Elite Consensus and the Euro

Yglesias:

Ryan Avent seemed to me to have the basic logic of European fiscal consolidation right: “The point at which euro-zone leaders said, ‘From here on in, we’re in the same boat with them’, was back when the euro zone was created. That boat has sailed.”

Except I gather that what happened is that the Eurozone’s political leaders spent the 1990s not explaining this correctly to the citizens they purported to represent. Or, specifically, the leaders of France and Germany didn’t explain it. How exactly this worked is a bit mysterious to me. Of course politicians all over the world lie, but normally you expect partisan competition to at least put this kind of issue on the table. But there seems to have been an adequate degree of elite consensus to keep the fundamental question off the table. Somehow the Brits and the Swedes escaped this fate, but the other nations of Europe (including formally non-euroized but practically pegged Denmark) are now caught up in a kind of grim machinery of financial doom. The only way to make the system workable is a level of fiscal and political integration that is, apparently, totally unacceptable to the voters. Which is fine, but the decision should have been put to them before getting the countries bound up in a remorseless logic of integration. A lot of people are going to be put through an awful lot of avoidable suffering before this ends, and I’m guessing nobody’s going to say “sorry” or admit to error. If the continent’s mainstream political parties manage to end up discrediting themselves in the process, it’ll be hard to say they don’t deserve their fate no matter how distasteful some of the rising extreme movements are in many ways.

The Euro crisis shows the power of elite consensus on agenda-setting in Germany and other European countries. After Maastricht, it became the consensus among virtually all German mainstream political parties that creating the Euro would be a Good Thing. It had something for everyone: the business-friendly types praised increased efficiency, the anti-nationalist Europhiles pointed to how it would cement bonds of peace and commerce. The question then became simply how to make it happen. The fact that ordinary Germans were strongly opposed to the Euro was of secondary concern. In an interview with Helmut Kohl I saw, he said that, after managing reunification, the action he was most proud of was pushing through the legal basis for the Euro in the mid-1990s, given that 75% of Germans were against it. The voices of skeptics -- who predicted essentially exactly what has happened -- were ignored.

The idea that the people could be opposed to a policy because they understand it and have good reasons for disagreeing with it cannot be acknowledged, at least when it comes to policies that the elite has already decided are Good Things. This is a problem that German politicians always refer to by the term Vermittlung, that is, 'getting the message across'. If the public stubbornly refuses to support a policy that the elites know will be good for them, it must be because the politicians haven't been explaining it properly. So they will try to package it ever more pleasingly. It's this packaging that ended up being part of the problem. German voters were told that they would never have to bail out profligate countries, that each nation would preserve its own sovereignty, that nations would be bound to strict 'growth and stability' targets, etc. All these promises were based on tendentious -- not to say misleading -- interpretations of extremely complex legal instruments.

And now, Germans are now experiencing buyer's remorse about the Euro. Actually, no, they're experiencing impotent rage, not buyer's remorse, because they actually didn't buy the Euro themselves -- it was decided over their heads, by a non-partisan permanent overclass of senior bureaucrats and mainstream politicians. Now, this is not to say that the Euro was necessarily a bad idea, or that all elite consensus views are wrong -- many are quite sensible! It's just that in political systems with strong party discipline and strong cross-party consensus among political elites, certain debates get shut down much earlier than they should.

Comments

[dubuc]

reminds me of the infamous 'cross-border leasing' banks and bureaucrats sold uninformed (and unsuspecting) local politicians.
sincerely

[noribori]

Politicians and bankers.
Both sell confidence.
If you trust them, you get some bubbles.
But if politicians trust bankers, and bankers trust politicians,
then you really get into troubles.

[Lisa]

Unrelated, but thought I'd draw your attention to this from Reuters:

Fatter and fewer German nudists as numbers dwindle