I distinctly remember the day I decided the UK should never join the European single currency. I couldn’t tell you the precise date, and am not absolutely sure what year it was – probably 1990. But I vividly remember sitting in my student digs – jostick burning, posters on the wall – surrounded by books and articles. It was one of those moments when, after intensive reading, the penny almost audibly dropped.
As an economics undergraduate, I had to study a lot of complex mathematical modeling. Rebelling against the arid pointlessness of pretending economics is a science, I immersed myself in economic history too. It was while learning about the failed monetary unions of the past – particularly those of the mid- and late-nineteenth century, in Latin America, Scandinavia and the nascent United States – that I instinctively realized the euro, still then not a reality but almost certainly coming, was in for a bumpy ride.
History clearly shows that monetary unions almost never work. Member states almost always do their own thing, either spending or saving too much, as befits their national character. They react differently, too, as they’re affected differently, by various external shocks.
To keep monetary unions together, you need significant cross-border transfers of cash – which end up causing resentment and outrage, not just among nations shelling-out, but recipients too, when their paymasters boss them around. The result, throughout history, has been violence, as monetary unions have dissolved.
The mighty Federal Reserve, came into being as late as 1913 – and it was only then that the permanence of the US dollar was cemented. In its early post-independence days, America had used a hodge-podge of regional currencies. Several previous attempts to create a unifying central bank had resulted in riots.
It took more than a century of nation building, then, and the forging of a common identity over decades of national government, for America’s single currency to take hold. Europe isn’t like that, I remember thinking to my undergraduate self, staring out of the window. In that sense, modern-day Europe, with its distinct countries, history of conflict and mosaic of cultures, is about as unlike America as it is possible to be.
Preparations for the single currency were nevertheless happening in earnest. The 1989 Delors report had declared that as long as member states coordinated their policies, and set up a European Central Bank, everything would be fine. When I eventually left university, and began making my way in journalism in the mid- and late-1990s, I was flung into the maelstrom of reporting and commenting on the UK’s national debate on joining the euro. And I was shocked.
Practically noone involved – certainly not the politicians, and very few media commentators – had the slightest idea about the history of previous monetary unions or the technical issues involved in setting up and maintaining a single currency. To attempt to articulate such details was to be seen as a weirdo.
What I witnessed instead, from the inside, was an entirely political, almost tribal debate. It was all about trading easy slogans, vague generalizations and ad hominem attacks – amidst a near vacuum of actual knowledge. The most telling aspect of the euro debate during those Blairite years was that it wasn’t easy being against. To oppose membership, even on technical grounds, was to be a little Englander, a xenophobe and a crank.
Yet us cranks were right. The single currency was and is a disaster, a monetary straitjacket that is crippling Southern Europe and, across the continent, spreading despair and ever-growing mistrust. Faith in “status quo” parties is ebbing, nationalism is on the march and much of the region remains in the economic doldrums. In Italy, GDP is still 9pc below where it was at the time of the Lehman collapse, while its 12pc adrift in Greece – a country that, together with Spain, still has over 25pc unemployment.
The euro area is far too diverse, and labour mobility too linguistically and culturally restricted, for the single currency to work in a meaningful and sustainable way. The euro is too low for the Northern members and too high for the “Club-Med” economies – and, as a result, tens of millions of people are having their dreams and livelihoods blighted.
What fiscal transfers do happen across the Eurozone have, meanwhile, been largely high-jacked by deeply-entrenched agricultural and financial services lobbies that are far too close to government. Driven by a self-serving and deeply myopic Brussels elite, hell-bent on feathering their own nests, emboldened by bureaucratic megalomania, European monetary union is the ultimate triumph of political hubris over economic common sense. It is a terrible, terrible idea – as some of us said at the time, and were repeatedly insulted for our trouble.
Why am I saying all this? I’m saying it because I really, sincerely hope that the UK’s upcoming debate on membership of the European Union isn’t conducted in the same shrill, finger-pointing manner as was the “debate” about the euro. I’m under no illusions and have absolutely no doubt it will be but, hey, it’s important to live in hope.
For there will now surely be a referendum on EU membership – and it’s about time too. After Ukip topped the bill at the European election – taking 28pc of the vote, and more than tripling its tally of local council seats – there can surely be no way the “establishment” parties can wriggle out of it this time. Nearly 60pc of those who voted in the European poll backed parties (Ukip, the Tories and the Greens) that have already promised an In/Out referendum. Meanwhile the Liberal Democrats, the party arguing there is no need to reassess our membership, was almost wiped out.
“When the facts change, I change my mind”. So said John Maynard Keynes. I see nothing to make me alter my undergraduate assessment of the euro. On the contrary, the debate has shifted towards me – so those advocating Britain joining are now the “nutters”, not those of us opposed.
But the facts are shifting in terms of what the EU is, and the extent of its power – which is why my mind is shifting too. I’ve long supported British EU membership, partly on the grounds that we need to be in the single market (such as it is) but also because certain issues – including crime and the environment – can be effectively tackled at the European level.
While I’ll be involved in the economic debate on EU membership, I don’t think that’s really what it’s about. Yes – we buy a more from the EU than we sell too them. So, if we vote to leave, we can certain do a trade deal. Meanwhile, we surely have to consider partially restricting the free movement of peoples when workers in some member states, such as Romania and Bulgaria, are so much poorer than we are. That’s fine if you live in London and want a cheap cleaner. It’s not fine – at all – if you’re a builder in the Midlands and your livelihood is being undercut, again and again, by waves of cheap migrant labour.
In the end, though, this debate should be about democracy and freedom. I want a close economic and political relationship with the rest of Europe but not what we currently have and certainly not “ever closer union”. That’s why, unless there’s a proper renegotiation, with our national sovereignty considerable restored, I’d regrettably vote to leave. And I suspect I’m far from alone.