Bishop Hill The Euro and the climate and the great and the good
Thanks to reader Alan for pointing out Allister Heath's opinion piece in the Telegraph this morning, on the subject of the UK's lucky avoidance of the shackles of the Euro. His recollection of the antics of the great and the good in the efforts to pressure the country into signing up is fascinating:
It is hard today to remember how countercultural keeping the pound felt in the late Nineties and early 2000s: Britain was being pressurised to join the euro by vast swathes of the UK and international establishment, a powerful group that has yet to be held fully to account for such a reckless error of judgment.
Hardly a day would go by without a senior business person or the Confederation of British Industry (CBI) warning that foreign investment would dry up if we didn’t join; and economists were convinced that countries that embraced the euro would benefit from an enormous boom in trade.
Eurosceptics were portrayed as fogeyish, nationalistic simpletons who didn’t understand the direction of history. The Greeks and others listened; we didn’t, thanks to the good sense of the British public and the efforts of a tiny number of anti-euro campaigners and the Tory opposition.
This all sounds terribly familiar, doesn't it?
Reader Comments (21)
The collective wisdom of lemmings appears to be a one-way street.
Familiar, too was the treatment of Eurosceptics like John Redwood, who was portrayed almost daily in the Guardian as being mentally deficient.
The Euro project was demolished intellectually even before its inauguration by a British high level Eurocrat. Can anyone supply his name and the name of the book he wrote?
Was it really an emphatic campaign ?
Surely the past "go for the Euro campaign" has nothing like the resources and PR dirty tricks of the Greenblob which also severely infiltrates the parties that got 80% of the votes in the election.
The BBC as usual was 100% campaigning to join the euro - Evan Davies anyone? Shukman was also a BBC pro-euro correspondent in those days. Nothing changes with these BBC people, except they move on from one failure in their job to another at which they are equally incompetent.
Yes and all that kept us out of the Euro was the insane spite of (economic genius hahaaha) Mr Gordon Brown, his 5 tests designed entirely to discomfit Tony Blair. The 'Great man' theory of history has I understand been discredited. Perhaps it should be replaced by the 'Mad Man' theory of history instead
This all sounds terribly familiar, doesn't it?
Yep. Exactly the same crowd of money grabbers spouting the same crap right now. Related to the same crowd spouting the same crap about climate change
It is almost forgotten now but William Hague campaigned to save the pound and was duly reviled in the terms you mention. But it gave a check to the headlong rush to the euro (which after our experience in the ERM seemed an almost perfect definition of insanity).
Geoff, You may be thinking of Larry Siedentop's book "Democracy in Europe", published in 2000. There was a good summary and review in The Economist http://www.economist.com/node/318556
Best wishes
Mark
Good observation Andrew. There's a simple engineering principle: if it doesn't bend it will break.
Politicians seem to work on the principle that "if it bends - we can pass a law to stop it bending".
The best way to view economies is rather like a huge building built on a variety of substrata. As everyone knows, some subsoils tend to give and the foundations slowly sink leading to cracking. And you cannot fight that cracking. Instead you build in movement joints where two solid parts of the building meet and the join is some form of flexible link (often just a filler).
This is really what currencies are. Economies are like the foundations of a building - constantly moving relative to each other. Currencies tie parts of the economic structures together into a solid economic unit - but if that unit is not built on a single subsoil - you will get movement. And sooner or later that movement will require one of two things:
1. A fundamental change in the economy as we get when exchange rates vary (equivalent to cracking or movement along a movement joint for a building)
2. Massive transfer payments so as to slow down the faster growing parts of the economy and boost the slower. (equivalent to constantly injecting subsoil beneath foundations that are sinking)
And the fundamental problem with the Euro, is that economies were tied together, but no mechanism was put in place to suck money from countries doing well and pump it into countries doing badly. Nor did you have the absolutely uniformity of political and economic system required to ensure countries were tied together as one economic block.
So I will absolutely guarantee that other countries will follow Greece out of the Euro - and how long it takes will depend on the rate at which their economies are moving relative to each other. So, we will almost be able to plot it on a graph. If Greece departs after 16 years, then an economy with 2/3 the disparity will leave after 24 years. One with 1/2 the disparity will be forced to leave after 32 years, etc. So between now and perhaps 2050 - we will either see most countries leave the Euro - or we will see the forced standardisation of economic, political, education and culture so that the economies are not only tied together but the richer areas accept massive taxation to prop up the areas with less natural resources or other reasons for poorer economies.
So basically because of this stupid single currency, countries face a choice of stopping being their own country and being a single country without any choice about their economies, taxation, higher taxes (for those like Germany) or getting out.
Heath's version of why the UK did not join the euro is fantasy. It was the opposition of
Gordon Brown, Ed Balls and some Treasury experts that decided matters. The Tory
position was hardly united, to say the least. Anyway they were in a shambles at the time.
As for the public....
And why did Brown oppose it? Possibly just to spite Blair. More likely, he genuinely
did not like the associated fiscal constraints. He was after all an avowed big spender,
to whom a budget deficit of 3% GDP was chicken feed rather than an upper limit.
