The central cause of the Eurozone crisis is the insistence on a single currency and hence a single interest rate across 17 highly diverse national economies, themselves made up of very diverse regional and local economies. Such a proposal was always opposed vigorously by economists--mostly of the right but also of the left--whose theory told them that there are very strict conditions under which a currency area can operate and that these were very far from being met by the European union and its member states. The argument was that the Eurozone project was always a political project, aiming to put unendurable pressure on countries, some of which were reluctant to relinquish sovereignty, to become part of a single political unit. Tie them into an unbreakable currency union, so ran the thinking, and the ensuing crises world force political union, making it eventually the lesser of two evils. This is the situation we have reached now, the last battle between the political unifiers and their unwilling citizens.
Yet underlying this is a more sinister and more elusive plan. If we observe who is benefitting from the current crisis it is not the democratic politicians. Rather it is the owners of capital and those who serve them. According to Richard Werner the decision about whether to resolve the Euro crisis lies in the hands of the monetary authorities. Just as in the pre-war German crisis, in the end the politicians decide that they can create and support money that resolves the morass of debt. With the attacks on working conditions, falling wage rates, the erosion of the assets of the poor and the inflation in the value of assets of the wealthy, the financial crisis has given the owner of capital an unprecedented opportunity to extend their power at the expense of citizens, whether workers or pensioners.
The immediate threats from such policies are apparent: the public services our mothers and grandmothers fought for are being dismantled while19th-century working conditions including child labour are being seriously discussed. But the solution to the crisis threatens even more dangerous consequences in the future. As German economist Hans-Werner Sinn has pointed out, we are creating a situation where the northern European countries will become the creditors of the southern European countries. Germany's young people will be obliged to seek 21st-century reparations from their southern European neighbours, with all the national hostility that is likely to evoke. The very same pattern that led to the Second World War (then as a result of the Gold Standard strait-jacket) are being recreated as a result of the single currency (this first round of this catastrophe is detailed in Polanyi’ The Great Transformation, published in 1944).
It is the stranglehold of the single currency that is generating this socially and politically dangerous pressure. This leads us to be obvious answer: loosen the straitjacket and allow the patient to breathe. This can be achieved by abandoning the idea of a single currency, but going further than these to argue that a sustainable and just economy needs a diversity of currencies for different purposes. In the remainder of this paper Scott Cato addresses three levels, from the bottom up. First, Scott Cato will explore the role that local currencies can play in reviving the local economies that once met the majority of our needs but have been asphyxiated by the process of globalisation. Secondly, Scott Cato will consider what it means to have a national currency, and why the Euro can never provide a substitute for a country's own currency. The proposal here is that, rather than abandoning the Euro, we use it as a common rather than single currency. In the final section Scott Cato considers the final role that we need a currency to play in a complex global economy: to facilitate transactions between nations. Here Scott Cato suggests that we took a seriously wrong turning at Bretton Woods and explore options for a global currency that could ensure justice as well as sustainability.