Hayek v. Polanyi in the European Union

by Henry on July 16, 2012

A somewhat different take on matters Hayekian – Martin Höpner and Armin Schäfer’s article on Hayek and the EU has just come out in International Organization. It’s been in gestation for a while (an earlier working paper version can be found here), but the argument is pretty straightforward – if you look at it right, the European Union looks rather more Hayekian than Polanyian-social-democratic.

Instead of re-embedding markets, the EU is beginning to resemble Hayek’s blueprint of “interstate federalism,” where individual (economic and social) rights are located at the central level while the capacity for taxation and interpersonal redistribution remains entirely decentralized. What appears to be the nucleus of supranational social policy might turn out to be a recipe for less social protection and redistribution at the national level. … by granting non-nationals access to social transfers while being unable to oblige them to contribute financially puts pressure on the generosity given to all entitled persons. As economic liberals have aptly observed, divorcing rights from obligations limits the capacity for redistribution. … political initiatives to re-embed markets have become extremely difficult as EU members have grown ever more economically diverse. At the same time, integration through law (as opposed to political integration) continues apace and limits national governments’ ability to correct markets.

This article stems from a broader left-skepticism about the EU associated with people like Fritz Scharpf and Wolfgang Streeck (uncoincidentally the former director and director of the Max-Planck Institut where Höpner and Schäfer are based). Its argument is open to challenge but is also, at the least, highly plausible. Nonetheless, it’s the kind of argument that gets very little attention in the US, where, broadly speaking, leftists are in favor of the EU, and rightists (especially Hayekians and libertarians) against it. Much of this surely has to do with the tribalism that John Q. was talking about last week – a lot of US intellectual politics is based on affect. But it also suggests that the EU is a different kind of experiment than most Americans believe. If the EU manages to weather the tempest that still threatens to swamp it, and comes out the other end with a currency union, a banking union, and some kind of bond system, it will still look, as Höpner and Schäfer suggest, very Hayekian. Will it be politically sustainable over the longer term? I suspect not – increasing misery at the national level as a result of increased exposure to international exposure, combined with a withering of social protections will create the kind of political upheavals that Polanyi described (whether with happy, or unhappy consequences). Polanyi’s ideas suggest that Hayekian federal constitutionalism is almost necessarily self-undermining. But of course, Polanyi could be wrong …

{ 122 comments }

1

Chris Bertram 07.16.12 at 5:24 pm

I suspect that Bryan Gould is feeling increasingly smug and vindicated, from the safe distance of New Zealand.

2

Robert Farley 07.16.12 at 5:55 pm

“Much of this surely has to do with the tribalism that John Q. was talking about last week – a lot of US intellectual politics is based on affect. “

I’m not sure that this is quite fair on two points; first, lots of intellectual politics everywhere is based on affect. More importantly, on the broader point of whether it’s reasonable to think of the EU as essentially a “left” experiment, I suspect that the tendency stems from skepticism about the (contingent, accidental, problematic) nation-state as ideal vehicle for the leftist political project. Skepticism about the nation-state generates enthusiasm for (or at least interest in) supranational projects, etc.

Which is not to say that Hopner and Schafer are wrong; it’s obviously true that supranational entities can have right/negative effects, and the EU may be such an entity.

3

Peter Hovde 07.16.12 at 6:06 pm

In certain ways the ability of EU members to restrict benefits is even more limited than that of U.S. states. I was quite surprised to learn that EU members are forbidden from explicitly favoring their own nationals for access to their public universities, something which, of course, U.S. states do as a matter of course with regard to their residents. Now that seems quite unsustainable.

4

Kukai 07.16.12 at 6:29 pm

Eventually the EU will be obliged to decide if it is a Confederation or not. If it is, we can only expect an awkward Hayek-ian least-common-denominator sort of system, leaving the awkward questions of regulation unresolved. It will all end badly, as surely as the UN has been rendered impotent, run up on the reef of sovereignty by the oxymoron of United Nations.

Switzerland was once such a confederation. Nobody would fight for it when Napoleon invaded. Back and forth they went until the formation of the current federal state, which is currently trending right-ish, much exercised by the influx of all those immigrants. Switzerland still calls itself a confederation but it’s a unique amalgam of direct democracy and republican principles. Such a model might serve well as a basis for the EU.

5

Wonks Anonymous 07.16.12 at 6:37 pm

“in the US, where, broadly speaking, leftists are in favor of the EU, and rightists (especially Hayekians and libertarians) against it”
That’s what I’ve observed, which is ironic because Hayek was in favor of a European federation. I believe Mises was also a one-worlder, which would be greatest heresy to the paleolibertarian insitution in Auburn which bears his name. I guess their experience with the demise of the Habsburg empire left them more inclined toward the supra-national than the nation states which replaced it.

6

Peter Dorman 07.16.12 at 7:25 pm

I have always resisted the idea that nationalism is deeply connected to democracy — that only the nation-state has been able, as a matter of historical fact, to construct the social institutions in which democracy can flourish. But I might have to reconsider, based on the record of the EU.

The EU has dedicated itself to the destruction of national preferences. University admissions have been mentioned above, but the the economic dimension has, of course, been critical. Above all, there are to be no impediments to the free movement of capital, but this means that all enterprises should be privately owned, and that shares should be marketable equally throughout the EU. Hence the opposition to the German Landesbanken (not to mention the quasi-public ownership of VW), the Slovenian worker funds, and to any form of regional policy that gives preferences, subsidies or whatever to firms for maintaining employment in locations that depend on them.

The problem is, when I try to imagine what democracy means in a world like the one we live in, I keep bumping into stakeholder governance, public ownership (especially in finance), and decentralized hooks by which local polities can dig their tendrils into enterprises. The institutional expressions of these sorts of things are anathema to the EU.

It is an interesting question whether there is a bizarro-EU, situated in an imaginary universe, which is able to achieve transnational integration through a widening of democratic control rather than its curtailment.

7

Billikin 07.16.12 at 7:57 pm

The US has intellectual politics??? When did that happen?

8

Substance McGravitas 07.16.12 at 8:15 pm

I was quite surprised to learn that EU members are forbidden from explicitly favoring their own nationals for access to their public universities

I don’t see that all member countries are complying with this, Romania off the top of my head. Where’s the text of that rule? I know it’s an ambition of the Bologna declaration, but that also stresses the autonomy of institutions.

9

Clay Shirky 07.16.12 at 8:31 pm

Henry, I can’t tell if ‘increasingly misery’ is supposed to be ‘increasingly miserly’ or ‘increasing misery’, but it seems to be a typo of some sort.

10

John Quiggin 07.16.12 at 9:20 pm

Australia and NZ had free reciprocal access to benefits until 10 years ago. IIRC, the NZ government made a transfer to Aust to offset the net balance of payments to Kiwis. The breakdown of the agreement was due to fiscal strains but to a dispute over migration policy – NZ allowed an effective backdoor route to Australia. We may get this sorted out again, as the injustice of the current situation, applied to those who have been paying taxes for some time, is obvious.

Looking at the EU case, I assume that Schengen makes the migration issue irrelevant (feel free to correct me). So, I think the issue could easily be addressed at the EU level by a set of relatively modest contribution adjustments to offset net imbalances in welfare. That doesn’t mean it will be, but it looks entirely feasible to me.

I’m obviously very distant, but my perception is that the strains in the EU so far have been more about labor market competition than about welfare “Polish plumbers” than “Polish layabouts”. The reports I’ve seen on anti-immigrant sentiment about welfare burdens seem to me to focus on immigrants from outside the EU, rather than movement within it.

11

hix 07.16.12 at 9:34 pm

What a horrible loss of national souvereignity, laws that officially permit university acess discrimination. More interesting to talk about how the spirit of those non discrimination rules is constantly undermined especially in Ireland and the UK. Especially 1 semester exchanges should be encouraged, not used as a cash cow as those countries prefer to do.

“I don’t see that all member countries are complying with this, Romania off the top of my head.”

Chargeing everyone including locals lots of money for degrees taught in English is no explicit discrimination. Just like chargeing exchange students the same price for 1 semester as for the entire degree, or chargeing everyone nothing for the first degree at the first University he attends. Or maybe it is and so far no one sued, or they just make up the next system after they lost in European court.

12

bert 07.16.12 at 10:44 pm

I’m not attempting any kind of gotcha here, Henry. Just a simple question. There was a time not so long ago when you were quite bullish about the prospect of this crisis prompting a democratising integrationist push. I wouldn’t blame you if you were somewhat less sanguine about that. Are you?
Perhaps you’d want to suggest that happy outcome as one of two possible longer term responses to the dystopia described above, the other being entropy and the redivision of Europe.

13

bert 07.16.12 at 11:17 pm

John, Schengen is about border controls, passports, etc. Not everyone is a member. In principle however, every EU producer can sell across the single market, and every EU citizen can work legally in every member state. There are still transitional restrictions for Romanians and Bulgarians, which are due to expire over the next couple of years, but that’s the general picture.

In local news:
Last year David Cameron attempted through an inept attempted veto to chip away at the single market by carving out an exemption for the financial services industry.
Earlier this month he put free movement for EU citizens into question, suggesting he might block desperate Greek nationals from entering the UK.
Currently, an “audit” of the EU is being conducted by Tory ministers. An attempt will then follow to “renegotiate” British membership. A referendum will be held in due course.
All of this is being driven by lumpen nationalism. The cowardice of the leadership and the stupidity of the rank and file is putting British membership of the EU at risk.
In the current atmosphere the Tory party is a toxic threat. The sooner it is removed to a safe distance from power, where the only damage it can do is to itself, the better.

14

Sam Tobin-Hochstadt 07.17.12 at 1:50 am

This picture expresses what I think of as a leftist perspective on the benefits of the EU. Unfortunately, I think this benefit gets taken a little too much for granted these days.

15

js. 07.17.12 at 4:23 am

This picture expresses what I think of as a leftist perspective on the benefits of the EU. Unfortunately, I think this benefit gets taken a little too much for granted these days.

