Book Review by Sapphire Ng
Yale University Press
Copyright August 2016
Europe Isn't Working is a strikingly ingenious book. With its content constructed with extraordinarily penetrating analyses and strong arguments, and coupled with comprehensive explanations and lucid writing, the book adeptly furnishes a compelling case against the euro. Though an occasionally dense and challenging read, the book is undoubtedly educational. Proponents of the euro should not be deterred from reading the book; the brilliance of the book makes it a treasure ought not to be missed.
The book paints an incredibly transparent, candid, and sometimes blunt, picture of the authors' attitude towards the euro—“it would have been better had the single currency never been created.” The euro is referred to as a “job-destroying, recession-creating, undemocratic monster.” The continued and further deterioration of Europe's economic performance was attributed to the creation of the single currency; the authors noted the decrease in living standards, investment, and productivity, slower growth, and higher unemployment. They also spotlighted the grave impact of the unwieldiness of the “one-size-fits-all interest rate” in addition to the lack of “exchange-rate flexibility”—Italy, for example, steadily lost competitiveness due to the “loss of freedom to devalue the currency.”
The book also details the winner-loser dichotomy—a pressing Eurozone problem—created by the euro mechanism, expressed most prominently through the notion of Germany's pursuit of a beggar-thy-neighbor approach. Germany, for example, enjoyed a rising trade surplus at the expense of others. The winner-loser polarity manifests as well in the form of the euro—a hard money—notably “favor[ing] creditors over debtors.” Certainly, the reality that five Eurozone countries required bailouts represented yet another point that buttressed the authors' stance regarding the euro.
The bleakness of the circumstances surrounding the euro was also evaluated through a discussion of the failings and missteps of the Eurozone policymakers—the European Central Bank (ECB). Without restraint, the authors highlighted for example, the ECB's tardy response in times of economic crisis, its “ideological” failures, or even its proclivity to exacerbate situations—the Eurozone authorities apparently once “turned what could have been a localized problem into a systemic crisis, creating fear where there had previously been none.”
Exceptionally profound is the authors' synthesis and evaluation of the conception of the euro. Intriguingly, the euro planners are said to have “woefully misconceived” the attempt to “reverse-engineer a political federation,” and thus committed the fundamental mistake of assuming that the establishment of a “United States of Europe” could be “facilitated by a currency akin to the dollar and a central bank akin to the Federal Reserve Board.” Other fascinating contexts explored include discussion of for example, the significance of the “wrong lesson”—the “redundancy of national frontiers and national currencies”—drawn by the euro designers from the post-1989 collapse of communism in eastern Europe.
The book laudably brims with examinations of other markedly refreshing and intellectually-stimulating ideas. One of which is none other than the investigation of the gold standard and the gold-exchange standard which “pre-echoed” the euro; the euro is said to be a “modern-day” manifestation of the 19th century gold standard. The authors very interestingly accompanied this exploration by delving into intriguing subject matters, including discussions of the Bretton Woods system and its subsequent breakdown, the “bullionist” argument, historical events such as the ending of French membership of the gold-exchange standard, and of course, parallels between the euro and the gold standard, such as “the insistence on deflation for countries running balance of payments deficits.”
The study of Britain's abstinence from the euro was also notably and distinctly outstanding. The authors rather exhaustively explored the matter from the “apparent inevitability of UK euro membership” to its eventual “deep unlikelihood.” An eye-catching appetizer in the lead-off to the discussion was the mention of the unusual term “virtual history” and the notion of it as “a growing academic discipline.” Somewhat of a dessert to the discourse, on the other hand, contains the authors' synthesized opinions for example, that “it would have saved a lot of economic pain had other countries, such as Italy, Spain and France, used the [UK] Treasury's five tests to assess whether the case for giving up the lira, the peseta and the franc was 'clear and unambiguous.'”
