John Mills asks why the intellectual ideals behind the EU have still not led to a viable European monetary union

Monetary Union In Crisis by Bernard Moss
MacMillan Palgrave, £65

MONETARY Union in Crisis is a timely reminder that many of the problems which the European Union faces are even more deep-seated that the current rows over the EU’s Constitution and its budget.
Why have the EU economies performed so poorly over the last 30 years, reversing the dynamism which was so widely evident for the first quarter century after World War II?
Why is unemployment so high, the EU so little loved, and its electorate so disaffected?
Monetary Union in Crisis traces the history of the EU’s monetary policy intellectual development and analyses what went wrong. The success of the Bundesbank in keeping inflation in Germany down and the Deutsche Mark competitive appeared to provide a lodestone for a Europe wide economic policy. Unfortunately, it was not so simple.
A combination of the distorting effect of the inflationary pressures in the 1970s, subsequent misguided attempts to lock European economies together with monetary union, and the disruption of the German economy caused by reunification, rendered the conditions which had made the Deutsche Mark so successful impossible to replicate.
Overlaying these historical developments, however, were the changes in intellectual ideas, which Monetary Union in Crisis analyses. Much of the driving force towards the establishment of roles and functions the European Central Bank, for example, came not so much from practical experience but from ideological commitment to the monetarist theories which swept much of the world in the 1970s.
If only inflation could be held down – the only policy variable with which the European Central Bank is concerned – then all other economic goals would find their due place.
Alas, this is not what has happened. Inflation would almost certainly have fallen anyway but the achievement of other economic goals slipped from the EU’s grasp. The relatively secure social structure of the 1950s and 1960s was undermined by slow growth, high unemployment and faltering public expenditure. The tax burden was steadily shifted from companies to employees.
The dispersion of income, wealth and life chances generally became much wider.
Unrealistic fiscal targets have led to wholesale privatisation and the weakening of organised labour’s capacity to fight for the disadvantaged.
Supposedly left of centre parties have been captured by monetarist ideas, leaving little effective opposition to the policies which have done so much damage.
Is there an alternative? The huge economic achievements of the Pacific Rim countries suggests that there must be. The reality is that, in many though not all cases, the economies in the far East and south Asia have been much more successful that the EU in combining rapid economic growth with building social cohesion. In those which have developed the most effective policies, there is less inequality and more social mobility.
Increasingly too – though again not everywhere – there is more democratic accountability, a factor in which the EU is conspicuously deficient. The globalisation of the world economy calls for appropriate reactions everywhere. No country can be exempt from its impact and all the evidence shows that isolationist policies do not work. It does not follow from this, however, that engagement with the rest of the world automatically brings success.
Everything depends on the mix of policies which are pursued and the skill with which conflicting requirements for efficiency, fairness, equity and social solidarity are pursued.
Monetary Union in Crisis shows how far the adoption of neo-liberal policies, despite the long welfare state traditions in nearly all EU countries, have led to outcomes being achieved on all the key measures which are so much less satisfactory than might have been possible.

• Councillor John Mills runs JML, a multi-million pound mail-order business, from Kentish Town and is the treasurer of Camden Council.
• Bernard Moss is a member of the Hampstead Labour Party. He has written books on the French labour movement and the single currency.