Pesos and Euros
Will Europe go the way of Argentina?
John O'Sullivan, an NR Editor at large
Januray 2, 2002 8:40 a.m.
nationalreview.com
Excerpt:
Which is where the euro comes in. As columnists like Stelzer and William Rees-Mogg in the London Times pointed out, the euro is an Argentine currency board on a much larger scale, uniting the currencies of twelve European nations from Finland to Sicily. This currency union also has a "one-size-fits-all" monetary policy on the Argentine model. Which means that no monetary policy set by the European Central Bank can possibly suit both Germany (whose economy is faltering and needs the boost of low interest rates) and Spain (which is inflating and needs the correction of higher ones.)
In the United States, we solve or at least ameliorate this problem of regional economic variations by labor mobility. When California hits a slump, some workers uproot themselves to move to the job opportunities in a part of the U.S. that is booming. In some of the individual European nations now in Euroland, they have traditionally responded with regional cross-subsidies, taxing the booming North of Italy to finance grants to the depressed Mezzogiorno. And so on.
But the European Union can resort to neither remedy to the degree necessary: Germans are unlikely to move to Spain in the numbers that would restore equilibrium in both countries; and Italians are even less likely to vote for large subsidies to Greece or Belgium. Because America is a nation as well as a currency union, its people are prepared to make these kind of sacrifices for each other in hard times; because Euroland is a collection of different nations in a monetary straitjacket, its peoples see no reason to bail out their neighbors from troubles they darkly suspect may be well-deserved.
What this ultimately threatens is that Euroland, like Argentina, will be rocked by perennial crises, with inflation in one country, long-running joblessness in another, and instability everywhere.
Journalists are supposed to notice that kind of possibility. Why did they not do so?
Most reporters lack passionate opinions on exchange-rate mechanisms. They do not root for the crawling peg, nor abhor "the snake in the tunnel." So the celebratory tone of most coverage — which concentrated either on the sheer excitement of the launch or on the "historic" nature of the event — is best explained as an expression of elite conformity.
Conventionally minded bankers, politicians, corporate officers, foundation executives, and Ivy League reporters all know-without ever having really thought about the matter-that the European Union is a Good Thing. And, by extension, the euro is a Good Thing too, a step forward, you know, historic, an insurance against future European wars, the fulfillment of an idealistic dream, that kind of thing.
The collapse of the same dream next door did not suit that scenario. To draw attention to it might have seemed grudging, or party pooping, or anti-European, or the vulgar triumphalism of an American provincial. So it was passed over in discreet silence.
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