Europe’s crisis & the Euro – predicted in advance

The following article, published in September 1996, that is prior to the creation of the Euro, accurately predicted in advance from fundamental economic theory the basic contradictions in the way the Euro was created and the crisis it would lead to in Europe. It predicted: ‘The proposal to create a single European currency, through the methods of the Treaty of Maastricht, is neither fish nor foul… There are two possible, coherent, ways to regulate relations between the different European economies. One is to create a de facto or de jure European federal state, with a sufficiently large budget to pursue an effective regional policy. This requires powerful democratic institutions that can control this budget — i.e. a greatly reinforced European parliament. This model could sustain a single European currency… The other model is that of adjusting economic relations between European states by means of exchange rate movements…
‘There will be sharply deepening regional imbalances and inequalities. The malignant expressions of economic depression — unemployment, poverty, collapse of the welfare system, weakening of trade unions, racism, chauvinism, crime — will multiply. The end will be either an economic tragedy, or the deepest crisis in the history of the EU, or more probably both.’
​This prediction was fully confirmed by the crisis in Greece, southern European economies, Ireland and the rise of xenophobic and racist movements symbolised by Le Pen in France. The forces analysed in this article continue to operate, and to determine fundamental dynamics in Europe. The struggle to create a truly Federal Europe, with a central budget to match, remains the only way to sustain the Euro in the long run.
​The title of the article has been changed from the original ‘Fundamental economic implications of a single European currency’ but otherwise the article is unaltered. 
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Preface – written with Ken Livingstone
An old Soviet joke sums up Maastricht’s attempt to create a single European currency (European Monetary Union — EMU).
President Gorbachev visits Britain, and is impressed. Wishing to copy this model he returns to the USSR, where he announces to the Politburo that he has discovered the secret of UK success. ‘Britain drives on the left, whereas we drive on the right. Therefore I will issue a decree. From now on, everyone in the Soviet Union will drive on the left hand side.’
The Politburo think about it a minute, and reply. ‘This is extremely radical. The people will not understand it. We must avoid extremism’
Gorbachev ponders ‘You are right. The decree will be altered. Half the cars will drive on the left, and half on the right.’
The proposal to create a single European currency, through the methods of the Treaty of Maastricht, is neither fish nor foul, and the resulting dish will be extremely unpleasant. There are two possible, coherent, ways to regulate relations between the different European economies. One is to create a de facto or de jure European federal state, with a sufficiently large budget to pursue an effective regional policy. This requires powerful democratic institutions that can control this budget — i.e. a greatly reinforced European parliament. This model could sustain a single European currency.
For reasons analysed below, this is the only long term solution for Europe. I [Ken Livingstone] openly champion it, and have no common ground with Tory ‘little Englander’ critics of Maastricht. Far from dreading ‘Huns,’ ‘Frogs,’ and others demons of the Tory right, I would welcome the day a common European democratic sovereignty was created.
The other model is that of adjusting economic relations between European states by means of exchange rate movements. This, for example, allowed Britain and Italy to escape from deep recessions imposed on them by membership of the ERM in the early 1990s. If the creation of a large European budget, with the ability to carry out substantial regional transfers, is rejected then this is the only model that will avoid deep economic problems. It is not viable in the long term, but can bump along for a few more years without disaster,
Maastricht’s proposals are, instead, disastrous. It proposes to create the most fundamental features of a common state — a single currency and a central bank. But it does not create any state budget which can deal with the huge regional and sectoral implications of this.
The process that would unfold with the creation of a single currency by this method may be predicted with certainty. Substantial parts of the EU, including Britain, will be pushed into severe recession if they join.
There will be sharply deepening regional imbalances and inequalities. The malignant expressions of economic depression — unemployment, poverty, collapse of the welfare system, weakening of trade unions, racism, chauvinism, crime — will multiply. The end will be either an economic tragedy, or the deepest crisis in the history of the EU, or more probably both.
It is, therefore, necessary to reject the Treaty of Maastricht. Not from the viewpoint of a utopian retreat into little England, but in the name of the democratic, and socially oriented, Europe which can alone provide an international framework for developing the living standards of the people of Britain and Europe. Precisely because Maastricht can only end in an economic, social and political debacle — just as did Britain’s earlier membership of the ERM — it actually stands as an obstacle to the Europe which we need.
A number of criticisms of the Maastricht Treaty’s proposals for EMU have, of course, been discussed in many publications — its deflationary bias, its anti-welfare and anti- Keynesian positions on public spending, the problem of lack of transfer payments between regions, absence of democracy in its economic mechanisms. However, these are frequently seen as individual points, rather than their integrated character being understood. The aim of this issue of Socialist Economic Bulletin is to draw together the issues in a systematic fashion, to examine underlying processes involved in the creation of a single European currency, and to show why it is impossible to separate economic and political issues in EMU.
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The attempt to create a single European currency, by the means of the Treaty of Maastricht, is reshaping and shaking not merely Britain’s but the continent’s politics. Infighting in the Tory party is merely a somewhat grotesque link in a European chain which includes last year’s mass strikes in France, the most severe austerity package in Germany since World War II, that country’s largest post-war protest demonstration, the long agony of government in Italy, the collapse of the Socialist government in Spain, and renewed strains on European currency markets
But the issues of politics and economics in the creation of the euro are too frequently treated as parallel but separate. Even Tory Euro-sceptics, constantly emphasising ‘national sovereignty,’ attempt to prise the two apart — claiming to support a ‘free trade area’ within a ‘Europe of nations.’ Unfortunately, it has escaped their 19th (or perhaps 17th) century frame of reasoning that free trade long ago escaped bounds within which it could be organised purely via ‘sovereign nations.’
Some on the left also pose as defenders of national sovereignty and therefore lock themselves into a doomed return to the discredited concept of the siege economy. Others on the left relegate unacceptable features of the Treaty of Maastricht to only a somewhat apologetic ‘democratic deficit’ — an apparently regrettable, but insignificant, blot on an otherwise clean table cloth of European economic integration.
Such approaches are inadequate. It is not possible to mix economic and political systems at will, without understanding the necessary relations which exist between them. An economy determines definite parameters within which political forms can exist. Unrestrained national sovereignty, and a free trade area, in a 20th century economy, are incompatible — for reasons outlined below. Rantings by Tory Eurosceptics will not succeed in generating viable off spring from the attempt to mate the elephant of modern large scale production with the mouse of 19th century absolute national sovereignty.
This, finally, reflects the fact that economics is not about self-sustaining theoretical relationships. The realities of economic policy, no matter what abstract form they are presented in, are valid only insofar as they reflect relationships between real structures. The real world is not obliged to match an economic theory; but an economic theory is only valid insofar as it conforms to the real world.
This reality is sharply posed in the debate on a European currency. If theory and the real world do not coincide, only two courses are available. A sensible person abandons the theory. Only a fool ignores the real world — demanding that it desert its sinful ways and correspond to their abstract theory.
This issue is acute because the economic consequences for Europe in monetary union, including for Britain, are impossible to underestimate. Exchange rates determine the relation between all prices in respective states, and not purely those of individual sectors — money, by its nature, enters every economic transaction. In turn, decisions taken by the currency’s Central Bank, with their effects on budgetary policy, will set the economic framework for each participating country. Such changes will be permanent.
The issue of a single European currency is, therefore, far more important than even the most significant sectoral policies for manufacturing, education, or transport. Due to the timetable for introducing a common currency, a decision on membership will have to be taken almost immediately the next Labour government is elected.

