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In today's New York Times, there was an extensive discussion of the move to a common European currency, the Euro. It supports what I have long argued--as have others--and that is that this move to a common currency is something that is only being pushed by big business and some of the governments, and that "ordinary" people are at best neutral, but often opposed. The stated political goal is to enable a unified "Europe" to economically compete against the United States and Asia.
The major problem as it is being implemented (as a result of the Maastricht Agreement in 1991) is that it would create a European Central Bank (headquartered in Frankfurt), and there would be no democratic control over the Bank--i.e., the Bank would run monetary policy for the continent on its own, with no one able to control it. It appears that the Bank will select its own Board of Directors, although I may be wrong here--can anyone clarify this point? (It's true that the Federal Reserve System in the US has no democratic control over its operations--its "independence" is cherished--but there is some control in that elected politicians nominate and the Congress must approve its Board of Directors. It ain't much, but it looks a hell of a lot better than this European bank.) Already the Times notes, "This bank will set interest rates and impose a fiscal discipline so strict that a profound reshaping of Europe's costly welfare state appears inevitable."
But, for sake of argument, let's consider some of the ramifications of the establishment of this European currency....
There are two things in the article that I did find EXTRMELY interesting: first of all, there are strict limits on which countries can apply to join the currency union, and to do so they must meet strict criteria. These criteria cover things like deficits, debt and inflation. The debt criteria is jumped out at me: (according to the Times) "Debt must not exceed 60 percent of total output [i.e., gross domestic product or GDP] unless it is approaching that level 'at a satisfactory rate'." In other words, THE UNITED STATES COULD NOT JOIN THE CURRENCY UNION (assuming it was a European country and wanted to) BECAUSE IT COULD NOT MEET THE DEBT REQUIREMENT! In 1995, the last fiscal year that complete data is available, the total national debt (or as written, "Gross Federal Debt") was $4.921 trillion, and this was 70.3% of the GDP! The debt as percentage of GDP has climbed from a post-World War II low of 33.6% in 1981 to 70.3% in 1995, and the last year it was below 60% was 1990. (Source: Statistical Abstract of the United States, 1996: 330, Table No. 520: Federal Budget--Summary: 1945 to 1996).
The second thing: again the Times, after noting that the European Union's economy is about the same size as that of the US's, and that it market is bigger since there's about 100 million more people living there, "Why, therefore should the euro not eventually make strong inroads to the dollar's international dominance, expressed in the fact that the dollar is the currency for close to 60 percent of the international trade and 80 percent of financial operations?
"Imagine oil prices in euros rather than dollars. Imagine the United States no longer able to assume that its deficits are automatically financed because the world wants dollars." And then it goes off onto other things.
What is the importance of this? The US has been able to run such massive deficits as it has run since 1982 because the world economy is unofficially run on dollars--and there is no "governor" on the US Government's ability to print dollar bills. In other words, there is nothing to control the printing presses except for politicians. (Are you getting the picture yet?) In other words, to generate the economic growth of the US since the early '80s, the US Government has engaged in massive deficit financing. (The US national debt has grown approxmately 400% since 1981, or 4 times all the debt owed from 1789 -1981!)
If the Euro is launched as planned and if it comes to compete with the dollar (and perhaps the yen), it could very well lead to the world economic system changing from being unofficially based on the dollar to being based on the euro, the yen or, more likely, a basketful of currencies. That would mean that there would have to be massive Federal spending cutbacks as the US would be forced to balance its budget. (Note: I believe that Clinton's budget deal with the Republicans earlier this year is a sham--and am operating off this premise.) To do this, there would undoubtedly be massive cutbacks in social services in the US, and probably an extremely severe recession and possibly even a depression--either of which would severely shake the world economy.
To sum this up: I'm not suggesting that the current US domination of the world economy is good--I find it abhorent. I am saying, however, that continuing to passively accept the US Government's acceptance of Capital's economic and financial plans--or to passively accept the creation of the European currency union on behalf of business--looks almost certain to lead the countryies of the world into severe recessions and/or a depression.
We on the left need to get our collective act together to present and fight for an alternative economic system that gives people an alternative to this madness!
Kim Scipes