Right Reason

The European Union Isn't a Polity

 

A flag intellectuals and bureaucrats alike can delude themselves into thinking people are loyal to it.

 

 

In “The Problem with the Euro Fix: What’s in It for the Dutch,” Josh Barro discusses the problems lying in the development of a European fiscal union, despite the beneficial effects it could have for monetary stability across the Continent: 

Large, economically diverse areas can successfully share a single currency if they have deep economic links that make it possible for troubled regions to ride out crises. That means shared bank regulation and deposit insurance, so banks don’t face regional panics; a labor market that lets people move from places without jobs to places with them; and a fiscal union, which allows the government to collect taxes wherever there is money and spend it wherever there are needs.

The United States shows that this approach can work: America’s 50 economically diverse states share a currency quite comfortably, in part because of our banking union (Washington State did not have to bail out Washington Mutual on its own when it failed), our fluid labor market (as oil prices rise and fall, workers move in and out of North Dakota) and our fiscal union (states in economic pain benefit from government programs financed by all states). Nevada does not need to devalue its currency to restore its competitiveness relative to California in a severe recession; instead, Nevadans can collect federally funded unemployment insurance and, if necessary, move to California. 

In the course of the article, Mr. Barro misses the point. He focuses on economics and on cool-minded cost-benefit analysis whereas the problem in Europe is a matter of political identity. The Euro Crisis is showing the weaknesses of the dream of a more centralized Europe not because of the fact that some nations will be worst off, but because of the fact that centralization has been pursued furtively at the scale of national governments and beyond without a corresponding shift in the national identities of Europeans. 

 

The United States of America has, for the most part, grown organically as a single nation since 1776. Unlike the European Union, it is a natural policy. Americans largely share the same religion, tongue, and nation mythology. When an American takes out a piece of money from his wallet, on the bill will be a figure that all Americans can recognize as part of his national heritage. The same can be said of the Britons and their pound. Nothing of the sort can be said of the Euro. In the United States, no one even has to ask the question: “What’s in it for Connecticut?” It’s simply a matter of understood duty that the federal government will pursue policies that will eventually favor some states over others. The growth of centralization has been supported by the growth a single national identity. 

The European dream is fundamentally a desire for a United States of Europe. The need for greater fiscal links between nations in order to sustain the Euro Zone isn’t a bug, it’s a feature. It’s a feature that has been hiding in plain sight for the past couple of decades until a crisis such as the one Europe is in right now makes centralization a mainstream talking point rather than an extremist conspiracy theory. The national identity, just like the European flag, isn’t been grown, it’s being constructed through the vehicle of the European Union.  

 

Nevertheless, that is not what the European Union has been sold as. It has been sold as both a necessary mechanism for stopping a Third World War and as an open market. In Germany, voters went separate ways with their beloved Deutsche Mark because Bundeskanzler Kohl took exploited the only things German fear more than inflation: European war. In Britain, joining the European Union was sold as entering a trade pact with Britannia’s largest trade partner. Unlike Germany, the United Kingdom didn’t go as far as to jettison its national 

The European project is unrealistic, but it is unrealistic less for the economic reasons pointed out by Mr. Barro as much as for political ones. He mentions the gradualistic centralization of the United States of America as a possible model for the United States of Europe, but that gradualistic centralization isn’t a mere model, it’s the way that polities evolve. 

Let Greece Go!

 

 

Greece owes  €317 billion, about 175 percent of its GDP. Those numbers are meaningless by themselves. For a vibrant economy, such as that of Germany or the United Kingdom, a similar debt wouldn’t be such a problem. But it’s neither Germany nor the United Kingdom that we’re all thinking about now. Instead, it’s Greece, a dysfunctional nation whose economy has been in recession since 2008. 