1. The Historical Development of Exchange Rate Systems
The clearest way to understand the economic and political implications of the single currency is to consider the question of exchange rates from their most fundamental aspect. This will immediately show why political and economic issues in European economic integration are inseparable; why the attempt to create a single currency by the methods of the Treaty of Maastricht will do extreme damage to both, and illustrates the real means by which an integrated European economy, including a single currency could be created.
This poses issues which are more general, and long term, than those usually dealt with in Socialist Economic Bulletin, but allows the full implications of the proposal for a single currency to be grasped. Detailed and specific issues then readily fall into place.
Gold and money
Exchange rates could only come to occupy a significant place in economic policy with the rise of truly national, essentially paper, currencies. Prior to this, precious metals were acceptable as a form of international payment — either in their direct form or, in certain cases, as coin. Gold was, and is, the pre dominant metal used in this fashion.1 In a system in which gold is the universal means of payment, the issue of exchange rates does not exist in any fundamental form, as gold has an essentially uniform international price.2 Direct use of precious metals in international payments may be termed a ‘pure gold’ system. In such a system a single European currency automatically existed — gold itself.
The gold standard
The first recognisably modern exchange rate system, based on pa per currency, was the gold standard from the 1870s until the early 1930s. This transposed the historic primacy of gold into the sphere of exchanges between paper currencies. Each participating currency, including all major ones, was ex changeable for gold at a fixed exchange rate.
A necessary consequence was that domestic monetary policy was subordinated to the necessity to maintain the fixed exchange rate. A fall in the market exchange rate below the official one led to exchange of the national currency for gold, and a run on the gold reserves. Tying the issue of paper currency to gold reserves, interest rate changes, and other measures, ensured that domestic monetary policy operated within parameters set by the gold denominated exchange rates. As all major currencies were tied to gold at inflexible rates, and as gold had a uniform international price, fixed exchange rates existed between every participating currency — including all major European ones.

The gold standard and European currencies
The gold standard differed from an international payments system directly based on gold in that different interest rates could exist on financial instruments denominated in different currencies — for example due to measures designed to stabilise the exchange rate. However, given fixed exchange rates, sustained divergences were small. Furthermore if, for any reason, a desire did not exist to hold a national paper currency, the option existed to exchange it for gold — thereby automatically reverting to a pure gold system.
While the gold standard did not automatically constitute a common European currency, as did payment in precious metals, it had far more of the attributes of one than present exchange rate systems — notably, fixed rates and the ability to revert, at fixed ratios, to a universally acceptable, and uniform, means of payment.

The transition to flexible exchange rates
The gold standard collapsed in the early 1930s and, for the first time, the world entered, outside ‘emergency situations,’ a system of significantly changeable exchange rates. Such rates were subsequently partially stabilised by the post-war Bretton Woods system — in which currencies were tied to a dollar which was itself linked to gold. But this system accepted the reality of significant, if infrequent, changes in parities between major currencies (e.g. devaluations of the Pound, revaluations of the Mark). In the early 1970s, Bretton Woods collapsed, and the system of variable exchange rates between majo
r currencies was formalised.