This episode should be a sobering reminder of how profound decisions get made.
Very relevant to climate decisions.
The ONLY reason we did not go into the Euro-zone was that Bliar and Brown had fallen out. Bliar was all for it, seeing it, no doubt, as easing his path to fame and fortune within the European empire; because of this, Brown was determined that we would not, and being Chancellor, had the connections to ensure his way won.
It was not the "good sense of the British public", it was the petulance of our politicians.
If there is a psychologist viewing, with nothing better to do ........
Is there a link between people who believed Britain should join the Euro, and people who believe in man made global warming?
Experts told us it was doom and gloom if we did not join the Euro.
Experts still tell us it is doom and gloom, if we do not stop burning fossil fuels.
Who trained the Experts, and why do so many find a home in the BBC?
Very accurate, RR. If Bliar could've made it happen, he would have. Brown, for whatever reason, got that one right.
yet we now suffer the indignity of those very same siren voices that were TOTALLY wrong about the UK joining the euro shamelessly spouting damn-near exactly the same nonsense about us remaining in the EU itself. Does the UK electorate have the self-confidence to reject subjugation to Brussels? I don't know if they do.
I certainly recall many articles at the time saying there had never been a successful currency union that preceded a genuine complete political union.
It is difficult to see a genuine complete political union before there is a linguistic union. The best options still seem to be a common language of either English or American. But I admit I may be biased.
The P.M. will get nothing from the E.U. unless he is prepared to leave which he is patently not . So it is up to the British People to send a massage via opinion poles that WE are prepared to vote out. I believe there is an article 50 in the Maastricht treaty which would allow us to force a meaningful renegotiation but it has not been triggered. The NO campaign have a real up hill struggle with both the Cameron administration and the Labour party ranged against it and blatantly fiddling the conditions.
One of the few positive achievements of Gordon Brown was keeping us out of the euro, albeit for the wrong reasons. It is also worthwhile remembering the consensus amongst the usual suspects for joining the ERM a decade or so earlier; clearly they didn't learn much from that episode.
Never forget, folks, that the euro was set up purely and simply as an 'envy' project; envy that the American dollar was being used as a global currency...
Greece saw it as free money - but of course the fertiliser was bound to hit the fan sooner or later...
The idea that it was simple petulance on Brown's part is unfair. Many, perhaps most (though less than 97%), economists were strongly opposed to joining the Euro. There was a whole literature on optimum currency areas and there was little doubt that that the EU did not meet the criteria for such an area. Simon Wren-Lewis has a useful discussion at
http://mainlymacro.blogspot.co.uk/2013/07/how-knowledge-transmission-should-work.html
The fear always was that joining a monetary union with strong fiscal controls would leave member countries without the policy tools necessary to combat shocks affecting some countries more than others, because the fiscal rules that were chosen ruled out countercyclical use of fiscal policy. The great irony in all this is that Osborne chose to follow exactly these kind of fiscal policies, even though he didn't have to. He did have freer hand on the monetary side than if we'd joined the euro, but with interest rates driven as low as possible there wasn't much that monetary policy could do, apart from quantitative easing, which does not seem to have had a strong effect. So I'm puzzled why the Tory eurosceptics are so against the euro. Had we been in a Labour government would have had to follow Osborne like policies, see the case of France.
I think on the part of our political elite hahaha the desire to be part of some super-national grouping grows out of a sense of their own hopelessness. Or, to put it another way, it means they can do unpalatable but necessary things without losing too many votes - "the rules (of the ERM, EU, whatever) say we have to" is perfect cover for almost everything.
golf charlie (Jun 18, 2015 at 12:05 PM)
Indeed there is, but a sociologist or a pollster is a better guide than a psychologist.Yuppies, Guardianistas, the chattering classes, the opiniocracy: - a core group of the educated middle class whose occupation of the media, academia and associated professions gives them an unusually powerful leverage are the spearhead of both movements.
The Marxist historian EP. Thompson nailed their Europhilia thirty years ago: it's all about cheap aubergines and green peppers in Waitrose. Global warming is a bit different, since there's no obvious pay-off in depriving yourself of cheap air travel and fresh tropical fruit.
Also, Eurosceptics were always allowed media access, even at the BBC and in the Guardian. No-one suggested that they didn't love their grandchildren.
Allister Heath is indeed giving a very false impression that most economists were in favour of the euro - as mikep (Jun 18, 2015 at 1:41 PM) points out, although it is probably true that the benefits of increased trade were overstated. The vast majority of leading economists in the relevant field were against. There was a spectacularly ill-timed piece published on the 10th anniversary of the Euro mocking US economists for being sceptical about the euro (http://econjwatch.org/file_download/403/JonungDreaJanuary2010.pdf). This exhaustively documents the anti-euro position of many leading US based economists (at that time almost all leading international economists were in the U.S.) on the eve of its introduction:
Whoops.
By the way Krugman, not exactly beloved of this site, was a leading member of those sceptics.