Thursday, June 7, 2012

Survival of the Euro is Paramount

Daniel Hannan has written an editorial in The Telegraph, entitled “The Euro Now Equals Poverty and Deflation.”  Mr. Hannan is a Conservative MEP for South-East England.  The editor offers a summary to the editorial, as follows:

Eurocrats see the survival of the euro as more important than the prosperity of its users, says Daniel Hannan.

Mr. Hannan writes:

According to the polls, two thirds of those who use the euro believe it has made them worse off. They’re right. On Europe’s periphery, monetary union means deflation, poverty and emigration. In the core, it means unprecedented tax rises.

EU leaders no longer argue that the single currency boosts growth. Instead, they fall back on the cure-would-be-worse-than-the-disease shtick.

The truth, of course, is that supporters of the euro were never interested in the economics. Newly released documents show that Helmut Kohl was specifically warned against including countries with high debt levels. He decided that the political imperative of integration mattered more than the economic practicalities.

This is true for the state, and has been true for the state since the founding of such centralized institutions: the state does not care about the national wealth, the wealth of the individuals living in its jurisdiction, or an increasing prosperity for those individuals.  The state only cares about increasing the value of the product accessible to the state.

James Scott covers this in his book, “The Art of Not Being Governed.”  He describes this feature as “State Accessible Product.”  I have previously written extensively about this book.  While the population might be wealthier by growing a variety of crops, the state preferred uniform crops – easier to count and therefore easier to tax. 

A premodern ruler in mainland Southeast Asia would have been less interested in what today would be called gross domestic product (GDP) of his kingdom than what we might call its "state-accessible product" (SAP!)....Given a choice between patterns of subsistence that are relatively unfavorable to the cultivator but which yield a greater return in manpower or grain to the state and those patterns that benefit the cultivator but deprive the state, the ruler will choose the former every time. The ruler, then, maximizes the state-accessible product, if necessary, at the expense of the overall wealth of the realm and his subjects.

Though shifting-cultivation agriculture might provide a higher return to the cultivator’s labor, this was a form of wealth that was inaccessible to the state.

The state does not care about the wealth of the governed.  The state works to ensure increasing wealth appropriated by the state.  What Daniel Hannan discusses in his editorial is a fact consistent with the objectives of centralizing governments throughout the world and throughout the recorded history of the institution of “states”.

The Euro was never about improving the lot of the average citizen in Europe.  It was about centralization and control.  Those charged with its keep will go to great lengths to ensure its survival – they have already circumvented democratic processes countless times even to reach this point.  I believe the survival of the currency in as wide a region as possible is more important that the survival of the banks (to the extent the survival of the two can be separated, which they certainly could). 

Control the currency and all can be controlled - at least for a time.  Sooner or later, the centralization will fail, as it will consume itself.

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