8 ms·

'Single currency experiment has been a disaster' admits economist Stiglitz

68 points by rottyguy 10y ago

sevenless 10y ago
> Stiglitz points his finger squarely at “the fatal decision to adopt a single currency, without first providing the institutions to make it work”. The second part of this quote means something quite different from what the headline implies. He isn't advocating an end to the single currency, he wants stronger institutions, which the Eurosceptics have undermined at every opportunity.
- vixen99 10y ago
  Yes because the EU bureaucratic organization is deeply undemocratic. I won't go over that again here but we have seen its dictatorial behaviour in action: to quote Dan Hannan "Elected prime ministers of Italy and Greece were toppled in Brussels-backed coups. Eurocrats were brought in to head what were, in effect, civilian juntas, whose purpose was to pursue a series of economic policies that would have been rejected at the ballot box. Or consider the EU’s response whenever a referendum goes against closer integration, as in Denmark, France, Ireland or the Netherlands. Public opinion is treated as an obstacle to overcome, not a reason to change direction."
  - VodkaHaze 10y ago
    The old joke goes: "If the EU tried to join the EU it would be refused for being too undemocratic"
  - sevenless 10y ago
    The EU is 'undemocratic' - as opposed to Britain's unelected Prime Minister, Queen and House of Lords, of course. A more serious response is that democracy can only be justified by its outcomes, and isn't a good thing in itself. A racist democracy that votes to harm minorities is worse than a dictatorship that upholds human rights and prevents the majority harming the rest. With the rise of explicitly anti-immigrant and anti-Muslim parties in Europe, this is not a theoretical consideration.
    - anexprogrammer 10y ago
      I imagine I'll be thoroughly downvoted, but I like the unelected House of Lords. There's a heck of a lot wrong with it - not least the ease of pushing ex party members up there in vast numbers, but all alternatives thus far proposed are far worse. All proposed alternatives will give us more elected politicians adhering to party lines. None of the alternatives will give us better government. Lords are pretty good at being difficult in the face of bad legislation - yet every time a notable instance takes place there are more calls to abolish the place. Their party allegiance mellows as they age - so you get Tory peers ridiculing some aspect of the current Tory government. Last there are enough independents (usually with long non-political careers) to bring domain knowledge and independent thought to the place. Most instances of Lords reform have been as a result of them doing their job well, inconveniencing or embarrassing the elected government of the day. It's not democratic, but it works.
      - spoonie 10y ago
        I mostly like it too, it's a similar model to Canada Senate. Who needs to go are the current hereditary peers: they weren't elected or even appointed by someone elected. At least they abolished the hereditary system.
      - kps 10y ago
        The current role of the House of Lords (like the Canadian Senate) is to introduce hysteresis into Parliament. It's a smoothing function over the last n elections to limit damage from noisy inputs.
    - Wildgoose 10y ago
      (1) Britain's Prime Minister is the elected MP for the Maidenhead constituency in Berkshire. (2) The Queen is the Head of State but does not control our Democracy - she doesn't even have a vote. (3) The House of Lords is actually a revising Chamber, but in this last case I am largely in agreement with you with regards to its democratic credentials. The EU on the other hand has a so-called "Parliament" which cannot propose legislation, cannot amend legislation and cannot repeal legislation. It has neither "Government" nor "Opposition", being essentially a rubber-stamping body for the unelected EU Commission. You seem to prefer this to the idea of allowing people a democratic choice simply because a minority of those people are voting for parties of whom you do not approve. However what happens when that unelected group (which is lacking in democratic restraints) starts to act in ways even more harmful than its current actions? You might not like Democracy, but at least it allows the possibility of correcting its mistakes.
- sremani 10y ago
  May be there is something to do with multiple sovereigns and diverse economies, that form the Centrifugal forces on EU. It is too simplistic to blame Euroskeptics. The bigger question is how did Greece even made it into the Common currency, when the writing was on the wall.
  - VodkaHaze 10y ago
    Yes, because things are going so well in Italy and Spain and forcing them to use the same monetary policy as Germany and France is a superb idea
    - madaxe_again 10y ago
      It depends on whether you choose to take a short or long term view. Part of the purpose of the EU and its instruments, such as the euro, is normalisation of European economies into a single framework, with the ultimate goal of parity, which would not only bring about a more efficient and frictionless market (I.e. Simple cross-border trade for services and products), but also ultimately elevate the standard of living for all citizens. This is why some states which are less developed are currently net beneficiaries of European funds, and others are net donors. Currently. Wealthier nations beget wealth in their neighbours. To look at monetary policy in a vacuum is a mistake, as it ignores the substantial eu development funds which Italy and Spain are beneficiaries of. If you look at things in the short term, then poor Britain is being ripped off, the Spaniards are starving, the Greeks are broke - but if you take a longer term view, you'll take into consideration that all normalisation processes inevitably have over and undershoots, which can result in an imperfect present - but only define the future if you choose to let them do so.
      - mirekrusin 10y ago
        You don't need to use euro currency to take advantage of unified trade/no borders etc. ie. currently Poland.
      - thatfrenchguy 10y ago
        "which would not only bring about a more efficient and frictionless market (I.e. Simple cross-border trade for services and products), but also ultimately elevate the standard of living for all citizens." But you would have to have a working culture that is similar, which is not the case in the EU. People in Spain don't work like people in France or Germany, their government are different and wanting to have a single fiscal policy is doomed to fail. Also, the 1 to 5 salary for entry level workers is killing entry level workers in Western Europe, and that's one of the reasons behind so much euroskepticism
- Noseshine 10y ago
  Neither do I understand the word "admits" in the title. AFAIK he's been consistent in his message about the Euro over the years and has nothing to "admit". At least I remember reading him saying pretty much the same thing at previous (non-recent) occasions. For example, here he is in July 2014: "Stiglitz: How to save a broken euro" (https://www.euractiv.com/section/euro-finance/opinion/stiglitz-how-to-save-a-broken-euro/ https://www.euractiv.com/section/euro-finance/opinion/stigli...), or here is an opinion piece from him in the Guardian from May 2010 "Reform the euro or bin it" (https://www.theguardian.com/commentisfree/2010/may/05/reform-euro-or-bin-it-greece-germany https://www.theguardian.com/commentisfree/2010/may/05/reform...)