Dynamic of exchange rate systems
The actual historical dynamic of exchange rate systems, over four centuries, has therefore been from fixed to increasingly variable rates. A major issue which arises from this historical trend, and is prior to the question of ‘how to establish a common European currency’, is, therefore, why exchange rate systems far more closely approximating to a single European currency than current ones were abandoned? As this progression from fixed to increasingly flexible exchange rates was universal, operating over a long period, and affecting all major countries, it evidently cannot have trivial roots, but must reflect powerful economic processes. Indeed, as will be seen, this trend was not primarily a ‘monetary’ phenomenon at all. It reflects the transformation of the core nature of a 20th century economy — compared to any which preceded it, and the revolution in economics which accompanied it.
The issues involved in the proposal to create a single European currency become transparently clear when the reasons for this historical transition from a ‘pure gold’ system, to the ‘gold standard,’ and to floating exchange rates are grasped

2. Exchange rates and inflation
All periods in history, and the 20th century in particular, experience constant pressures to changes in prices created by technological changes, uneven rates of increases in productivity, shifts in wages etc. No monetary system can eliminate this ‘endless sea’ of fluctuations. What different monetary/exchange rate systems do is to drastically affect the way in which these underlying shifts in the real economy manifest themselves. In particular, briefly contrasting the former fundamental monetary unit, gold, to the purely paper currencies of the 20thcentury, brings out clearly the essential nature of the latter.
Gold has a real, substantial, cost of production.3 This determines the money supply under a gold based system. If the price of gold rises above its cost of production, including the average rate of profit, the consequent higher than average profit results in previously unprofitable deposits being mined, or new resources flowing into the industry, or both. The quantity of gold, i.e. the money supply, therefore expands in response to the increase in the price of gold — and the gold price reflects the new cost of production. In either a pure gold, or a gold standard, system all prices are therefore ultimately expressed in relation to gold’s production cost. Except in the case of a change in the production price of gold, the price standard is fixed.

Pre-20th century inflation
This fact that, prior to the 20th century, all major monetary systems were based on precious metals had decisive consequences for prices. Sustained inflation, that is a general rise in the price of other goods and services relative to money, was possible only when either the cost of producing gold decreased (spectacular examples being following the first European voyages to America, and the ‘gold rushes’ of the 19th century), or if the average cost of all other commodities rose relative to the cost of producing gold. As the latter is unlikely, monetary systems based on gold are, except in period of sharp drops in the price of the latter’s production, characterised by relative price stability.
Indeed, under a gold based monetary system, prices, particularly in specific branches of production, frequently fall — this regularly occurred throughout the 19th century.4 Under pre-20th century monetary systems dramatic economic and technological advances were not accompanied by rising prices, but reflected in relatively stable, or falling, prices. Prior to the 20th century, therefore, the monetary unit remained relatively invariable, and changes in prices were largely reflected in shifts in the real economy.

Inflation and the 20th century
In the 20th century economy the exact opposite principle to formerly has operated. Except in the most limited spheres, for example computers, even dramatic increases in productivity are not reflected in reductions in prices. Instead, sharply increasing productivity, throughout the 20th century, has been accompanied not by falling but by drastically rising prices. Inflation in the 20thcentury vastly exceeds, by a factor of thousands of per cent, the total price rises previously accumulated in human history. Whereas, in pre-20th century economies the monetary unit remained relatively stable, and the adjustments took place in the real economy, in the 20th century the most severe fluctuations took place in the monetary sphere.
These unprecedented monetary phenomena was, in turn, accompanied by a revolution in economics — the development of ‘Keynesianism.’ As the upward shift in inflation is as striking and universal as the trend to flexible exchange rates, only the most profound economic processes can explain it — particularly as, prima facie, inflation cannot be regarded as desirable. This historically unprecedented phenomenon of sustained inflation, indeed, flows from the same underlying causes, and is inextricably linked to, the shift from fixed to flexible exchange rates.

3. Money and the productive economy
At a technical level the reason for sustained inflation in the 20th century is easily explained. It reflects universalisation of the use of paper money. Whereas gold has a real, high, cost of production, expansion of paper money requires trivial, essentially nil, outlays. In this aspect, its quantity may be expanded indefinitely. By elementary supply and demand, its value, therefore, may fall infinitely — this theoretical possibility being verified by hyperinflation.
This technical fact, however, merely raises another, more fundamental, question. Why did the universal change from gold based to paper based money take place? After all, at a first glance, it might have seemed more reasonable to maintain a gold based currency, and therefore avoid inflationary possibilities.
Once universalisation of paper money took place, exchange rates, necessarily, took a central place in economic relationships. Whereas the quantity of gold in circulation was ultimately limited by its cost of production, expansion of paper money required no outlay. Countries could, at will, create entirely different supplies of it — thereby creating variable ratios (i.e. varying exchange rates), between its values. The fundamental reason for this universal transition from gold to paper money in the 20th century may be seen clearly via examining the link between the money supply and the physical economy. The connection between these two is not imprecise, but an exact quantitative one, expressed through the formula usually, although inaccurately, referred to as the Quantity Theory of Money. The inaccuracy lies in the fact that this is not a ‘theory’ at all, but merely a necessarily true quantitative relation expressing that, in a monetised economy, every transaction has simultaneously an (exactly equivalent) monetary and real component.

