Left, right & the euro
Varun Chandra’s post raises a question: could it be that, in Britain at least, the left and right’s attitudes to the euro are the wrong way round?
To see what I mean, imagine - which is not certain - that we eventually get a short-term fix for the debt crisis, whereby the fiscal compact (pdf) finally causes the ECB to buy sufficient bonds to reduce yields. (Nobody other than Lutheran masochists seriously thinks that fiscal restraint alone is sufficient). Even if we get this fix, the longer-term problem remains: how will southern European nations be able to grow, given that they are lumbered with both over-valued currencies and fiscal constraint?
One possibility, and the reason why technocrats have taken charge of Greece and Italy, lies in supply-side reforms. Relaxing employment protection and reforming public sectors might allow the private sector to grow.
And it’s here that left and right attitudes are the wrong way round.
A standard rightist answer here might be: “fiscal policy was always a weak tool anyway, and supply-side policies do raise growth, so maybe the euro can survive.” Leftists, by contrast, think the end of activist fiscal policy is a serious loss but are sceptical about supply-side policies, so they should be more pessimistic about the euro’s chances of survival.
But this is not how things actually are. The noisiest forecasts of the euro’s failure come from the right, whilst the left are generally either silent or more confident of its survival. This is the mirror image of what one might expect. Why the difference?
One possibility is that the right’s elasticity optimism causes it to believe that floating exchange rates are a good and powerful thing, whilst the left’s scepticism about the efficacy of free markets leads it to deny this and accept the feasibility of a single currency. Another possibility - which I’m less sure about - is that the right has valued national sovereignty more highly than the left and so thought its loss more grievous.
These factors might have been pretty much the limit of the British left and right attitudes to the euro for a long time. But they no longer are. I suspect, therefore, that the British left might - and should - therefore become increasingly sceptical about the viability of the euro in the long-run, even if it does survive in the short-term. Whether anyone gives a damn about the opinion of the British left on this issue is, though, another matter.