Jacques Delacroix has belatedly responded (he’s retired!) to an inquiry about the upcoming French elections. Happening History posed the following question to Dr. Delacroix:
I found your post very interesting. One thing I found particularly interesting was your remarks on the French left. Since the presidential election is coming up soon, what do you think would happen to how the financial mess in Europe is being handled if the Socialist candidate were elected considering the major role France plays? How likely do you think it is that Hollande could win?
Dr J’s response deserves to be read by all:
The first thing to know is that France is a country where common conservative and libertarian ideas about market efficacy are rare. A conservative stance is absent from the public discourse.
I think Hollande is going to be elected. He is the worst the French Socialist Party has to offer. He has never done anything in his life, like our current president, or worse. He does not even have the merit of being a member of an interesting minority. He is the pale consort of a former big loser in a French presidential election (Segolene Royal). How much lower can you get?
All this because Sarkozy annoyed too many people, swing voters, with his bad manners and because Strauss-Khan couldn’t keep his second thinking tool where it belongs long enough. Yes, Strauss-Khan was going to be the Socialist candidate. He understands money, unlike Hollande who knows nothing about money except that the “rich” have too much of it and that it’s the root of all evil.
Hollande is the worst of a Socialist Party that has had few new ideas, has not updated itself, in the past thirty years. However, his colorlessness, the fact that he barely exists may be a blessing. It’s possible that economic technocrats in his party, or close to it, will be able to make him do what’s needed: many reforms leaning toward austerity under some other name.
The alternative scenario is that several eastern and southern European countries leave the Euro zone one by one and that France follows. The Euro is kept alive in name early as a virtual currency to pay for cross-border transactions within Europe. It’s a good face-saving solution. Individual countries resurrect their independent currencies. Some will keep a formal vestiges of the Euro: the Eurofranc, the Eurolira, etc. Some small countries: Netherlands, Belgium, Austria, may form mini currency unions.
In the aftermath, the cost of living rises quickly in the individual European countries but not but much. The rise corresponds to the rebirth of intra-European transaction costs the Euro had reduced to next to nothing. I think the rise will be a lot less than 10%. Soon, there will be competitive devaluations between countries, impoverishing several of them and making trouble for several American industries.
I can’t read the future beyond this.
Indeed. I am not so sure that a common currency did that much to eliminate transaction costs, and I think that the national currencies competing within the EU would have helped to stabilize the economy much more so than a common currency. I could be wrong on this, though. After all, the competing currencies would have still been national ones, rather than private ones, but from what I can see even national-level currencies competing within the Eurozone would have been a better option than the Euro.
Competition among the national currencies probably would have kept the central bankers much more honest than they currently are, and transaction costs would be fairly minimal anyway due to the elimination of other trade barriers.
Addendum: Happenin’ History’s blog can be found here.