The reader can expect the book to be an excellent overview for the euro and its specific characteristics, though of course tinged with the authors' personal conceptions. A prescient remark was cited; countries in the Eurozone could find themselves “trapped in a burning building with no exits.” The euro was described as having a “deliberately claustrophobic and constricting design,” being a “restrictive currency system with no escape hatches,” and being supposedly “speculator-proof” and “market-proof.” The Stability and Growth Pact (SGP), for example, was one facet of the single-currency system designed to prevent member countries from running up excessive budget deficits.
Another somewhat poignant dimension of the euro explored was of course, highly-anticipated outcomes and goals that failed to materialize. An example being the “glorious optimism” that the euro would successfully “allow Europe to challenge America's economy and geopolitical hegemony,” or the vision of the Eurozone as “a sea of monetary tranquillity.”
Fundamental information pertaining to the backstory of the euro was certainly covered as well. For example, the essential Maastricht Treaty, “the document that paved the way for the euro;” the significance of the Bundesbank—the German Federal Bank—as the “inevitable” template for the ECB; the euro's predecessor, namely the Exchange Rate Mechanism, and notably “a building with exits;” and certainly the role of countries, such as France, which were the prime architects of the euro.
Other interesting coverage in the book include the elucidation of the “curious role” Italy played in the story of the euro; the country was one of the masterminds behind the creation of the euro—as manifested in the form of the intellectual Tommaso Padoa-Schioppa—, yet it doubles as a Eurozone member “whose problems could threaten the whole [European Economic and Monetary Union] EMU project.”
The comparisons between Ireland and Iceland, the former a member of the Eurozone and the latter “not even a member of the European Union,” was also singularly fascinating. The juxtaposition was beautifully set against the context and the background of their histories—for example, in the way both countries shared “a recent history of strait-laced semi-puritanism,” “a coalition-based consensual political culture,” and even their “sometimes difficult” respective relationships with the United Kingdom.
The book notably contains apt analogies that enliven the text, in addition to effectively making complex concepts more easily accessible to the general public. An outstanding instance was the use of the schooling analogy to illustrate specific details of the euro. Germany was said to have intended the euro to be run along the lines of Gordonstoun, a rigorously disciplinary school. There was the “Maastricht entrance exam” comprising of 5 papers that countries keen on participating in the monetary union are required to sit for; there were also further use of education lexicon such as the “fifth exam,” or “test number one” which pertains to the importance of keeping inflation under control.
Such use of analogy not only effectively sustains reader interest, but proved to be rather creative and even ingenious as it allows individual readers to stand in the shoes of the countries vying to join the Eurozone. In another instance, there was a relatively fun illustration of Germany in contrast to other Eurozone countries—“If the rest of Europe was like schoolboy Billy Bunter in the stories by Frank Richards, always waiting for his postal order to turn up, Germany was like the school swot, burning the midnight oil in order to retain its position at the top of the class.”
There was also the somewhat rare, satirical and humorous, memorable and entertaining moment in the book. In reference to a question by an audience member in a program, “Will the British government ever grow up and adopt the euro currency?,” the authors later smugly wrote, “the people of the United States, who, then and now, showed no urge to do anything so 'grown-up' as to abolish the Federal Reserve and outsource US monetary policy to non-Americans.” Not only the authors effectively conveyed, or rather thrust, their point, the reader cannot help but share a collective sense of triumph and satisfaction thanks to the intelligent rebuttal.
Understandably, the authors might have conceived of the ideal manner they hoped to organize certain pieces of information or present certain concepts along the narrative. At certain times however, it might help the reader immensely if for example, the first mention of Bretton Woods was accompanied with at least a brief explanatory description. There were a couple of mentions of the Bretton Woods system before the concept was ultimately demystified, further elaborated upon, and examined comprehensively in its designated pages much later on in chapter 3. With the Bretton Woods system immediately mentioned in the context of other discussions at the outset, and compounded with the generally more challenging contents of the book, confusion might be inevitable. With understanding blurred, some degree of enjoyment could potentially be taken out of the reading experience.
Disclaimer: I received an advance review copy of this book from NetGalley for this review.