Before I say anything else, I should say that I’m not exactly sure what the 2nd your sentence is meant to imply. That said, and we might be in agreement here, isn’t the problem that it’s really, really, not worked out that way? In a way—and this is what (maybe wrongly) I take Henry to be getting at—the Union is in danger of creating exactly the sort of problems it was supposed to avert. (Not to mention it’s highly undemocratic structure, etc.)

To put it another way, the abstract political (or political-economic) ideal is brilliant of course. But it seems very strange for leftists in the US to hold on to that ideal while simply not paying attention to the political-economic realities of the Union, and esp. of the Eurozone.

16

Sebastian H 07.17.12 at 4:52 am

They must be using “Hayek” in a very limited sense, because the EU suggests a complete breakdown of feedback mechanisms that are essential to the Hayek view coupled with a an ECB playing the role of unaccountable planner with a single minded focus on ignoring various price signals that doesn’t seem very Hayek-like. And wouldn’t Hayek suggest that removing the price signal of varying currencies is an enormous mistake?

“if you look at it right…”

You don’t have to look at it very cock eyed to suggest that the EU has fallen into the planning/insulation from feedback problem, or perhaps has had the problem from the beginning.

Trying to define its failures along Hayek/Polanyi contours seems odd. It took the worst of both, so of course it is a mess.

17

Chris Bertram 07.17.12 at 7:10 am

_And wouldn’t Hayek suggest that removing the price signal of varying currencies is an enormous mistake?_

I don’t know Sebastian, did Hayek recommend different currencies for Arkansas and New York, so as to get extra signally goodness?

18

Chris Bertram 07.17.12 at 7:11 am

_It took the worst of both, so of course it is a mess._

No, the worst of Hayek is support for regimes that murder leftists in football stadiums.

19

Data Tutashkhia 07.17.12 at 7:37 am

The way I see it, if we taxonomize enlightenment ideologies as libertarian, egalitarian, and fraternalist (nationalist), then the EU would be libertarian and anti-nationalist, but indifferent to egalitarianism (the left).

20

Guido Nius 07.17.12 at 9:49 am

For this once US leftists and rightists have it right. The European right by the way has the same opinion than the US right (UKIP, Wilders, …), it is only in parts of the European left that the European project is seen only for the bad parts (although even Syriza ultimately is pro-European seeing the benefits of the long term project far outweighing the current short term hassles).

What the right has always opposed in the European integration is the ability to tax at the European level and harmonize taxation policies. The article is right in concluding that it has been a successful opposition until now and that therefore the current EU construction is from a solidarity/redistribution (and hence democracy) point of view more of a nuisance than a help.

That said, the direction of the recent EU proposals (including the almost consensus on putting up a Tobin tax) is a clear sign that this design error will have to go. The current nation state social security systems were by the way mostly put in place by the parties that are currently in charge in the EU (Merkel and Hollande are in that tradition).

The odd one out more and more is the UK (together with Scandinavian countries and the Netherlands who have a history of being outsiders). Either there are politicians in the UK that finally succeed in convincing voters that they are more important than the City and other British traditions or the EU needs to move ahead without the UK (every single attempt to have a social dimension to the EU and/or to give some tax authority to the EU has been effectively veto’d by the UK in the great tradition of Thatcher).

The UK left joining the euro-bashing just has the effect of a self-fulfilling prophecy, in this case not one of Europe staying too much on the right but of the UK becoming even more of a colony of US capitalism (I’m sure US capitalists will grandly leave the UK in the delusion that Brittania still rules the waves).

21

Alex 07.17.12 at 10:18 am

every single attempt to have a social dimension to the EU and/or to give some tax authority to the EU has been effectively veto’d by the UK in the great tradition of Thatcher

Errr, no. The UK did not, in fact, veto the Social Chapter (for example). It stayed out of it for a bit less than five years and then, joined. Punkt, ende. We implemented the agency worker and working time directives (after a bit of moaning in that case). This would be an interesting point if it were true.

also, what is the pony that is meant to come from an EU tax? Guy Verhofstadt used to push this all the time in the bizarre belief that it would make the EU popular.

22

Nick 07.17.12 at 10:37 am

“I don’t know Sebastian, did Hayek recommend different currencies for Arkansas and New York, so as to get extra signally goodness?”

Yeah, sort of: http://www.iea.org.uk/publications/research/choice-in-currency-a-way-to-stop-inflation

The difference being his solution didn’t involve geographic monopoly of any size.

23

Metatone 07.17.12 at 11:00 am

Alex – the pony is that if the EU had an actual tax budget in theory it could spend on something that Frau Merkel does not approve of. Not sure it works out in reality, given that the EU establishment is as orthodox neo-liberal as any…

24

bert 07.17.12 at 11:12 am

Ah, we’ve just been treated to another parallel between the US right and some on the European left. The tendency to divide people into Real America and the rest. (Guido’s preferred term is “outsiders”.) Historically, one of the rock solid blocking votes on tax harmonisation is the Irish one. If you’d like to perform an excommunication, Guido, then CT would be the place to do it.

25

Sam Tobin-Hochstadt 07.17.12 at 11:30 am

js. — The “benefits” I’m referring to is that (a) there have been no wars between any of the EU countries since its founding and (b) they’re all democratic, and the EU has been a big part of pushing that (see Romania, Bulgaria, the Baltics, the Iberian peninsual for examples). With reference to the poster [1], every one of the wars referred to was fought between Germany and France. Every year that we don’t have one of those wars is an enormous amount of human suffering averted. Note that this was the explicit goal of Schuman when he proposed the ECSC.

What I mean by “taken for granted” is that lots of people seem to assume that without the EU, we would have had western European social democracy, just without the integration. But that’s not necessarily the right counterfactual — this is the first 50 year period without war in Western Europe in a very long time.

26

Manta1976 07.17.12 at 12:14 pm

While I agree with Sam @23, it seems to me that the EU is doomed, because the EU politicians (the central bank and the commission) are hell-bent on destroying it.

27

Melet 07.17.12 at 12:15 pm

Sam, is it really true though that European peace should be credited to the EU? The balance of power in the Cold War and the periphery status of Europe during that period seems to me much more credible as a reason. Also, nuclear arsenals deter war efforts greatly and France and the UK have sizable ones.

28

lamadredeltopo 07.17.12 at 12:17 pm

@23
Please read Polanyi, yeah that guy in the title of the thread.

29

Guido Nius 07.17.12 at 12:35 pm

Alex, yes, as we all know the UK has been to the left of the EU policies for a long time. As long as the EU has no authority on harmonizing taxation in member states, we’ll be stuck with member states needing to compete for the best tax offers to big money. That is the real institutional blackmail the right across the world wants to keep in place, divide and conquer.

30

Chris Brooke 07.17.12 at 1:16 pm

Otmar Issing, ‘Hayek, Currency Competition and European Monetary Union’, the eighth annual Hayek Memorial Lecture (London: Institute of Economic Affairs, 2000).

31

bert 07.17.12 at 1:17 pm

Actually Guido, Alex was talking about the question of an independent tax raising power. I was the one talking about tax harmonisation. They’re separate issues.

On the former, Alex is right to point out that some people think the EU’s legitimacy and democratic deficit problems can be addressed by having it start to send out tax demands in the post. It’s a point of view, I suppose. It may be relevant that it seems to correlate strongly with Belgianness.

On the latter, you might have to explain a bit more clearly how the enforcement of uniformity over how governments raise revenue improves rather than worsens the problem described in the original post.

32

Shay Begorrah 07.17.12 at 1:27 pm

The American right are against a more social democratic version of the EU from twenty years ago, correspondingly the American left (and much of the European left) cling to the idea of an older EU not badly contaminated by neoliberal dogma.

Ever closer union, right or wrong, is just as morally empty a vision as earlier nationalist ones.

Sam Tobin-Hochstadt@23

The “benefits” I’m referring to is that (a) there have been no wars between any of the EU countries since its founding

Or Malaria epidemics. The absences of any malaria epidemics in Europe over the last sixty years can only be due to the EEC/EU.

More seriously there has not been just one European Project, today’s version was not the version of the 1980s or the 1970s so the question has to be asked which versions or parts of the European Project are you in favour of? Or are better environmental standards inseparable from reduced popular democratic control of monetary policy?

33

Kasper 07.17.12 at 1:29 pm

It’s probably worth noting that the Hayekian parts of the Union are the most popular while the social (cross country transfers) and democratic (The European Parliament) are widely unpopular.

34

Guido Nius 07.17.12 at 1:36 pm

Well, in 18, I talked about both EU taxation and harmonization.

It may well connect with Belgianness in the sense that in Belgium the Flemish nationalists are questioning the authority of Belgium to tax or to harmonize taxes. The stated reason to take away the Belgian authority on taxation is to allow the regions to lower taxes so as to be ‘more competitive’. Obviously this would also break the solidarity between regions and employees across the regions and thereby break the Belgian social security model (& this model is probably not the worst in the world).

Interestingly, the ‘right’ for Belgium to define taxation levels is questioned specifically because somehow the entity Belgium is, for nationalists, democratically illegitimate.

One way a European authority over taxes (either by harmonizing them or by directly raising them) would address specifically the point in the original post would be that it would for instance make it harder for wealth to seek out the weakest link and forcing the whole chain to become weaker. Downward pressure on taxation of the rich is not a European phenomenon but the only way to resist it in Europe is by resisting it as one Europe.

I don’t particularly like Verhofstadt but in many ways, yes, his proposals make sense, at least directionally.

35

Antoni Jaume 07.17.12 at 2:00 pm

Kasper 07.17.12 at 1:29 pm
“It’s probably worth noting that the Hayekian parts of the Union are the most popular while the social (cross country transfers) and democratic (The European Parliament) are widely unpopular.”

Who gets to say what is popular or not? Murdoch?

