, Spain and others constitute an increased debt burden that they have little hope of repaying while they are going backwards. Little wonder that the money markets immediately saw the Spanish bailout for what it was – a postponement of the inevitable.
The threat to the future of the eurozone, which may also engulf the global economy, is therefore the outcome of policy mistakes, both in terms of deficiencies in the project itself and in the response to recession. If the measures taken so far have made matters worse, what should now be done to offer better prospects?
The answer to that question from Europe’s leaders is not encouraging. Because they, and in particular the “troika” of the European Commission, the IMF and the European Central Bank have, through a failure of analysis, ignored the actual causes of the eurozone crisis, they have accordingly continued to press for exactly the wrong remedies. As one eurozone country after another succumbs to the burdens of both euro membership and austerity, the remedies proposed are simply an intensification of both of those burdens.
It is simply not admitted that the burdens of euro membership have been too much for many members. No attempt has been made to distinguish between those countries that have prospered and those that have not, or to suggest refinements of the rules that might help those that have not. Those that have already demonstrated by falling into economic difficulties that they find membership burdensome, if not impossible, are now being told that if they want help they must accept still tougher rules within a banking union. This would make it even less possible for them to grow and repay debt and would require them of course to concede what remains of their economic sovereignty.
Even if this proved politically possible (and elections in France and elsewhere seem likely to throw doubt on this), it is hard to see how such a “remedy” would do anything other than bury the root causes of the problems even deeper and make them even more difficult to resolve in the long term. It is the equivalent of plastering over the cracks while the foundations are crumbling. Reality is not averted simply by denying it.
What is the alternative? The first step must be to recognise the reality that Europe as a whole is handicapped rather than benefited by the current breadth of the eurozone, and that it cannot possibly function well with such diverse membership. There should be a negotiated process for identifying those countries that would benefit from being, or that wished to be, released from the burdens of membership and for helping them to make an orderly withdrawal. Such a process would be complex and difficult, but by no means impossible, and in any case would be less disruptive than a disorderly break-up that otherwise seems inevitable.
Those countries that chose and were able to remain within the eurozone would no doubt proceed to create what would be in effect a greater German economy. Even so, some of those might well baulk at the prospect of being absorbed into such an entity.
Countries which chose to leave the eurozone would be able to return to their individual currencies, devalue to the appropriate level, abandon austerity in favour of a strategy for growth, and re-negotiate their obligations with creditors on the basis of a credible prospect of improving tax revenues. No one would pretend that this process is without problems, still less choose to start from here, but other countries, such as Brazil and Argentina, have negotiated similar issues and come out on the other side with improved prospects.
The numbers of countries choosing to take this option might swell in due course once the practicality and advantages of opting out of the euro became clear. They could then set about, together both with the eurozone and actual and potential European Union members who are not members of the eurozone, the task of building a new kind of European cooperation – what might be described as organic or functional cooperation, in which the process of ever-increasing convergence in the pursuit of common interests did not get too far ahead of the political and economic realities.
In economic terms, Europe would be much stronger as an entity if the constituent parts were able to apply monetary and exchange rate policies that were more suited to their needs and in particular to their different stages and rates of development. A Europe made up of economies each enjoying optimal macro-economic policy settings, trading with each other on special terms and negotiating trade arrangements with the rest of the world as a single entity, consciously pursuing convergence across the whole field of regulation , co-ordinating and aligning policy development wherever possible, increasingly working together in pan-European deliberative and eventually legislative bodies, would serve Europe’s economic interests much more effectively and do more to promote a genuine sense of European identity than the current abortive attempts to impose from above a European super-state that only a tiny elite has ever wanted.
To acknowledge that there is not yet a United States of Europe, with a single political identity that makes it possible to accommodate without undue strain a range of divergent economic interests, is not to admit defeat but to recognise the need to build a Europe on the basis of democracy and popular will if the result is to be sustainable. The eurozone crisis may in the end be a blessing in disguise.
Bryan Gould
14 June 2012
This article was published on the NewNations website on 18 June – at http://www.newnations.com/specialreports/theeuro.html