  - tptacek 10y ago
    Isn't the Telegraph a Euroskeptic paper? Not the worst of them during Brexit, but notable for it before Brexit?
    - Noseshine 10y ago
      What is your point? I don't see a connection to what I wrote. He did write that article and over 6 years ago, so he has nothing to "admit" since he's said the same things all along.
      - tptacek 10y ago
        I agree with your complaint about the headline and was trying to add some context.
        tim333 10y ago
        The Telegraph tends eurosceptic but the Guardian which trends pro europe has a similar review https://www.theguardian.com/books/2016/aug/22/the-euro-and-its-threat-to-the-future-of-europe-joseph-stiglitz-review https://www.theguardian.com/books/2016/aug/22/the-euro-and-i...
    - et-al 10y ago
- MichaelGG 10y ago
  Isn't that what Eurosceptics have been saying though? They don't want a political union? I've only seen a few videos but I'm pretty sure Farage has been saying something like that. That things cannot work without going all the way, and they don't want to go all the way. "Undermined" seems like the wrong word for opposing.
  - kwhitefoot 10y ago
    Eurosceptics and europhiles are not necessarily on opposite sides when it comes to closer political union. Many of us who are of the opinion that the European Union has done a lot of good are nonetheless of the opinion that tighter integration and standardization are not necessarily a good idea.
  - tonyedgecombe 10y ago
    I'm not sure what Farage wants apart from attention, it's been obvious for a number of years that political union was very unlikely and that the UK isn't going to join the Euro zone yet he continued to campaign. My feeling is most of the brexit campaigners didn't like the EU because they saw it as left leaning, this is why the opposition mainly came from the right.
- spriggan3 10y ago
  > the Eurosceptics have undermined at every opportunity The Eurosceptics don't want a political union for good reasons. It would devolve into a soviet style dictatorship. People that different just can't live under the same government. Europe is not USA. The Eurosceptics are the ones that are grounded in reality here, the other camp is trying to push an utopia that already had horrible consequences.
  - madaxe_again 10y ago
    1) EU 2) ....? 3) Soviet union! There's a gap somewhere in your logic. Europe is far more likely to end up a set of Soviet vassal states if it disintegrates, as that big hegemonic power called Russia is still very much a thing.
    - spriggan3 10y ago
      There is absolutely no gap in my logic. Tyrannies are often born from virtuous ideas and well intended people. The problem with concentration of power is that the people holding that power only care about insuring their own survival, not the good of the people they govern. This is already true at the national level and even more true at the supra-national level in EU. I don't want to give more power to corrupt bureaucrates that are completely disconnected from national concerns.
    - zigzigzag 10y ago
      The EU and latter day Soviet Union share more similarities than people would like to admit. The EU tries to prevent countries breaking away from its dictats using economic war as a threat (i.e. you obey us or we stop trading with you), rather than "hot war" - at present. But elements of the EU are pushing to get its own army, and the EU already has a system in place to effectively eliminate or take over governments that are deemed to not be reflecting EU "values": http://www.breitbart.com/london/2016/05/24/eu-vows-use-new-powers-block-elected-far-right-populists-power/ http://www.breitbart.com/london/2016/05/24/eu-vows-use-new-p... Fast forward 20 years and you get zealots like Juncker who already want to "punish" countries where voters disagree with him, put them in charge of their own army with a puppet parliament, and presto - the USSR is back.
- bane 10y ago
  Something I don't understand, as somebody who's not a European, is that stronger institutions, more centralization of power in some European-wide political body, more executive control in crisis situations, etc. all points very clearly to a European-wide Federal System a la the U.S., or maybe Australia or Canada, with a centralized Federal government, and some executive position -- all able to overrule local state autonomy. But even many of my European friends who favor these things seem to not agree that that's the inevitable vector that these institutions point to. I'm certainly not saying that the system will mirror the U.S. system, but it certainly will end being a system like this if Europe continues on the present unification course. Is there some nuance of the direction that I don't understand? It seems like as every crisis comes to Europe, advocates of pro-Europe seem to continue to point to centralization and empowerment of a single over-arching European government.
  - tim333 10y ago
    Voters are often not keen on being governed by another nationality or culture. The US only managed to keep their federal system by fighting a war to prevent the south doing their own thing and the Brexit vote is another sign the voters are not keen. Much of the European project has been pushed through without voter consent but there are limits.
    - cynusx 10y ago
      Voters are not keen on being governed by a government they didn't elect, if you look at it that way then you can see the civil war as the final step in the consolidation of the democratic authority that was vested in the US president as the only directly elected official in the federal government. The south didn't vote for Lincoln and attempted to secede with the US president initiating the war to overturn the local state's right to do so. I think a lot of europe's problems would be fixed by making the office of the EU presidency a directly elected office in a similar fashion to the US presidency. The EU would still require further centralization to maintain the eurozone and to further deepen the EU single market. They are just required to maintain our current levels of wealth and to fix the banking crisis that has never really been solved in the EU. A single individual with a policy platform that has gained legitimacy through campaigning in all EU member states would settle questions related to the future of the union and will be best placed to implement and direct policies that benefit the majority of the EU population.
- mseebach 10y ago
  You can't really lay this at the feet of eurosceptics. No, they don't want the institutions (and they also didn't want the currency), so they fought against them, which is exactly what you are supposed to do in a democracy. But it was not eurosceptics who ignored Stiglitz and other economists and pushed forward with the implementation of a common currency anyway.
  - sevenless 10y ago