The quantity of money
In mathematical terms the relation between the money supply and the productive economy is expressed in the famous formula MV=PT (Mass of money (money supply), times Velocity of circulation is equal to the Price level times the number of Transactions in the economy). As this quantitative relation is nece
ssarily true, it applies in any economic framework — whether monetarist, Keynesian, or a la carte. All that can change in different economic systems is not the quantitative relations, but the factors which determine the equation’s components.
Within this formula, monetarism asserts that velocity is essentially constant — this, for the sake of illustration, will be accepted here.5 The number of economic transactions, in turn, is closely related to the level of output, and the latter is typically taken as a surrogate for the former — a practice that will be followed here by referring to ‘transactions/output.’
Using this fundamental frame work, the significance of the historical evolution of monetary and exchange rate systems, and the importance of the proposal to create a single European currency, may be clearly seen.

Relations between the monetary and productive economies
In one crucial aspect, the transition from gold to paper currencies did not alter the character of money. By its nature, money is homogeneous (every unit is interchange able), and essentially entirely divisible — i.e. money is infinitely flexible.
The productive economy, however, is radically different in character. The infinitely elastic character of money has its parallel in only one possible structure of a productive economy — that known to economics textbooks as ‘perfect competition.6 Perfect competition, among other things, assumes that there exists an infinite (in practice extremely large), number of producers; that the Out puts they produce are homogeneous; that production may take place at an infinitely gradable output of units etc.
Perfect competition’s closest physical approximation is a large number of farms producing a standard commodity such as wheat, or a large number of factories producing a relatively uniform product such as wool or cotton thread. Such physical counterparts are unsurprising, as the concept of perfect competition was developed in the context of the 19th century economy — when production on the modem large scale did not exist.7
If a very large number of producers is assumed, it immediately follows that none has the ability to influence prices.8 An attempt by a firm to prevent prices falling, for example due to a decline in costs, will merely lead to the market being fully supplied by other producers. In such an economy, therefore, as each producer has no ability to set the market price, technically they are ‘price takers.’ As producers cannot control prices the latter may move both up and down. In such an economy, that of the 19th century, the infinitely flexible character of money is paralleled by pliable prices in the productive economy.

4. Monetary dynamics in the 19th and 20th centuries
If , in ‘perfect competition,’ the features of money and the productive economy, discussed above, parallel each other, in the case of monopoly or imperfect competition, where a small number of firms dominate an industry, this symmetry between money and the productive economy collapses. Flexibility in prices in the productive economy, does not apply. Entry into an industry is restricted by a minimum efficient scale of production limiting the number of possible firms in the industry, by costs of initial investment, by the ability of existing producers to force new entrants out of business by temporary predatory pricing, by technological factors, or other means. Under such conditions, firms are not simply price takers, but price makers. As firms have the ability to influence prices, and therefore the possibility to resist reductions (and can meet a contraction in the market by maintaining prices and decreasing their quantity of production), such prices are ‘sticky’ or ‘administered.’
It is clear that this situation of imperfect competition/monopoly corresponds to the economy of the 20th century, just as ‘perfect competition’ did to that of the 19th(and earlier ones). In particular, in the most advanced, and therefore decisive, economic fields, modem scales of production make it impossible for more than a few producers to exist within an industry — not merely nationally but internationally.
There is, for example, only one fully competitive producer of microprocessors — Intel. Only one major producer of personal computer operating systems, and increasingly, application programmes — Microsoft. There exist only two competitive producers of large civilian aircraft — Boeing and Airbus Industry. The $15 billion production cost of the ‘Eurofighter’ is impossible to finance by any single West European aerospace company. In the 1960s Siemens had to win only half the West German market to finance the cost of development of an electromechanical switch, today it has to capture 20% of the world market to make such an investment worthwhile. Such examples may be multiplied.
The revolution in modem economics, the development of Keynesianism, therefore was not about self-sufficient developments in logic. It occurred because the concepts, and policy prescriptions, developed to analyse the classically competitive economy of the 19th century were not adequate to, because they no longer reflected, the real economy. They could not deal with the imperfect competition/monopoly of the 20th century. Attempts to apply 19th century theories, as with the Treaty of Maastricht, to 20th century realities necessarily lead to disasters.

Trade unions and perfect competition
Before returning to the central issue of monetary union, the situation of one crucial market, that for labour, should be noted. It is frequently neglected that the labour market is by far the largest in the economy — wages and salaries account for over 62% of UK GDP. In the 19th century it may have been adequate to consider that the market for labour corresponded to that of perfect competition — tens of millions of units of production (aka human beings), with few jobs which could only be carried out by a very small number of people. But this situation is radically altered both by the enormous costs of producing a modem skilled labour force, which thereby creates huge expenses in substituting labour, and, in particular, by the existence of organisation of the labour force — through trade unions and other mechanisms.
As has been frequently noted, this creates a situation of imperfect competition in the labour market. In a modem economy, therefore, both capital (firms) and labour no longer exist in a situation of perfect competition. This is decisive for monetary policy.

