Here is the article in text mode for those who have trouble with HTML. My remark in this: when the metric system was developed Britain refused to work with France on similar grounds as expressed in this article. Metric would be a failure. A big mistake! And although there are risks, I am confident that this will prove to be another big mistake as well,
Han ----- Original Message ----- From: kilopascal To: U.S. Metric Association Sent: Monday, 2002-01-07 04:56 Subject: [USMA:17308] Europhobia MONDAY JANUARY 07 2002 I wouldn't put my money on the euro WILLIAM REES-MOGG Gus O'Donnell, the Treasury official responsible for the assessment of the euro, almost certainly did say that it can "never be clear and unambiguous". If so, he was correct. Almost all independent commentators have taken the same view, including those who favour British entry. For instance, Philip Stevens, the pro-euro columnist on the Financial Times, wrote last Friday that "the evidence will never be clear and unambiguous". The reason is inescapable. It is not possible to predict the outcome of complex variable factors at an indefinite period in the future. The Italian Defence Minister, Antonio Martino, who was a euro-sceptic, commented last Wednesday that "there are big risks that the experience with the euro will end in failure". As most currency systems have ended in failure, his statement also seems correct. Whatever view one takes of the possible benefits of the euro, there is no certainty about the outcome and the risk of failure is substantial. That must be the starting point of any serious debate, though one might not think it from the glib assurances of Charles Kennedy and Peter Hain. The euro is a project of long history. The Roman Empire had a single currency, though it lapsed into inflation, and many currency reformers have wanted to recreate it. The first serious modern reformers belong to the third quarter of the 19th century, particularly the French economists of the time of Napoleon III. The most interesting developments came between 1858, when the United States made proposals towards the assimilation of currencies, to mid-1870s, when the dollar, the mark and the franc were all re-established. In 1863 the International Congress of Berlin made recommendations for a realignment of currencies. This was, of course, in the gold period when all serious currencies were valued in terms of gold or silver. The 1863 congress did not recommend either a single international or a single European currency. It observed that several major currencies were already close to an orderly alignment in terms of their gold or silver content. One pound was worth approximately $5 and 20 French francs. The Austrian florin also fitted this scheme. The congress recommended that these currencies should be adjusted so that the pound sterling could serve as a 25 franc piece in France or a $5 piece in America, and so on with each currency. The congress also recommended that other countries should tie their coinage to one of the main currencies. This would probably have created three currency blocks, the UK for the British Empire, the US for America and France for Europe. Little events then intervened. Bismarck united Germany by defeating Austria and Bavaria in 1866 and France in 1870. In the United States, the North reached victory in the Civil War in 1865. Even after 1870 France continued to attempt to unite the European currency, with some initial success. France, Italy, Spain, Austro-Hungary, Switzerland, Belgium and Greece formed a currency group linked to the franc. However, the alignment of the pound and the dollar never took place, though the United States restored gold convertibility. Scandinavia formed its own separate block. The decisive choice, however, was Germany's, or rather Bismarck's. The German recoinage of 1875 ended the inconsistent muddle of the coins of the German states; the new 20 mark coin was fixed at 7.1685 grams of pure gold, as against the 7.2581 grams or the French 25 franc coin. An historic decision. The 89.6mg of difference meant that Europe could not have a single currency in 1875. It also made it impossible to make further progress towards a world currency. Bismarck wanted to use a separate mark to complete the unification of Germany. His motive was political. The great English economist William Stanley Jevons commented: "It cannot be too much regretted by all friends of progress that, in deciding upon the weight of the new mark piece, the German Government should have studiously avoided assimilation to the France system." The French system itself broke down, partly because of the absence of Germany, and partly because of the almost perpetual bankruptcy of Austria. The French made the mistake of including too many weak economies; that could also damage the euro. Currencies are hard enough to manage; currency blocks, covering differing economies, are even harder. All the currencies that mattered in 1875, except for the dollar, have lost between 98 and 100 per cent of their purchasing power. Of course, they have all lost their convertibility into gold; if the dollar were still convertible into gold at the 1875 rate, it would be worth 14 dollars; the pound would be worth �48. These have been the successful currencies. The mark always was a political currency; Bismarck wanted to consolidate the Prussian Empire as the dominant European power. The euro has a similar purpose for the EU. Yet it is politics which gave the mark its own peculiar history. The first and the last periods were quite successful; the 30 in the middle were catastrophic. The number of names it has passed through gives some indication of the changes the mark has experienced: the mark, the Renton mark, the Reich mark, the Deutsche mark, the Ost mark, and now the euro - six names in a hundred years. A currency which repeatedly changes its name is as suspect as a man who repeatedly adopts an alias. The original mark now has no value; that was wiped out with the inflation of 1923, and wiped out again in 1945. The mark has passed through many different external regimes. It has been on the gold standard and the gold exchange standard, has floated or not floated, been convertible or inconvertible, been regulated or unregulated. It has been part of a snake and an emu, which is zoologically bizarre. It had been subordinate in Bretton Woods and the master of the European exchange-rate mechanism. The euro is the latest of its transformations but, with so many different roles behind it, who can say that the euro will positively be the mark's last resting place? In 1875 Jevons foresaw that the dollar would be the leading currency of the 20th century. "It is firmly adopted as the money of a nation, which as far as human wisdom can penetrate the future, is destined to be the most numerous, rich and powerful in the world." "Numerous" may have proved mistaken, but the forecast has proved true. Jevons had no confidence in single currencies for regional groups, nor in inconvertible paper currencies. The euro is an inconvertible paper currency for a regional block of differing economies. As such, it is quadruply vulnerable. I doubt whether in Britain we can now do better than manage our own independent floating currency, in control of our interest rates and money supply. If, however, we want to take the risk of joining a fixed currency, outside our control, we would do better to apply to join the dollar rather than the euro. The dollar is still much the better currency. Currencies depend for their strength on their economic and political base. The economy of the United States is technologically superior to the European; it has lower costs and taxes and less regulation; it is more resilient and adaptable. Politically, Europe is halfway between being a group of states and a single power; the US is a single nation, under a proper Constitution. The US is the super- power; the EU is not. The euro itself could fail, but so could the individual euro nations. There is no guarantee against individual default. The evidence is that all currency systems are dangerously exposed to extreme events; to wars, revolutions, inflations and slumps. With good management, a small number survive for longish periods, though with a consistent loss of purchasing power. However, there were at least six events in the 20th century which would probably have destroyed the euro - two World Wars, the Russian and Nazi revolutions, oil inflation and the great slump. Such events are likely to occur again. The euro is not as strong as the dollar and has not yet faced any serious test. It may well not survive. History will decide. Copyright 2002 Times Newspapers Ltd. This service is provided on Times Newspapers' standard terms and conditions. To inquire about a licence to reproduce material from The Times, visit the Syndication website. Opinion January 07, 2002