36

Antoni Jaume 07.17.12 at 2:08 pm

Sam Tobin-Hochstadt 07.17.12 at 1:50 am
“This picture expresses what I think of as a leftist perspective on the benefits of the EU. “

Unfortunately google translate cannot translate it correctly. Must be some local language and not hoch Deutsch, to be specific it doesn’t understand, ‘e’, ‘kän’ and ‘bißje’.

37

William Timberman 07.17.12 at 2:10 pm

Even in the Europe supposedly to come, with its house in order, and even Greece made perfectly competitive again by some unspecified Merkelian magic, I just don’t see how tax harmonization is possible without transfer payments being part of the deal as well. And when the subject of transfer payments comes up, oh, Lordy.

Just today, the Frankfurter Allgemeine, reports that Horst Seehofer is raging once again about the injustice of the Länderfinanzusgleich. Imagine how much more apoplectic he’d get if he had to send the money to Brussels for transshipment to Greece or Portugal, rather than to Berlin for transshipment to Schleswig-Holstein. Of course, here we’re talking about Bavaria, which has never much wanted to be part of anything else anyway, but still….

This is weird stuff indeed for us in the U.S., where the red states on the receiving end of this federal largesse are the ones complaining the loudest about the federal taxing authority. I suspect it’s us who are the crazy ones, but if the US still has these disputes after 200-odd years of federalization, I do wonder about those, like Joschka Fischer, who think it would be a good idea to try it in Europe. Europe will have to put it to a vote someday, and it now looks like that day will have to come well before anyone thinks that any sort of federalization would win. Somehow, I think that Europe will have a lot more trouble with Bavaria than the US now has with South Carolina. The Carolinians don’t look as though they’d go so far as to fire on Fort Sumter again, but Horst Seehofer just might.

38

William Timberman 07.17.12 at 2:23 pm

Antoni: “e” = ein (a), “Kän” = kein (no), “bißje” = bisschen (a bit, a little while)

39

Sebastian H 07.17.12 at 2:30 pm

Chris, your responses make it sound almost as if the whole point of the exercise is being able to find the right dead person to discredit in academic point scoring contests rather than deal with the realities of the current failing institutions.

Couching the EU failures along Hayek/Polanyi divides is silly when the answer should be: “neither a hundred times neither”. It has fallen into nearly all of the centralization traps that Hayek warned against, it insulates itself from feedback mechanisms (both democratic and economic), and the ECB especially exhibits the classic central planning problems of becoming too fixed on one stupid metric (in this case inflation) while ignoring all the other warning signs that the spontaneous discovery mechanisms reveal again and again. “Looking at it right” and finding Hayek apparently involves ignoring all of his major insights.

Polanyi talked about spontaneous order revealed through competing specialists, creating excellent science. I might submit that many of the specialists in power in the EU are self-professed instead of actual and their removal of feedback mechanisms throughout their system hasn’t helped anything. He talked about the need for societies to go beyond value neutral. The EU is all over the place on that. The main Polanyi recommendation that they have followed is they have a central bank.

Trying to decide if the EU is more Hayek like or Polanyi like is akin to arguing whether or not cucumbers are more like chickens or more like sharks.

40

Walt 07.17.12 at 2:39 pm

Sharks. Next question.

41

Henry 07.17.12 at 3:13 pm

Clay – thanks – fixed.

bert – fair question. I’ve always been skeptical about the imbalance between the market making and market embedding/democratic choice aspects of the EU, I think – can probably dig up a few old posts on this. And while I do think that there’s a path to a genuinely democratically attractive EU, it’s a very difficult one – my fear is that we might end up with a ‘successful’ resolution of the current crisis which would be very nearly bad as the disease it purported to cure.

42

Chris Bertram 07.17.12 at 3:35 pm

Sebastian: I think you’ve muddled up your Polanyis in that last comment.

43

Henry 07.17.12 at 3:42 pm

bq. Sebastian: I think you’ve muddled up your Polanyis in that last comment.

Which would strongly suggest that you haven’t actually read the paper under discussion in either its final or working paper format, which would seem to me a useful intermediate stage in evaluating whether its argument actually makes sense …

44

Sebastian 07.17.12 at 4:07 pm

We’re talking about the culture and economics Polanyis right?
I haven’t read the final paper, as I’m not about to spend good money on a bad blog debate. I read the working paper. I do however seem to have combined the culture and economics Polanyis and the spontaneous order Polanyis into one person. I would have done better if I had looked them up on Wikipedia instead of working off stupid memory from more than a decade ago.

The paper, in working form, smacks of cucumber, closer to chicken or shark: cucumbers are green, chickens are sometimes red, green and red are colors therefore chicken! Wait cucumbers are slick and bumpy, therefore shark!

They are certainly right that the EU isn’t very Polanyi/economics-and-culture-are deeply-related oriented. The problem is that you have to squint super hard to get anything Hayek-like out of the EU. I’m pretty sure that Hayek wouldn’t have a big problem saying that if you throw out everything he said about prices, planning, and centralized stupidity, and focused ONLY on what he said about confederations WITHOUT taking into account the rest of it, you are going to get silly looking results.

The EU looks ‘more’ like a Hayekian confederation than a Polanyi culture-embedded state, I guess. So in super limited terms of offering a rebuttal against the paper they don’t like, they win! But the debate they are winning is silly. A Hayek-like criticism of the EU using all of the general Hayek-like criticisms would be pretty much right. And in addition to all of those criticisms, a Polanyi-like criticism of the fact that the economic analysis of the EU fails to deal with the fact that economics is culturally encoded would also be pretty much right. The EU is essentially nothing like either of them describe as a good thing, so to decide which one is ‘closer’ is number of angels on a pin…

45

piglet 07.17.12 at 5:16 pm

On University access:
http://europa.eu/youreurope/citizens/education/university/fees/index_en.htm

European student exchange has been practiced and popular for a long time as celebrated in Klapisch’s movie L’Auberge Espagnole. The motivation used to be genuine interest in cultural exchange. I wonder – are lots of Britons now enrolling in other countries, where University is still comparatively cheap? Of course, there is still a language barrier in most cases.

46

piglet 07.17.12 at 5:34 pm

Re the left/right question: There has always been both a left and a right tradition of Euro-scepticism. The mainstream media and politicians found it convenient to delegitimize Euro-scepticism as a right-wing nationalist phenomenon so left critics could easily be ignored.

47

bert 07.17.12 at 6:58 pm

Thanks for the reply, Henry.
I get the sense there’s a shared tendency among well-intended Europeans now to feel we were swimming naked for a while there (in the W Buffett sense). Perhaps I’m just speaking for myself, but with growth gone it seems like all these horrible interlocking problems are crawling out of the woodwork to bite us.

No matter, try again, fail again, fail better.

48

bert 07.17.12 at 6:58 pm

Guido, I should learn not to get involved in interesting threads when I don’t have reliable internet. I’ll be travelling for the rest of today, so may not get back to you. Here’s my thoughts about why your way may not be the right way to go.

Start with an obvious practical problem. In redressing market failures (the second phase of the “double movement”, to use Polanyi’s term), you’re not going to be setting absolute standards. If you were, then you’d have to be asking yourself what level of protection you’d want to set, and I can tell you your answer on that now if you like. You’d look across the EU and on each measure of social protection you’d to choose the highest one you could see. Why? Because any other answer would force you to travel round the continent telling specific groups of people who had voted for specific social protections that they would have to remove these protections at your insistence. So, rather than do any of that, you’re going to be setting minimal standards at the bottom end above which people are free to build additional protections, on the model of the minimum wage. Europe already involves a fair bit of this. But because you want to make a difference, what you’re going to do is apply the same principle more broadly.

Fine. Where’s your mandate? Not at the national level. We can assume that if the Irish wanted the corporate tax rate that the French think appropriate for them, they’d have said something. Perhaps even voted for it.
Nor does a judicial mandate fit the bill. In the working paper there’s a discussion of the role played by the ECJ, and of the inherent limits to this role from your point of view.
Finally, to suggest that you’d get a pan-European electoral mandate would merely involve taking on the task of fixing the democratic deficit on top of everything else. It may narrowly help your argument, but at the cost of a retreat from reality.
Happily a model does exist, readily available in Europe today for reaching these kind of agreements. The best example of it currently is the Fiscal Pact. It’s a centralised decision taken at the level of the European Council, which is then voted through national parliaments. (German bullying isn’t a required feature, but it does help concentrate minds.) I have to say I don’t think it’s remotely realistic to put your agenda through those hoops. The fiscal pact is one thing – a minimum standard setting the percentage of GDP by which spending can diverge from revenue in a given year. But rewriting the tax code, and the benefits system, and the labour regulation handbook by this method would represent rather more of a stretch.

So, anything more ambitious than a low minimum standard will face insurmountable obstacles getting through. And even that more modest objective will struggle to secure support and legitimacy. You might justifiably respond that a determined optimist pushes on regardless. But there’s one final problem which ought to stop you dead. If you were asked to highlight one cause of the eurozone crisis, and one blockage to its resolution, a good answer on both questions would be the one-size-fits-none interest rate. Tax rates are a tool of macroeconomic management. As is the overall fiscal pattern determined by the government. Likewise the generosity (or otherwise) of the benefits system and the burden (or otherwise) of regulation. These are things that can be tweaked in response to asymmetric shocks. To choose to bind governments’ hands so tightly on fiscal policy while they are unable to run their own monetary policy would not only be a mistake. It would also in the current environment be in supremely poor taste.

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Sam Tobin-Hochstadt 07.17.12 at 8:23 pm

Shay — Seriously? This is exactly the kind of attitude I’m talking about, as if the default state of Western Europe is peaceful coexistence, the same way that they don’t have much malaria in Sweden. Over the last 500 years, Western Europe has been one of the least peaceful places around. Fostering peace in Europe was an explicit goal of ECSC, peace in Europe was rare before it, integration clearly makes war less likely, we haven’t had Franco-German war since. I think that’s a pretty strong connection.

