What If Ireland Defaults? (33 page)

How is it, therefore, that American's navigate more cheaply than we do? … The European navigator ventures on the seas only with prudence; he departs only when the weather invites him to; if an unforeseen accident comes upon him, he enters into port at night, he furls a part of his sails, and when he sees the ocean whiten at the approach of land, he slows his course and examines the sun.

The American neglects these precautions and braves these dangers. He departs while the tempest still roars; at night, as in day he opens all his sails to the wind; while on the go, he repairs his ship, worn down by the storm, and when he finally approaches the end of his course, he continues to fly toward the shore as if he already perceived the port. The American is often shipwrecked; but there is no navigator who crosses the seas as rapidly as he does. Doing the same things as another in less time, he can do them at less expense.

Before reaching the end of the voyage with a long course, the European navigator believes he ought to land several times on his way. He loses precious time in seeking a port for relaxation or in awaiting the occasion to leave it, and he pays each day for the right to remain there.

The American navigator leaves Boston to go to buy tea in China. He arrives at Canton, remains there a few days and comes back. In less than two years he has run over the entire circumference of the globe, and he has seen land only a single time. During a crossing of eight to ten months, he has drunk brackish water and lived on salted meat; he has struggled constantly against the sea, against illness, against boredom; but on his return he can sell the pound of tea for one penny less than the English merchant; the goal is attained.

Then in summary de Tocqueville tells us:

I cannot express my thought better than by saying that the Americans put a sort of heroism into their manner of doing commerce. It will always be very difficult for the European trader to follow his American competitor on the same course. The American, in acting in the manner that I described above, not only follows a calculation, he obeys, above all, his nature.
³

In essence, de Tocqueville assessed that if there was an American exceptionalism at that time (and he certainly concluded that there was), it culminated in an exception to risk aversion. De Tocqueville's observations of American commerce, when added to the life stories of the founders of the American union such as Hamilton, show an undeniable appetite for courage, boldness and heroic self-sacrifice underpinned by Judeo-Christian values, yearning for justice and the rule of law, and the exercise of classical liberalism. I find it mildly ironic that many of the same voices in today's Europe that decry any concept of ‘American exceptionalism' are often the very same voices that seek to tell us that Europe can learn little from the American experience. I dare to assert that Europe, facing our very own financial and political crisis of union, has something to learn from the American experiment, which, after all, found its inspiration from the best ideas imported from European history. What we need to learn most of all is that which might define a ‘European exceptionalism', requiring a complete re-think about Europe's approach to risk, political and financial, because unless we radically attack the disease that has beset the idea of European unity this modern European experiment with union will fail, with consequences as yet untellable but that I believe may be severe.

It was the grand disaster of World War One that inspired the early founders of the European Union idea, an idea that only began to properly come into being following the disastrous efforts to unite Europe under the not-so-varied totalitarian jackboots of National Socialism, fascism and communism.

Today, as we observe the now bizarre ritual of failed European summitry, the uninspiring posturing of Europe's ‘leaders' and the short-term political risk aversion, leading to chronic errors and splits with potentially dangerous long-term consequences, one cannot but wonder to what extent these politicians grasp the magnitude of what they are putting at risk by their petty politicking. For my small part, I have spent some time and resources in trying to draw attention to the sucking wound that is really eating away at Europe's vitality.

That wound is the chronic lack of democracy, accountability and transparency now rupturing the heart of the European project and manifesting itself in everything from the machinations of the Commission and the European Council's Committee of Permanent Representatives to the boardroom of the ECB and to the back rooms of Europe's newest self-styled elite: the so-called ‘Frankfurt Club' encompassing a would-be Franco-German axis planning on turning the Eurozone into what effectively would be a collection of vassal states.

So what are Europe's options? Which path in this historical fork in the road are we to venture down? It would seem in their lack of vision our leaders want to either go in reverse or continue the practice of strong rhetoric backed by limp action, all of which compounds the growing type of injustice that we see in Ireland effectively being forced to spend billions to make good the losses of bondholders that we at no point ever borrowed money from.

Looking at the consequences of Europe's leaders' unwillingness to lead justly, or indeed at all, one is reminded of the words of Hamilton and de Tocqueville's contemporary, the great classical liberal and Irishman Edmund Burke, who said: ‘Nothing turns out to be so oppressive and unjust as a feeble government.'

