Tuesday, January 20, 2004

Small Is Beautiful?

Here's an interesting perspective about the European Union by Marshall Auerback. Quite informative.


The European constitution has been derailed, the Stability Pact looks to be jettisoned, and a nagging rupture over Iraq has affected overall cohesiveness in the European Union. The greatest fears of the euro-sceptics look set to be justified and many are now forecasting the beginning of the end of the European Monetary Union.

To us, it appears as if the fears are overstated. True, the fragilities of the EU have been magnified by the destabilising impact of enlargement. The entry of the former Warsaw Bloc nations has shifted the centre of gravity eastward, whilst simultaneously diminishing the drive to greater integration. But a reduced ability to integrate and centralise is no bad thing, if the EMU is to emerge as a proper functioning currency union.

This is not consensus opinion, as the whole historic thrust of the EU has been toward “ever closer union”. Indeed, the concept of a “United States of Europe” has had a history going back centuries. The notion of a pan-European Parliament was promoted by William Penn as early as 1693. German philosopher Immanuel Kant stressed the need for a league of nations and a Federal Europe in the 18th century. French author Victor Hugo took up the cause during the latter part of the 19th century, after the Serbians revolted against Turkish domination in the Balkans.

In more recent times, economic integration was used after the Second World War to realize political goals, chiefly to anchor West Germany within the western European alliance. Since that time the economies of member states have slowly integrated. The economic environment of the 1950s is a far cry from the integrated community of today. In the 1950s European currencies were not convertible and domestic trade was highly protected. Intra-European trade was based on bilateral clearing arrangements institutionalized by the European Payments Union. Today EU currencies are fully convertible; capital controls, intra-EU tariffs, and quotas have been eliminated; and the single market has been completed. Now the talk is of a new constitution, ostensibly to provide the final institutional arrangements governing the European Union and the euro. But is the constitution really necessary? ...Continued

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