Don't be an Ostrich, or Who is the Single Currency for?

This paper is called `Don't be an ostrich' because I am convinced that there is a good joke involving emus and ostriches; but unfortunately I haven't thought of it yet. Anyway the ostrich image is relevant to what I want to say about EMU, because too many in the alternative movement or Green movement are ignoring the issue of monetary union because it is so boring and intractable. This is probably a mistake because it is relatively easy to figure out what EMU is for, and hence to argue against it, and also because if we are clever we can use the movement towards monetary union to our own advantage.

EMU stands for Economic and Monetary Union and it represents one of three possible options for Europe's monetary and financial future:

1. status quo: under this option we proceed as before, all with our own currencies, having to exchange them to spend money in other currency areas. Within a single market this has disadvantages for businesses, who have to keep changing their prices as the relative values of currencies change and it is also a problem for us as European citizens, since we are tending to travel more between each other's countries.

2. common currency: this means that we have a currency, which could be the ecu that can be used in all the EU countries running parallel with their national currencies, so that we would all have our individual exchange rates with it. This common currency would be a real advantage to people who travel a lot in Europe, but it wouldn't solve businessmen's problems because exchange rates would still change. In countries like the Netherlands it is so easy to slip from one currency area to another that you need to keep a wallet with three or four currencies in it. Actually the Dutch have used human ingenuity and got around this problem by simply having large tills and accepting any of the local currencies, carrying out on the spot conversions themselves. But a common currency would be more straightforward.

3. single currency: this is the option that is happening and it means that most of the countries of continental Europe have scrapped their own national currencies and switched to sole use of the ecu. (In parenthesis I should point out how cunning the French have been in fixing the name of the currency as 'ecu', because it looks like an abbreviation for `European Currency Unit', which of course it is, but is was also the name of a 16th-century French coin and hence they can feel that it is really theirs.) Because of the link between money and inflation and the other economic variables a single currency means a single economy. This economy is not run democratically and politically but 'managed' by the central bank, which is in Frankfurt. So what seems like a convenient monetary tool actually means a huge political change for all the countries involved.

So the question we need to ask is why we, the people of Europe, are getting option 3 rather than 1 or 2. The pressure for this is not coming from economists, who in this situation are divided as to the benefits of EMU. Economic theory can find all sorts of problems with this policy option. The decision to make a single economy of Europe is a political decision. So who is driving this process of change? I'm going to follow a transcendental method by working out who benefits from the change and then follow the route back to the find the engine driving that change.

Who Gains from EMU?

The main argument produced in favour of monetary union is that it will encourage a growth in trade which is universally considered by assumption to be A Good Thing. But this is not the case from the perspective of economies on the periphery, such as in Wales, or from the perspective of the environment, which is seen as a free resource to be polluted at will by international transport.

The third option, that of monetary union, is only in the interests of transnational corporation: for them one currency means one economy and only one political entity to lobby. This represents greater 'efficiency' and will be cheaper. The drive towards the single currency, as is true for many of the changes that are underway within the European Union, is emanating from the European Round Table of Industrialists, a very powerful but totally undemocratic body.

The 'harmonisation' or straightjacketing of fiscal regimes that a single currency necessitates also serves the interests of corporations. National governments can no longer take active measures to reduce unemployment by boosting demand. In the new Europe their only option will be to cut wages, leading to a downward spiral of wages around the Eurozone countries, as governments compete with each other to attract corporations to create jobs in their territories.

If you try to imagine the world from the perspective of a CEO of a transnational corporation then the move towards the single currency begins to make sense. An enlarged Europe, including Central and Eastern European countries, all using the same currency is perfect for cheap production. TNCs can create a division between producer countries, such as Poland, where Welsh steel jobs have recently walked off to, and consumer countries, perhaps Germany with its imported Indian computer programmers. They can play this game in each currency zone: in the NAFTA area Mexicans can work for low wages, allowing US citizens even higher levels of consumption.

Problems with EMU

Once the European economies are linked together into a single economic unit individual countries will not be able to use the economic tools of demand management to influence their own 'domestic' economies. As already discussed, this means that, for example, they won't be able to devalue their currency to encourage demand, or to invest in public works programmes to deal with unemployment. In the future Europe inequalities between regions will only be able to be dealt with by interregional transfers, which basically comes down to Germany giving money to other countries. This will clearly lead to resentment on both sides.

Europe will lose the economic flexibility offered by different economies being in different stages of the business cycle. Other variability between economic systems will also be lost. The drive to centralize and make uniform economic policy seems to me rather like the drive to make us all grow the same species of fruit and vegetables and it is subject to the same dangers. Because in a crisis we will all sink or swim together, just like the reliance on a single species of potato led to the Irish potato famine when a disease which attacked that species invaded the crop and there were no resistant strains.

This need for uniformity between the economies that are melding themselves into one is the reason the UK is staying out at present. Because we are in a very different stage of the business cycle from the other economies. We are in a boom time of low unemployment, whereas most of the European economies are entering slumps and facing high and growing levels of unemployment.

In fact this is a disastrous time for them to get together, because the central bank will not allow any of them to tackle their domestic problems and as things deteriorate the people in all countries will be able to blame their neighbours next door, thus leading to nationalist antagonism. So the policy that claims to ease tensions and make war in Europe impossible may have exactly the opposite effect. If you think this is the usual Green doom-mongerer I should tell you that just such a scenario was painted by Professor Martyn Feldstein of Harvard University on a recent Newsnight programme.

I think it is possible to see EMU as part of the three-pronged assault by multinational corporations to increase their power by simultaneously reducing the power of democratic governments:

economic: EMU removes most economic instruments from national government control;

legal: the MAI prevents states from introducing environmental and social legislation which might impede their profit-making activities;

political: the culture of attacking politicians and smearing them (e.g. Clinton) undermines trust in elected representatives, so that, as shown in a recent survey, more people trust brand-names then politicians.

Opportunities Offered by the EMU debate

In many ways the political manipulators have given us an excellent opportunity to put on the agenda the sorts of policies that normally bore people stupid. We can use the EMU debate to put forward some of our own radical policy suggestions

The movement of the banking system to Frankfurt will increase the sense of isolation already experienced by many people within European. Our positive response should be to build up local banking networks, such as the very successful credit unions, or perhaps local versions of Triodos bank. Such banks can only lend to borrowers in the local community, hence making impossible the sucking of capital out of peripheral regions. Their activities should be extended to include funding of businesses as well as people.

What about the currency itself? It is a typical European product, lacking in cultural resonance and offering no basis for identification or support from European citizens. We can use this alienation to our advantage by proposing our own regional currencies, particularly in the areas of the UK that now have some political autonomy. This would require legislative changes, since it is illegal to set up your own currency (for obvious reasons: it would mean we could all have a share in the banking scam!), but the debate about it would raise many interesting and subversive political questions.

At the level of ideology it seems that the capitalists have over-played their hands. I see international corporate capitalism as a playground roundabout: as the roundabout spins at ever more dangerous and dizzying speeds more people are going to be flung off into the margins. They are finding spaces to exist outside capitalism in various outlaw states. And even those near the middle are beginning to feel rather sick. Although they are doing better than ever in financial terms, their quality of life is becoming so poor that they are asking questions about the economic system that imposes it on them. That is where many in the Green movement now find ourselves, having decided to get off the treadmill of work and life in an 'advanced' industrial economy. EMU is just one of the forces that will encourage others to join us, and together we can build our alternative, our own Eutopia.