    As you say, having done everything in their power to undermine the institutional effectiveness of the EU, the Eurosceptics cannot reasonably turn around and blame the results of their own actions on the EU. Nonetheless, that's exactly what they do. It's very similar to the Republicans in the US making sure the federal government can't pass any bills, then blaming 'big government' for being ineffective. Case in point: The migrant crisis, caused by large numbers of refugees coming to Greece and Italy's wide open coasts. How did they get there? No unified European border or coast guard and no integrated defense, which Britain ensured would never happen. No government should tolerate this kind of behavior, as it is a hostile action against the state, holding the population hostage. It should be treated as a form of criminal extortion or terrorism.
    - zigzigzag 10y ago
      lol ... let me get this straight, the UK is a terrorist state because the EU doesn't defend its southern border? It was President Juncker who said he thought borders were the worst invention of politicians ever, not the Brits who we learned recently are rather fond of borders. Your argument is backwards.
      - sevenless 10y ago
        You have Juncker backwards. He was saying internal EU borders are a bad idea. Rejecting all borders is a tenable ethical claim - indeed it's hard to justify why states should exist in most ethical frameworks that value human equality - but Juncker didn't go there. But yes, Britain sabotaged the EU, including its having a joined-up defense and border strategy. Indeed, you might expect the departure of the most Eurosceptic nation to strengthen the EU.
- rayiner 10y ago
  It's not quite so simple as that, right? The single currency was never billed as something that required individual countries to give up their autonomy to centralized EU institutions. If it had been sold as a package deal from the start, the Euro never would have happened to begin with. The lesson Europe seems to have failed to take from the US is that federalism is a Trojan horse. The U.S. federal government was billed as being sort of like what the EU government is pitched as today, but ultimately destroyed the sovereignty of the States and reduced them to administrative divisions that have to take orders not just from Congress, but unelected bureaucrats at random federal regulatory agencies. And it wasn't some slippery slope process, but necessity. States in a federal union have none of the tools of international relations. California can't embargo imports from Michigan that, e.g. don't meet its environmental standards. It can't threaten economic sanctions against Alabama for its treatment of minorities. It can't bomb anybody. The only way to avoid race to the bottom problems becomes pushing more authority up to the federal government.
  - pfranz 10y ago
    If that's the case, how can California have auto safety standards or standards for gasoline that are more strict than other states?
    - initram 10y ago
      Exactly! And living in California, I can't tell you what a pain in the ass it is to try to send a friend in another state a bottle of wine. Whenever you visit a vineyard or even a wine specialty shop, they have a list of states they can't send anything to, and states they can stuff to with restrictions. It's kind of a mess!
    - rayiner 10y ago
      California has special standards for gasoline and fuel efficiency under a special exemption to the Clean Air Act granted to California and only California.
      - Mz 10y ago
- gaius 10y ago
  There are some people for whom the solution to any problem with the EU is always "more EU". And there are some who say, when you're in a hole, stop digging.
  - tonyedgecombe 10y ago
    Is there evidence the EU has been expanding it's activities? Has it been creating more or less laws? Beyond the accession of new members. I'm asking because I really don't know the facts although I do know what some people who have me believe.
    - gaius 10y ago
      The treaty text the UK failed to get removed that basically forced the referendum to happen was the bit about the goal of the EU being "ever closer union".
      - tonyedgecombe 10y ago
        The referendum came about because of agitation from UKIP and the right of the Tory party, Cameron's rather lame attempt at renegotiation came after the referendum was called. But despite all that and the words in the treaty I am still not sure if the EU has expanded it's activities, has there been "more EU"?
MatthiasP 10y ago
Anyone who did an economics 101 class could predict that forcing such diverse economies with populations reluctant to move to richer parts of the union into a single currency would result in net wealth reduction. [1] Even the bureaucrats in Brussels knew about this. It was still pushed through because they wanted to accelerate the political union via the currency union, ignoring the financial costs. What they did not expect was the US subprime crisis to hit europe that hard and that early. [1] https://en.wikipedia.org/wiki/Optimum_currency_area https://en.wikipedia.org/wiki/Optimum_currency_area
- blue1 10y ago
  I remember reading an interview with Romano Prodi, former president of the European Commission, saying that it was well known from the beginning that the currency union alone could not work. The idea was that it would have eventually caused the political union to happen.
- simongray 10y ago
  I don't disagree with your point, but just wanted to point out that "Anyone who did an economics 101 class" is usually not the best people to get advice from. Economics is field where the agreed mainstream consists of some simplistic views of how an model economy could work in a sort of "perfect vacuum" where certain unrealistic parameters apply: perfect information and perfect competition, for example. The real value to economics as a discipline does not lie with the introductory concepts, but rather on everything learnt after Economics 101, i.e. the mess that is the real-world economy which features transaction costs, political institutions, and all of the aggregated effects of 7 billion agents with different psychology.
  - ivan_ah 10y ago
    Is there anything in ECON that's good then? I'm thinking 70% of first-year ECON would be bullshit, but surely some ideas about demand and supply are useful. Are you an economist? Or did you study economics? I'd like to publish a book in the spirit of "Economics, only the good parts," and would be interested to hear your opinion what to include. For example, I really liked this class: https://www.edx.org/course/principles-economics-calculus-caltechx-ec1101x-0 https://www.edx.org/course/principles-economics-calculus-cal...
todd8 10y ago
Here's what Milton Friedman said about it in 1997: http://www.greekcrisis.net/2012/08/the-euro-monetary-unity-to-political.html http://www.greekcrisis.net/2012/08/the-euro-monetary-unity-t...
- anon1385 10y ago
  From 1992: http://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-all-that http://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-all...
- jkn 10y ago
  Thanks, impressive foresight in the last paragraph (as of today; the picture might yet get bigger of course): The drive for the Euro has been motivated by politics not economics. The aim has been to link Germany and France so closely as to make a future European war impossible, and to set the stage for a federal United States of Europe. I believe that adoption of the Euro would have the opposite effect. It would exacerbate political tensions by converting divergent shocks that could have been readily accommodated by exchange rate changes into divisive political issues. Political unity can pave the way for monetary unity. Monetary unity imposed under unfavorable conditions will prove a barrier to the achievement of political unity.
