The Euro: A Mindless Idea

Ashoka Mody on the arrogant delusion of the architects of the EU.

An Interview with the former IMF director cross-posted from Sp!ked.

‘It has been a little bit of a lonely effort.’ Ashoka Mody, an economics professor at Princeton University, and the former deputy director of the International Monetary Fund’s European department, is talking about EuroTragedy: A Drama in Nine Acts, his brilliant, magisterial history of the EU and the development of the Eurozone. ‘The vast majority of the European establishment’, Mody continues, ‘has either tried to ignore or to contest what it seems to me are very basic economic principles and facts’.

One can see why the European establishment might be inclined to do so. EuroTragedy is an indictment of the whole postwar European project, a meticulous, excoriating takedown of that which the European establishment holds dear. And it is also an attack on the European establishment itself, on its members’ groupthink, their delusion, their technocratic arrogance. What’s more, it comes from the IMF’s chief representative to Ireland during its bailout from the post-2008 banking crisis – someone, that is, with an inside track on the EU’s fiscal workings.

spiked spoke to Mody to find out more about his critical overview of the European project, the fatal flaws of the Eurozone, and why integration is driving European peoples apart.

spiked: Do you think you found working on EuroTragedy a lonely effort because, after Brexit and the other populist movements, the EU establishment is very defensive at the moment?

Ashoka Mody: I’m sure it plays a role. But I think that the nature of the entire project is very defensive. Think back to Robert Schuman’s declaration on 9 May 1950, which laid the ground for the European Coal and Steel Community two years later – he said that a common source of economic development must become the foundation of a European federation. This idea of the European federation was discredited very quickly, but European leaders have continued to flirt with it in different guises – ‘ever-closer union’; ‘unity in diversity’; and this particularly meaningless phrase that French president Emmanuel Macron uses called ‘European sovereignty’. The whole language is problematic and mystifying.

But most serious of all is the notion of common economic development as a basis for Europe. It was briefly true after the Treaty of Rome in 1957, which opened up the borders, but the momentum ran out within two decades. You open borders, but once they’re open, there’s not a lot more you can do. Even the gains from the so-called Single Market are very limited beyond a certain point. Every economist understands that.

On the Euro, there was never any question that it was a bad idea. Nicholas Kaldor, an economist at Cambridge University, wrote in March 1971 that a single currency was a terrible idea, both as economics and as politics. And Kaldor has been proven right time and again

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