As an aside, do you think that the postwar economic growth of Italy (surely an EU-related phenomenon) helped to eliminate malaria there?

50

Henry 07.17.12 at 9:21 pm

Sebastian – your criticisms have no obvious relationship to the paper in either gated or ungated form. It doesn’t talk _at all_ about the inflation fighting aspects of the ECB. As the authors of the paper demonstrate – at length – the EU is _not_, contra the mythology that you perpetuate in your comment, a particularly centralized entity. Really. It’s not. There is a quite voluminous literature on this. And that is not at all to get into the Michael Polanyi v. Karl Polanyi thing (it would make _no sense at all_ to talk about ‘Michael Polanyi v. Hayek, since large chunks of Hayek’s thought are taken more or less directly from Polanyi).

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novakant 07.17.12 at 10:44 pm

Those criticizing the EU for being undemocratic seem to presuppose that the decision making process in nation states is democratic – and that is simply not the case in the vast majority of cases. And I am very happy that there is an institution that can hit national governments over the head if they try to circumvent or ignore the law as governments often do. Also, from my own experience freedom of movement and equal rights for all EU citizens are a major achievement that make life a lot easier.

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Sebastian 07.17.12 at 11:41 pm

I’m sure that the EU’s structure is vastly more complicated than I understand. Be that as it may, I’m not sure how you can suggest that the EU doesn’t have strong centralized components when the ECB effectively threatened to destroy Italy’s economy unless they got rid of a prime minister that the ECB didn’t like. Whatever you want to call that, it sounds rather central as opposed to distributed.

Now maybe you can come up with some really complicated explanation about how that is really all about deference to local governments, but I’m not going to make that argument up in the hopes that it might be good.

“It doesn’t talk at all about the inflation fighting aspects of the ECB.”

Quite. And talking about the European Union being ‘Hayek’-like without mentioning the ECB and its incredibly centralized planning mechanism is kind of like trying to talk about a Marxist analysis without wanting to talk about labor and capital issues.

If the EU project fails, a huge part of the failure will be because the ECB is being bat shit insane with its central monetary policy. Now maybe that is because the project was impossible. I don’t know. But you can’t talk about Hayek and the EU while ignoring that rather enormous elephant in the living room.

53

LFC 07.18.12 at 12:22 am

Two things

1)
On the US left and the EU: I think what R. Farley said @2 has something in it. But most Americans, including many intellectuals, I suspect, don’t know a lot in detail about the EU. (I don’t, at least.) I do know that one area in which the EU has not been any more ‘progressive’ — perhaps even less progressive — than the US is agricultural policy, specifically subsidies. The Common Agricultural Policy allows countries to subsidize heavily their agricultural sectors. I can understand why countries want to preserve their farm sectors (and sympathize), but it is well known that agricultural subsidies in the West hurt farmers in developing countries and therefore hurt developing countries more broadly.

2)
Sam Tobin-Hochstadt:
Over the last 500 years, Western Europe has been one of the least peaceful places around. Fostering peace in Europe was an explicit goal of ECSC, peace in Europe was rare before it, integration clearly makes war less likely, we haven’t had Franco-German war since. I think that’s a pretty strong connection.

I would agree that integration may make war less likely. However, the absence of Fr-Ger war since 1945 is overdetermined. I think there would have been no continent-wide or major-power war in Europe in the last 60+ years even if the EU hadn’t existed. There has been no direct great-power war anywhere in the world since either 1945 or 1953, depending on one’s definitions. Interstate war in general is v. rare these days. (This has been discussed/argued here in other threads.)

54

piglet 07.18.12 at 1:30 am

“I do know that one area in which the EU has not been any more ‘progressive’—perhaps even less progressive—than the US is agricultural policy, specifically subsidies.”

I’m not too sure but I thought the EU subsidy policy is in fact more progressive than in the US because it does much more to support conservation and environmentally friendly practices and to prevent overproduction, whereas the US is still mostly subsidizing production.

55

Alex (not the first one) 07.18.12 at 2:17 am

If the EU project fails, a huge part of the failure will be because the ECB is being bat shit insane with its central monetary policy.

Yes, which is why Greece et al. would have been better off if they’d simply abolished the governmental monopoly in money and established free banking as Hayek argued.

No chance of a depression or massive housing bubbles there.

*eyeroll*

56

Alex (not the first one) 07.18.12 at 2:22 am

I seem to have one comment stuck in moderation, can someone fish it out please?

I’m not too sure but I thought the EU subsidy policy is in fact more progressive than in the US because it does much more to support conservation and environmentally friendly practices and to prevent overproduction, whereas the US is still mostly subsidizing production.

Are you quite sure about that?:

http://www.monbiot.com/2011/11/28/big-farmer/

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lamadredeltopo 07.18.12 at 3:04 am

How many Franco-German wars were in the century between 1812 and 1914?

58

MPAVictoria 07.18.12 at 4:24 am

“How many Franco-German wars were in the century between 1812 and 1914?”
One I think? The Franco-Prussian War in 1870.

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MPAVictoria 07.18.12 at 4:26 am

“Western Europe has been one of the least peaceful places around”
I am not actually sure that is true. For example during that time the Chinese experienced one of the deadliest wars in history, the Taiping Rebellion.

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lamadredeltopo 07.18.12 at 5:12 am

So you have just one year of war in a full century, and they didn’t have EU! Of course, they also didn’t had Germany for most of the time.
Now your homework: reading Polanyi’s “The Great Transformation” first chapters.

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Data Tutashkhia 07.18.12 at 7:50 am

Hypothetically, if the main reason for all those European wars was imperialism, desire of national French, German, British elites to expand their control over resources and populations, and then it was resolved by merging all those national elites into one European elite, would this be a great achievement of human civilization? Or, possibly, just a prelude to an age of different, more massive wars, the Oceania, Eurasia, and Eastasia sort of thing?

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P O'Neill 07.18.12 at 11:42 am

One odd thing about the Hayekian argument given his views in other areas is its optimism that revenue and spending assignments can be aligned to ensure that everything is internalized at the sub-federal level. Maybe for classic fiscal instruments that can be done. But would Ireland and Spain have financed their property bubbles through an integrated banking system if they had known their own taxpayers would be picking up the bill when it all went wrong? By the time everyone realizes that, though, it’s too late, from the small federalist perspective. Cleaning up that mess ends up with the federal layer bigger.

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Kevin Donoghue 07.18.12 at 12:37 pm

“…it is well known that agricultural subsidies in the West hurt farmers in developing countries and therefore hurt developing countries more broadly.”

Many things which are well known are actually false. I’m no expert in this area, but I’ve never seen a good rebuttal of dsquared’s view:

http://www.guardian.co.uk/commentisfree/2006/jul/26/dumpingdumping

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rf 07.18.12 at 12:48 pm

“You would not think, in the normal course of events, that a sensitive and intelligent person would go to Ghana”

And you wonder where J Otto’s hostility came from?

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Kevin Donoghue 07.18.12 at 1:03 pm

I don’t actually give a shit where J Otto’s hostility comes from. The passage clipped by rf runs as follows:

You would not think, in the normal course of events, that a sensitive and intelligent person would go to Ghana, spend a few days walking round and talking to locals, have in-depth briefings on the local economy and come away with the following policy prescription:

“What a great country! You know what they really need though? More expensive food!”

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Uncle Kvetch 07.18.12 at 1:33 pm

Those criticizing the EU for being undemocratic seem to presuppose that the decision making process in nation states is democratic – and that is simply not the case in the vast majority of cases.

Exactly — and the same dynamic applies in questions of state vs. federal power in the US. The notion that state governments are, by definition, more responsive, transparent, or accountable is laughable on its face (spend some time carefully following the goings-on in Albany if you need convincing)…but that doesn’t stop it from being trotted out when convenient.

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LFC 07.18.12 at 2:03 pm

@62
Thanks for the link to D2′s column. Will look at it.

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rea 07.18.12 at 2:17 pm

“How many Franco-German wars were in the century between 1812 and 1914?”
One I think? The Franco-Prussian

You’re forgetting the Battle of Nations, and Waterloo . . .

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Henry 07.18.12 at 2:18 pm

rf – you should check to see whether the Romney campaign’s Artfully Truncated Quotes Department is hiring – you clearly have the makings …

Sebastian – as the speech that Chris Brooke links to discusses, Hayek had complicated views about the proper role of central banks, and at one point at least seems to have persuaded himself that an institution independent of government control would be a good thing _as long as it focused on price stability as its main objective_ . So giving out about how the authors misrepresent Hayek since they ignore the profoundly unHayekian institution of an autonomous ECB, dedicated to fighting inflation seems a non-starter …

70

Random Lurker 07.18.12 at 2:22 pm

@Sebastian
“If the EU project fails, a huge part of the failure will be because the ECB is being bat shit insane with its central monetary policy.”

From wikipedia: “In 1976, in a paper on The Denationalization of Money,[44] Hayek advocated that rather than re-instituting a government-mandated gold standard, a free market in money be allowed to develop, with issuers of money competing with each other to produce the best, most stable and healthy currency.”

I think you are very wrong when you say that the centralized ECB is something “anti Hayek”.
Hayek’s theory was that a decentralized market was superior to central planning, but by “decentralized market” he did mean the price mechanism. He didn’t say “unlimited freedom to all” but “the only limit of freedom should be the price mechanism”.
The prices mechanism is important because it conveys information about the actual cost of the stuff consumed, so a lack of stability in prices is a very bad thing from the point of view of austrian economics. In fact austrian economists were mostly goldbugs; from the wikipedia quote above Hayek rejected goldbuggism in favor “free money issuing”, but only because he believed that this would lead to the “most stable” currency.
This is because austrian economists believed that fiat money and fractional reserve were in essence a sort of forgery, that could disrupt the “information value” of prices, so he hoped that “free money issuing” could force money issuers to print few to none money.