Monetary dynamics under perfect and imperfect competition
Returning to the fundamental monetary issues discussed above, the different dynamics of perfect and imperfect competition directly relate to, and explain, the shifts in exchange rate systems which have already been analysed. To show this, consider first the case of a downward shift in the supply of money — or a fall in its rate of increase.9 From the fundamental monetary formula, MV=PT, it follows that if the quantity of money (M) falls, then either the price level (P) or the number of transactions (T) must decline. Which fall, that of prices or that of output, will predominate? That depends on the structure of the supply side of the economy, and the competitive conditions which exist within it.
Under conditions of perfect competition, those of the 19th century, producers have no ability to control prices. A contraction in the money
supply, therefore, may potentially cause the price level to fall, while the number of transactions/output remains constant. Indeed a combination of falling prices and rising output was frequently seen in the 19th century. Under imperfect competition/monopoly, however, producers have the ability to significantly influence prices — most particularly, for present concerns, the ability to resist declines in prices. If, however, prices cannot decline in response to a fall in the money supply, then this must be compensated for by a decline in output/transactions. Therefore, in a 20thcentury economy, reduction in the money supply will lead to a sharp decline in output.
Furthermore, the fundamental situation is worse. Imperfect competition/monopoly gives firms the ability to administer prices upwards. However, from the fundamental quantitative relation between the money supply and the economy, it follows that if prices increase, and the money supply does not, output/trans actions must fall. Therefore, in conditions of imperfect competition/monopoly, the money supply must constantly increase merely to accommodate the upward shifts in prices created by the fact that firms are no longer price takers but price makers.
Once this transition from the economic structure of the 19th century to that of the 20th is understood, then the reasons for the profoundly inflationary bias of the last ninety years is evident. A constant increase of the money supply became necessary to accommodate the ability of producers to administer prices upwards — that, in turn, reflecting the collapse of classical competition. This constant upward expansion of the money supply, in turn, necessarily required abandoning gold as the monetary unit because: (i) it was impossible to expand a money supply based on gold sufficiently rapidly to adjust to such upward pressures on prices; (ii) the relative price of gold compared to other goods and services, that is the general price level, in any case depended on the relative cost of production of gold. Sustained inflation was thereby limited within the bounds by which the costs of production of other commodities could fall relative to gold — a rate much too small to accommodate the upward pressure on prices created by the new economic structure.
The transition from perfect competition to imperfect competition/monopoly therefore required a transition to a new unit — paper money. The universalisation of the use of paper money in the 20th century is just as much a reflection of inflationary pressures as it was its cause.
The reason for the historically unprecedented inflation of the 20th century is therefore also evident — it represented the transition to a new economic structure. However, as the structure of the productive economy had changed, any attempt to fit 19th century monetary policies onto it would necessarily end in disaster. Keynes genius, in the monetary field, was to define the new policy necessary to deal with the transformed structure of a 20th century economy.

5. UK Exchange Rates in the 20th Century
The issues involved in the new monetary framework of the 20th century may be practically, and vividly, illustrated by Britain’s two most important exchange rate episodes so far this century — prior to the decision whether to join a single European currency. These were the return to the gold standard, in the 1920s, and membership of the ERM in the early 1990s. Not merely do these experiences have direct lessons for a single European currency, but the former was the direct context in which Keynes formed his economic ideas. As both had an identical outcome — deep recession, disastrous financial crisis, and final collapse of the attempted exchange rate policy — which are exactly the phenomena accompanying the current attempt to introduce a single European currency — not merely their theoretical but practical relevance is evident.
The return to the gold standard
The process involved in the UK’s return to the gold standard was evident. The government was aware, and Keynes pointed out, that after World War I British relative prices were higher, compared to its competitors, than in the pre-war period. By returning to the gold standard, at the pre-war exchange rate the government established, therefore, competitive constraints creating sharp downward pressure on nominal prices. If the economy had operated according to perfect competition this would not have constituted a great problem. Tight money would have led to a de crease in the price level, and output would not have declined.
In fact, the economy no longer operated in that fashion. First wages had to be reduced in the main industry of the period — coal. The decisive element of ‘stickiness’ in this sphere was the National Union of Mineworkers. The result was the general strike of 1926. However, even after the price of labour had been made ‘unsticky’ — via deunionisation, starving the miners back to work, general reduction of wages, anti- trade union legislation, and other ‘humane’ methods — the economy did not behave as the government had anticipated. Capital responded not by cutting prices, and maintaining its output, but by maintaining its prices and limiting its output. UK economic growth, therefore, lagged behind the rest of the world in the 1920s even before it was hit by the maelstrom of the 1930s depression.
To its shame, and culminating in its destruction, the 1929-31 Labour government did not take the only way out of this situation — abandoning the gold standard. Only when the fetish of the exchange rate was abandoned, by a Conservative dominated government, did recovery begin. This experience of the 1920s illustrated devastatingly what would result from the attempt to impose monetary policy derived from the 19th century model onto the imperfect competition/monopoly of a modern economy.

UK Membership of the ERM
The fundamental economic development of the UK during its period of ERM membership, in the 1990s, repeated, with tedious exactness, the pattern of the return to the gold standard. The theory of ERM membership, to use the litany of the Treasury, was to ‘bear down on inflation.’ To maintain competitiveness, and prevent a balance of payments crisis, UK companies would not be able to raise prices by more than other countries within the ERM. The underlying problem in this, as analysed by Socialist Economic Bulletin in 1990, in Why RecessionBased on ERM Membership Cannot Solve the Problems of the UK Economy, was that UK productivity growth lagged behind that of other economies in the ERM – due to Britain’s inadequate level of investment. If the UK were in a 19thcentury world, this would not have led directly to a crisis — UK costs, i.e. wages and profits, would simply have fallen in price relative to rivals.
Indeed, both wages and profits were ‘born down on’ during ERM membership — more precisely real incomes and profits fell sharply. But in instead of output remaining constant, while prices declined, Britain entered its most prolonged and severe recession in post-war history — interest rates soared, the balance of payments remained stubbornly in deficit despite deep recession. The consequences of this economic disaster have still not been fully overcome six years later. In both cases – return to the gold standard, and membership of the ERM – applying a monetary theory based on the 19th century to a quite different economic structure did immense damage.

