Blame the architect not the residents

germany_greece-flags-400x266– why free-marketeers should be far more sympathetic to Greece and far more critical of Germany than they are!

I recently got on Facebook the following, glorious Blackadder pastiche… thanks Mark David Ivan Haley and Justin Trick. 

Baldrick: “What I want to know, Sir, is, before there was a Euro there were lots of different types of money that different people used. And now there’s only one type of money that the foreign people use. And what I want to know is, how did we get from one state of affairs to the other state of affairs”
Blackadder: “Baldrick. Do you mean, how did the Euro start?”
Baldrick: “Yes Sir”
Blackadder: “Well, you see Baldrick, back in the 1980s there were many different countries all running their own finances and using different types of money. On one side you had the major economies of France, Belgium, Holland and Germany, and on the other, the weaker nations of Spain, Greece, Ireland, Italy and Portugal. They got together and decided that it would be much easier for everyone if they could all use the same money, have one Central Bank, and belong to one large club where everyone would be happy. This meant that there could never be a situation whereby financial meltdown would lead to social unrest, wars and crises.”
Baldrick: “But this is sort of a crisis, isn’t it, Sir?”
Blackadder: “That’s right Baldrick. You see, there was only one slight flaw in the plan”.
Baldrick: “What was that then, Sir?”
Blackadder: “It was bollocks”.

Brilliant!  And making a very important point.

The Euro was, is and will be for the foreseeable future, structurally flawed.

It did not have to be flawed.  But the political desire to have a common currency but not a debt union ensured failure from the start.

To outline briefly what is now widely recognised…

For a common currency to work, there also has to be a debt union to even out differences of wealth and productivity.  Alternatively, something similar can be achieved if, over time, productivity converges.  However, productivity convergence also requires single European labour and capital markets.  The Euro is a common currency but without any of the rest.  Nor is the Eurozone moving in the right direction!

All this was known, recognised and understood at the time of the creation of the Euro – and promptly ignored by the architects.

Ignoring it has had a number of damaging consequences: one of the most important is the impact on the price of exports from Euro member states.

The absence of exchange rates and therefore exchange rate movements between the Euro member states means that the more productive countries’ goods are under-priced in global terms – the Euro is worth less than a Deutschmark would be if it still existed: that means Germany benefits.

The reverse is also true: the absence of a Drachma or, say, Peseta,  to fall in value on international currency exhanges makes Greek and other southern European goods relatively more expensive than they should be – with no economic mechanism to counteract this.

The Bible expresses the consequence beautifully and poetically: ”For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath.” [Matthew 25:29, The Parable of the Talents.]

In short, as Baldrick might put it, the Euro is providing a windfall for German business and stuffing the Greeks, Italians, Spanish and Portuguese.  It is doing this every day the Euro continues in its current form: lucky Germany, for them, the Euro is the gift that keeps on giving.

Why will no libertarians, classical liberals or monetarists acknowledge this?

I suspect because they are enjoying attacking Greek profligacy and southern European laziness and collectivism!

You can add that the southern Euro states should not have been so stupid as to agree to such a damaging arrangement; they were hoodwinked by German self-interest disguised as the next, inevitable phase of the European project – truly a wolf in sheep’s clothing.

But come on!

Do the people of Greece and elsewhere in southern Europe really deserve endless impoverishment because of the gullibility of their political elite at the end of the last century?

More importantly, this inherent German benefit was built in from the beginning by the Euro’s architects.

When a building does not work in practice – the new EP building in Strasbourg is a good example of one such – then surely, you should blame the architect and the project managers not the poor saps that have to live with the consequences of the ineptitude day-by-day?

Actually I think it is worse than that: I suspect the Germans did it deliberately – all the time laughing at the economic illiteracy of their southern European neighbours!

They may be duping more than just their Eurozone partners.

Whereas the US government has been much exercised by the Chinese boosting growth by keeping down the value of the Yuan, it seems to be passing almost un-noticed that the Germans are in effect using their membership of the Euro surreptitiously to do the same thing.  Does the Federal Reserve even realise what is really happening?  Certainly not judging by the desire of the current US government to keep the EU on its road to ‘ever closer union’ – and the UK in it.

All of which brings us back to Blackadder… the Germans may have lost two world wars in the last century – mainly thanks to the British.  But, they are certainly winning the peace!

And monetarists, classical liberals, Austrians, libertarians – Anglo-American free-marketeers of all kinds – are acting as cheerleaders for this monstrous policy mistake when we should be helping their victims understand how they have been duped – and to plot their escape route from Blackadder’s bollocks!

Tony Brown, policy adviser to the EFD (Europe of Freedom & Democracy Group) in the European Parliament.

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