It’s looking increasingly likely that Greece will default on that debt this summer. Let’s not kid ourselves, whether Greece would default on its debt has been clear since the Euro Crisis began in late 2009. Since then, Greece has teetered on the brink of default with increasing amounts of cash being given to the Greek government to keep it going—and compliant. The question has been when not if. That time seems to be upon us. Despite technocrats’ efforts to steer Greece to calmer waters, with capital controls on Greek banks being the most recent attempt, Greece is far from them. Rather, the inescapable currents of change, hiding right beneath the surface, continues to drag the Greek ship of state further from coast.

 

Really, the trend of Greek politics over the past half decade or so has been the story of captain after captain fighting against those currents. Greek’s economic and political nature cannot be recast from Brussels or even Athens. Recent concern about Greece failing as a state if it were to default misconstrues the predicament the nation finds itself in. Greece won’t suddenly fail as a state as a result of defaulting on its debts. Rather, Greece has been a failed state all along. Greece has had a long history of political corruption, economic inefficiency, and the systemic failure of its institutions. It was only able to gain admittance to the Euro Zone by cooking its books. Wall-street designed financial instruments could only cover up the mess that was Greece’s fiscal situation for so long. 

The nation has to reform, that much is true. Economic liberalization, and yes austerity, need to occur if Greece is going to prosper. Greece is stuck in an equilibrium of leisurely inefficiency that the Greek people are deluded to think can continue. It cannot, but the teethed reform that can actually change Greece structurally is a point that cannot be pursued as long as Greece holds onto its current debt. Paying back that debt is currently such a drain on the Greek economy that reform simply isn’t politically feasible. Moreover, the point of the troika’s bail-outs have never been to liberalize Greece, but to preserve Greece as a member of the European Union. 

 

Throughout the Euro Crisis, the important decision makers within the European Union have been interested in their own political projects. As self-interested politicians, their interest in Greece has largely been restricted to how Greece fits into a scheme of European unity and they have been more than willing to sacrifice Greece on the cross of European ambition. 

Last May, when giving a speech during the award of the Charlemagne prize for furthering European unity, Chancellor Angela Merkel warned that if the Euro fails, then “then Europe and the idea of European union would die.” Yet, Chancellor Merkel knows to let no crisis go wasted: "We have a common currency, but no common political and economic union. And this is exactly what we must change. To achieve this—therein lies the opportunity of the crisis."  Jean-Claude Juncker has yet to show a whiff of sympathy for Greece and has instead gone out of the way to state that he felt betrayed by Greece in the latest negotiations over Greece’s debt. To European leaders and Eurocrats alike, Greece is just a means towards their end of a centralized Europe, not an end in and of itself.

 

The crisis calls for an empathetic point of view that genuinely wants what is best at Greece. Policy makers should want to best for everybody involved in any political question. Looking at the crisis merely as a moment in the history of the European Unions inextricable march towards unity or as a threat to the world’s financial stability ignores many of the political dimensions that define the crisis.

For instance, merely looking at the financial consequences of Grexit overlooks how the strain of Greek debt has prevented any political progress in Greece. Syriza rose to power by speaking out against the demands put on Greece by the European Union and the troika. The party’s policies may be the last thing that Greece needs, but these are the policies that Greece will inevitably get as long as the troika meddles in their politics. The Greeks understand that the European Union care little for their plight. According to them, Greece needs to stay in the European Union, no matter the Greek costs. 

Greece has borrowed beyond its means, yes, but the banks have been there as enablers. They should have lent money with their eyes wide open. The banks that have lent to Greece made bets that haven’t paid off. The losses of those who haven’t already been bailed out will be certainly extreme, but so have the loses of the Greek people. The interests of the financial sector shouldn’t be made sacrosanct as the expense of the Greek people. Obsessed with the standard of economic efficiency, policy makers have been blind to the concerns of justice and equity involved when the banks get themselves into trouble. Nevertheless, policy choices today can put the developed world back on the right political track. In a world where finance has increasingly made the world fragile, a Greek default could help signal to the world that policy won’t play favorites for the financial sector, as it has done in crises past. 

