SECS1: The 'New Hedonist' school throws Europe's currency rules out the window

The present euro system is on its last legs. A new European Currency will have to be built. How should Europeans create a Supranational Economic and Currency System? It should be fairly obvious that countries and nations that have fought each other for more than two thousand years need a system tailor-made for them. It is no use going to theorists living on other continents who are ignorant of Robert Schuman, one of France's most successful Finance Ministers initiating thirty glorious years of postwar growth, and how he brought about a system that ended war -- including Europe's expected Third World War.

The euro's fatal flaws arose because the politicians decided in the 1960s, 1970s and 1980s to abandon supranational democracy and the supranational philosophy that built the Community. Under the arrogant impulse of Charles de Gaulle who wanted to destroy the Community, the other European politicians succumbed to his closed door Council. They acquiesced to the non-democratic easy route of 'package deals'. Vote-getting Wine Lakes and Meat Mountains for farmers were paid for by European taxes and tariffs. This has led to our present Politburo Council system, where a cartel of political parties has replaced de Gaulle and his spineless European cronies. They FEAR openness in the Council as it will unfreeze moves to further democratic progress.

The European Community system must have a currency based on supranational currency principles. North American federal ideas won't cut the mustard. For decades economists have said that a European Currency must be based on a Optimal Currency Area. This idea is based on two fallacies:

• (a) it assumes that the European Community will act like a federal system such as either economic theorist Robert Mundell's native Canadian federation or the USA.
• (b) it relies on the Neo-Hedonist presumptions about the economy and currency.

For example, the US currency is minted by the Fed (the privately owned US Federal Reserve -- which is neither federal nor a reserve). Their mission is to print money only on the basis of encouraging growth and employment for Americans. Further dollars are created by the banking and speculative institutions which try to multiply loans for all. The massive avalanche of dollars that is being churned out by the Fed has had in practice little effect on either growth or employment. It has seen a massive flight of jobs abroad to places like China and other parts of Asia. Its own growth has only been kept above zero by massive borrowing. This is hardly healthy and will lead to 'an adjustment'.

The USA, now shackled by huge debts and overdraft from the other world economies, has become a dangerous and explosive debt overhang for the rest of the world. China, Japan, Russia and other major economies are avoiding US Treasury Bonds and divesting. Why? because of the coming massive inflation. The USA is likely to go through even worse crises than it has so far. This was clear several years ago. The world will also suffer. About 70 per cent of dollars circulate OUTSIDE the USA.

The European Community system is different from the North American experience. It is based on remedying the flaws that Robert Schuman and others saw in those systems and creating a better one. The Canadian and US federations are distinguished in the sense that because of their respective constitutions the first tends to stimulate the growth of governance powers to the provinces away from the centre, while the second has a tendency to centralize and grab powers from the constituent States, both where the constitution allows it and too often where it would seems to forbid it. The European Community system is designed -- when it works democratically -- to reinforce the nation State and build a higher supranational level, based on law and economics, above it.

America is suffering from toxic assets from the sub-prime property bubble scam, junk bonds and complicit credit rating agencies and a central banker with little democratic control. Europeans have most of the same plus a wide variety of political and statistical corruption in a 'European Union' -- not a democratic Community. It is led by the nose by the secretive EuroGroup (that meets in the dead of night) and the closed door European Council which decides policy in a democratic vacuum for the public.

Both sides of the Atlantic are now crying: 'Growth, Growth, Growth. That will change all our fortunes and the people will forget our mischief.'

The Neo Hedonists make no distinction between toxic (or crooked) deals and a healthy economy based on what should be obvious to all: The economy is not a separate or independent creature but it is connected to the real world, real people and goods and has to obey universal and supranational values. Any operation that is based on Ponzi schemes, pyramid selling and ignores morality will end in collapse, trauma and catastrophe.

The European Community is not based on Neo Hedonism as far as its founding philosophy is concerned, nor is it a model that can be shaped by either American, Canadian, Mexican or other federal systems. Whatever politicians try to do against those founding principles and philosophy will end unhappily. At the moment they are trying out all the wrong alternatives (mostly against supranational democracy and in line with a Politburo or political cartel approach).

Their failures are apparent to all but themselves. Thirty years of political corruption, behind closed doors, is now being exposed. Unfortunately all Europeans will have to pay for this mess.

The Community is not designed to be a centralizing governance system, but a purifying system for national democracies that willingly participate in it. Schuman said it was designed to de-toxify European relations.

That must include money, detoxifying it from private and governmental fraud and corruption. But in the 1990s the politicians threw the supranational rule book for a successful currency out of the window. They decided to base the euro on other fanciful ideas. They belittled and sidelined the Werner Report that in 1970 traced the steps needed for Monetary Union. This was written by a Luxembourg Prime Minister who knew Schuman, and among others, the governor of the Bank of France, Bernard Clappier, Schuman's former directeur de Cabinet. He acted as Chairman of the key Monetary Committee.

