In memoriam
Is Europe an optimal size for a state? Probably not. "Europe" (understood as the Eurozone membership) will never be a national state, but could become something like a federal state. Many argue (correctly) that some form of political union is necessary to make monetary union sustainable. Others argue more clearly that monetary union is simply a step towards the real goal: European political union. I would say that this goal is antihistoric. In 1946 there were 74 countries in the world, and today there are 192. More than half of these countries are smaller than Massachusetts. In 1995 87 countries had fewer than five million inhabitants.
The optimal size of a country can be conceived as the result of a compromise. On the one hand, small countries have the advantage of a low degree of conflict and a relative convergence of preferences. On the other hand, large countries have several advantages, including economies of scale in the provision of public goods, protection from external shocks, and market size. However, as the market becomes more open, one of the main benefits of being a large country becomes much less important. A country doesn't have to be big to open up to the market. So the trend towards reducing a country's average size is perfectly understandable in an environment of trade liberalization. Why would a country want to lock itself in a political union when it could be small, benefit from freedom of political direction, and trade peacefully with the rest of the world? There is no need for political integration if there is economic integration. Economic integration should go hand in hand with political separatism, as I argued with Enrico Spolaore and Romain Wacziarg . Europe is going in the opposite direction.
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Is monetary union useful for ensuring peace in Europe? It is often said, both in the media and in science, that the costs and benefits of monetary union are trivial in comparison with the authentic political advantage of the European Union: that of preventing destructive military conflicts such as those that led to the two world wars . This argument does not seem convincing to me and is probably incorrect. It could also be argued that in fact the likelihood of conflictual tensions is likely to increase if several countries are forced to coordinate their policies and seek compromises on various issues due to an unnecessary monetary union. A free trade system, accompanied by national independence in choosing the political direction, may be more appropriate for promoting peaceful interactions. At the very least, this reasoning is as convincing as its opposite. I would also like to note that considering the past twenty years, the animosity between western countries has rarely been as high as in recent months, while monetary union is becoming a reality.
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I would like to note that in recent progress towards European unification voters have often been less enthusiastic than their politicians. This observation raises some doubts about the political sustainability of the integration process and indicates that, in this case, European citizens have been more cautious than their leaders.
(… here , on p. 301 …)
(… however you think, it leaves us a courageous and prescient political thinker, a genuine interpreter of liberal thought. You may disagree with this thought, and I myself, as a Keynesian, found myself in controversy with some of its degenerations, but one cannot fail to recognize that when it expresses itself genuinely and free of conditionings, as in this case, by relying on data, it achieves internal coherence and an ability to read and predict the dynamics of reality that we generally do not find in thinkers so-called progressives, although in theory they have equally powerful reality analysis tools. I ask you, as we would be asked in the classroom, a minute of silence …)
This is a machine translation of a post (in Italian) written by Alberto Bagnai and published on Goofynomics at the URL https://goofynomics.blogspot.com/2020/05/in-memoriam.html on Sun, 24 May 2020 09:43:00 +0000. Some rights reserved under CC BY-NC-ND 3.0 license.