6. A Single European Currency
While the effects of the return to the gold standard, and mem
bership of the ERM, were disastrous they had one saving grace — they could be brought to an end. The effects of a single European currency, of course, cannot. Joining it, in the form proposed by the Maastricht Treaty, would be as though Britain had been forced to pass through the 1930s while still on the gold standard, or it had not been able to withdraw from the ERM. The damage done, in short, would be on a scale exceeding the two greatest disasters of 20th century British economic history. Examining in more precise detail what is involved, will both show what is wrong with the methods of Maastricht, and under what conditions a single currency can be created.

The trend to flexible exchange rates
The economic processes analysed above make clear why the world economy has historically shown a progressive shift from fixed exchange rates systems to flexible ones. In classical competition prices are pliable — i.e. they can move both up and down. The developments of unevennesses in productivity, cost movements etc. can, therefore, be absorbed, and equilibrium maintained, by the monetary unit remaining fixed and price shifts taking place in the real economy. Under imperfect competition/monopoly prices are not flexible — they may move up but not down. The necessary process of adjustment, therefore, cannot take place in the real economy, but must take place via flexibility, more precisely inflation, in the monetary unit. As a consequence, the rise of the structure of a twentieth century economy necessarily led progressively from a regime of totally fixed exchange rates to increasingly flexible ones.
If this historical trend towards flexible exchange rates exists, however, why is Europe appearing to go in the opposite direction, and striving to create a single currency? Furthermore, why is this necessary? The answer lies not primarily in relatively minor issues which are sometimes stressed, such as eliminating the transaction costs in exchanging currencies, but in the same processes which created the transition from the economy of perfect competition to that of the 20th century.

Why a single European currency?
If the features of modern large scale production are considered — i.e. the real world economy of the Intels, Microsofts, Boeings etc. — one thing is immediately obvious. The huge scale of production required for efficiency means that the products which result require an international market for their absorption. The 10 largest companies in the world, alone, in 1995 had a turnover of $1,495 billion — 35% larger than the entire UK economy. The 500 largest companies had an income of $11,378 billion — more than 50% larger than the economy of the U.S.10 As a result, even the largest economy in the world, the United States, has during the post-war period moved away from being self-contained to its companies exporting, and producing, on an international scale.
The well known result is that almost every large firm has become a multinational company — the requirements of huge scale production which produced the transition from classical competition to imperfect competition/monopoly, also produced the internationalisation of markets and production. Breaking up such internationalisation, limiting the practical scale of production, via tariffs or other means, to the scale of a single state would qualitatively throw back efficiency, and make many types of production literally impossible (Boeing and Airbus Industry would simply not produce the models they do if they were restricted to their domestic markets). As is widely understood, it is the requirements of the scale of modern production that it take place for an international market that was a fundamental driving force creating the EU.

Conditions for ‘free trade’
Tory Eurosceptics, or at least the more intelligent ones, have no objections to this. They oppose a return to a Europe of tariffs, which would radically reduce the scope of markets. They support moves to create a single European market — as did Thatcher. They merely believe that this should take place in a ‘Europe of nations,’ without a single European currency, without centralising decrees from Europe etc. The problem is that while proclaiming the words they fail to realise the practical con sequences of even a ‘free trade area’ — including that for a single currency.

A ‘level playing field’
Consider one of the few roles the Tory Eurosceptics assign to the state — ‘creating a level playing field’ within which the market can operate. What does this mean? Consider for example a hypothetical single British city, which for convenience we will refer to as ‘Slumsville’ — although it might also be called ‘Perfect Tory Model.’ Slumsville announces that all health and safety regulations will be abolished — funeral benefit will not be paid for workers burnt to death in sweatshops as a result; it will operate its own health regulations on food (particularly lowering standards for beef); trade unions are illegal; prisoners will be set to work producing for the market, but paid at prison rates; apprenticeships are abolished — but skilled labour is welcome to move in from other areas; the school leaving age will be reduced to eight — but those with higher education, financed by other regions, are welcome to move in; a tax haven is to be established; the city will operate according to its own (secretive and lax) banking laws etc. If this were permitted, costs would be drastically lower than in the rest of the UK and companies would invest in the area — Slumsville might be able to proudly proclaim itself a leading recipient of ‘inward investment.’
All other regions, however, would justifiably claim that a level playing field did not exist. That Slumsville was driving down health and social standards, and pay, throughout the country; that firms based in Slumsville were benefiting financially from its dreadful health and safety record, and prohibition of trade unions; that it was parasitically benefiting from labour whose education was financed by other regions; that it was undermining the profit ability of the entire country’s agricultural system, through creating a new pocket of BSE; that it was diverting investment from other regions due to its low standards, that it was artificially attracting banking business to the detriment of other regions etc. In short this would not be tolerated. At most, the government might, to tackle a regional imbalance, introduce certain of these privileges, in the form of a ‘special economic zone’ but this would be subject to decision by the national government. It could not be unilaterally ‘proclaimed’ by a single region without negatively affecting the whole country. A level playing field could not be created though a ‘Britain of cities,’ but only via a national state.
This equally applies to any ‘free trade’ area in Europe — and, increasingly, to the world economy. If common standards do not exist in labour practices, banking, health standards, regulations for safety at work etc. no ‘level playing field’ exists. One region can exploit lower standards to undercut, and undermine, others while, as with lax British standards leading to BSE, potentially threatening the prosperity of all. To maintain a ‘level playing field’ in a free trade area, without which it will not be maintained, the authorities are forced to intervene in its standards.