The politicians based the euro on the Delors Report of 1989. That did not even recognize the five key institutions of the European Community and understand how they should develop to take on the responsibility of a European Currency. It spent a good deal of ink explaining why the supranational criteria and conditions should not be applied, and ignoring others.

The Community made its first major contribution in a way that no federal system has succeeded in doing: it made war impossible between its Member States. But this is only the first step in the process of a supranational Community.

The politicians of the Delors era looked into the Treaty of Rome with its Economic Community Treaty to find out how to create a European Currency. In vain. It is not there. The principles are set out well before the Treaty of Rome in the founding documents and treaties. They set out the principles of the Single Market of 1953 and the way to currency union. They apparently did not even seem to analyse the first Community -- which defined both the Economic Community and Euratom.

The founding principles are well outlined in the Schuman Declaration, its democracy in the great Charter declaration, that the politicians still refuse to publish. It provides a clear outline of future developments including a Single Market, single economy and Single Currency based on enhanced democracy and justice.

The aims spelt out in the Schuman Declaration are to serve all Europeans and the world. They include raising employment, increasing innovation and building a stable European currency. Check it out!

• National decisions made together with supranational independent arbitration would become enforceable international law
• Equality, open information systems, better treatment of workers
• Raising living standards, promoting peace, aiding developing countries
• Was an aim of the Coal and Steel Community to create a single market?
• Goods would circulate within the Community free of customs duties
• The new Community was neutral about nationalizations or private ownership
• The new Community drew on the experience of the International Ruhr Authority
• Do a Common Market and a common currency figure in the proposal?
• Is a European economic community part of the proposal?
• Is monetary union implied in the original proposal?

Monnet5 Schuman's speech on 20 June 1950 that defined the struggle for Europe's democracy

On 20 June 1950, Robert Schuman, French Foreign Minister, opened the Schuman Plan Conference, that gave birth to modern Europe, based on the European Communities. This supranational Community system made a complete break with history and Europe's record of wars and bloodshed. The Conference defined the five major democratic institutions of Europe:

European Commission (High Authority)
Consultative Committee (body for organised Civil Society, producers, workers and consumers)
European Parliament
Council of Ministers
Court of Justice

The supranational Community system also far surpassed the achievements of inter-governmentalism (still a major aspect of the Lisbon Treaty with its less than democratic accountability).

Schuman led a large delegation of more than a dozen, half of which came from his own staff, (Bernard Clappier, later Governor of the Bank of France), the two legal counsels of the Ministry (Andre Gros and Paul Reuter) one of the directors-general and other officials of the ministry. Other members included officials from other ministries, plus Jean Monnet (later President of the High Authority) and Etienne Hirsch (later Commission President of Euratom) from the Planning Agency.

The speech gives quite a different perspective than that in Monnet's Mémoires.

• Monnet was not in charge of the conference. Schuman makes it clear who was.
• The aim is to create supranational institutions, whereas Monnet says that he did not fancy this expression and never liked it.
  
• The conference was an intergovernmental conference with a single goal to achieve this supranational Community. It was not as Monnet seemed to think in the Mémoires a step towards a federation like the USA. Schuman later explained how a supranational Community has certain aspects of federal powers but is not in itself a federation.
• Monnet was wrong. Schuman was right: the Community system has not developed into something like the USA. It has followed its own separate path. Schuman said his aim was to avoid creating a Superstate, another Leviathan -- the most obvious example of which would be the federal USA.
• Thus Monnet Mémoires are wrong in saying that the conference was to do anything other than the revolutionary creation of a supranational European Community. It had no mandate to create anything else. A federation is inferior in potential as a democracy to a supranational system when fully developed.

The speech is notable for defining the objectives not only of Europe's first Community but setting the objectives for Europe's peace-making and peace-enhancing path into the future. It describes the goal as creating the supranational institutions necessary for European democracy. The delegates of the six States were told that their draft treaty would have to be so clearly democratic that it would not only have to convince the governments but also all the eleven parliamentary chambers of the six potential Member States (plus other democratic bodies such as economic and social committees). This it did with huge majorities.

On orders of President Charles de Gaulle after he seized power in France in 1958, the democratic development of these five institutions was "chloroformed". Governments have still not fulfilled their obligations under the early treaties, such as a Europe-wide election for the Parliament (instead of many national elections under different rules), elections for organised civil society in the Consultative Committees (rather than uncontrollable lobbyists), proper selection for membership of the European Commission based on the criteria for impartiality and openness of the treaties, and open debates in the Council of Ministers (rather than closed door inter-governmentalism). Selection of judges should also be made on more impartial grounds as the original treaties specify.

Schuman did not specify when Europeans would succeed in achieving full democratic status for these institutions but he asserted, on the basis of a long study of democracy, constitutions, political and moral philosophy that the achievement of democracy was inevitable. This prediction must be taken as seriously as the one he made in the Schuman Declaration and in the speech below that the Community system was able to make war between Member States 'not only unthinkable but materially impossible.'

