Friday 6 July 2012
How to win an economics prize
If member states leave the Economic and Monetary Union, what is the best way for the economic process to be managed to provide the soundest foundation for the future growth and prosperity of the current membership?
The irony of this is that there isn't a sensible answer to the question. The "colleagues" are determined not to allow a managed process. If any eurozone member drops out – other than, possibly, Greece – it will be a chaotic event with huge and unpredictable political consequences. Economics will take second place to the political issues.
In 156 pages, however, Bootle answers the answerable, making the classic mistake which has dogged this entire crisis. He is offering economic solutions to a political event.
Nevertheless, Bootle's great labour is summarised in the Failygraph, whence we are told that his brilliant insight is for the eurozone to split, north and south, with Germany forming its own currency bloc.
France, he says, should to stay out of this "northern monetary union". There would be attractions, he avers, in it leading a grouping of former euro members. This would split the former eurozone into two roughly equal parts, with the French-led bloc slightly larger.
Yet, says Bootle, "this would amount to a complete overturning of post-war French economic and political strategy". And this is his great plan?
I suspect, Bootle continues, that the French establishment would choose to stick with Germany without even thinking about it. He then concedes that, however attractive a German exit might be, this also looks unlikely. "Germany and other core countries are not (yet) prepared to make this leap".
Thus, if the euro is to be reconfigured, says Bootle, it looks as though it will be through the departure of the weaker southern members, one by one. In that case, we would end up with a set of independent floating currencies for the peripheral countries while the euro continued as the currency of the German-dominated northern core.
In my view, Bootle concludes, this cannot happen soon enough – both for their sakes and for ours.
So there you go. That is how to win an economics prize. Postulate the impossible, and then suggest a scenario so vague that it could very well happen in one form or another, without having to be specific.
Then call yourself Roger Bootle, line up and collect your money. Simples.
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Richard North 06/07/2012
Friday, 6 July 2012
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