Eurozone: F.A.Hayek’s “Toys for the Boys”

“Eurozone: It seemed a good idea at the start” – By Anthony de Jasay (Philosopher and Economist)

“Friedrich A. Hayek, whose severe diagnosis of this result was his most valuable contribution to political philosophy, called it Constructivism. Disrespectfully and suggestively, one might also call it “Toys for the Boys.” (…)

The Boys are usually well-educated, intelligent and very ambitious men and women forming networks at or close to the centres of power. They are over-represented in political parties, the higher reaches of regulatory agencies and in the better sort of print and audio-visual media. Their fertile minds keep producing good ideas, blueprints of new structures that, if duly constructed, should make the world a better place. For the Boys, such Toys promise a double boon. One is the satisfaction of being the champion of a good thing, of progress. The other less easily avowed, is that as newly constructed institutions come with new job opportunities, exciting career prospects will beckon to the inventors and promoters of the new Toys. (…)

Extravagant calculations of the cost of quitting the euro are being floated, Greece would lose 40 per cent of its GDP if it reverted to the drachma, while if Germany led a dissident group of the fiscally honest countries, Austria, Finland and the Netherlands, into a separate currency area—as proposed by H. O. Henkel, one of Germany’s most prestigious industrialists—she would lose 20 per cent of her GDP straight away and 10 per cent in subsequent years. The absurdity of these estimates is exceeded only by the childish credulity of their audience. The gravest forecasts of the Cassandras do not even have numbers attached: they simply say that if Greece went, Portugal, Ireland, Italy and Spain, and maybe France, too, would “necessarily” follow and the consequences would be “incalculable”. Therefore neither Greece nor any other country must leave the Eurozone. Q.E.D. With everybody busily engaged in frightening everybody else, and this in a modern economy with an advanced financial system that cannot function without a measure of confidence, the consequences may be “incalculable” indeed. It does seem a pity that freedom of speech comprises the freedom to spread panic on the back of half-baked scenarios and a refusal to lose face and admit honestly that the good idea was not such a good one after all. (…)

Logically enough, the Boys, refusing to lose face over their currency area, are pinning new hope on another and more powerful new Toy, a real federal union with a centralised budget for the whole area”

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