Barry Eichengreen is George C. Pardee and Helen N. Pardee Professor of Economics and Political Science and Director of the Institute of European Studies at the University of California, Berkeley. He is co-author of Built to Last: A Political Architecture for Europe.
For some, the process of European integration resembles nothing so much as a long-running Broadway play: the actors change, but the roles remain the same, the lines endlessly repeated, the action tightly scripted. So it is in John Gillingham's history of the European Union.
Gillingham's libretto revolves around the conflict between the champions of economic statism and proponents of economic liberalism. The lead roles are those of Jean Monnet, the charismatic French technocrat, and Friedrich Hayek, the bookish Austrian economist. Act I, which stretches from the late 1940s through the mid-1970s, is dominated by Monnet and his circle, who responded to the material and moral conditions of post-World War II Europe, which rendered the rapid restoration of liberal market arrangements infeasible, by making enterprise nationalization and indicative planning (whereby the government uses a combination of direct controls and financial incentives to encourage investment in particular sectors) the order of the day. Controls on international capital flows, retention of which was permitted under the Bretton Woods settlement, gave each government the leeway to elaborate a national economic plan. But capital controls did nothing to rebuild Europe's trade or to create confidence that Germany's economic might would be funneled in productive directions; if anything, financial restraints stood in the way. Monnet's response was to advocate the creation of a supranational entity, a union of European nations, through which state guidance of the economy could be formulated on a continental scale, intra-European trade could be liberalized, and Germany's economic energies could be reliably channeled. The economic constructs of the Monnetists, from the European Coal and Steel Community to the customs union, were all flawed to some degree. But together they gave birth to a basic set of institutions -- a commission of technocrats, a representative assembly, and a court of justice -- on the basis of which it became possible to organize transnational policies and create the European Union (EU).
Act II, commencing after an interlude of six years, sees the revenge of
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