A question which I used to be asked frequently runs as follows: “If a single currency works in a huge economy like the USA, why on earth do you think a single currency won’t work in the EU?”.
I must say I get asked this much less often these days, when the abject failure of the €uro project is writ large for all to see. As Allister Heath put it in the Telegraph recently: “The €uro has been entirely and unremittingly catastrophic”. He goes on to quote statistics showing that far from increasing intra-eurozone trade, such trade has declined substantially since the currency’s introduction.
But I was always very happy to get the question, and to explain the answer, because if you understand why the Dollar works in the USA, you have a pretty clear idea why a single currency won’t work in the EU. I used to give three reasons: first, labour mobility. If you’re out of work in Pittsburgh, you get on a Greyhound Bus to California. There’s less labour mobility in most EU countries than in the USA, and far less mobility between EU states.
Second, redistribution. Large Federal programmes and government sourcing have the effect of moving funds and resources from rich areas to poor areas, on a scale far beyond the scope of the EU budget.
Third, political will. Americans all salute the same flag, and a well-off New Yorker is prepared to see some of his tax dollars go to support disadvantaged folk in Detroit. But well-heeled Germans are far less happy to provide long-term bail-outs for Greece, as we’ve seen.
Today, I’d add a fourth factor. The US Federal Reserve is empowered to take tough and timely decisions to manage the dollar and the US economy. The ECB, on the other hand, is trammelled with treaty obligations and threats of law-suits in the German Constitutional Court, and cannot operate like a proper Central Bank. There is no lender of last resort (except Germany, and it’s getting a bit tired of that role).
But today, another essentially similar question is being asked, in the context of the Scottish “Independence” debate. If UKIP is opposed to the union of the UK with the EU, how on earth can we support the union of Scotland in the United Kingdom? (“Does UKIP oppose Scottish independence?” I hear you ask. The clue is in the name — we’re the United Kingdom Independence Party).
And the answer is the same one given above. If you understand why the Union has worked successfully for Scotland and England for 300 years, you’ll understand why the EU is most unlikely to last 300 years. Or 100, come to that.
And to justify this proposition, let me quote, yet again, my favourite line from Enoch Powell, who said that democracy can work and have legitimacy “where people share enough in common, especially in terms of history, culture, language and economic interests, that they are prepared to accept governance at each others’ hands”. Of course we can argue whether that criterion is satisfied within the UK: I would assert that it self-evidently is. But surely no one could argue that it is satisfied in the EU. Manifestly, it is not.
I suppose it is right that the vote on Scottish independence is a matter for the Scots (though I was shocked to hear that EU nationals resident in Scotland are entitled to vote). Nonetheless, we English have an enormous stake in the issue, both for practical economic reasons, and in terms of history and identity. I have no Scottish ancestry (that I know of), but I feel strongly that Scotland is part of my country, whether it’s the Fingal’s Cave overture (I have seen Fingal’s Cave a couple of times); or the novels of Sir Walter Scott; or “The Land of the Mountain and the Flood” by Hamish Maccunn; or the Edinburgh Tattoo and the marvellous War Memorial Chapel atop Edinburgh Castle; or a glass of Talisker, from the Isle of Skye, before bedtime (I worked several years in the Scotch Whisky industry), I feel that Scotland is part of my own heritage in a way that no foreign country could be.
I find it quite extraordinary that the letter from 200+ Scottish businesses today supporting the YES campaign says that the biggest economic danger in staying in the UK is the risk that the UK will leave the EU! Indeed if Scotland stays with the UK, there is a possibility (pray God) that we will all leave the EU. But if Scotland goes independent, it is absolutely certain to leave the EU. Of course it could apply to re-join the EU as a new member-state, but then it would be committed to the €uro disaster.
More generally, the contradiction at the heart of the YES campaign is the idea that Scotland could ever be “Independent in Europe”. The whole point of the EU is that member-states cease to be independent, and become part of a larger polity. Alex Salmond’s offer of independence is a lie. He proposes that Scotland the Brave become a vassal-state of Brussels. That’s an odd kind of independence.
The SNP case also bemoans Scottish subservience to Westminster (as they see it). But given the disproportionate representation of Scotland in Westminster, and the Barnett Formula, and the fact that a large number of British Prime Ministers and other senior officials, have been Scottish, it’s clear that Scotland has far more influence in Westminster than it could ever have as a 1% member-state in a country called Europe.