  - toyg 10y ago
    I think it's not all black and white, and there's actually a bit of both at play. Eurozone Countries now have no choice but to achieve increased levels of fiscal and political coordination. That process will inevitably produce friction, but this would have happened even without the currency. If anything, a heightened level of friction creates an urgency that would not otherwise be there. If you are looking at it from a Brexit perspective, consider that shedding skeptic countries that never joined the Euro is a good thing in a federalist sense, since it makes it easier to achieve consensus in a smaller and more committed group. In a way, losing Greece or Italy would have proven Friedman right, but the opposite happened: the Euro survived, Greece and Italy now are forced to drive their economy from a European perspective. De-facto political unity is happening, country by country.
return0 10y ago
So his idea is that, if the common currency did not exist, eurozone would be better. Yet, the most affected people (the Greeks) are staunch supporters of the Euro, and willing to suffer for it.
- tomp 10y ago
  Are they? from my (non-local) point of view, it only looks like they prefer the Euro now (i.e. they're unwilling to be the only ones leaving it), not that they think it was a good idea in general.
  - tonyedgecombe 10y ago
    If I was Greek and had savings I would want to stay in the Euro, the idea of switching back to the drachma with it's likely inflation would be worrying. On the other hand I wouldn't leave my savings in a Greek bank.
tom_morrow 10y ago
"The Telegraph finally admits left-wing economist had it right all along."
- tim333 10y ago
  Funny seeing The Economist as left wing. Wikipedia has it as "It takes an editorial stance of classical and economic liberalism which is supportive of free trade, globalisation, free immigration and cultural liberalism." Guess it shows how right the right has gotten.
bane 10y ago
One of the surprising things in history is how well the Dollar has worked out, and I think it's probably very instructive to study it. The U.S. Dollar has a long and surprisingly complicated history as it worked its way up to becoming the official currency of the U.S., and at each stage, there was some reason for it to move forward to unification. For example, the U.S. civil war was one of those reasons. Before the war, the U.S. had standardized coinage, but not paper money. After the war the U.S. ran, effectively, two different currencies that exchanged between each other (coins and bills). After dropping the gold standard, the exchange between the instruments was pegged at 1:1. But before this, paper money was issued by local banks, exchangeable for some weight in silver (or other precious metal) coinage. Notes taken from one region to another devalued simply because of distance from the issuing bank. At one point there was thousands of different kinds of paper bills in circulation, and several kinds of coinage (Spanish, Mexican, U.S., etc.) I think as Europe slowly gravitates towards some kind of unified system, it would have been far better for blocks of nearby or economically similar countries to each adopt locally unified currencies and controlled, as a block, exchange, duties, interest rates, etc. Thus we should have had a West Euro, Greater Pound, Romancis, New Rubles, Drachmas, New Thalers, etc. and then another couple steps of intermediate currencies and economic blocs. Furthermore, the overlapping optional unification layers: EU, Eurozone, Shengen, NATO, etc. was also a mistake. Economic, political and other ties really need to be accepted all at once. Partial acceptance hasn't worked as well as might be expected, and has only introduced complexity and confusion over who gets say in what (these things are all deeply interconnected). The unification experiments in Europe are noble, and are supposed to prevent future crises, but when met with real crises (both internal and external) has shown that the system put in place is overly fragile and not as normative as had been hoped.
ihaveahadron 10y ago
I think it would be interesting to experiment with implementing state currencies in america, see what happens. Key word "experiment". Like have dual currencies in california for instance, the "cali" alongside the dollar. also, it's pretty obvious that europe is a failed continent, their leaders don't seem to be very bright
redstripe 10y ago
This claims the differences in language and culture provide enough friction to keep people from migrating efficiently throughout the union. This seems at odds to me with what has happened in the EU (especially Britian) - many who voted for Brexit seem to have done it because they felt overwhelmed by the foreign hordes.
- gaius 10y ago
  The UK is unique in that its native language is also the "common" language. I've worked in Europe with multi-lingual teams; if a Dutch-speaker wants to talk to a French-speaker or a German-speaker wants to talk to an Italian-speaker they'll do it in English. This means there is much less friction for anyone from the EU to work in the UK than for a Brit to work anywhere in the EU. Not saying this is necessarily good or bad in and of itself, but it is a thing that cannot be ignored in any of these discussions.
  - kwhitefoot 10y ago
    Not quite, Ireland also speaks English.
- teamonkey 10y ago
  Ironically the areas of the UK that most strongly voted for Brexit are also generally the areas which see the lowest levels of immigration.
  - mamon 10y ago
    Can it be because in areas with high immigration some immigrants have stayed long enough to be granted citizenship and right to vote? And their votes are affecting overall score?
    - teamonkey 10y ago
      In general, rural areas in England voted to leave while cities voted to remain. Immigrants are more likely to come to cities rather than the countryside. Those that work in the countryside are more likely to be seasonal labourers. That said, I don't think the immigrant numbers are so high to have made that big of a difference. The UK population is >60M.
sfifs 10y ago
The Euro project has basically demonstrated that a common currency ia not possible sustainably without an fiscal union - ie. Willingness to underwrite each others debt and transfer wealth from richer to poorer areas. A fiscal union requires a true political union and it is very doable given the right political stimulus - the most successful recent major example being India which unified dozens of princely states (a couple of them merged forcefully) and provinces speaking dozens of languages and having wildly different cultures into a federal political union - the unifying political stimulus being throwing out the British :-)
- sfifs 10y ago
  Carrying the analogy further, what would have made Euro work I guess is pushing hard for political.a nd fiacal union during the 60s/70s given the threat of Soviet Union and the recent experiences of wars. There's no real driving factor today for political union today so it is likely Euro as it stands may not last our lifetime.
tonyedgecombe 10y ago
The problem with economists is you get a different answer to the same question depending on their political leanings. No wonder it's called the dismal science.

