Joseph Stiglitz has won the Nobel Prize for economics, which these days more or less presupposes that he’s a champion of spend-and-tax. And that he’s an economist at all presupposes that he’s lost outside the narrow confines of his discipline.
Even within those confines he at times resembles an arsonist put in charge of a fire department. In fact, he was in the past put in charge of other things. Prof. Stiglitz has served as the World Bank’s chief economist and, more recently, economic adviser to Jeremy Corbyn. Being left-wing is an ironclad requirement for both jobs, and Prof. Stiglitz amply qualifies.
Some things he does get right, as suggested by the title of his book The Euro And Its Threat To The Future Of Europe. “The euro is just a 17-year old experiment, poorly designed and engineered not to work,” he writes.
Alas, he then contradicts himself by suggesting that, however poorly designed, the euro could still work if only European leaders listened to Prof. Stiglitz’s ideas, mostly involving raising taxes in parallel with spending.
But the euro part is true, or rather a truism, like saying that a chap’s hope will be frustrated if he believes that drinking a bottle of whisky every day for 17 years will improve his health. The more challenging task would be to explain why he became a dipsomaniac and how he can stop being one.
To extend the simile, if Prof. Stiglitz applied his economic views to the problem, his answer would be that the man began to drink because it seemed like a good idea, and his only way out is to start drinking more.
No doubt shoving the same currency down the throats of vastly different countries is economic madness. But, and here Prof. Stiglitz is correct, the purpose of the euro was political, not economic. It’s wrong, he writes, “to let economic integration outpace political integration.”
Yes, unless economic integration is merely a tool designed to bring about the political kind. This was done successfully by Prussia, which started out by uniting German principalities in the Zollverein customs union, only then to unite them politically under its own aegis in 1871.
Economic integration can disguise the underlying political purpose, and here I can’t stop repeating Jean Monnet’s 1952 quotation, I love it so much: “Europe’s nations should be guided towards the superstate without their people understanding what is happening. This can be accomplished by successive steps, each disguised as having an economic purpose but which will irreversibly lead to federation.”
Because Prof. Stiglitz misunderstands the nature of the European Union, he blames the euro fiasco on his customary whipping boys the “neoliberals”, which is to say all economists to the right of Prof. Stiglitz. It’s their “market fundamentalism” that’s to blame.
This line is popular among socialists. For example, Emmanuel Macron, France’s former Economics Minister, declared with relish that Brexit would spell “the end of an ultraliberal Europe that the British themselves have pushed for, the end of a Europe without a political plan, centred on its domestic market.”
Actually, centring on the domestic market, and protecting it with punitive tariffs, is the exact opposite of liberal economics. Adam Smith, the founder of this genre, specifically wrote that “To give the monopoly of the home-market to the produce of domestic industry… must, in almost all cases, be either a useless or a hurtful regulation.”
Yet it’s pointless to expect socialist ideologues to know what they’re talking about. Macron certainly doesn’t and – for all his commendable attack on the euro – neither does Prof. Stiglitz, not really, especially when he mounts his hobby horse and rides it into battle against nonexistent EU ‘neoliberalism’.
Prof. Stiglitz proves his ideologically induced ignorance with a single sentence: “Europe, the source of the Enlightenment… is in crisis.” Contextually, he seems to be claiming that somehow the whole euro debacle contradicts the sterling virtues proclaimed by French philosophes and reasserted by German philosophers.
This is another case of putting the problem on its head. The EU, and the euro as its logical and inevitable extension, happened not in spite of the Enlightenment but because of it.
Rampant internationalism, wrapped together with such fallacies as egalitarianism, was part and parcel of the Enlightenment. As Christendom collapsed, philosophers from Grotius to Kant, and all the Frenchmen in between, came round to the idea that an international system should supersede national allegiances.
For example, Kant, a fanatic of republicanism, whose “heart was overfilled with joy” by the French revolution, argued that, as more European countries became republics, they could guarantee peace by coming together in some sort of supranational arrangement. One can hear echoes of the same notion in the frankly idiotic pronouncements by today’s federalists who ascribe the 70-year absence of a major European war to the EU rather than NATO’s nuclear umbrella.
One wishes economists chatted about their cherished paradigms and models among themselves and left us alone. They seem to be wholly wrong even when they’re partly right. If we listen to them, before long we’ll all march to soup kitchens, singing the Economists’ Anthem Brother, Can You Paradigm?.