Robert Schuman's speech in the Salon d'Horloge of the French Foreign Ministry, 20 June 1950
Six weeks to the day have barely passed since, in this very room so full of historic memories, the French Government announced its plan. Six weeks, although a brief period when it comes to something so new and so vast such as the pooling of coal and steel production of our six countries, is but a short lapse when you consider the usual delays in international transactions.

Some have criticized France for being in a rush. There was talk of swift and brutal tactics. It is precisely because experience has taught us that the best initiatives are stifled when, even before their birth, they linger too long in the prior consultations.

In a world with so many failures, full of anxiety and helplessness, I believe we had the right, even the duty, to count on the strength of an idea to capitalize on the momentum of hope that it gave rise to and the instinctive encouragement of our peoples.

We are at the start of this work. Gentlemen, it is up to you, to whom our six governments have entrusted the task, to justify this hope. This is to be expressed in clear and flexible texts, in order to prepare specific commitments. They are to embrace the principles that determined the choice of our objectives and which constitute the basis for our deliberations. There is agreement between us to focus our work on the goal we want to achieve. Our governments have agreed to seek together, in a free exchange of views and from different situations, the best way to apply the principles we have assumed, leading to the creation of new institutions, unprecedented in the world today.

Gentlemen, it is an awe-inspiring task that our governments have allocated to us and entrusted us with. We will undertake it with respect, conscious of our responsibility. We feel that we are not allowed to fail this task, to abandon without concluding an agreement. That accord, moreover, as you know, will be subject to the judgement of the governments and the sovereign decision of our parliaments.

None of us should hide the exceptional difficulties of our enterprise.

Certainly, each of us can rely on ample statistics. We will also make use of unbiased studies that have been previously undertaken on a national level, as well as by international bodies. But never before has such a system that we advocate been tried out as a practical experiment. Never before have States delegated a fraction of their sovereignty jointly to an independent, supranational body. They have never even envisaged doing so.

We have to prepare a draft treaty, which define in broad terms the function of this common Authority, its attributions, and appeals against its decisions and how its responsibilities will operate. We have to foresee, however, without inserting it in the Treaty, the technical details that will involve agreements to be concluded later, after the ratification of the Treaty. These agreements must be easy to revise and adapt to the lessons of experience.

The fruit of our discussions will determine our conclusions. Here each of you will contribute your suggestions and your criticisms. What we will share is our determination to succeed, to work constructively on the basis of defined principles. We will be inspired by the bold sense of innovation that is too often absent from our international institutions.

Without losing sight of the specific necessities of our own countries, we must be aware that the national interest today consists precisely in finding beyond our national boundaries the means of achieving a more rational structure for the economy, a more economical and intensive production and a larger and more accessible market. Our negotiations will be better and more than selfish haggling that refuses both risk and trust.

Our initiative has no intention of ignoring or disregarding the attempts that are made elsewhere to clean up the European economy. My colleague, Mr. Stikker has recently made an important and fruitful contribution on a different plane than ours; there are between our two objectives no duplication or contradiction.

What characterizes the French proposal is that beyond its economic developments that at present we may only guess at, it has had and retains a political significance that, before any other consideration, has from the first hour appealed to public opinion in many countries.

We want to replace the former practice of dumping and discrimination with enlightened cooperation. That is essential. What is important, however, and is highlighted as the very purpose of the plan, is our willingness to bring together in a common and permanent work of peace two nations, which over centuries have fought each other in bloody conflict. What is important is thus to eliminate from our European Community this latent cause of the trouble, distrust and anxiety. What is vital is the hope of founding on the basis of this peaceful cooperation a solid European edifice accessible to all nations of good will.

We would very much wish that the United Kingdom were present at our discussions. We cannot conceive Europe without it. We know, and this reassures us in our efforts, that the British Government wants the success of our work. When both sides explained their views frankly and amicably, some differences appeared that have prevented it from participating actively, at this stage at least. We remain hopeful that the remaining doubts and scruples arising from doctrinal reasoning will eventually give way to a demonstration of more pragmatism.

The French Government will act in accordance with the concerns of all participating governments and keep the British government well informed of the development of our discussions. It will provide it with the opportunity, if not to come and join us, a hope we continue to have, at least to send us any positive criticism, while preparing the way for future cooperation.

As for us, we will begin work assigned to us as well. We shall first have to adopt a working method. It will be a team effort, rather than a conference with her meticulous and rigid regulations. We have primarily a concern for efficiency. Brilliant eloquence will not distract us.

An information session will allow us tomorrow to fix our ideas in this regard. They will be clarified in the course of personal contacts that we will have the need to establish and maintain.

The substantive issues will be addressed at the same time; we cannot separate one from the other.

We will share our ideas, we confront them against each other, and we will chose between them. The French Government will make known its own ideas in the next few days. The draft text that it will submit to you will form a basis for work that it hopes will prove useful and fruitful.

For today I confine myself to welcome you on behalf of my Government with the ardent desire that we will not disappoint the expectations of the people who put in you their hope and confidence.

Original French Version is available on www.schuman.info