Saturday, January 8, 2011

Well there's a surprise...

Dani Rodrik writes:

Through long and painful experience, Europe’s leaders first learned that financial integration requires eliminating volatility among national currencies. Next they learned that eradicating currency risk requires doing away with national currencies altogether. Now they are learning – but resisting – the lesson that you cannot achieve monetary union, among democracies, without political union.

Financial integration not only requires the elimination of national currencies, but also demands political union. No surprise at all, really.

And this whole "union" thing was sold to people as a way to improve the economy. But that was silly. Political solutions do not solve economic problems.

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