Large scale production and exchange rates
Even more powerful in their consequences for trade, however, are the effects of exchange rates. While the word is distinctly unfashionable in certain political circles, nevertheless firms have to avoid vagaries of fashion in pursuit of money. They, in short, have to plan. In which country, for example, should they establish a factory? A firm can take into account wage costs, laws etc. However, calculations based on this are completely bypassed if, for example, that country’s exchan
ge rate devalues or revalues by 20%. A plant which is profitable at one exchange rate becomes nonviable at another. Worse, a firm may decide to supply the European market by exports from one country — indeed, it may be forced to do so by the necessary scale of production. But if that country’s exchange rate revalues, the company loses not only that market, in which it will be undercut by imports, but the entire European one — because exports to the latter are now uncompetitively priced.
None of the nostrums of perfect competition can deal with this situation confronting large scale production. A firm cannot ‘flexibly’ relocate from one country to another, in response to shifts in exchange rates — because the costs of initial investment are too high. It cannot diversify, by producing in all major countries, because the scale of modem production means that all markets can, and for efficiency frequently must, be supplied from one or a few sources.

Britain, Italy and the ERM
To consider the practical implications of this, consider the situation following Britain and Italy’s withdrawal from the ERM. As long as these two countries were within the ERM their situation was one of growing, and finally intolerable, losses — due to their costs rising more rapidly than Germany and France. However, for Germany, France, and their companies, the situation was excellent — they were constantly improving their competitive position relative to Britain and Italy.
With the withdrawal of the UK/ Italy from the ERM, and their subsequent devaluations, the situation re versed. The British and Italian economies began to grow, and their balance of payments sharply improved. German/French companies now began to scream as their exports to Britain and Italy became uncompetitive — and as British and Italian exporters undercut them within their domestic markets. It was for this reason that, following the partial disintegration of the ERM, large German and French firms became even more vociferous advocates of EMU, and began to propose ‘sanctions’ against countries which carried out devaluations.

Kohl and Chirac
Chancellor Kohl and President Chirac may, or may not, have deep pacifistic commitments to ensuring the peace of Europe, which they believe requires a single European currency, but their enthusiasm cannot be dampened by the fact that this measure directly corresponds to the interests of Mercedes, Siemens, Renault, Thompson etc. Large firms are quite correct when they state that a Europe of variable exchange rates is a casino in which it is impossible to plan for the future, and in which, therefore, the most effective organisation of large scale, and necessarily international, production will be impossible.

The hidden assumption of the EEC
Indeed, it is clear that when the EU was created, as the old European Economic Community (EEC), it had, in fact, a hidden assumption, little noticed at the time. When the EEC was formed, the Bretton Woods system was still in operation, and exchange rate shifts were extremely infrequent. The barrier to free trade, and scales of production sufficiently large to be competitive, was constituted by tariffs. The main activity of the early EEC, in order to create a truly European scale of production, was therefore devoted to eliminating this problem.
But exchange rate fluctuations of 10 or 20%, which are what has been experienced in Europe, are just as effective as tariffs in affecting intra-European trade — indeed they are more generalised in their effect.
The hidden assumption of the EEC, in short, was fixed exchange rates. This merely wasn’t emphasised at the time because of the operation of Bretton Woods. As soon as the latter collapsed then, merely in order to organise an ad equate scale of production, it became necessary to try to fix European exchange rate — first through the currency ‘snake,’ then through the ERM, and finally through EMU.

What scale of economic unit is required?
It is empirically quite easy to make a rough estimate of the scale of market required for modern efficient production.
The world economy is dominated by three blocs — the US, Japan, and the EU. The size of all three is in the range $4-7 trillion. Excluding internal trade within the EU, all are relatively, although not absolutely, self-contained — exports and imports being less than 12% of GDP. It is wholly improbable that this convergence in the proportion of exports and imports, at this size of market, is accidental.
It may, therefore, be taken that $4 trillion is the minimum size of market required for rounded development of a modem economy — although some sectors of production can only operate efficiently in a larger, purely world, market. But the largest European economy, Germany, is less than half this size. If effective organisation of production cannot be organised at an all European level, then Europe will be unable to achieve US and Japanese levels of efficiency. However, as already noted, the organisation of a ‘free market’ at a European level requires not merely absence of tariffs, and a ‘level playing field’ in terms of standards and regulations, but also stability between its currencies.
The idea of a single European currency arises not out of sinister plots of Eurocrats to undermine British sovereignty — to deprive of us of our ‘cricketing friends around the world,’ as John Redwood put it in the Financial Times — but from the practical necessities of organising a single European market.11 By arguing for ‘free trade’ in Europe, without understanding its practical implications, Tory Euro sceptics are rather like a general who declares himself in favour of total war provided there is no killing — once you accept the end, you have to accept the means. All the efforts of little Englanders will not succeed in stuffing the genie of large scale production back into the bottle of unrestricted national sovereignty.

