The Eurocalypse Now debate

Thanks to the NZ Initiative I was able to attend the Eurocalypse debate at the Auckland War Memorial Museum last week. Cam Browne was also there and has blogged on it. The pro-EU speaker commented that given the timing of the debate (new Greek elections just called), that he felt like someone preaching contraception to the College of Cardinals 🙂

I won’t cover the debate in full, but it was a good example of the NZ Initiative can contribute to public policy discussions in New Zealand. There was one statement by MEP Dan Hannan which resonated with me.

Hannan said that the reason the UK (and other countries) went into the EU was the promise of prosperity. No country wants to surrender political sovereignty, unless there are benefits for them in doing so. The trade-off for surrendering power to the EU, was that they were forming a prosperous and powerful trading bloc. Europe would rival the United States as an economic super-power.

Two issues have undermined those benefits. One is the declining power of the EU in the global economy, as Asia especially grows. Growth in the EU is fairly minimal in the older member countries (but quite strong in the new economies). Already the EU has shrunk to just under 30% of the global economy. By 2050, it will be just 15% they project.

Worth noting the original EEC cost only 0.03% of European GDP. The EU now costs 1%, or 30 times that.

Now also put on top of that the Euro crisis, as weak economies threaten even the healthier EU economies. It becomes apparent that the rationale of greater economic prosperity in return for surrendering political sovereignty has disappeared.  Hannan asked if either major party in the UK would propose joining the EU today, if it were not already a member. He says there is no chance at all.

So Hannan advocates that the UK leave the EU, but like Switzerland and Norway sign free trade agreements with the EU, so you get the benefits without the loss of control. Hannan said he thought a referendum on the UK staying in the EU was inevitable, but conceded to the other speaker that it is quite possible the UK would vote to remain, as the two main parties would both campaign to stay in there.

So it was an interesting debate, which I hope we will see more of. Also worth highlighting a profile and interview in the Listener of Initiative Executive Director Oliver Hartwich. Some extracts:

“Thank God for the porn industry,” he wrote in a newspaper column two years ago. “The seemingly questionable industry does not care about morality, but is nevertheless a constant source of innovation and social improvement.” The column lauded the industry for the development of 3D films, predicting the technology – if not the content – could be used by schools to make geography and chemistry lessons much more interesting. “With some justification, sexual needs could be called the mother of the web’s invention. Without streaming videos of screaming porn stars, bandwidth would not have been added so fast to the global net,” he suggested.

Oliver is not the only person to have noted the Internet porn industry has had a considerable part in the development of the Internet.

Since the end of the gold standard in the US in 1971 – which required the US dollar to be backed by a fi xed amount of gold – money has had no intrinsic value. Hartwich believes we need to again anchor the monetary system to a commodity – although not necessarily gold, and maybe a mixture of commodities. He’s not a lone voice on this. In 2010, World Bank president Robert Zoellick called for a return to the gold standard, saying the world needed a more co-operative monetary system and should “consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values”.

Hartwich’s friend and colleague Detlev Schlichter, author of Paper Money Collapse, says the financial crisis is not an accident of capitalism but the “unavoidable consequence of the political decision to abandon a gold standard and to adopt in 1971 a system of unrestricted fiat money creation”. Hartwich believes New Zealand and Australia should consider moving their currencies to some “new system of commodity banking”, although he hasn’t got a recipe for how that could be done.

A return to the gold standard is far from the orthodox view. Would be quite interesting to hear maybe Oliver and the Reserve Bank Governor debate whether we should return to commodity based currencies. I’m personally not convinced, but have never heard anyone except the anti-monetarist lunatics of Social Credit advocate this. It would be good to hear a more rational debate.

Although international leaders promoting stimulus packages often say they are following the path of British economist John Maynard Keynes, Hartwich claims they often misrepresent his actual writings. “Keynes never said you can spend and spend and spend.” In the 1920s, Keynes even said that government should make up no more than 25% of the economy. “That would make him a neoliberal by some standards today,” Hartwich chuckles.

A good reminder.

Hartwich is obviously well to the right of centre, yet he is not an aggressive tax cutter. He agrees there is a relationship between economic growth and levels of taxation, but he derides last decade’s Bush tax cuts in the US as “fiscally irresponsible” and does not believe governments should go into deficit to fund them.

I agree. Spending has to be under control to cut taxes.

Asked about his top priorities for New Zealand, he names education and housing policy. He also wants to examine social issues such as mental health. He worked for 15 months in a mental health institution as a young man “because I didn’t want to join the army”, and was moved by the experience.

Glad to see education on the list.