- - Sunday, October 2, 2016

ANALYSIS/OPINION:

THE EURO: HOW A COMMON CURRENCY THREATENS THE FUTURE OF EUROPE

By Joseph E. Stiglitz

Norton, $28.95, 416 pages

What a difference 17 years make. Sitting in the cocktail lounge of Paris’ elegant Prince de Galles hotel in June of 1999 — as the franc was being phased out and the euro was being phased in — all the talk was about how the rapidly-expanding European Union, now armed with a common currency, was about to leave us backward, reactionary Yanks eating dust. The EU and Japan, one was constantly told, were riding the crest of the Wave of the Future as the American Century ended and Uncle Sam slipped into his dotage.

Not quite. In fact, not at all. The term “Sick Man of Europe,” coined in the 19th century to describe the fatal decline of the Ottoman Empire, could now be applied to the European Union itself. This is thanks largely to an overreaching Eurocracy that was so eager to overtake the United States in size, population and economic power that it bit off far more than it could chew, much less digest. With the addition of each shaky, peripheral member state the EU became a more culturally, historically and linguistically dysfunctional family of nations, with more and more economic basket cases as new members.

Imagine the chaotic disunity that our own Founding Fathers would have faced if all of America’s 13 original colonies, like the EU’s 19 member states, spoke a different language or dialect and had fought frequent, bloody wars against each other for hundreds, sometimes thousands, of years. Add to all this the negative birth rates in some of the most productive European economies — a chronic problem shared by Japan and China as well — and the building ethnic and nationalist animosities fed by the open borders within the EU, and neither the problems it faces nor its unpopularity with many ordinary Europeans should come as a surprise.

As the EU’s common currency the euro is a natural lightning rod for much of this dissatisfaction. But, despite the shrill polemics of leftist economists and politicians like Nobel-winning economist Joseph Stiglitz, it is really more of a symptom than a cause of the disease. You have to wait until page 315 of Mr. Stiglitz’s “The Euro” to get to the point of both his book and the crisis it claims to explain. “Though few would admit it,” Mr. Stiglitz writes, “the debate — the struggle — over the euro is as much or more about power and democracy, about competing ideologies, visions of the world and the nature of society, than it is about money and economics.”

Indeed it is, but not quite the way Mr. Stiglitz thinks. Ever since the end of World War II a welfare state ideology based on entitlements rather than productivity has driven the “democratic” politics of almost all of non-communist Europe’s elected governments. Countries with skilled work forces, efficient, competitive industries and a traditional work ethic have managed to stay — usually just barely — above water thanks to the quality of their labor force and the dynamism of their private sectors. One thinks of Germany, Scandinavia and the U.K., to cite a few examples. But one of the reasons for their relative well-being is that their voters and politicians, to varying degrees, have come to recognize the need to rein in the runaway entitlements that were eroding their economic and social foundations.

Meanwhile, in European countries where the political process was more corrupt and the economies more backward, several generations of post-war politicians won votes by imitating everything that was wrong with their more prosperous neighbors and ignoring what they were doing right. The disastrous result of unsustainable entitlements and bloated public payrolls in countries like Greece was inevitable. A rotten, corruption-riddled system run for the most part by “progressive” leftist kleptocracies collapsed of its own weight. To blame the euro for current and pending economic disasters in chronically mismanaged countries like Greece, Italy, Spain and Portugal is like blaming the law of gravity every time a drunkard falls on his face.

It is instructive to remember that there were three previous attempts at “European Union” in modern times, all of them imposed at gunpoint by dictators with a lust for power and a disastrous ignorance of economics: Messieurs Napoleon Bonaparte, Adolf Hitler and Josef Stalin. The latest attempt, run by colorless bureaucrats rather than bloodthirsty egomaniacs, may be just as doomed as its predecessors.

Aram Bakshian Jr., an aide to Presidents Nixon, Ford and Reagan, writes widely on politics, history, gastronomy and the arts.

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