The Progression Theorem and the EU
To answer another question concerning the move from hard money to paper money--from the origin of money in Mises "regression theorem" to the destruction of money in what Salerno and Huelsman have called the "progression theorem"--I had the occasion to reread J.G. Huelsman's excellent piece on political centralization from the JLS.
The whole article is worth revisiting. He argues that the same forces that drive the monetary system away from gold to paper also force a change from small and lcoalized government to large and centralized government. In this passage, he argues that the origin and growth of the EU government can be found in regime financial irresponsibility:
The case of the European Union is an excellent illustration of a central institution that helps to reduce the co-ordination costs of several highly indebted—and contagion-threatened—governments. In the European Union, some states—Belgium, Italy, and Greece—are virtually bankrupt. Other states, including Austria, Portugal, Ireland, Spain, and Sweden, are on the wave of becoming so, and the rest is not much better.20 In other terms, more and more members of the European Union need to be bailed out.21 It will not take a very long time before no private investor will give them new credits. As the governments know this, they have started to become serious in their bargains with other governments. This has accelerated the negotiations leading to the reinforcement of the central bureaucracy in Brussels. Most of the governments became more interested in a coordination of their financial and economic policies. They needed an instrument to facilitate the complicated multi-lateral bargain. Of course, the European Commission was glad to step in. Now, it is our governments’ servant. In the future, it could be their master.
Comments (1)
Thanks to Jeffrey for pointing this article out. I found the swap the Germans made for giving up their Mark interesting. I guess it means the general German public will pay higher prices for imports, in exchange for the following regulation across the union:
1. Social Standards: will restrict people willing to work for lower wages from doing so and competing with the higher wage earning German trade unionists. All consumers in EU will suffer.
2. Environmental Standards: will make businesses in the rest of the union less productive so that the exporting German industries can compete better. All consumers in the EU will suffer.
3. Technical Standards: will force businesses in the rest of the union to adopt higher technical standards which so far, apparently, the market has not demanded from them. This will force businesses in the rest of the union to try to compete directly with the German companies that already supply the higher end market. Consumers of the lower end market will suffer, and so will the businesses now forced to compete in this higher end market.
Everywhere you turn, when you study government activity, it is just a very dark and dismal experience. And the bigger the government, the darker and more dismal it is.
Published: June 10, 2005 2:50 AM