Monetary unity comes at vast cost


stefan-auer-thumb Dr Stefan Auer


First published in The Australian on 28 September, 2011.

When Friedrich von Hayek wrote his Road to Serfdom, he feared that collectivist thinking, which he decried as socialism, would lead to the destruction of individual liberty. He did not envisage that something like the EU - driven by a strange amalgam of neo-liberal and socialist thought - could destroy the liberty of whole nations.

How else is one to describe the demands voiced by the EU leaders, alongside the European Central Bank and the International Monetary Fund, that the Greek government fire tens of thousand of public sector workers by the end of the year.

Or is what Greece is experiencing simply the downside of globalisation? That is what all students of politics are taught in International Relations 101. No man is an island, no nation is on its own. In other words, no nation is truly free, constrained as it is by the forces of global capitalism.

The EU was meant to provide the right answers to globalisation. It was said to be particularly advantageous to the small nations of Europe which would find themselves empowered.

This is the idea underlying the EU's supranational institutions. It was meant to enable Europe's constitutive nations to be both democratic and powerful. The reward for pooling national sovereignty would be to gain more control over one's national destiny.

The most ambitious step towards such supranational collaboration was the introduction of the common currency, the euro. The euro was to allow Europe to defy the forces of a global capitalism underpinned by the dominance of the US dollar.

That project is now destroying not only European unity but also European freedom itself, a situation at once tragic and ironic.

Tragic, because the constraints imposed on whole nations create intolerable burdens on most individual citizens of these nations; just ask people in Greece what they think about Europe today. Ironic, because the EU was created with the specific aim of protecting democracy in Europe.

Increasingly, political efforts directed towards the rescue of the eurozone display qualities of socialist-style central planning. Their aim is to outwit the markets, but the ultimate goal of unification is as elusive as ever.

The result is the destruction of freedom at European level similar to what Hayek expected to occur at national level.

"The effect of the people agreeing that there must be 'a decisive action' without agreeing on the ends, will be rather as if a group of people were to commit themselves to take a journey together without agreeing where they wanted to go: with the result that they may all have to make a journey which most of them do not want at all."

Substituting "a decisive action" for "central planning" in Hayek's formulation updates The Road to Serfdom to describe the current European predicament.

This is what you get when you ignore the simple lesson that Hayek articulated: defying the logic of the free market endangers political freedom.

Having politicians decide one's fate might be more oppressive than submitting to the anonymous forces of the free market.

If the way to restore the self-government of EU nations is to give up the euro, then yes, abandon that dysfunctional currency union once and for all.

Stefan Auer holds a Jean Monnet chair in EU inter-disciplinary studies at La Trobe University