If North Americans can think constructively about Europe’s
problems, maybe they can start thinking a little more creatively about their
own.
In a fascinating interview with Terence Corcoran of the Financial Post, Robert Mundell, American
Nobel prize–winning economist and widely identified as the “author of the euro,”
challenges the most popular theoretical argument used to attack the logic of
Europe’s currency union, as well as the logic of our own.
“[Mundell] dismisses
the claims of critics who say that the euro was a mistake because Europe is not
a fiscal union. ‘Very few countries in the world have a fiscal union. It would
be almost impossible for a large country to have a complete fiscal union.
Canada and the United States do not.’
“‘It is curious how
American and sometimes North American economists have tried to nail the deficit
problem as a 'euro' problem. If the Government of Canada or Newfoundland or
Ontario ran up their public debts, and had big current deficits to boot, would
that be a debt-deficit problem or a loonie problem? If California is on the
verge of insolvency would that be a U.S. dollar problem or a debt-default
problem for California?’”
Estonia, Germany, France, Italy, and 13
other states; Newfoundland, Ontario, Quebec, Alberta, and 6 other provinces;
California, Texas, Michigan, South Carolina, and 46 other states—all using the same
medium of exchange and responsible for own budgets.
For 15 years, for 145 years, for 236
years, three democratic currency unions with multiple fiscal regimes, with uneven
business cycles and hot and cool labor markets, have allowed for long-term
economic growth and peaceful political change.
Each currency union, furthermore,
includes sub-jurisdictions with significantly different political cultures—some
enjoying great power and many carrying on with relatively little.
Europe’s central institutions and
federal budget (less than 2% of Europe’s GNP) are, today, relatively small
compared to the public sectors of its 17 members. Consequently, political
coordination is required to mobilize the credit and power of the whole of
Europe to fight a crisis in its member states. This problem hasn’t existed
in North America for over a century.
North American federalists don’t face
Europe’s currency management crisis. Instead, we imagine ways to stay apart as
readily as we bother to act together.
With severe global pressure to be even
more innovative, productive, and flexible, tell me again: What’s the
conversation-killing argument against a currency union of the two oldest
federations—Canada and the United States?
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