If Greece is guilty of an irresponsible fiscal policy, the nation’s culpability must be balanced by the irresponsibility of those who lent money at close to near-German rates to a very non-German nation. Creditors and debtors alike are at fault. Greece alone cannot be isolated as the only guilty party who deserves to suffer the costs of the fact that they cannot pay back their loans. Just like almost all the other rich nations, those of Europe need to demonstrate to the financial sector that their interests are no more special than those of ordinary people’s. Letting Greece default on its debt without back-room negotiations to ensure that the banks get paid on their imprudent loans would be a small improvement on that margin.

 

The creation of a euro was an ill-conceived policy, informed more by the fantasies of politicians and eurocrats alike than the fundamentals of their societies. Reality needs to reassert itself. European leaders need to admit that Greece cannot prosper as part of the Euro Zone. The slogan of the hour needs to be: Let Greece go! 

Greece will still be in an unenviable predicament, but it will be in a position to decide on their own policies. If political reform fails, the Greeks would deserve to suffer a catastrophe of their own making. Today, they deserve relief and an opportunity to pursue reform on their own initiative. 

Syriza: A Reaction Against Federalism

 

 

I am liberal, neither a social democrat nor a socialist. I believe that the just society is one in which each person is left to pursue his own interest in his own way insofar as he does not violate the laws of justice. I believe that austerity is needed when governments expand beyond their economically sustainable purview and that a recession, when recalculation is occurring throughout the economy, is as good a time to go about that, since austerity will be an important part of that recalculation. Culturally, I am more of a stern North European than a romantic Southern European. Nevertheless, I still sympathize with Syriza. 

 

Although the Euro Crisis is centered around the feasibility of the Eurozone, the Euro Crisis is wider than nations’ choice in national units. It involves questions federalism, of who should be making decisions for whom. Europe’s very political structure is changing towards greater federalism with the European Union. Each state’s laws and regulations are ever more determined by politics in Brussels than at home. That trend towards greater federalism was one of the causes leading to Syriza’s win, as CJ. Polychronious writes: “The Greek electorate has had enough of the imposition of the harsh austerity measures…”  

A system of money can only last as long as the political structures supporting it. What makes the Greek situation interesting is that they are facing a choice of whether they want to go about using the Euro, with the accompanying demand for greater federalism, or returning to the Drachma, where they can be sure that decisions about Greek debt can be made by Greek officials. Both will have wide political conclusions. One of those political conclusions is whether they want to have German and French, but especially German, bureaucrats in Brussels making decisions of national policy for them. Yet federalism can only be successful if the electorate judges those decisions to be legitimate. The election of Syriza points to another conclusion. 

 

If I were Greek, I think I would like having my government tied to the post when it comes to certain fiscal issues. I would trust Brussels more than I trust Athens. But I’m not a Greek nor are my politics Greek and that matters. My politics, as bureaucrats in Brussels would call them, are Anglo-Saxon and I would trust English-speakers more than I trust Continental Europeans to make my nation’s policies. So even though I think the Syriza’s policies are anathema to a free and prosperous society, I still sympathize with their situation because I think they speak for people who see policies being made that they want no part in. Where Germans see themselves having to support economic deadweight, Greeks see themselves as a German fiefdom. 

I say to both: Amicably divorce! Both would be better for it.  

The Euro Crisis and the Assault on Nation-State Democracy

Who is loyal to this flag? Mostly bureaucrats.

 

The ongoing crisis in the European Union allows us to be witnesses to perhaps one of the most important assaults on freedom in this generation. It is not a conscious assault of freedom, for the most part, but rather a process by which politicians are willing to sacrifice the freedom of those that they are supposed to represent and those of nearby nations in order to fight against the inevitable. The Eurozone is doomed or it will have an extravagantly high cost, focused in the Mediterranean nations, to save. The entire project of putting heterogeneous nations with little economic similarity under a common currency was a bad idea to start off with and its implementation was just as faulty.