68 points by rottyguy 10y ago

> Stiglitz points his finger squarely at “the fatal decision to adopt a single currency, without first providing the institutions to make it work”. The second part of this quote means something quite different from what the headline implies. He isn't advocating an end to the single currency, he wants stronger institutions, which the Eurosceptics have undermined at every opportunity.

vixen99 10y ago
Yes because the EU bureaucratic organization is deeply undemocratic. I won't go over that again here but we have seen its dictatorial behaviour in action: to quote Dan Hannan "Elected prime ministers of Italy and Greece were toppled in Brussels-backed coups. Eurocrats were brought in to head what were, in effect, civilian juntas, whose purpose was to pursue a series of economic policies that would have been rejected at the ballot box. Or consider the EU’s response whenever a referendum goes against closer integration, as in Denmark, France, Ireland or the Netherlands. Public opinion is treated as an obstacle to overcome, not a reason to change direction."
- VodkaHaze 10y ago
  The old joke goes: "If the EU tried to join the EU it would be refused for being too undemocratic"
- sevenless 10y ago
  The EU is 'undemocratic' - as opposed to Britain's unelected Prime Minister, Queen and House of Lords, of course. A more serious response is that democracy can only be justified by its outcomes, and isn't a good thing in itself. A racist democracy that votes to harm minorities is worse than a dictatorship that upholds human rights and prevents the majority harming the rest. With the rise of explicitly anti-immigrant and anti-Muslim parties in Europe, this is not a theoretical consideration.
  - anexprogrammer 10y ago
    I imagine I'll be thoroughly downvoted, but I like the unelected House of Lords. There's a heck of a lot wrong with it - not least the ease of pushing ex party members up there in vast numbers, but all alternatives thus far proposed are far worse. All proposed alternatives will give us more elected politicians adhering to party lines. None of the alternatives will give us better government. Lords are pretty good at being difficult in the face of bad legislation - yet every time a notable instance takes place there are more calls to abolish the place. Their party allegiance mellows as they age - so you get Tory peers ridiculing some aspect of the current Tory government. Last there are enough independents (usually with long non-political careers) to bring domain knowledge and independent thought to the place. Most instances of Lords reform have been as a result of them doing their job well, inconveniencing or embarrassing the elected government of the day. It's not democratic, but it works.
    - spoonie 10y ago
      I mostly like it too, it's a similar model to Canada Senate. Who needs to go are the current hereditary peers: they weren't elected or even appointed by someone elected. At least they abolished the hereditary system.
    - kps 10y ago
      The current role of the House of Lords (like the Canadian Senate) is to introduce hysteresis into Parliament. It's a smoothing function over the last n elections to limit damage from noisy inputs.
  - Wildgoose 10y ago
    (1) Britain's Prime Minister is the elected MP for the Maidenhead constituency in Berkshire. (2) The Queen is the Head of State but does not control our Democracy - she doesn't even have a vote. (3) The House of Lords is actually a revising Chamber, but in this last case I am largely in agreement with you with regards to its democratic credentials. The EU on the other hand has a so-called "Parliament" which cannot propose legislation, cannot amend legislation and cannot repeal legislation. It has neither "Government" nor "Opposition", being essentially a rubber-stamping body for the unelected EU Commission. You seem to prefer this to the idea of allowing people a democratic choice simply because a minority of those people are voting for parties of whom you do not approve. However what happens when that unelected group (which is lacking in democratic restraints) starts to act in ways even more harmful than its current actions? You might not like Democracy, but at least it allows the possibility of correcting its mistakes.
sremani 10y ago
May be there is something to do with multiple sovereigns and diverse economies, that form the Centrifugal forces on EU. It is too simplistic to blame Euroskeptics. The bigger question is how did Greece even made it into the Common currency, when the writing was on the wall.
- VodkaHaze 10y ago
  Yes, because things are going so well in Italy and Spain and forcing them to use the same monetary policy as Germany and France is a superb idea
  - madaxe_again 10y ago
    It depends on whether you choose to take a short or long term view. Part of the purpose of the EU and its instruments, such as the euro, is normalisation of European economies into a single framework, with the ultimate goal of parity, which would not only bring about a more efficient and frictionless market (I.e. Simple cross-border trade for services and products), but also ultimately elevate the standard of living for all citizens. This is why some states which are less developed are currently net beneficiaries of European funds, and others are net donors. Currently. Wealthier nations beget wealth in their neighbours. To look at monetary policy in a vacuum is a mistake, as it ignores the substantial eu development funds which Italy and Spain are beneficiaries of. If you look at things in the short term, then poor Britain is being ripped off, the Spaniards are starving, the Greeks are broke - but if you take a longer term view, you'll take into consideration that all normalisation processes inevitably have over and undershoots, which can result in an imperfect present - but only define the future if you choose to let them do so.
    - mirekrusin 10y ago
      You don't need to use euro currency to take advantage of unified trade/no borders etc. ie. currently Poland.
    - thatfrenchguy 10y ago
      "which would not only bring about a more efficient and frictionless market (I.e. Simple cross-border trade for services and products), but also ultimately elevate the standard of living for all citizens." But you would have to have a working culture that is similar, which is not the case in the EU. People in Spain don't work like people in France or Germany, their government are different and wanting to have a single fiscal policy is doomed to fail. Also, the 1 to 5 salary for entry level workers is killing entry level workers in Western Europe, and that's one of the reasons behind so much euroskepticism
Noseshine 10y ago
Neither do I understand the word "admits" in the title. AFAIK he's been consistent in his message about the Euro over the years and has nothing to "admit". At least I remember reading him saying pretty much the same thing at previous (non-recent) occasions. For example, here he is in July 2014: "Stiglitz: How to save a broken euro" (https://www.euractiv.com/section/euro-finance/opinion/stiglitz-how-to-save-a-broken-euro/ https://www.euractiv.com/section/euro-finance/opinion/stigli...), or here is an opinion piece from him in the Guardian from May 2010 "Reform the euro or bin it" (https://www.theguardian.com/commentisfree/2010/may/05/reform-euro-or-bin-it-greece-germany https://www.theguardian.com/commentisfree/2010/may/05/reform...)
- tptacek 10y ago
  Isn't the Telegraph a Euroskeptic paper? Not the worst of them during Brexit, but notable for it before Brexit?
  - Noseshine 10y ago
    What is your point? I don't see a connection to what I wrote. He did write that article and over 6 years ago, so he has nothing to "admit" since he's said the same things all along.
    - tptacek 10y ago
      I agree with your complaint about the headline and was trying to add some context.
      - tim333 10y ago
        The Telegraph tends eurosceptic but the Guardian which trends pro europe has a similar review https://www.theguardian.com/books/2016/aug/22/the-euro-and-its-threat-to-the-future-of-europe-joseph-stiglitz-review https://www.theguardian.com/books/2016/aug/22/the-euro-and-i...
  - et-al 10y ago
MichaelGG 10y ago
Isn't that what Eurosceptics have been saying though? They don't want a political union? I've only seen a few videos but I'm pretty sure Farage has been saying something like that. That things cannot work without going all the way, and they don't want to go all the way. "Undermined" seems like the wrong word for opposing.
- kwhitefoot 10y ago
  Eurosceptics and europhiles are not necessarily on opposite sides when it comes to closer political union. Many of us who are of the opinion that the European Union has done a lot of good are nonetheless of the opinion that tighter integration and standardization are not necessarily a good idea.
- tonyedgecombe 10y ago
  I'm not sure what Farage wants apart from attention, it's been obvious for a number of years that political union was very unlikely and that the UK isn't going to join the Euro zone yet he continued to campaign. My feeling is most of the brexit campaigners didn't like the EU because they saw it as left leaning, this is why the opposition mainly came from the right.
spriggan3 10y ago
