voters never approved the euro — 4/06/17

Today’s encore selection — from War and Gold by Kwasi Kwarteng. European countries have high levels of trade with each other, so they needed currency exchange rates that are relatively stable. In the early twentieth century, having their currencies tied to gold provided that. After World War II, it was provided by the Bretton Woods agreement, which tied these major currencies to the dollar, which was in turn tied to gold. But after President Richard Nixon took the U.S. off the gold standard in 1971, the need reappeared and a number of European countries created a mechanism called the “snake,” which constrained fluctuations of currencies, and then the “exchange rate mechanism,” which did much the same thing. But the ultimate dream was to create a single currency — the euro — in one of the boldest monetary initiatives in history. For something so resolute and so laden with potential moral hazard, and for something that has in recent years contributed to so much European economic pain, it was surprisingly the creation of technocrats, and never taken to any country’s voters for their approval:
“The fiscal situation of the European countries which aspired to join the single currency [in 1997] did not inspire confidence. All through the late 1990s, the lack of preparedness of certain EU countries to join the euro was a subject of open debate. ‘There has, of course, been some sleight of hand,’ wrote Rupert Cornwell in the Independent in February 1998. ‘It remains mysterious quite how Italy, which for years regularly ran double-digit budget deficits, conveniently slashed last year’s to a mere 2.7 per cent of GDP.’ It was obvious, even before the euro was launched, that the single currency was an almost purely political project, which would be pursued without any real regard for the underlying economic reality. As the Frenchman Jacques Rueff had said, ‘Europe will make itself by money or not at all.’ The words of the Portuguese Prime Minister António Guterres at the Madrid summit in December 1995 were even more grandiose and emphatic: ‘When Jesus resolved to found a church, he said to Peter, “You are Peter, the rock, and upon this rock I will build my church.” You are the euro, and upon this new currency we will build our Europe.’

“There was never any idea that the people of Europe, the citizens of the individual states, would be consulted before this momentous step was taken. As [Otmar] Issing [the German economist who also served as a member of the European Central Bank’s first executive board], himself later admitted, it was ‘doubtless in Germany that resistance to EMU was the greatest’. The decision to ‘abandon the D-Mark required a great deal of political courage’, he remembered. In opinion polls conducted as late as the autumn of 1995, only 34 per cent of Germans were in favour of the single currency, while 45 per cent were against. Needless to say, these figures were reversed as the decade wore on and the single currency became more imminent. By the spring of 1999, some 55 per cent of Germans now supported the single currency while only 36 per cent continued their opposition.

“In the same poll from 1995, the Finns were shown to be the least in favour of the currency among the nations which eventually joined: 53 per cent of Finns were hostile to the currency, while only 33 per cent approved. It is important to grasp the extent to which Europe’s political elites were committed to the single currency. The reasons why numerous political figures and bankers became strong advocates of the euro differed. For the Germans, it was often as much a symbol of fiscal discipline as a badge of European unity. For Issing, the benefits of the euro were explicitly focused on the need for fiscal discipline. This was a view widely held in Germany and the Netherlands.
“The people of Europe, of course, had not been consulted before the single currency was officially launched on 1 January 1999. The euro was always conceived as an elite project, conjured up by technocrats, to be foisted upon a largely acquiescent and amorphous European public. There was as yet no European superstate, a fact which worried Germans, unsure of whether a monetary union was possible without a political union.”
To subscribe, please click here or text “nonfiction” to 22828.
War and Gold: A Five-Hundred-Year History of Empires, Adventures, and Debt

Publisher: PublicAffairs
Copyright 2014 Kwasi Kwarteng
Pages: 277-278

If you wish to read further: Buy Now
All profits are donated to charity and support children’s literacy projects.

the other side of the monroe doctrine — 6/2/14 is a brief daily email with an excerpt or quote we view as interesting or noteworthy, offered with commentary to provide context.  There is no theme, except that most excerpts will come from a non-fiction work, mainly works of history, are occasionally controversial, and we hope will have a more universal relevance than simply the subject of the book from which they came. 

the other side of the monroe doctrine — 6/2/14

Today’s selection — from James Monroe by Gary Hart. The Monroe doctrine was a declaration by U.S. President James Monroe in 1823 that the Western hemisphere was now off-limits to European powers and that the 300 year era of colonization by Europe in North and South America was therefore officially over. It was a bold declaration, and well beyond America’s ability to truly enforce, but it was one of the most important and consequential doctrines ever put forward by the U.S. Few remember, however, that it was also a reciprocal doctrine — the U.S. simultaneously pledged not to meddle in the affairs of Europe and had no intention of imposing its political system on any who did not wish it:

“On December 2, 1823, James Monroe submitted his seventh annual national report to Congress, and it included what were first known as the Principles of 1823 and later as the Monroe Doctrine. His statements were simply a presidential declaration of national principles and never codified in any statute, treaty, or proclamation. …

“James Monroe’s message to Congress yield[ed] the following principles:

1. Neither North nor South America should any longer be considered subject to colonization by any European power.

2. Any effort by any European power to extend its monarchical system of government to any portion of the Western Hemisphere will be considered as a hostile act by the United States.

3. Although the United States will not interfere in existing South American colonial relations, any effort to reassert European power over those former colonies who have declared themselves to be independent republics, and have been recognized as such by the United States, will be seen as an unfriendly act by the United States.

4. The United States will remain neutral in any ongoing war between Spain and the new South American republics so long as new circumstances (presumably the intervention of the Holy Alliance) do not require additional steps by the United States to ensure their security.

5. The United States will continue to refrain from interference in the affairs of any European power and will seek to maintain cordial relations with all, but in turn will not itself accept being interfered with by them.

6. Allied European powers (that is, the Holy Alliance) should not seek to impose their monarchical system of government anywhere in the Western Hemisphere. Believing the new South American republics will never be subdued by Spain, the United States will leave those parties to themselves and expects other powers to do the same.

“Particular attention is due the fifth principle, which should be called the principle of reciprocity. The conventional, and traditional, understanding of the Monroe Doctrine has almost always been as a unilateralist declaration: Europe is no longer welcome in the Western Hemisphere. In fact, Monroe, and [his Secretary of State John Quincy] Adams, were stating that the United States also was declaring its policy of noninterference in European affairs, particularly its conflicts. ‘In the wars of the European powers in matters relating to themselves we have never taken any part,’ Monroe states, ‘nor does it comport with our policy to do so.’ This was consequential in that, as the United States gained maturity, influence, and power, one or another side in the endless European struggles would be seeking alliance with it to add to its side of the scale of influence.

Officials Creating Monroe Doctrine

“Monroe further declared that, aside from South America, ‘with the existing colonies or dependencies of any European power we have not interfered and shall not interfere.’ This might provide a degree of comfort to those in Europe who feared America as a militant firebrand with a self-appointed mission to stamp out colonialism, and monarchy, throughout the world. Monroe was saying, according to one historian, it was ‘only when American rights were menaced that the United States made preparation for defense.’ What made the difference between the American hemisphere and the rest of the world was the contrast of the two political systems: ‘It is impossible that the allied powers [European] should extend their political system to any portion of either continent [in the Western Hemisphere] without endangering our peace and happiness,’ Monroe stated. But he also made it clear the United States had no intention of imposing its political system on any who did not wish it.”