In other words, Hayek clearly was an anti-inflation freak, and the ECB is clearly following an Hayekian policy of “no inflation at any price”.
Now you can argue that Hayek hated everithing with the word “central” in its name, including the ECB, but I strongly believe that he would have appreciated a lot present ECB policy, expecially since it is evident that, if states like Greece or Italy exit the euro, the first thing they do is to print like mad.
In this sense, I think that the ECB is the most Hayekian part of the EU, and you are wrong when you say that inflation fighting is the ususal wrong metric used by a burocracy, because “price stability” is exactly the base of austrian economics before than ECB policy, and pertains to Hayek (and his idea of the markets) more than to Draghi.

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MPAVictoria 07.18.12 at 2:35 pm

“You’re forgetting the Battle of Nations, and Waterloo . . .”

Well that is embarrassing. You are of course right.

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piglet 07.18.12 at 4:28 pm

The agricultural subsidy issue is more complicated. There is not just one but many different kinds of ag subsidies. Some of them are quite benevolent, others aren’t. Some are a waste of taxpayer money, some are a giveaway to big landowners, some are actually cost effective means of achieving a social good (conservation, land stewardship, preservation of agricultural knowledge and culture). Of the bad subsidies, some are bad for rich countries’ taxpayers but don’t affect other countries at all. Some genuinely hurt farmers in the developing world because they promote dumping.

If Monbiot says that most EU ag subsidies are in the wasteful or malevolent category, I tend to trust his word because he usually does his research. Now dsquared’s criticism is valid in part insofar as those he criticizes are guilty of oversimplification and exaggeration but then, so is he. The byline “There is nothing wrong with developed world farm subsidies” is nonsense. There is something wrong with certain kinds of subsidies. Apart from that, DD makes some surprising claims.

DD: “Farm subsidies in the EU and USA mean that we sell some kinds of foodstuffs (mainly grains, milk products and sugar) to Africa and other countries cheap. So cheap, in fact, that the Africans etc can buy our imported goods cheaper than they can produce them for themselves. This is good news…”
“This is why Africa does in fact export a lot of food to the EU and USA; it exports value-added prepared vegetables, cocoa, palm oil and other commodities in which it has a comparative advantage. Believe it or not, David Ricardo’s trade theory works.”

Please. When India imports sugar from the EU (because some so-called Free Trade agreement actually forces them to do so) even though its farmers can produce sugar much more cheaply than European farmers, that is absolutely not Ricardo’s theory at work. It’s pretty much, well, the opposite. In DD’s theory, dumping should always be welcomed as good news. It’s good for consumers, so nothing can be wrong with it. DD wouldn’t take that argument seriously when applied to his own economy. I think I can stop here.

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Stephen 07.18.12 at 4:32 pm

LFC@53

You’re right about peace in Europe post-1945 being overdetermined. One major determining factor, though not of course the sole one: major European wars since the 1860s have been Franco-German, with the Germans provoking war (1870) or starting the invasions (1914, 1939). Since 1945, Germany enjoyed for long periods the presence of Russian, American, British and French garrisons, none of which would have looked kindly on new German hostilities against France. And that would have been the case if the EU had never existed.

Looked at another way: earlier in the twentieth century, the UK had sent troops into France, Belgium, the Netherlands, Germany and Italy. The UK did not join the EEC (as it then was) till 1973. Would anyone argue that, for twenty-eight years, France etc were in serious danger of another British invasion, and this threat was only removed when the UK joined the EEC?

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Sebastian 07.18.12 at 4:39 pm

“So giving out about how the authors misrepresent Hayek since they ignore the profoundly unHayekian institution of an autonomous ECB, dedicated to fighting inflation seems a non-starter …”

No. The thread went like this. I suggested that the EU suffers from the centralization/lack of accountability/information problems that are pretty much the main thing Hayek wrote about again and again. You replied with EU “not particularly centralized”. I responded by noting that the EU has the ECB which apparently has the power to say to Italy “you know what, sure you’ve been keeping your deficit down to almost nothing for a bunch of years before the world wide depression, and your debt is mostly what you were saddled with from a generation ago, but we don’t think you’ve gone far enough so replace your prime minister immediately or we will blow up your economy” looks pretty damn centralized in the important areas.

Your reply is……lets change the subject.

And even on the dodged subject, you’re missing the point.

Hayek was about the discovery process, normally through prices. His whole freaking point was that good systems which allow the discovery process to work are better than those that don’t. His whole schtick was that individuals and small groups weren’t going to be coming up with better answers. His non-process personal answers are of course equally subject to that criticism. Both you, and the original paper cited, want to talk about Hayek as if he wanted to be a central planner, analyze his ideas that way, and ignore the process problems. Saying that a central planner, temporarily agrees (sort of) with one of Hayek’s concepts about outcomes while ignoring his critiques on process does not mean that the planner is being Hayekian.

If you’re for abortion rights, and a dictator legalizes abortion (because of overpopulation) while still kidnapping and torturing political opponents and barring women from high status jobs, you wouldn’t say that he had a progressive or pro-woman or pro-human rights state and then try to limit it to a discussion of abortion. You’d say that he got an end outcome on one area that you agree with if you squint hard enough, but that he isn’t running a pro-human rights state.

Hayek may or may not have thought that confederation would be a good idea, and if you squint REALLY hard you can sort of argue that the EU is ‘more’ like a confederation of that style than certain other specialized labels you might use. But the way the ECB exercises its power is straight up central planning process. It decides a host of economic situations that it desires and wields the interest rate like a club to get these outcomes out of countries like Italy.

The EU, all over the place, but especially through the ECB squelches local information signals and feedback to get one size fits all solutions. That is about as anti-Hayek as you can get.

“Hayek advocated that rather than re-instituting a government-mandated gold standard, a free market in money be allowed to develop, with issuers of money competing with each other to produce the best, most stable and healthy currency.”

Random lurker, you then say “The prices mechanism is important because it conveys information about the actual cost of the stuff consumed, so a lack of stability in prices is a very bad thing from the point of view of austrian economics.” That isn’t Hayek at all. Forcing price stability on changing events is the height of stupidity from Hayek’s point of view. Prices need to change in response to changing events. That is how they work.

You then take that misinterpretation all the way up to “Hayek clearly was an anti-inflation freak, and the ECB is clearly following an Hayekian policy of “no inflation at any price”.”

Even if that were true, and I’m pretty sure it isn’t as Hayek’s outcome oriented writing on those questions appears to be mixed, the whole point of Hayek is that your system has to be open enough to local information (usually through prices) that *if you are wrong, you’ll notice it*.

You can’t treat Hayek like a central planner, find places where the ECB central planners maybe-sorta-kinda agree with him, see that they implement it, and call that Hayekian. He wasn’t a central planner, he was someone who thought that he if were wrong about outcomes and policies, the process of discovery would correct it.

Hayek’s insights were process insights. Yes, Hayek had ideas about where he thought good processes might end up. Yes, he was probably right about some of them and wrong about others. No, you can’t call ramming those end states through in direct opposition to all of his process insights ‘Hayek-like’. The ECB is not Hayek-like.

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Data Tutashkhia 07.18.12 at 4:45 pm

Food is important. If I’m a nation-state, I want to be able to produce my own basic food stuff, even if it’s cheaper to import. And I also want other states to be dependent, as much as possible, on getting their food from me.

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Henry 07.18.12 at 5:53 pm

bq. No. The thread went like this. I suggested that the EU suffers from the centralization/lack of accountability/information problems that are pretty much the main thing Hayek wrote about again and again. You replied with EU “not particularly centralized”. I responded by noting that the EU has the ECB which apparently has the power to say to Italy “you know what, sure you’ve been keeping your deficit down to almost nothing for a bunch of years before the world wide depression, and your debt is mostly what you were saddled with from a generation ago, but we don’t think you’ve gone far enough so replace your prime minister immediately or we will blow up your economy” looks pretty damn centralized in the important areas.

Come off it Sebastian – that is a tendentious and demonstrably untrue account of this conversation (I’ll do you the courtesy of assuming that this is the result of sloppiness and faulty memory on your part). You started going on about the ECB in your very first comment – #16, well before I said anything about centralization (indeed, well before I had written any comments at all). To wit:

They must be using “Hayek” in a very limited sense, because the EU suggests a complete breakdown of feedback mechanisms that are essential to the Hayek view coupled with a an ECB playing the role of unaccountable planner with a single minded focus on ignoring various price signals that doesn’t seem very Hayek-like. And wouldn’t Hayek suggest that removing the price signal of varying currencies is an enormous mistake?

You then repeated different versions of this claim at #39 and #52. If Hayek was (at least at one point in his career; he appears to have been inconsistent according to bits quoted the linked speech) unfazed at the prospect of an institution setting monetary policy without external political checks, _as long as it emphasized price stability_, then this suggests that the ECB’s misguided obsession with inflation is nowhere near as incompatible with a Hayekian approach as you would like it to be. In other words, the criticism you have been making since #16 doesn’t hold . Perhaps you can be more Hayekian than Hayek himself on this – that’s not impossible. But your criticisms of other people for Getting Hayek Wrong would still be very silly …

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Sebastian 07.18.12 at 9:28 pm

I don’t have any idea what mileage you think you get out of pointing out I mentioned the ECB first, that doesn’t even contradict my summary and avoids the point. It is one of the most obvious centralization examples to make, right? Which I made. To which you responded: the EU isn’t very centralized. Then I reiterated that the ECB looks pretty damn centralized. And still no response to that point.

Hayek suggests a free market in money be allowed to develop, with issuers of money competing with each other to produce the best, most stable and healthy currency. I’m unaware of the ECB setting up such a system. Are you aware of the ECB setting up such a system?

You also completely ignore my point Hayek critques being process oriented. You seem to think that you can look at individual policy prescriptions, squint REALLY hard, and if they sort of agree with a policy prescription Hayek made somewhere at some point, the EU counts as Hayekian.