> the Eurosceptics have undermined at every opportunity The Eurosceptics don't want a political union for good reasons. It would devolve into a soviet style dictatorship. People that different just can't live under the same government. Europe is not USA. The Eurosceptics are the ones that are grounded in reality here, the other camp is trying to push an utopia that already had horrible consequences.
- madaxe_again 10y ago
  1) EU 2) ....? 3) Soviet union! There's a gap somewhere in your logic. Europe is far more likely to end up a set of Soviet vassal states if it disintegrates, as that big hegemonic power called Russia is still very much a thing.
  - spriggan3 10y ago
    There is absolutely no gap in my logic. Tyrannies are often born from virtuous ideas and well intended people. The problem with concentration of power is that the people holding that power only care about insuring their own survival, not the good of the people they govern. This is already true at the national level and even more true at the supra-national level in EU. I don't want to give more power to corrupt bureaucrates that are completely disconnected from national concerns.
  - zigzigzag 10y ago
    The EU and latter day Soviet Union share more similarities than people would like to admit. The EU tries to prevent countries breaking away from its dictats using economic war as a threat (i.e. you obey us or we stop trading with you), rather than "hot war" - at present. But elements of the EU are pushing to get its own army, and the EU already has a system in place to effectively eliminate or take over governments that are deemed to not be reflecting EU "values": http://www.breitbart.com/london/2016/05/24/eu-vows-use-new-powers-block-elected-far-right-populists-power/ http://www.breitbart.com/london/2016/05/24/eu-vows-use-new-p... Fast forward 20 years and you get zealots like Juncker who already want to "punish" countries where voters disagree with him, put them in charge of their own army with a puppet parliament, and presto - the USSR is back.
bane 10y ago
Something I don't understand, as somebody who's not a European, is that stronger institutions, more centralization of power in some European-wide political body, more executive control in crisis situations, etc. all points very clearly to a European-wide Federal System a la the U.S., or maybe Australia or Canada, with a centralized Federal government, and some executive position -- all able to overrule local state autonomy. But even many of my European friends who favor these things seem to not agree that that's the inevitable vector that these institutions point to. I'm certainly not saying that the system will mirror the U.S. system, but it certainly will end being a system like this if Europe continues on the present unification course. Is there some nuance of the direction that I don't understand? It seems like as every crisis comes to Europe, advocates of pro-Europe seem to continue to point to centralization and empowerment of a single over-arching European government.
- tim333 10y ago
  Voters are often not keen on being governed by another nationality or culture. The US only managed to keep their federal system by fighting a war to prevent the south doing their own thing and the Brexit vote is another sign the voters are not keen. Much of the European project has been pushed through without voter consent but there are limits.
  - cynusx 10y ago
    Voters are not keen on being governed by a government they didn't elect, if you look at it that way then you can see the civil war as the final step in the consolidation of the democratic authority that was vested in the US president as the only directly elected official in the federal government. The south didn't vote for Lincoln and attempted to secede with the US president initiating the war to overturn the local state's right to do so. I think a lot of europe's problems would be fixed by making the office of the EU presidency a directly elected office in a similar fashion to the US presidency. The EU would still require further centralization to maintain the eurozone and to further deepen the EU single market. They are just required to maintain our current levels of wealth and to fix the banking crisis that has never really been solved in the EU. A single individual with a policy platform that has gained legitimacy through campaigning in all EU member states would settle questions related to the future of the union and will be best placed to implement and direct policies that benefit the majority of the EU population.
mseebach 10y ago
You can't really lay this at the feet of eurosceptics. No, they don't want the institutions (and they also didn't want the currency), so they fought against them, which is exactly what you are supposed to do in a democracy. But it was not eurosceptics who ignored Stiglitz and other economists and pushed forward with the implementation of a common currency anyway.
- sevenless 10y ago
  As you say, having done everything in their power to undermine the institutional effectiveness of the EU, the Eurosceptics cannot reasonably turn around and blame the results of their own actions on the EU. Nonetheless, that's exactly what they do. It's very similar to the Republicans in the US making sure the federal government can't pass any bills, then blaming 'big government' for being ineffective. Case in point: The migrant crisis, caused by large numbers of refugees coming to Greece and Italy's wide open coasts. How did they get there? No unified European border or coast guard and no integrated defense, which Britain ensured would never happen. No government should tolerate this kind of behavior, as it is a hostile action against the state, holding the population hostage. It should be treated as a form of criminal extortion or terrorism.
  - zigzigzag 10y ago
    lol ... let me get this straight, the UK is a terrorist state because the EU doesn't defend its southern border? It was President Juncker who said he thought borders were the worst invention of politicians ever, not the Brits who we learned recently are rather fond of borders. Your argument is backwards.
    - sevenless 10y ago
      You have Juncker backwards. He was saying internal EU borders are a bad idea. Rejecting all borders is a tenable ethical claim - indeed it's hard to justify why states should exist in most ethical frameworks that value human equality - but Juncker didn't go there. But yes, Britain sabotaged the EU, including its having a joined-up defense and border strategy. Indeed, you might expect the departure of the most Eurosceptic nation to strengthen the EU.
rayiner 10y ago
It's not quite so simple as that, right? The single currency was never billed as something that required individual countries to give up their autonomy to centralized EU institutions. If it had been sold as a package deal from the start, the Euro never would have happened to begin with. The lesson Europe seems to have failed to take from the US is that federalism is a Trojan horse. The U.S. federal government was billed as being sort of like what the EU government is pitched as today, but ultimately destroyed the sovereignty of the States and reduced them to administrative divisions that have to take orders not just from Congress, but unelected bureaucrats at random federal regulatory agencies. And it wasn't some slippery slope process, but necessity. States in a federal union have none of the tools of international relations. California can't embargo imports from Michigan that, e.g. don't meet its environmental standards. It can't threaten economic sanctions against Alabama for its treatment of minorities. It can't bomb anybody. The only way to avoid race to the bottom problems becomes pushing more authority up to the federal government.
- pfranz 10y ago
  If that's the case, how can California have auto safety standards or standards for gasoline that are more strict than other states?
  - initram 10y ago
    Exactly! And living in California, I can't tell you what a pain in the ass it is to try to send a friend in another state a bottle of wine. Whenever you visit a vineyard or even a wine specialty shop, they have a list of states they can't send anything to, and states they can stuff to with restrictions. It's kind of a mess!
  - rayiner 10y ago
    California has special standards for gasoline and fuel efficiency under a special exemption to the Clean Air Act granted to California and only California.
    - Mz 10y ago
gaius 10y ago
There are some people for whom the solution to any problem with the EU is always "more EU". And there are some who say, when you're in a hole, stop digging.
- tonyedgecombe 10y ago
  Is there evidence the EU has been expanding it's activities? Has it been creating more or less laws? Beyond the accession of new members. I'm asking because I really don't know the facts although I do know what some people who have me believe.
  - gaius 10y ago
    The treaty text the UK failed to get removed that basically forced the referendum to happen was the bit about the goal of the EU being "ever closer union".
    - tonyedgecombe 10y ago
      The referendum came about because of agitation from UKIP and the right of the Tory party, Cameron's rather lame attempt at renegotiation came after the referendum was called. But despite all that and the words in the treaty I am still not sure if the EU has expanded it's activities, has there been "more EU"?

