Would dissolving the European common currency, as proposed by the French free-market economist and entrepreneur Charles Gave in his book Libéral mais non coupable (“Liberal But Not Guilty”) free the Old Continent to stand upright on its financial feet again? Or would dissolving the currency drastically end the European project altogether, as some pro-Euro technocrats in Brussels fear?
Charles Gave, the chairman of the investment firm GaveKal, (and whose lecture I listened to at a 2011 Acton Conference Family Enterprise, Market Economies, and Poverty in Rome), offers an excellent economic policy analysis in answering these urgent questions. However, as you will read below, the European side of the financial crisis cannot be fixed in purely economic terms.
In his chapter “Europe: A Turtle on its Back”, Gave says that the EU’s already slow-moving economic tortoise is now in a worse position while laying flat on its back – its shell “heavily weighed down by a systemic debt trap” whose origins are found in keeping the common currency afloat at all costs.
Gave believes that the only way to get the turtle walking upright again would be lighten its load by effectively dissolving the heavily debt-tied euro and restoring national currencies to pre-1999 monetary standards. In Gave’s opinion, a restoration of national currencies across the Eurozone would force member states to return to a culture of self-reliance, that is to say, to count more on their own national fiscal and monetary means and standards.
The positive effect would also mean abandoning the quasi-idolatrous ways in which Europeans go to save their common currency while closing a blind eye to less responsible member states’ reckless spending.
Gave’s criticism of local/national responsibilities and the very origins of debt raise deeper questions about the cause of the European debt and monetary crises, but it is far from offering a more complete picture of the problem.
Acton’s research director, Dr. Samuel Gregg, helps us fill in the gaps. As he said in a recent editorial for the American Spectator:
Europe does indeed face huge monetary challenges. Having a common currency while permitting euro-members to violate mutually-agreed debt limits was always a recipe for disaster. Greece could happily splurge on adding tens of thousands of public sector workers to the government’s payroll and financing Chicago-esque patronage politics, while Portugal built dozens of now-idle, often half-finished soccer stadiums. Why? Because everyone knew if things went bad, then preserving the euro (a ‘sacred cow’ for Europe’s political class) from the impact of nations’ defaulting meant that heavyweights like Germany would go to considerable lengths to try and prevent a currency-meltdown.
Yet this amounts to only a partial — and therefore inadequate — explanation of Europe’s present disarray…[It] can’t disguise the truth that there’s something even more fundamental driving Europe’s economic crisis.
From the beginning, post-war Social Democracy’s goal … was to use the state to realize as much economic security and equality as possible, without resorting to the outright collectivization pursued by the comrades in the East. In policy-terms, that meant extensive regulation, legal privileges for trade unions, “free” healthcare, subsidies and special breaks for politically-connected businesses, ever-growing social security programs, and legions of national and EU public sector workers to “manage” the regulatory-welfare state…with little-to-no experience of the private sector.
None of this was cost-free. It was financed by punishing taxation and, particularly in recent years, public and private debt. In terms of outcomes, it has produced some of the developed world’s worst long-term unemployment rates, steadily-declining productivity, and risk-averse private sectors.
In sum, the idolatrous preservation of a European common currency and the ensuing “debt trap” and “domino default” which Gave articulates in his book is more fully understood when we link the European financial crisis to a crisis of Christianity — a faith which makes challenging demands on practicing members’ moral interrelationships, levels of risk aversion, and practical ways in which they care for fellow citizens and see their moral duties relation to their neighbor and society.
Christianity, as defined so well by the Catholic Church’s teachings on subsidiarity, demands that social problems must be first solved at the individual, local level. Only if the local and personal proves insufficient should the problem to be taken to higher levels, with the state as the means of last resort.
Subsidiarity – a guiding principle to all responsible Christians – helps limit public debt by relegating moral duties first and foremost to the private sphere. Subsidiarity is a check against forms of collectivization and the expensive public costs involved. When too much of the moral duty is placed on the state, public costs grow and debt is possible. When it is not, the state’s welfare machine is tends to shut down.
In conclusion, if it is true that the vast majority of Europeans no longer practice their Christian faith or take their charitable duties very seriously, one can rightly doubt how easily it will be them to free themselves from the weight of unsustainable debt (see also Sam Gregg’s ALS lecture below on this topic). If non-practicing Europeans tend to pass on more of their individual moral responsibilities to the state for the welfare of the elderly, sick and need people of society, it ends up being a costly delegation of Christian freedom and responsibility. In economic consequences, this makes the EU a fertile ground for a systemic debt traps and precarious monetary crises.