If you had a central planner who dictated by fiat a bunch of Hayekian policy prescriptions, that isn’t Hayekian because it cuts out the whole discovery process which was his concern. He wasn’t nearly so sure as a central planner that his policy prescriptions (what level inflation at what point in an economic cycle, what level deficits, etc.) were right as he was sure that you needed good feedback mechanisms like prices to test the right policy. *That* is what Hayek is about, time and time again, throughout all of his work. Even when he is not focusing on prices, he focuses again and again on feedback.

If you don’t understand that the process critique is central to Hayek, you really are getting Hayek wrong, in the most fundamental way.

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Henry Farrell 07.18.12 at 10:17 pm

Sebastian, with all respect, if I am asked whether Sebastian Holsclaw or F.A von Hayek is a better guide to the thought of F.A. von Hayek, I am going to go with the latter. Let me repeat myself: the fact that Hayek was Sometimes Apparently Unsound on the question of independent monetary authorities with monomaniacal fixations on price stability suggests that the ECB is not incompatible with Hayek-thought in the ways that you suggest. And as for your claim that Hayek Is Process All The Way Down, I look forward with great interest to your detailed explanation of how authoritarian militaristic coups can be understood as a process of catallactic discovery …

79

Martin Bento 07.18.12 at 11:09 pm

After two worlds wars, I think Europe was finally sick of it, which was a good thing. Nonetheless, you cannot credit the EU with preventing Germany and France from going at it again when they simply did not have this option. After 1945, Europe was not in charge of its own military affairs. Who was going to start this Franco/German war? West Germany? Prohibited by law from developing a significant military, and the US had troops and bases on the ground easily sufficient to enforce this. France? An attack on Germany would have been an attack on Nato, and France’s ass would have been swiftly kicked. What if the US decided to stay out of it? If the US stood aside, the Soviets would have taken over the whole show. It may suit European vanity to proclaim it all economic integration and Kumbayaism, but completely absent those things, there was no option for renewed Franco/German war while Europe was the leading front in a conflict between two military powers far greater than any of the EU members or all of them combined.

Afterwards, Europe had grown accustomed to peace and rather liked it. No problems there. They had to push Maastrict through though, and now here we are with significant tension within (former) Western Europe far greater than at any time in the last sixty years.

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Sebastian H 07.19.12 at 2:42 am

Using your admin privileges to lift my last name isn’t distracting enough for me to notice you abandoned the argument. But bravo anyway.

So in Henry world, the actions of the ECB aren’t evidence for centralization, Italy just misplaced their prime minister, and Hayek advocating strongly for competing currencies but mentioning once that a central bank might be ok is reason to say that the ECB is Hayek like, and btw please ignore everything else ever written by Hayek on the importance of feedback.

Ok. That is scholarly work right there!

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Yarrow 07.19.12 at 3:38 am

Sebastian H @ 78, how would admin privileges have given Henry your last name? Google tells me you stopped using around 2009, but I remembered it.

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Sebastian H 07.19.12 at 4:21 am

The hidden email address. He could have an excellent memory for names that almost everyone spells wrong. Better than his comprehension of Hayek clearly. Im not overly worried about it even though it was a slimey move.

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Random Lurker 07.19.12 at 11:09 am

@Sebastian

“That isn’t Hayek at all. Forcing price stability on changing events is the height of stupidity from Hayek’s point of view. Prices need to change in response to changing events. That is how they work.”

Yeah, sorry, I didn’t explain my point very well. For what I can understand, Hayek logic is:

1) Private, delocalized entityes, as long as they have access to some information, are better at making choices than central planners, both for pratical and moral (freedom) reasons.

2) The information is channelled through prices.

3) Governments and other “central planners” have the tendency to meddle whith the price system in various ways, through subsidies, money printing, etc. This is bad, because this limits the ability of private, delocalized decisors to make decisions. Governments and central planners of various sorts should refrain, or be forbidden to, meddle with the price system.

4) In a fiat currency system, one important way the governments have to meddle with the price system is money printing. This government-induced inflation should be limited. The gold standard could be a way to limit it, but since those days are not coming back, a better idea would be to limit the government’s monopoly on money printing, so that if various entities can print money, people will likely only hold the currency that keeps its value, and this limits government-induced inflation.

Point 4 is what I meant when I said that Hayek wanted “price stability”, not in the sense that price of stuff should be carved in stone but in the sense that governments should be prevented to abuse of seignorage.

Before the entry in the euro many european countries, such as Italy for example, engaged in continuous competitive devaluation and engineered inflation, that clearly could be seen as a form of seignorage. This is, so to speak, “not Hayek like”.

The BCE on the opposite is stricter on inflation, thus limits seignorage. In this sense the BCE is limiting the scope of government intervention in the economy (i.e. Italy is forced to cut budgets in the middle of a recession).

Now you say that the BCE is “not Hayek like”, because it is a central planner, which is true (although also nationals banks, such as the bank of Italy, would be just smaller central planners); however, when you say this, you imply in pratice that the economy was better, when nation states like Italy could meddle much more with the price system.

This, in my opinion, is much more a negation of Hayek theories, than the existence of a supernational central bank as the ECB.

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Henry 07.19.12 at 11:12 am

Sebastian – this is pathetic. I didn’t need to check your email address, nor did I – you have been commenting here for several years, first under your full name, and then merely under ‘Sebastian,’ but in both cases with the same inimitable style, mixing (sometimes) genuine argument, with (sometimes, as here) weakly lawyerly attempts to bang on about trivialities, accusing others of deliberately sidestepping while yourself ignoring quite blatantly the inconvenient bits of their argument. For better or for worse, you’re instantly recognizable, and, as Yarrow says – you are quite memorable. If you had wanted to preserve quasi-pseudonymity that would have been OK with us – but a specific request or suggestion would have been appropriate. As for the rest of the arrant bullshit, forget it. If, after the Pinochet arse-licking discussion you can’t recognize that Hayek combined his stated enthusiasm for processes of discovery with an unpleasant, and sometimes more than unpleasant eagerness for the forcible imposition of the policies he thought right, then you’re ineducable on this.

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John Quiggin 07.19.12 at 11:31 am

I haven’t been following this closely. But everyone at CT knows perfectly well that Sebastian H is Sebastian Holsclaw who used (IIRC) to blog at Obsidian Wings (may still do, I don’t follow closely). In fact, still from memory, don’t we have another Sebastian who takes care to distinguish himself from SH?

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Barry 07.19.12 at 12:36 pm

lamadredeltopo 07.18.12 at 5:12 am

” So you have just one year of war in a full century, and they didn’t have EU! Of course, they also didn’t had Germany for most of the time.”

If one limits it to Franco-Prussian Wars; if one includes the wars that Germany fought, there are more. They were just short. From http://en.wikipedia.org/wiki/Timeline_of_German_history#1800s:

1848 – 1849 The Revolutions of 1848 in the German states
1848 – 1851 First Schleswig War
1864 Danish-Prussian War
1866 Austro-Prussian War; Battle of Königgrätz
1870 Franco-Prussian War

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P O'Neill 07.19.12 at 2:04 pm

With notably rare exceptions ….

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LFC 07.19.12 at 2:15 pm

There was no shortage of conflict in Europe after 1815, but the Crimean and the Franco-Prussian wars were the only major great-power wars between 1815 and 1914. That period was thus one of relative peace in Europe — i.e., relative to the centuries that preceded it — even if Polanyi’s label “the Hundred Years’ Peace” in the opening chapter of The Great Transformation is a bit of rhetorical exaggeration. Here is Polanyi (p.5):

Apart from the Crimean War — a more or less colonial event [?] — England, France, Prussia, Austria, Italy, and Russia were engaged in war among each other for altogether only eighteen months [in the 1815-1914 period]. A computation of comparable figures for the two preceding centuries gives an average of sixty to seventy years of major wars in each. But even the fiercest of nineteenth century conflagrations, the Franco-Prussian War of 1870-71, ended after less than a year’s duration with the defeated nation being able to pay over an unprecedented sum as an indemnity without any disturbance of the currencies concerned.

One may or may not accept Polanyi’s explanation for this period of relative peace in Europe — namely, the role of “international finance” — but that’s a separate point. He is right about the 1815-1914 period as one of relative great-power peace in Europe. (The Franco-Prussian War had high casualties and was disastrous for many caught up in it (see Zola’s The Debacle), but it was relatively short.)

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Barry 07.19.12 at 2:47 pm

John Quiggin 07.19.12 at 11:31 am

” I haven’t been following this closely. But everyone at CT knows perfectly well that Sebastian H is Sebastian Holsclaw who used (IIRC) to blog at Obsidian Wings (may still do, I don’t follow closely). In fact, still from memory, don’t we have another Sebastian who takes care to distinguish himself from SH?”

As somebody who’s seen Sebastian’s comments back through the time when he was a poster on ObWings (and who finds him obnoxious and greasy), I would still say that Henry didn’t error on the side of pseudonymity, which should be the default.

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Sebastian H 07.19.12 at 2:59 pm

Henry, which inconvenient bit of the argument about the original post am I sidestepping?

You are sidestepping the fact that the ECB offers good evidence of EU centralization of the sort that falls squarely within the routine Hayekian critique.

Trying to talk about the EU as Hayekian stretches the term to uselessness. You have to actively ignore the huge majority of his work and grasp at one offs to do that. It’s irritatingly bad scholarship that would be instantly noticed if done about Marx or Keynes (both of which had some bad policy prescriptions that couldnt fairly be called Marxist or Keynesian if you were talking about institutuions as a whole) which doesn’t get any better just because you are talking about Hayek.

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Henry 07.19.12 at 3:49 pm

bq. Henry, which inconvenient bit of the argument about the original post am I sidestepping?

The bit about how Hayek himself seems to have been OK with an independent central bank as long as it was devoted to an anti-inflationary policy, which you only acknowledged grudgingly after multiple comments. And on

bq. Trying to talk about the EU as Hayekian stretches the term to uselessness. You have to actively ignore the huge majority of his work and grasp at one offs to do that. I

it would be remarkably helpful if, rather than deducing for yourself what Hayek _must_ believe, you took the trouble of finding out what he actually argued about banking and inflation.

