Acton Institute Powerblog

The eurozone could learn a lot from the Reformation

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Euro symbol in front of the European Central Bank in Frankfurt

The president of France, with the agreement of Germany, has called for the creation of a single eurozone finance minister who would exercise some authority over the budgets of all its member nations – and the right to redistribute wealth between them. Yet the euro itself removes 19 widely divergent economies from market influences, does not incentivize good behavior or disincentivize bad behavior, and ignores the most important lessons of Western culture.

The last oversight is the most important, according to Michael Maibach in a new essay for Religion & Liberty Transatlantic“The history of power and its successful use since the Protestant Reformation and the American Revolution has been the history of decentralized and disaggregated power, of federalism, or the closest European analogue, subsidiarity,” he writes in his essay, “The euro: An economic and moral crisis.”

Maibach, who is managing director of the James Wilson Institute on Natural Rights and the American Founding, describes how an economic union intended to advance free trade and free markets morphed into an increasingly centralized government that continually removes financial decisions further and further away from its members – and their citizens.

Maibach is well-versed in how business really works in Europe. He served as president and CEO of the European-American Business Council after working with Intel and Caterpillar.

In his concise but expert overview, Maibach describes the tensions inherent in one currency, the euro, attempting to unite 19 economies at varying levels of health, from Germany (on one extreme) to Greece (on the other). All 19 nations pursue their own fiscal policies, which are to some extent insulated by this common currency. Maibach explains why this is problematic in detail. Among the most important of his insights, he writes:

When the value of a nation’s currency becomes disconnected from the decisions of elected leaders, public accountability is lost, just as are the vital market signals related to the efficacy of those decisions. Good behavior such as thrift, industry, and efficiency is not rewarded and bad behavior such as profligacy, sloth, and poor decision-making are not discouraged.

The eurozone has realized that having one currency directed by 19 separate national policies is not working. As a result, it offers its panacea of an “ever-closer union.” Maibach notes that the creeping, institutionalizing tendencies of any government work against the greatest force for human flourishing, the free market.

Maibach, who also also attended the most recent Acton University, brings his peerless insight to bear on the proposed eurozone finance minister, the development of eurobonds, how the euro temporarily concealed poor economic decisions, and the cultural insights that should guide the thinking of people of faith.

You can read his full essay here.

(Photo credit: weekendpower. CC BY-SA 2.0.)

Rev. Ben Johnson Rev. Ben Johnson is Senior Editor at the Acton Institute.

Comments

  • Donk

    And who will elect this individual, or have the power to remove them? Reason number #457 to be happy about the UK leaving.

  • Ben, I think Mr. Maibach should read Hayek’s “Monetary Nationalism” and Philip Bagus’ “Tragedy of the Euro.” The single currency could have been a blessing and was certainly not the problem. Floating national currencies allow governments to escape bad policies by devaluing their currencies, which is the same as default. Hayek shows that a single currency for an area like the Big EZ works much like the gold standard in that it punishes bad monetary and fiscal policies and rewards the good. The Big EZ’s problem was 1) loaning ridiculous amounts of money to the Southern Conference, the PIIGS, and 2) bailing them out after the crisis and 3) rescuing banks that loaned ridiculous amounts to the South. If people want sound monetary and fiscal policies, they must allow the natural working of the economy to punish bad policies but the Big EZ doesn’t want anyone to suffer for any reason at any time. As a result, nothing improves. Macron clearly understands nothing about economics or he would know that his plan will ensure that bad fiscal and monetary policy drives out any good policies that may have survived. It punished responsible state like Germany and the Netherlands and rewards the worst.