Monday, November 21, 2011

A New Deal for Europe

During the Great Depression, the New Deal represented a dramatically different sovereign structure in the US than what had existed before. Individual states--who had given up monetary sovereignty long ago--gave up political sovereignty as Academics joined forces with national politicians to run America.

The days of corporate paternalism and local politics was over.

I don't know how much State level resistance there was to this takeover. I'm guessing that your average unemployed worker didn't think much of his local politicians, and may have believed that the wise technocrats in DC were going to usher in better governance, and a better life. Maybe local politicians saw this centralization as a meal ticket to plummer plum jobs, and even more opportunities for power. Or maybe people saw it as a dreadful curtailment of States rights and fought against the changes. I don't know.

Nevertheless, I see parallels to this and the situation in Europe right now, as member nations, who gave away their monetary sovereignty when they joined the Eurozone, are now losing their political sovereignty as well and don't seem to have any desire to go back to their old currencies or their old politicians. I think Italians and Greeks would rather be ruled by Germans, they just want the Germans to be less stingy.


Blogger Tom Hickey said...

Looks like Germany is betting the farm on the rest of the EZ caving. To maintain their mercantilist empire they need a relatively weak euro and peripheral countries to absorb exports, while they repress wages at home. A return to the DM would end this cushy game.

Even if German is successful in constructing a Fourth Reich, I don't see this leading to European stability any more than the New Deal has led to US stability. Opponents of the New Deal immediately began to oppose it, and the current political divide in the US can be laid to this to a great degree. I would not expect to see European nationalism just fade away either.

10:52 AM  
Blogger winterspeak said...

Hi Tom:

Calling this a "fourth Reich" is unfair. Would you call Roosevelt's New Deal a "Third Reich", for it certainly represented as dramatic a discontinuity from the previous political order as the Civil War did 70 years earlier?

I don't think that language is appropriate in either instance.

European nationalism *has* been fading quite dramatically for years though, but I think recent events have highlighted just how weak it has become.

10:59 AM  
Blogger Tom Hickey said...

Not my term, Winterspeak. This is what is being said now in Greece and other countries of the periphery.

The Rise of the Fourth Reich

Disclosure: My mother emigrated to the US from Vienna, Austria, and I acknowledge my Germanic tendencies.

12:05 PM  
Blogger winterspeak said...

Come now, Tom.

All sorts of terms are used all over the place. It's up to us as to whether we choose to repeat them or not.

Referring to Germany this way propagandizes the issue and makes discussion more difficult.

12:57 PM  
Blogger Tom Hickey said...

Sorry, winterspeak, but that is my perception of the situation. The Germans are acting badly, and I fully understand the outrage connected to previous events. IMHO, they are being very tone-deep in their blatant pursuit of national self-interest at the expense of a truly unified Europe. They want a Europe unified with them in charge, and they are being transparent about it.

I also think your notion that nationalism is on the wane is wishful thinking. Nationalism will be with us for the foreseeable future. I don't expect humanity to get beyond it for centuries if not millennia. It's in the blood, and evolution moves slowly.

I hope you are correct, however. There is nothing I would like to see more in the process of globalizing than the recession of nationalism. But there is little indication of it as far as I can see. It is going to be one of the major obstacles in the way of achieving an integrated global economy. If Europe cannot cooperate and coordinate, how can the whole world be expected to.

5:35 PM  
Blogger Ralph Musgrave said...

There are two ways of unifying Europe. One is the way chosen by the UK, US and various other counties: have wealthier regions subsidies the less well off. That works given a high degree of cultural and historical cohesiveness over the relevant geographical area.

The second is the EU way: unity in various respects (e.g. free trade) but not unity in the sense of one country subsidising others. The EU has operated to date on the basis that one country does NOT subsidise others to any great extent, and that was the basis on which EU countries originally joined the EU. I.e. if a country becomes uncompetitive, the rules of game stipulate it has to go thru a period of austerity to get its costs down.

Germany is not behaving in a 100% saintly fashion, but no other EU country behaves this way, especially the Greeks who joined on the basis of fraudulent figures for its deficit, etc. Germany is sticking to the conditions on which it originally joined the club. That is fair enough.

12:34 AM  
Blogger NeilW said...

The problem is that small units acting their own self-interest are more effective in a modern highly connected world.

There is an argument that even the US is being held back by its size and its union. California is having its wings clipped due to lack of money and the poorer states can't get out of the handout trap.

It's very likely that even the UK is too big for a modern world and should fragment into smaller pieces with its own currency and parliament.

Centralised large state apparatus is very 20th Century.

12:35 AM  
Anonymous Anonymous said...

Great, Interesting post,....including the nutshell, "Italians and Greeks would rather be ruled by Germans, they just want the Germans to be less stingy."
Sounds about right!

10:54 PM  
Blogger death maiden said...

i read a german econ-policy hack making this point (can't remember his name): that it's bretton woods redux, with germany as us and europe (heavy on the piigs) as europe

10:24 AM  

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