Twenty years ago last month, we penned one of our favorite and most controversial pieces. Regular readers will recognize it well, not just because we made a bold prediction, but because we have repeated that prediction several times since – usually at the beginning of every year. The piece started like this:
Psst! You wanna know a secret. The Euro, and the mess it represents, is going to be a social, economic and political catastrophe. Indeed, I think it is probable that the adoption of the Euro will be to 21st century Europe, what the killing of the Archduke Ferdinand was to 20th century Europe; i.e., that point in time when history will record that the unraveling began in earnest.
The idea underpinning our prediction was that the “planners” in Europe – i.e. the technocratic socialists – would make all the economic and politics decisions in the “new” Europe; they would expand the power of the super-state so substantively that it would not only choke off economies but would also enrage the people over the loss of their individual autonomy and self-governance; they would impose a one-size-fits-all-solution on all the member nations, despite their clear and undeniable differences. The planners, we wrote, “will take over virtually all responsibility for the economic affairs of the combined nations. And when the dust settles, individual Europeans will be left to wonder what happened to all the grand promises of ‘great prosperity,’ and what happened to the demos in their democracies.” In the end, we warned, the planners would treat Orwell’s Animal Farm not as a warning, but as a “how-to manual” and would change the sign reading “All Animals Are Equal” to read "All Animals Are Equal But Some Animals Are More Equal Than Others," just as the pigs did in Orwell’s great book.
Over the past several years, our expectations, if not our specific forecast, have been borne out – repeatedly and vividly. The Greek crisis – or crisEs, to be more accurate – almost destroyed the Union, largely because the command-and-control economic solutions imposed upon all members didn’t address the needs of all people and countries, but rather those of ONE people and ONE country in particular. Britain, while not a member of the monetary union, nevertheless bristled at the excessive control exerted upon it by the Continent and, as a result, decided to leave the Euro-planners behind and chart its future course independently. The recent Italian crisis was precipitated by the country’s President Sergio Mattarella, who initially refused to accept the anti-European sentiments of his people, as expressed through the democratic process. Crisis after crisis after crisis, all in response to the planners’ overreach.
For the time being, it appears that the current storm has passed. Late last week, Mattarella swore in the new anti-European government, and now everything can return to normal. But that illusion of normalcy will not last long. Last week, Greg Katz, the Associated Press’s London correspondent and a radical centrist, expressed in plain terms what is happening to the EU. Appearing on the BBC’s Dateline, he said:
We have been saying this for 24 months, but we are running out of ways to say EU is in trouble. Europe still exists but there is no unifying concept that I can see.
When I got here twenty years ago, Francois Mitterrand and Helmut Kohl were these giant figures with a vision of European unity.
Now it’s in such disarray that it doesn’t even matter where you look….
The whole thing seems to be unravelling.
He is right, of course, it does “seem” to be unraveling, but that’s likely because it was never especially raveled in the first place.
As we noted twenty years ago and will note again today, the EU’s fate was probably sealed nearly a century-and-a-half ago, during the famous intellectual battle, the so-called Methodenstreit, between Carl Menger, the first of the great Austrian free-market economists, and Gustov von Schmoller, Bismarck’s one-man, socialist brain trust.
Modern economic historians acknowledge that Menger, one of the great pioneers in modern economics, won the day intellectually. But Schmoller prevailed in the more important arena of European academia, and the rest, as they say, is history.
Bismarck is widely credited with the dubious distinction of being the founder of “welfare capitalism,” because his efforts led to the passage of the first package of social security laws in the 1880s. But it was Schmoller’s two-decades of exhaustive work in the German social bureaucracy, including a term as chief of the “Socialists of the Chair” (the Kathedersozialisten), and as founder of the so-called “Younger Historical School” of economists, that provided the intellectual underpinning for Bismarck’s efforts.
Ludwig von Mises, one of the great Austrian economists who followed in the giant footsteps of Menger, maintained in his classic 1922 book, Socialism, that Bismarck’s social security scheme was “a more momentous pioneering on the way towards socialism than was [Lenin’s] expropriation of the backward Russian manufacturers.”
The reasons for this were explained in rather stunning detail by another of Menger’s followers (and one of our “Great Thinkers”), F.A. Hayek, who put it as follows in his classic The Road to Serfdom:
It is not difficult to see what must be the consequences when democracy embarks upon a course of planning which in its execution requires more agreement than in fact exists. The people may have agreed on adopting a system of directed economy because they have been convinced that it will produce great prosperity. In the discussions leading to the decision, the goal of planning will have been described by some such term as "common welfare," which only conceals the absence of real agreement on the ends of planning. Agreement will in fact exist only on the mechanism to be us ed. But it is a mechanism which can be used only for a common end; and the question of the precise goal toward which all activity is to be directed will arise as soon as the executive power has to translate the demand for a single plan into a particular plan. Then it will appear that the agreement on the desirability of planning is not supported by agreement on the ends the plan is to serve. The effect of the people's agreeing that there must be central planning, without agreeing on the ends, will be rather as if a group of people were to commit themselves to take a journey together without agreeing where they want to go: with the result that they may all have to make a journey which most of them do not want at all.
It may be the unanimously expressed will of the people that its parliament should prepare a comprehensive economic plan, yet neither the people nor its representatives need therefore be able to agree on any particular plan. The inability of democratic assemblies to carry out what seems to be a clear mandate of the people will inevitably cause dissatisfaction with democratic institutions. Parliaments come to be regarded as ineffective "talking shops," unable or incompetent to carry out the tasks for which they have been chosen. The conviction grows that if efficient planning is to be done, the direction must be "taken out of politics" and placed in the hands of experts--permanent officials or independent autonomous bodies.
The headlines say the crisis has passed. But it hasn’t. It’s really only just begun.