Britain and "Old Europe"

I had to laugh at an article in the Times of London about how Britain will be asked to give up its national health care programs in order to join the European single currency zone (Euro). In principle, I have nothing against public health care. I think that guarantees of basic services by the government is the most effect foundation for health care, and that government involvement can have the effect of keeping down costs without affecting the quality of the care (I know a bunch of American doctors who'd rather have the government on their backs than the insurance companies, whom they think are more ruthless.) There are many countries that are told that they must end their universal health care systems in order to participate in World Bank and IMF programs. Most of these are African countries--in the 1960s, after a (US-organized) coup of Nkhruma (because he invented the concept "neo-colonialism"--the replacement of political control of colonies in favor of economic control of dependent former colonies), Ghana was forced to dismantle its health care programs. It is amusing that the first industrial state would fall into the same category.

But the question that I would raise is what does this mean about "Old Europe." Britain is more dependent on its social programs in order to maintain the political status quo. It has problems adapting to the constraints of EU financial policies where poorer nations like Portugal are more determined, gaining much from its full association with the organization. I remember an article from a few months ago that even if Britain would join the Euro zone now, it would still be at a disadvantage, but even more so if it never joined. (It should be noted that other countries, like Sweden and Denmark, that rejected the Euro allow for free exchange and circulation of the currency, thereby enjoying some of the benefits of the unified currency without abandoning national monetary policies. But they also adjust their monetary policies to EU norms.) The critique given by the government is that "[t]axation and public spending are matters for individual member states." This is true. But the EU sets clear targets for economic performance, debt, and inflation that Britain refuses to meet. And it's not like Britain is tearing up the trading world. It isn't even the fifth strongest European economy.

Of course, the Euro is facing new challenges due to the rise in its value vis-a-vis the US dollar. The fall of the dollar is forcing small shifts in the patterns of currency reserving. More nations are buying up Euros rather than dollars. While EU planners expected this, they hoped that (1) the US would still be the currency of choice and that (2) this would not come to pass until the Euro was well embedded in economic life. Whereas the US has no compulsion screwing other nations over with its currency (see archives on Argentina), Europeans fell responsible for the effects that their monetary policies have one world markets.

BTW, I really hate that the costs of things in Europe have increased by around 25% due to the decline of the dollar. Thanks again, Junior.

New Reading

You might notice that I am actually reading something that is purely about US politics. I have been anxious to read this book, even though I believe I will ultimately disagree with it. For reference, here are my favorite books on economic history:

1. House of Rothschild by Niall Ferguson. Perhaps one of the five best histories ever written, combining economics with culture, race relations, diplomacy, ... .
2. The Peaceful Conquest by Sidney Pollard. It concerns the industrialization of Europe, giving the best account of how industry emerged on the continent.
3. The First Modern Economy by Jan de Vries. Awesome, but long book, explaining how the Dutch perfected mercantile capitalism and the supporting political institutions but could neither invent nor import industrialization.
4. The Reconstruction of Western Europe by Alan Milward. Explains how American capital was used, why France and Germany benefitted from it more than Britain, and how ineffective the Marshall Plan was in moving forward American reconstruction policies (the rearmament of Germany was the real motivating force.)
5. The Origins of Economic Backwardness in Eastern Europe edited by David Chirot. This edited volume has essays concerning the theories of economics and government of Alexander Gerschenkron. He postulated that economic elites better resist political reform if they are based in agricultural economies that lack a significant production phase (that they are largely rent-seekers.)