 

The institutions of nation-state democracy may be an object of great trust to modern day Libertarians, and this is not entirely without justification. After all the institutions of nation-state democracy have done little to nothing in either guaranteeing liberty or to preserving it against erosion. The parliamentary reforms in the United Kingdom, for instance, opened the gates for Fabian socialism and the hey-day of the Liberal party was short, one could even go as far as to say the Liberal Party died with Gladstone. In the United States, the Progressive belief in the absoluteness of democracy brought with it not only Federal encroachment on the lives of each citizen, but also a regulatory ecosystem in which an alphabet soup of bureaucracies regulate largely without the oversight of Congress. Nation-state democracy brought along with it a superstitious regard for democracy as a means of creating society anew and it contributed to the decline of the rule of law as it became popular to deny any authority about the representative body. Those that thought democracy would protect liberty were mistaken and the experience of the last two centuries better corroborate the opinions of the franchise's bears than it's bulls.

It could be said that we live in a world of the second best. It could very correctly be pointed out that, especially in Europe, the alternative to nation-state democracy is a Federal European state. Either the sovereignty of nations like Greece and Spain to tax and spend, certainly a sine qua non of nation-state democracy, as their governments decide is upheld, or the European parliament usurps that power by deciding how those nations may tax and spend. That is certainly true, but something braver and more pertient can be said: that despite its many problems, nation-state democracy has been the best set of political institutions for the maintenance of human prosperity the human race has ever discovered.

 

Yet, if the Eurozone is going to be salvaged, then nation-state democracy must be cast aside and the powers given to a body that claims sovereignty above the representative bodies within the nation-state. The reason for this is that the Euro Crisis cannot come to a close without an influx of capital into the Mediterranean economies, and this cannot happen without German and other Northern European investors buying assets in those countries. For that in turn to happen, these investors need to expect their investments to bear fruit in the future and they will only have this expectation if the local governments have their fiscal and monetary hands tied by an outside sovereign who ensures that local governments limit their spending and are irrevocable joined to the Euro. Only closer political union will bring the Northern, Germanic capital that the Mediterranean, under their present conditions, so desperately need and it will only travel downward when there is closer political union.

Closer political union, though, would mean the sacrifice of the Mediterranean nations' self-determination to a legislative body in Strasbourg and Brussels that is no longer accountable to the peoples of those nations. Where the Connecticut Compromise was able to balance the power of the smaller and larger states of the United States, the abrogation of nation-state democracy in Europe would mean that the Mediterranean states would be more or less giving up their power and agreeing to terms set by the Northern states. There is no give-and-take, there is simply the agreement of some states to the conditions set by others. Let's not forget that the EU is the organization that when the Irish rejected the Lisbon Treaty in a referendum, simply figured they had it wrong and forced another referendum. In addition, if the political union were to ever happen, the entire process of recovery for the Mediterranean would be for what should be considered foreign investors going into nations and buying them. Not only will nation-states like Greece and Spain be under the political terms set by Germany, but they will also by the end process be owned by German capitalists.

 

The good news is then that this union will never succeed. Europe is not a polity. It is united neither by tongue nor law nor religion nor common experience. The language of Spain is Spanish, that of Poland is Polish and that of Austria is German. There is the Napoleonic Code in France and the Basic Law in Germany. Greece comes from a Orthodox religious tradition while Dutch religious tradition is highly influenced by the events that followed the Protestant Reformation. The only thing close to an experience shared by the entire continent was the Second World War, but that was won by soldiers who are foreign to the nations now in the EU. The entire project of the EU is primarily bureaucratic in nature and it has been explicitly created by treaties rather than the loyalties of people.

There is simply no social fabric to hold a Federal European state together and any attempt to make one will fail. The road to that Federal state would be an arduous one, especially for Mediterranean nations, and there is simply nothing that will hold it together through that arbor. Nations like Greece and Spain will find it much easier to simply leave the Euro, though they may never do so explicitly, than to accept the terms of an artificial European state. Though they may travel down that road for the time being, when the real sacrifices have to be made and when hope of recovery is all but extinguished, the national governments of many nation-states will simply not be able to withstand the protest against the usurpation of their nation-state democracy.