Eurozone, or history repeating itself?

Essays

There were at least two fears expressed when the global financial crisis began in 2008. One was that we were in danger of repeating the 1930s and all that followed. The other was that this would be prefaced by an era of protectionism when each nation retreated behind the barricades determined to secure its own financial and economic interests at any cost. As one follows the unfolding drama of the Eurozone it is easy to see how the second of these appears to be coming true. An article in the UK press today (The Guardian, November 24th) likens the role of Germany in the current crisis to that of the USA in the early 1930s. At that stage it was the USA which had the resources to support ailing economies, notably Germany, and could possibly have prevented the social meltdown which handed power to the Nazi regime. But the opportunity was spurned – and the rest, as they say, is history. Now it is Germany that possesses the economic strength to bail out or support its fellow members in the Eurozone as their borrowing costs soar and austerity measures required threaten deeper cuts and greater social unrest. But, once again, it seems as though the nation that has is determined to hold on to its short-term advantage, at the long-term cost of the nations that are now struggling. Meanwhile, the criticism of the UK is that it sits on the sidelines, not having joined the Euro, but wants to tell the Eurozone members how to conduct their business in a way that will not disadvantage the City of London. In the end, of course, all will lose out, Germany included, as recession looms and finance ceases to circulate. So, have we learnt anything at all or are we doomed to repeat the mistakes of the past?

As the Second World War drew to a conclusion, various economists and political leaders attempted to achieve agreement on a new and more stable economic order. Most notable amongst these was probably John Maynard Keynes. At one point he proposed the creation of a universal currency, but this suggestion was rejected as the USA insisted that the dollar would actually play this role once the rebuilding process began. This is what indeed took place, along with the support for two other leading currencies – those of Germany and Japan – which, between them, could provide the stability required. That system survived until the 1970s when the USA went into deficit, but the dollar remained the effective global currency nevertheless as those countries now in surplus continued to feed those into the American economy. With the onset of the global crisis in 2007-8, that also has broken down, and we now have a system in chaos and a future that awaits the inexorable rise of China to become the world’s largest economy. If and when that happens though, nobody can predict with any certainty. In the meantime, there is a real fear that protectionism will be the order of the day. Instead of what is needed – those who can helping out those who cannot in order to protect the interests of all – those who can will support their own, and protect their own national political and economic interests. Keynes argued, according to the Greek economist, Varoufakis, for something like a Global Surplus Recycling Mechanism, a process whereby the surpluses accumulated by the few could be put at the disposal of those in deficit – a redistribution of wealth for the benefit of all. One could argue that the same process is required within countries as the levels of inequality between rich and poor continue to rise. It is certainly what is needed at an international level. In other words, an ethical and even faith-based principle of a more just and equitable distribution of wealth between and within nations, is essential if we are to avoid repeating the mistakes of the 1930s. It would be good to believe that we have progressed enough in the last 80 years to see this put into practice. The Eurozone would be a good place to start!

 

John Reader is Rector of the Ironstone Benefice in the Diocese of Oxford and a Senior Honorary Research Fellow with the William Temple Foundation (University of Chester. UK). His first degree was from Oxford (Philosophy and Theology); then an M.Phil from Manchester University, and finally a Ph.D from the University of Wales, Bangor on “The Problem of Faith and Reason after Habermas and Derrida”. He has taught on a number of courses and been Director of Pastoral Theology at an Anglican theological college. His books include Local Theology (SPCK); Blurred Encounters (Aureus); Reconstructing Practical Theology (Ashgate) and Encountering the New Theological Space co-edited with Chris Baker (Ashgate). He is also a visiting scholar at OxCEPT based at Ripon College, Cuddesdon.

 

 

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