To wit:

(1) Hayek was _consistently_ anti-inflation. He saw inflation as distorting the money channel, and hence making it harder for individuals to pursue their particular goals. Hence, he would have had no problem with the lunatic anti-inflation bias of the ECB.

(2) Hayek _did not believe_ that banking should be run along laissez-faire principles. See here for a detailed discussion of his evolving position, noting that he specifically excepts central banking from his laissez-faire arguments in _The Road to Serfdom._ And later doubles down.

bq. During a 1945 radio broadcast in Chicago, Hayek (1994, 116) was asked pointedly
about the exception he was making in the case of banking: “Is the Federal Reserve Bank on the road to serfdom?” He replied: “No. That the monetary system must be under central control has never, to my mind, been denied by any sensible person.” A flatter dismissal of the free-banking position can hardly be imagined.

(3) His objection to central banks, as it emerged later, centered around his belief that they were subject to political pressures, and hence soft on inflation.

bq. The proposal grew (via the 1976 pamphlet Choice in Currency) from two footnotes in The Constitution of Liberty arguing that free choice among government fiat currencies—the freedom of citizens to substitute from an inflated domestic currency to a sounder
foreign currency—would provide a salutary check on the inflationary propensities of central banks.

(3) When he argued against ECB type arrangements, it was on pragmatic, political grounds – that he did not believe that it would be possible for governments to agree enough for the arrangement to work. This was not a principled objection – indeed he had already described a genuinely international central bank as an ideal, albeit an impracticable one.

An ECB, independent of government control, and pursuing an insanely rigid monetary policy focused on fighting inflation is not anti-Hayekian. Indeed, the evidence overwhelmingly suggests that if Hayek were still alive, he would be cheering the ECB on all the way. It’s dangerous to _derive_ a theorist’s position from what you think they _must_ think, given your understanding of their priors – it can, as it has here, turn into a species of No-True-Hayekism.

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Martin Bento 07.19.12 at 4:59 pm

There came a time during the Iraq War when almost all honest commentators recognized that it was a debacle, and those who had opposed it asked for (or demanded) an account from those who had supported it. For the most part, these were not forthcoming, which is a sore point to this day between former supporters and opponents of the war. The important thing was not an apology, but an actual analysis of, if you now think you were wrong, what in your thinking was wrong.

Was there a poster on this site who was critical of Maastricht as such five or six years ago? Some, notably Henry and I think John Q., were critical of the undemocratic way it was being imposed, and others defended this, but did anyone argue that the unification itself, as specified in the Maastricht treaty, was a bad idea?

It seems to me that the bulk of the European left did support the treaty and should now answer for that. When I lived in Europe, most of the left treaty opponents I knew were dreadlocked anti-globalization types reeking of pot; the “respectable” left was all for it. I think this has a lot to do with affect – with liberal tribalism, and it has a lot to do with what Robert said in comment 2 and Peter in comment 6, the left supported this largely out of hostility to the nation-state, and perhaps in light of this debacle that should be re-evaluated. When I argued here that the transnational character of the EU would undermine the social solidarity necessary for political support of the welfare state, I was ignored or attacked. Is this not happening?

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Random Lurker 07.19.12 at 5:57 pm

@Martin Bento

Count me as an european leftish that highly dislikes the politics of the EU today, but still is an euro enthusiast in general.

Suppose, for example, that in an important trial the judge gives a very bad judgement; would you for this reason say that judges are useless and we should do without judges?

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Martin Bento 07.19.12 at 6:04 pm

There is no “euro in general”; there is the EU as it exists. Just as proponents of the Iraq War could not hide behind “we would have favored a war better handled than it was by Bush” – advocating the war meant advocating what was on the table, not some platonic ideal form of such – proponents of the EU cannot hide behind the idea that there is some other ideal EU that they would be justified in supporting. If you supported this, you are accountable for supporting this.

The judge analogy would only have a possibility of working if I were to argue, solely on the basis of the problems of the EU, that all supranational institutions were illegitimate.

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Antoni Jaume 07.19.12 at 7:13 pm

«[...]If you supported this, you are accountable for supporting this.[...]»

I disagree, first it is ‘if you support this, you are accountable for supporting that’ which is not an universal truth. Second if I don’t support the present distribution of powers and everything else in Europe, I do not have to support every alternative that happens to come. Thirdly, I do not know you, but I cannot, here, avoid distrusting you. And that, I think, trumps everything else there may be.

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Antoni Jaume 07.19.12 at 7:35 pm

«[...] the left supported this largely out of hostility to the nation-state, and perhaps in light of this debacle that should be re-evaluated. When I argued here that the transnational character of the EU would undermine the social solidarity necessary for political support of the welfare state, I was ignored or attacked. Is this not happening?»

What is happening is that the nation-state, a misnomer by the way, is against the solidarity. What they would not tolerate in themselves, they want outwards. What you propose is to give to it.

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Martin Bento 07.19.12 at 7:39 pm

No, I meant what I said, and I was not quoting anything, so I don’t know how it is you presume to correct me: it is “if you supported this, you are responsible for supporting **this*”, meaning if you supported the Maastricht treaty, than you are responsible for supporting that actual treaty, not some other version of European unification that might have gone better. And I said nothing about what alternatives you might *have to* support. I supported the status quo ante Maastricht. If you thought Maastricht was a good idea, then you either have to defend that now or acknowledge that you were wrong.

As for not trusting me trumping everything, even with an avowed absence of actual knowledge about me, well, that’s ideological tribalism for you. I don’t have to even listen to people who don’t put forth the signals i like regardless of argument. Did you trust the Maastricht advocates? Why?

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Martin Bento 07.19.12 at 7:41 pm

The second sentence of the second paragraph above is my paraphrase of what Antoni is doing. I think that is obvious, but I wanted to state it in case anyone was obtuse or dishonest enough to characterize it as my own position.

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Antoni Jaume 07.19.12 at 7:54 pm

«As for not trusting me trumping everything, even with an avowed absence of actual knowledge about me, well, that’s ideological tribalism for you. »

It is not due to ‘even’ , but rather ‘because’.

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Martin Bento 07.19.12 at 7:57 pm

The biggest problem in the EU right now is the ECB, which is not a national institution but a European one. It is using the crisis to undermine the welfare state in various countries, in accordance with its ideological preferences and perhaps banking industry interests.

As for the nations resisting the solidarity, the solidarity has to be constructed. If the people do not feel this solidarity, the EU does not get to select a new people. In a large nation like America, the richer regions subsidize the poorer ones. New York and California have subsidized Alabama for decades and will continue to do so for the foreseeable. This is not even a political issue, because, despite regional tensions, there is sufficient national solidarity that this is seldom even mentioned politically. Is Germany going to subsidize Greece? F-o-r-e-v-e-r? I don’t think the possibility is even seriously discussed. IF the people do not support this, there is no use stamping your foot and insisting they must. Nor is the problem primarily the hoi polloi. There is nothing hoi polloi about the ECB, and it does not translate simply to “Germany”. It is the voice of a European elite that does not feel the solidarity with the multinational EU poor, and is behaving accordingly.

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Martin Bento 07.19.12 at 8:01 pm

PS. I don’t bother much with autobiography, but I have a long commenting history on this site. Google

site:crookedtimber.org “Martin Bento” -”Martin Bento on”

if you’re curious.

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Antoni Jaume 07.19.12 at 8:10 pm

Martin Bento 07.19.12 at 7:57 pm
«The biggest problem in the EU right now is the ECB, which is not a national institution but a European one.»

Whose main defect is that it was shaped to the preference of one member.

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Antoni Jaume 07.19.12 at 8:19 pm

Martin Bento 07.19.12 at 8:01 pm
«PS. I don’t bother much with autobiography, but I have a long commenting history on this site. Google»

Yes, I know, while I do not usually comment, I’ve been reading for most of the last decade. Still, I do not feel that what you intend deserve my lowly trust. Hey, look at Maastricht, they claimed one thing and we got another.

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Antoni Jaume 07.19.12 at 8:22 pm

«It is the voice of a European elite that does not feel the solidarity with the multinational EU poor, and is behaving accordingly.»

That is an understatement. (Which means that, here, I agree with you)

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MPAVictoria 07.19.12 at 8:27 pm

“deserve my lowly trust”
I am curious what you mean by trust in this instance?

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Antoni Jaume 07.19.12 at 8:43 pm

What I mean by trust? that if I do as he says all will go well.

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piglet 07.19.12 at 9:46 pm

“Was there a poster on this site who was critical of Maastricht as such five or six years ago?”

There was never a shortage of left criticism of Maastricht (that was btw 20 years ago, not just 5 or 6). I remember that vividly in Germany (and yes, I was critical). In those countries where referendums were held, the opposition came from both left and right. However, the winning strategy was always to paint any opposition as right-wing nationalism and thereby force the centre-left into the pro-Maastricht camp.

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piglet 07.19.12 at 10:12 pm

“proponents of the EU cannot hide behind the idea that there is some other ideal EU that they would be justified in supporting.”

Some on the radical left were all out anti-EU but admittedly, that was a minority. The problem with your characterization however is that we are long past arguing about EU or not EU. The EU is a fact of life. Analyze it, criticize it, reform it, revolutionize it – great. What is not productive as a political position is to wish it weren’t there.

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Random Lurker 07.19.12 at 10:20 pm

@Martin Bento
There are three points on which I disagree with you:
First, when we speak of democratic institutions, there is a big difference between the office and the person who hold the office: I can well think that the european council is legitimate and cool but the people who are in it are a bunch of cretins and/or ideologues.
Second, since the EU was produced by a process of continuous integration, I believe that while the present form of the EU has a lot of problems, if the integration goes on those problems will be solved.
Third I don’t understand why you take for granted that

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Random Lurker 07.19.12 at 10:25 pm

that In the single nation states there would be more solidarity:
It seems to me that in most european countries there are neoliberal governments and German stance vs debtor nations is not that different from lombardy stance vs sicily inside Italy.

