Friday, October 14, 2011

The Eurozone, Solidarity for Sale and the Ghosts of Currencies Past

Last Summer I started writing on an essay I intended to put here on my blog. It was going to be a critique of the EU’s Eurozone. I picked my condensed copy of the Maastricht Treaty off the shelf for the first time in many years, and wrote around seven handwritten pages in preparation.

The arguments were going to be built against these points:
1. The Treaty states that the union works to promote “solidarity” between member states. That can for instance mean monetary aid.
2. I got my copy of the treaty in 1994 and it then stated that the member states should work towards a system of one currency. The Euro that we now have. The intellectual architect of the Euro, Robert Mundell, once famously said: “the optimal number of currencies in the world is an odd number, preferably less than three.” He doesn’t seem so clever now! –though I was never a fan before.

The arguments were going to be that:
1. True “solidarity” should monetarily speaking be helping your neighbour attain his best possible position in the marked. That is not done by feeding him with the surplus money from your own industrial production, in a large scale or on a regular basis. It is done by creating a system where he has access to every competitive advantage that every one else has access to!
2. Just think about the massive competitive advantage Greece would have right now if it still used the Drachmas! The country is, monetarily speaking, currently just worth a few buildings and antique monuments. The labour force is hardly employed, so there is very little work that creates monetary worth. Naturally, every high-fly industrialist in Germany wants to bail them out. At the moment, there are a lot of things that are slowing down the growth in the Eurozone, but Germany is not one of them! As it stands, Germany is earning lots on the Euro, combined with very clever politics of course; and Greece is bleeding because of the Euro, but would in spite of slightly bonkers politics still produce goods under private initiatives if it had a proper competitive advantage. That advantage would be called ‘Drachmas,’ and if they still existed they would be so cheap that you could sprinkle your ice-cream with the coins and decorate your sandwiches with the notes. Goods would sell, people would be employed, money would be earned and the people of Greece could get on with cleaning up some of its government offices. I’m not saying everything would be perfect, but they would be a lot better! –and more importantly, growth could eventually become sustainable! Germany would possibly have to work a little bit harder to compete, but Greece would be allowed a position to sell more… sorry, sell anything at all!

An investor and financial analyst was asked on a recent BBC programme if he thought investors would return to Greece if the planned bail-out package is received from Germany et al. He replied that the bail-out package would eventually run out and the willingness to provide credit to a country with close to no marked confidence would be very low. Spot on indeed!

The interviewer mumbled something about the feasibility to return to the Drachmas and the expert nodded and might have said something containing the word “possible.”

I have never liked the word “solidarity” and I think there are many other words that do a better job. It has become old and worn, and it has been applied in too many situations to make sense to any one situation in particular any more. But whatever specific and nice meaning we have been convinced or fooled into believing that it holds, we have learned another less flattering definition as of lately. You see, between nations in close alliance it can also mean: “Pay your neighbour so he forgets he is broke!” –But you should still keep him from employment.

I like that old word even less now!

So, I was going to write an essay as captivating as a thriller on the topic! And believe me, it was going to be grand! It would be flamboyant! It would be sharp and funny like Shakespeare! –Epic like a gothic knights’ tale! It was going to paint a picture of a scarily real farce; as frightening as your least favourite politician and as much a farce as the management at Fawlty Towers!

But I never got there, cause someone beat me to it! The EU beat me to it!

(Way to go!)

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