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Archive for Friday, June 22, 2012

Thatcher warned against union

June 22, 2012

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— One of many things left out of the film “The Iron Lady” was Prime Minister Margaret Thatcher’s warnings on the effects a single currency would have on the economies of European nations. Thatcher’s premonitions place her among the great political prophets of all time.

On the single currency, Peter Oborne, a columnist for the London Daily Telegraph, writes, “Mrs. Thatcher foresaw with painful clarity the devastation it was bound to cause. Her autobiography records how she warned John Major, her euro-friendly chancellor of the exchequer, that the single currency could not accommodate both industrial powerhouses such as Germany and smaller countries such as Greece.” Thatcher predicted the currency would harm poorer countries because it would “devastate their inefficient economies.”

The idea of a European Union modeled on the United States was unlikely to succeed from the beginning because, unlike American states, European countries lack a common bond. There are different languages, different histories (Colorado, for example, never invaded Nebraska) and different religions, including for six decades, atheism imposed by communist dictators in Eastern Europe.

How can a European “E Pluribus Unum” be forged out of that?

BBC reporter Laurence Knight stated the obvious when he summed up Spain’s financial disaster by noting its citizens during the relatively brief “good times” of the 1990s spent much more on housing and other material goods than they could afford. Sound familiar? Living within one’s means was a lesson forgotten by individuals and governments, whose main preoccupation — in Europe and America — has been giving people what they want in hopes they’ll re-elect the politicians who dispensed the goodies. That formula has contributed to an unemployment rate in Spain approaching 25 percent. Spain last weekend was approved for a bailout of up to $125 billion from the eurozone, the fourth country to ask for a loan since Europe’s debt crisis began.

Knight wrote last month, “Unfortunately for Spain, it shares a currency with Germany. That means Spain can no longer simply devalue the peseta — something that would automatically make its workers cheaper and more competitive in the world. There is no peseta to devalue.”

After all this, the “conservative” British government, still ignoring Thatcher’s warnings, is proposing a referendum that, if approved by voters, would move Britain closer to the European Union. The Daily Telegraph reported.

Are they mad? Why would Britain want to associate itself with governments and economies (and people) that have behaved so irresponsibly? During the Cold War, Britain did not try to integrate its economy with that of the Soviet Union. In Europe, union has not brought unity, nor can it.

Again, Margaret Thatcher was right when she said, “A democratic Europe of nation states could be a force for liberty, enterprise and open trade. But, if creating a United States of Europe overrides these goals, the new Europe will be one of subsidy and protection.”

Most profoundly, Thatcher warned, “We have not successfully rolled back the frontiers of the state in Britain, only to see them re-imposed at a European level with a European super-state exercising a new dominance from Brussels.”

That is precisely the seductive siren call the “conservative” British government now hears. It is a call, that, if answered “yes” by voters will wreck Britain’s struggling economy and potentially cause it to go down the drain along with most of the other economies on the continent.

Today’s politicians can’t pretend they were not warned.

Comments

just_another_bozo_on_this_bus 1 year, 10 months ago

Paul Krugman agrees-- sort of

http://www.nytimes.com/2012/06/18/opinion/krugman-greece-as-victim.html

"On the other hand, many things you hear about Greece just aren’t true. The Greeks aren’t lazy — on the contrary, they work longer hours than almost anyone else in Europe, and much longer hours than the Germans in particular. Nor does Greece have a runaway welfare state, as conservatives like to claim; social expenditure as a percentage of G.D.P., the standard measure of the size of the welfare state, is substantially lower in Greece than in, say, Sweden or Germany, countries that have so far weathered the European crisis pretty well.

So how did Greece get into so much trouble? Blame the euro.

Fifteen years ago Greece was no paradise, but it wasn’t in crisis either. Unemployment was high but not catastrophic, and the nation more or less paid its way on world markets, earning enough from exports, tourism, shipping and other sources to more or less pay for its imports.

Then Greece joined the euro, and a terrible thing happened: people started believing that it was a safe place to invest. Foreign money poured into Greece, some but not all of it financing government deficits; the economy boomed; inflation rose; and Greece became increasingly uncompetitive. To be sure, the Greeks squandered much if not most of the money that came flooding in, but then so did everyone else who got caught up in the euro bubble.

And then the bubble burst, at which point the fundamental flaws in the whole euro system became all too apparent.

Ask yourself, why does the dollar area — also known as the United States of America — more or less work, without the kind of severe regional crises now afflicting Europe? The answer is that we have a strong central government, and the activities of this government in effect provide automatic bailouts to states that get in trouble.

Consider, for example, what would be happening to Florida right now, in the aftermath of its huge housing bubble, if the state had to come up with the money for Social Security and Medicare out of its own suddenly reduced revenues. Luckily for Florida, Washington rather than Tallahassee is picking up the tab, which means that Florida is in effect receiving a bailout on a scale no European nation could dream of.

Or consider an older example, the savings and loan crisis of the 1980s, which was largely a Texas affair. Taxpayers ended up paying a huge sum to clean up the mess — but the vast majority of those taxpayers were in states other than Texas. Again, the state received an automatic bailout on a scale inconceivable in modern Europe."

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cato_the_elder 1 year, 10 months ago

"Living within one’s means was a lesson forgotten by individuals and governments, whose main preoccupation — in Europe and America — has been giving people what they want in hopes they’ll re-elect the politicians who dispensed the goodies."

Well-stated indeed.

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cato_the_elder 1 year, 10 months ago

"Living within one’s means was a lesson forgotten by individuals and governments, whose main preoccupation — in Europe and America — has been giving people what they want in hopes they’ll re-elect the politicians who dispensed the goodies."

Well-stated, Cal.

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