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Antoni Jaume 07.19.12 at 10:40 pm

Random Lurker 07.19.12 at 10:25 pm
«[...] is not that different from lombardy stance vs sicily inside Italy.»

Or between Catalonia and Extremadura in Spain (not to say the Basque Country whose two regions do not contribute to general budget).

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Keith 07.19.12 at 11:39 pm

The centralisation involved in the creation of the EU and particularly the Euro has been sold to the left as allowing more left wing policy and to the right as allowing more right wing policy than national politics would allow. This is the trick or con. At the moment the policy mix in the euro zone is clearly right wing and hard money. So the soft pro EU left are proven by results to have been duped. Or if you like Thatcher was right to be hostile but for the wrong reasons. Namely her objection to the project of integration was the loss of power of the National state. The actual development of policy at the EU level has been entirely to favour big business and banking at any cost. Based on a erroneous theory that a single currency on its own could erase differences in productivity at the National and regional level. As a purely economic system the Euro has increased divergence between states not reduced it. I assume this is a very big mistake rather than deliberate. But no one running the EU wants to admit they got it wrong.

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Sebastian 07.20.12 at 12:01 am

Henry:

1) Hayek was consistently anti-inflation and talked about it quite a bit in the 1940s and 1970s, where inflation often hit double digits even in the US. To extrapolate from that to your: “Hence, he would have had no problem with the lunatic anti-inflation bias of the ECB” is far too much, especially as many of the countries in the EU are seriously flirting with deflation given the current ECB policy.

Which leads to

2)

Consider:

I am the last to deny – or rather, I am today the last to deny – that, in these circumstances, monetary counteractions, deliberate attempts to maintain the money stream {NGDP], are appropriate. I probably ought to add a word of explanation: I have to admit that I took a different attitude forty years ago, at the beginning of the Great Depression. At that time I believed that a process of deflation of some short duration might break the rigidity of wages which I thought was incompatible with a functioning economy. Perhaps I should have even then understood that this possibility no longer existed. … I would no longer maintain, as I did in the early ‘30s, that for this reason, and for this reason only, a short period of deflation might be desirable. Today I believe that deflation has no recognizable function whatever, and that there is no justification for supporting or permitting a process of deflation.

That was Hayek in the 1970s. So it appears that he would NOT support the ECB’s current course.

Also in the 1970s he was arguing for competing currencies and abandoning the central bank.

So giving your argument maximum generosity, and ignoring everything Hayek said about centralization in general, he is mixed on central banking. Apparently you take that to mean that we by looking at different speeches thirty years apart we could call requiring a central bank Hayekian AND call not having a central bank Hayekian. Which rather suggests that ‘Hayekian’ is not a good adjective for usefully describing central banks.

I’m not sure why you think “When he argued against ECB type arrangements, it was on pragmatic, political grounds” is helpful for you. First, ‘ECB type arrangements’ is such a ridiculously broad category as to be essentially useless for the purposes of this discussion. Does it mean farm subsidies? We know what Hayek says about that, right? Does it mean forcing countries into deflation? We (now I hope you do at least) know what Hayek thought about that. Again, Hayek was largely about process, you insist on treating all of his thoughts as if he were of a (your?) central planning style. In fact you consistently refuse to engage the information discovery problem which was the main thing he wrote about constantly.

“Indeed, the evidence overwhelmingly suggests that if Hayek were still alive, he would be cheering the ECB on all the way. It’s dangerous to derive a theorist’s position from what you think they must think, given your understanding of their priors – it can, as it has here, turn into a species of No-True-Hayekism.”

The evidence actually doesn’t show that, which you now know, and which I knew earlier because I’m more familiar with Hayek than you. And that is fine. I’ve read a lot of Hayek for various reasons, you’ve read lots of other people.

Anyway, back to the ECB, do you agree that institutionally it is

a) a centralized force in the EU
b) pretty important
c) is insulated from feedback/correction mechanisms and
d) is meddling with far more than just inflation issues?

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Henry 07.20.12 at 12:50 am

That was Hayek in the 1970s. So it appears that he would NOT support the ECB’s current course.

Actually, he would. The ECB’s policy is _not_ deflationary – it is to have inflation around 2%, Current Eurozone inflation is 2.4%. Hayek’s change of mind about the salutary effects of a brutal deflation has no bearing on his possible views on eurozone policy. Hayek and the ECB are at one with respect to keeping inflation low – the people who disagree with this are the Keynesians (like John Quiggin) whom Hayek so disliked.

As stated, the competing currencies proposal has to do with his belief that this would limit political controls and hence curb inflationary tendencies, by getting government’s hands off the money supply. It’s not about discovery processes. I agree that he is mixed on central banking – I have tried to be clear that he seems to have been inconsistent.

The ECB has absoultely nothing to do with agricultural subsidies (which are, unknown to most people, actually relatively decentralized – the member states keep a tight grip on them through the comitology procedure, and actual implementation is pretty well all at the level of individual member states).

Certainly, the ECB is interfering in lots of ways. But it is by and large interfering in the _ways that Hayek would like_ – that is, forcing through the shrinking of the state, swingeing cuts to welfare and so on (see e.g. the notorious Italy letter). If Hayek didn’t shrink from a military coup with accompanying murder, torture and disappearances as a means towards the end of increasing economic freedom, I hardly think that he would have caviled at the ECB’s threat of various forms of economic unpleasantness. Hayek’s enthusiasm for catallaxy and experimentation appears to have gone hand-in-hand with a fair degree of authoritarianism, and a very specific distrust of _democratic_ forms of feedback and correction.

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Martin Bento 07.20.12 at 3:36 pm

Piglet, I thought it was obvious that by 5 or 6 years ago, I meant at least 5 or 6 years ago, i.e., before the financial crisis. I was critical of Maastricht at the time too.

By your standard, we should never analyze or criticize the reasons any war was fought, because no war can ever be unwaged, and therefore all that have occurred are fait accompli. If Maastrict was a serious mistake, and I think it was, we must analyze and learn from the mistake. We must reevaluate the beliefs that led to the mistake. Although, I don’t think the demise of the EU looks anywhere near as far-fetched as it did a couple of years ago and the unthinkable happens. The USSR was an inescapable fact of life whose disappearance was not even worth discussing as a serious possibility, until this changed very quickly.

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Martin Bento 07.20.12 at 3:51 pm

Random, political institutions cannot be evaluated solely on the basis of how they function when the authorities are wise and benevolent. Most any institutions will be fine then. And a big part of the problem with the EU is that the institutions are not very democratic. A lot of people foolishly acceded to this because of anti=populism – they wanted to see the wise elites prevail over popular ignorance, which requires weakening democracy.

Whether further integration can solve the problems remains to be seen. I don’t see any way it will happen, though, without very loud protest against the problems, analysis of the causes, and condemnation of those who have created them.

As for comparing what is happening between the EU and member states to tensions between those states and certain regions, I don’t think these things are comparable. We’re seeing austerity measures imposed that double existing unemployment rates, tear up existing pension contracts, compel replacement of elected officials, etc. I don’t think Italy has been doing anything on that level to Sicily recently. Furthermore, some of the neoliberality we are facing is, in fact, written into the Maastricht treaty – the deficit constraints and the inflation-only mandate of the ECB, for example. Supporting that treaty was supporting the institution of neoliberal rules.

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Martin Bento 07.20.12 at 3:57 pm

Antoni, my impression is that Maastricht is working pretty much according to what the treat specifies. The problem is that the establishment left was not “paranoid” and “populist” and looking for ways the elite could use this treaty to screw us. Rather, they were glorying in the opportunity to transcend the small-mindedness of national identity and singing “It’s a Small World After All”.

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Random Lurker 07.21.12 at 1:16 am

Martin, I admit you have a point.
However I believe that there is a lot of neoliberality inside the nation states. For example those who say that the various nations should exit the euro usually think that debtor nations should devalue to boost exports and reduce imports. That would be a very mercantilistic policy and would be a tragedy in europe where big slices of each country’s gdp are based on intra european trade, trade wars could be very nasty.
For this reason I don’t think that the EU is playing a completely negative role in this crisis, a disruption of the euro could be even worse.

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Sebastian 07.21.12 at 3:05 am

Portions of the eurozone have been flirting with deflation throughout the crisis, and nearly the whole area minus Germany has been dealing with deflationary pressures for at least the past two years.

See for example IMF warns of sizeable risk of deflation“;

and fistfulofeuros on the big deflation threat in 2009, and again in 2011 (note that that is by two different authors on the well respected euroblog.

“Smallwood points out that Greece, Portugal, Spain and Italy have suffered a rise in costs relative to Germany and some of the northern economies of up to 30%….”

etc, etc.

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Martin Bento 07.21.12 at 7:39 pm

Random, in my book, neoliberalism and mercantilism are too different things. And, yes, breaking up the EU will be very painful, and this too was by design and openly so declared, so it is not a fact that should be counted in the EU’s favor. In fact, it’s something else that should have made people suspicious. If you start a new job, and the boss says, “You’ll love it here. By the way, you’ll have to put on this shackle”, it might be time for some chin-scratching.

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Martin Bento 07.21.12 at 7:40 pm

uh, “two different things” – commenting in a hurry.

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Random Lurker 07.22.12 at 12:44 am

Martin, I disagree with this. Since neoliberalism asks for policies that tend to push down wages, in pratice it is a form of mercantilism: if Italy solves its problems by devaluating its currency, or through internal devaluation, it is actually dumping its acting mercantilist. I believe that since the beginning the Eu and its predecessors were crafted exactly to avoid this outcome (the problem is not that exiting the EU is painful, but that europe without the EU might be very disfunctional).
The actually existing EU limits mercantilism through devaluation but not other forms of (unconscious) mercantilism.
The point is that, to solve present problems, we would need keynesianism on a European scale, and while it seems unlikely with really existing EU, it seems even more unlikely wthout a EU.

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