MatthiasP 10y ago

Anyone who did an economics 101 class could predict that forcing such diverse economies with populations reluctant to move to richer parts of the union into a single currency would result in net wealth reduction. [1] Even the bureaucrats in Brussels knew about this. It was still pushed through because they wanted to accelerate the political union via the currency union, ignoring the financial costs. What they did not expect was the US subprime crisis to hit europe that hard and that early. [1] https://en.wikipedia.org/wiki/Optimum_currency_area https://en.wikipedia.org/wiki/Optimum_currency_area

blue1 10y ago
I remember reading an interview with Romano Prodi, former president of the European Commission, saying that it was well known from the beginning that the currency union alone could not work. The idea was that it would have eventually caused the political union to happen.
simongray 10y ago
I don't disagree with your point, but just wanted to point out that "Anyone who did an economics 101 class" is usually not the best people to get advice from. Economics is field where the agreed mainstream consists of some simplistic views of how an model economy could work in a sort of "perfect vacuum" where certain unrealistic parameters apply: perfect information and perfect competition, for example. The real value to economics as a discipline does not lie with the introductory concepts, but rather on everything learnt after Economics 101, i.e. the mess that is the real-world economy which features transaction costs, political institutions, and all of the aggregated effects of 7 billion agents with different psychology.
- ivan_ah 10y ago
  Is there anything in ECON that's good then? I'm thinking 70% of first-year ECON would be bullshit, but surely some ideas about demand and supply are useful. Are you an economist? Or did you study economics? I'd like to publish a book in the spirit of "Economics, only the good parts," and would be interested to hear your opinion what to include. For example, I really liked this class: https://www.edx.org/course/principles-economics-calculus-caltechx-ec1101x-0 https://www.edx.org/course/principles-economics-calculus-cal...

todd8 10y ago

Here's what Milton Friedman said about it in 1997: http://www.greekcrisis.net/2012/08/the-euro-monetary-unity-to-political.html http://www.greekcrisis.net/2012/08/the-euro-monetary-unity-t...

