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The euro project is about as far removed from a “spontaneous order” as you can get. It was dreamed up by unelected bureaucrats in countries like France, and rammed down the throats of the European public. It artificially fixes the exchange rate between countries with vastly different economic structures and a high level of wage rigidity due to extremely interventionist labor laws. Free market supporters like Milton Friedman and Margaret Thatcher correctly predicted that it would lead to massive problems.

And now we’ve reached the point where even publications that are generally sympathetic to the European project admit:

Any fair reckoning of the euro must therefore judge it to have been a failure.

So it must be time for libertarians everywhere to gloat, right? Unfortunately, all I seem to see is libertarians claiming the euro is not the problem. Both Daniel Mitchell of the Cato Institute and John Cochrane cite the following statement by Pascal Salin with approval:

Contrary to what is claimed daily in the media by politicians and many economists, there is no “euro crisis.” The single currency doesn’t have to be “saved” or else explode.

Mitchell says the real problem is big government. I also favor smaller government, but that doesn’t make big government the cause of every economic problem. If the Spanish and Greek governments shrank enough to balance their budgets, they’d still have 24% unemployment, if not more. Their economies are hopelessly uncompetitive at the current exchange rate. Milton Friedman understood that. What in the world has happened to the modern libertarian movement? If we can’t gloat over the failure of the euro-project, what can we gloat over?

PS. I don’t even know whether Mitchell or Cochrane self-identify as libertarians. I’m using the term loosely to designate people who clearly have pro-free market views.

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This entry was posted on July 20th, 2012 and is filed under Misc., Monetary Policy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or Trackback from your own site.