Given all that has happened I now see Europe's choice as this: we either learn from the lessons of history and take the calculated but worthwhile risk to fully unite in a democratic and federal union, or we will see this project fall apart. To believe that it can fall apart in an orderly fashion, reverting to a neat trading club, I fear is an over-indulgence in wishful thinking. It is at least as likely that a collapsing of the European project, made more likely by a collapse of the Euro, would result in a balkanisation of Europe as a return to some type of trading utopia that would be devoid of internal rivalries and outside threats.

For example, consider this. If the Euro's collapse were to destroy the political credibility of the union in the minds of the average European, what might a sundering of Europe mean for Europe's eastern borders? The issues arising are too many to detail here but they are deadly serious with all the potential to become another Yugoslavia but written on a much larger map.

The proposition of a fully federal European Union fills many Europeans with deep concerns and I must say that it should. The idea that we would further centralise power to the European Union in its current form should be an anathema to any right-thinking lover of liberty and democracy.

In the words of the eighteenth-century Scottish philosopher David Hume, ‘it is seldom that liberty of any kind is lost all at once', but a further concentration of central power without accountability would be a very mighty step.

So Europe must now grasp the nettle of major reform – of ‘treaty change' – to establish a Europe not of the now defunct and bankrupt Lisbon Treaty but one created ‘by the people for the people' – a Europe bringing us that only form of temporal governance that should ever be acceptable to free peoples, government by consent of the governed.

In summary, this is the federalisation that Europe should implement now:

1. The position of President of the European Commission and President of the European Council should be merged into one office holder and should be made subject to a popular democratic election to be held not later than December 2013. Voters should be weighted in an ‘electoral college' type format so that smaller member states' voters are not made irrelevant. This president would serve for one six-year term only and would be chairperson and chief executive in the same manner as the President of the United States of America. An accommodation might be made to remaining European monarchies in respect of their traditions, to allow for some ceremonial roles.
   
2. The Commission should become the servants of the executive arm and be filled by nomination of the democratically elected president, and ratification of a newly created upper house of the European Parliament.
   
3. An upper house or ‘senate' should be created, with four representatives of each member state, each representative holding equal voting power. That is to say, Ireland will have four senators and Germany will have four senators, etc. This upper house will be given the co-right to initiate legislation along with the lower house, the current European Parliament.
   
4. The European Parliament should be reformed to give greater balance for population (which would favour larger member states) and should be given the power (along with its upper house) to initiate legislation.
   
5. All lobbying of the executive and legislative branch must be registered and transparent.
   
6. A full insolvency purge of all European financial institutions should be immediately undertaken. A liquidation and asset sale of all unhealthy institutions should take place forthwith. A write-down of significant size, together with a Hamiltonian-scale re-negotiation, should take place on all distressed EU member state debts. The federalising of all remaining state debt should immediately follow, backed by the issue of union bonds backed by the entire tax revenue of the Eurozone. (This can be altered later but will end market turmoil and establish real stability.)
   
7. The Union civil service should be kept small and highly efficient; this should be enshrined in Europe's new constitutional arrangement. A debt ceiling will also be set constitutionally.
   
8. The Union should have monopoly of external action, both in soft and hard power.
   
9. The ECB should be guaranteed full independence and a low inflation policy be pursued.
   

It is to be understood that the above model may be considered unfathomable to many. However, it is not unreasonable to suppose that anything less than a democratic federalisation of a similar form to that set out above will result in failure and a loss of confidence in European unity that may lead to this continent turning back the clock by 100 years. The price is worth paying; the risk is worth taking. As Europeans we should, in de Tocqueville's words, ‘open all [our] sails to the wind' and seize this moment in history while always guarding our right to government by consent of the governed – essential to maintain our individual liberty – which can never be negotiable. As de Tocqueville also underlined with his explanation of the early Yankee Clipper shipping trade from China, fortune does indeed favour the bold. Time for Europe to put some ‘heroism' back into politics.

Endnotes

¹
George Washington, letter to George Martin, ‘Head Quarters', 10 August 1783.

²
Ron Chernow (2004)
Alexander Hamilton
, New York: Penguin, p. 481.

³
Alexis de Tocqueville (1835 [2000])
Democracy in America
, Volume 1, Part 2, Chapter 10, Reprinted, Chicago, IL: University of Chicago Press, pp. 386–387.

The economists, politicians and commentators writing in this book address these fundamental questions from a variety of angles:

• Ireland's debts and its position within the Eurozone
  
• The wisdom, or not, of an Irish default
  
• The defaults of Russia, Argentina, Iceland and New York, which provide illuminating examples of what can happen and how recovery can come about
  
• Where Ireland can go from here to achieve recovery