anon1385 10y ago
From 1992: http://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-all-that http://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-all...
jkn 10y ago
Thanks, impressive foresight in the last paragraph (as of today; the picture might yet get bigger of course): The drive for the Euro has been motivated by politics not economics. The aim has been to link Germany and France so closely as to make a future European war impossible, and to set the stage for a federal United States of Europe. I believe that adoption of the Euro would have the opposite effect. It would exacerbate political tensions by converting divergent shocks that could have been readily accommodated by exchange rate changes into divisive political issues. Political unity can pave the way for monetary unity. Monetary unity imposed under unfavorable conditions will prove a barrier to the achievement of political unity.
- toyg 10y ago
  I think it's not all black and white, and there's actually a bit of both at play. Eurozone Countries now have no choice but to achieve increased levels of fiscal and political coordination. That process will inevitably produce friction, but this would have happened even without the currency. If anything, a heightened level of friction creates an urgency that would not otherwise be there. If you are looking at it from a Brexit perspective, consider that shedding skeptic countries that never joined the Euro is a good thing in a federalist sense, since it makes it easier to achieve consensus in a smaller and more committed group. In a way, losing Greece or Italy would have proven Friedman right, but the opposite happened: the Euro survived, Greece and Italy now are forced to drive their economy from a European perspective. De-facto political unity is happening, country by country.

return0 10y ago

So his idea is that, if the common currency did not exist, eurozone would be better. Yet, the most affected people (the Greeks) are staunch supporters of the Euro, and willing to suffer for it.

tomp 10y ago
Are they? from my (non-local) point of view, it only looks like they prefer the Euro now (i.e. they're unwilling to be the only ones leaving it), not that they think it was a good idea in general.
- tonyedgecombe 10y ago
  If I was Greek and had savings I would want to stay in the Euro, the idea of switching back to the drachma with it's likely inflation would be worrying. On the other hand I wouldn't leave my savings in a Greek bank.

tom_morrow 10y ago

"The Telegraph finally admits left-wing economist had it right all along."

tim333 10y ago
Funny seeing The Economist as left wing. Wikipedia has it as "It takes an editorial stance of classical and economic liberalism which is supportive of free trade, globalisation, free immigration and cultural liberalism." Guess it shows how right the right has gotten.

bane 10y ago

One of the surprising things in history is how well the Dollar has worked out, and I think it's probably very instructive to study it. The U.S. Dollar has a long and surprisingly complicated history as it worked its way up to becoming the official currency of the U.S., and at each stage, there was some reason for it to move forward to unification. For example, the U.S. civil war was one of those reasons. Before the war, the U.S. had standardized coinage, but not paper money. After the war the U.S. ran, effectively, two different currencies that exchanged between each other (coins and bills). After dropping the gold standard, the exchange between the instruments was pegged at 1:1. But before this, paper money was issued by local banks, exchangeable for some weight in silver (or other precious metal) coinage. Notes taken from one region to another devalued simply because of distance from the issuing bank. At one point there was thousands of different kinds of paper bills in circulation, and several kinds of coinage (Spanish, Mexican, U.S., etc.) I think as Europe slowly gravitates towards some kind of unified system, it would have been far better for blocks of nearby or economically similar countries to each adopt locally unified currencies and controlled, as a block, exchange, duties, interest rates, etc. Thus we should have had a West Euro, Greater Pound, Romancis, New Rubles, Drachmas, New Thalers, etc. and then another couple steps of intermediate currencies and economic blocs. Furthermore, the overlapping optional unification layers: EU, Eurozone, Shengen, NATO, etc. was also a mistake. Economic, political and other ties really need to be accepted all at once. Partial acceptance hasn't worked as well as might be expected, and has only introduced complexity and confusion over who gets say in what (these things are all deeply interconnected). The unification experiments in Europe are noble, and are supposed to prevent future crises, but when met with real crises (both internal and external) has shown that the system put in place is overly fragile and not as normative as had been hoped.

ihaveahadron 10y ago

I think it would be interesting to experiment with implementing state currencies in america, see what happens. Key word "experiment". Like have dual currencies in california for instance, the "cali" alongside the dollar. also, it's pretty obvious that europe is a failed continent, their leaders don't seem to be very bright

redstripe 10y ago

This claims the differences in language and culture provide enough friction to keep people from migrating efficiently throughout the union. This seems at odds to me with what has happened in the EU (especially Britian) - many who voted for Brexit seem to have done it because they felt overwhelmed by the foreign hordes.

gaius 10y ago
The UK is unique in that its native language is also the "common" language. I've worked in Europe with multi-lingual teams; if a Dutch-speaker wants to talk to a French-speaker or a German-speaker wants to talk to an Italian-speaker they'll do it in English. This means there is much less friction for anyone from the EU to work in the UK than for a Brit to work anywhere in the EU. Not saying this is necessarily good or bad in and of itself, but it is a thing that cannot be ignored in any of these discussions.
- kwhitefoot 10y ago
  Not quite, Ireland also speaks English.
teamonkey 10y ago
Ironically the areas of the UK that most strongly voted for Brexit are also generally the areas which see the lowest levels of immigration.
- mamon 10y ago
  Can it be because in areas with high immigration some immigrants have stayed long enough to be granted citizenship and right to vote? And their votes are affecting overall score?
  - teamonkey 10y ago
    In general, rural areas in England voted to leave while cities voted to remain. Immigrants are more likely to come to cities rather than the countryside. Those that work in the countryside are more likely to be seasonal labourers. That said, I don't think the immigrant numbers are so high to have made that big of a difference. The UK population is >60M.

sfifs 10y ago

The Euro project has basically demonstrated that a common currency ia not possible sustainably without an fiscal union - ie. Willingness to underwrite each others debt and transfer wealth from richer to poorer areas. A fiscal union requires a true political union and it is very doable given the right political stimulus - the most successful recent major example being India which unified dozens of princely states (a couple of them merged forcefully) and provinces speaking dozens of languages and having wildly different cultures into a federal political union - the unifying political stimulus being throwing out the British :-)

sfifs 10y ago
Carrying the analogy further, what would have made Euro work I guess is pushing hard for political.a nd fiacal union during the 60s/70s given the threat of Soviet Union and the recent experiences of wars. There's no real driving factor today for political union today so it is likely Euro as it stands may not last our lifetime.

tonyedgecombe 10y ago

The problem with economists is you get a different answer to the same question depending on their political leanings. No wonder it's called the dismal science.