7. Conditions for a Single European Currency
It is now possible to summarise the economic and political factors that must be brought together if an economy capable of operating on a large enough scale to be efficient/competitive is to be created. On the one hand, a modern economy no longer operates on a model approximating to perfect competition. As a consequence, imperfect competition/monopoly means that adjustments can no longer be handled via an unvarying monetary unit and flexible shifts in prices in the real economy — as vividly demonstrated for the UK, in this century, by the disasters of the return to the gold standard and membership of the ERM. As prices in the real economy have lost downward pliability, the strain of the adjustment was taken, instead, by a flexible monetary unit. At the national level this produces the 20th century phenomenon of sustained inflation, and at an international one it required the substitution of flexible exchange rates for fixed ones — in both cases, it is the monetary unit which takes the strain of adjustment, either via a change in the exchange ratio between money and goods (inflation) or via shifts in the ratio between different monetary units (exchange rates). However, the European economy, to function on the necessary scale of production, requires fixed exchange rates.
How can this apparent circle be squared?

Fundamental errors of the Maastricht Treaty
Maastricht, in essence, attempts to solve the problem of creating a single currency by grafting a 19th century monetary system, with the same rigidity in exchange rates as a gold based one, onto a 20th century economy. By irrevocably fixing the ratios between national currencies (i.e. abolishing them), adjustments between different levels of productivity, and other factors affecting costs, can no longer take place via exchange rates — this, incidentally, would
occur with any attempt to introduce a single currency, and not simply under the Maastricht Treaty. The only issue is ‘what type’ of adjustments will take place in the real economy.
If there existed a 19th century productive economy, to correspond to a 19thcentury concept of exchange rates, the price system could take the strain of adjustment. Regions falling behind in productivity, for example as with the UK due to low rates of investment, would reduce their prices relative to those in other regions. In order for relative prices to fall in these regions, firms would have to accept reductions in profits, labour would accept reductions in wages etc. In reality, of course, this will not occur — because the 19th century economy no longer exists. Firms engaged in imperfect competition/monopoly will respond, just as textbooks de scribe, and as the history of the 20th century demonstrates, not by reducing prices but by reducing output. Labour will not react with favour to reductions in wages. Recessions will multiply, regional imbalances will intensify, racism and xenophobia will spread, the trade unions will be attacked to attempt to reduce wages, the welfare system will be eroded to drive down costs, crime will soar as unemployment rises etc. The experience of the UK re-joining the gold standard, or of its ERM membership, will be repeated on a European scale.
All the phenomena, in short, experienced with the move to implement the Treaty of Maastricht will intensify to a qualitatively higher level. The mismatch between 19th century money and a 20th century economy, while an interesting ‘theoretical’ experiment, will be most unfunny to witness in practice.

The conditions for a single currency
There is only one way round this. There is nothing mysterious, either theoretically or practically, about organising economic areas embodying very large scale production but possessing a single currency. From a single currency it flows, necessarily, that the adjustments to shifts in relative productivity, and other costs, cannot take place, in such economic areas, via changes in the exchange rate. They must take place via changes in the real economy. However, these shifts in the real economy cannot adequately take place via the price mechanism — for the reasons analysed above. The only solution, therefore, is that the shifts in the real economy take place, to a substantial degree, by mechanisms other than the price system.
In national states there is a well-known mechanism for dealing with this. It is the budget — i.e. taxation and state expenditure system. Money and resources are transferred/redistributed not via prices but by state transfers.
It is clear from the above that this use by the state, in the 20th century, of transfer payments (taxes, subsidies, pensions, benefits, regional policies etc.) — whether between individuals, firms, or areas — is rooted not merely in morality, or political expediency, but in fundamental economic realities. It is, undoubtedly, no longer generally regarded as socially acceptable (except by sections of the Tory and Republican right), that mothers should ‘price themselves back into work’ by doing without the costs of housing, and living with their children in shop doorways. Neither has it escaped the attention of European governments that if regional pockets of mass unemployment, or appalling housing, are allowed to develop, particularly if these correspond to national/ethnic divisions, the result will be riots, terrorism, separatist movements etc. But the economic processes noted above, create a much more substantial and widespread economic basis for the rise in transfer payments. These are the only way to deal with a situation where adjustment cannot take place either through the exchange rate or, without tremendous economic losses, through the price system.

Britain, Italy and the ERM
To see the implications of this, consider the situation confronting Britain and Italy towards the end of their period of ERM membership. Due to the shifts in relative costs between themselves and Germany! France, their economies were forced into increasing unacceptable recession and financial crisis. They eventually escaped via devaluation — i.e. a shift in the monetary unit carried out the adjustment which the price mechanism had been unable to achieve. However, if Britain and Italy had been within a single currency zone with Germany/France, this would have been impossible. The British and Italian economies would have become more and more depressed compared to Germany/France — Britain would have come to occupy the same relation to Europe as the North East did to En gland during the 1930s. At the political level racist (‘the blacks have taken our jobs’) and xenophobic (‘the Huns and Frogs have pushed us into poverty’) sentiments would soar. The resulting combination would probably have exploded the system — Britain withdrawing from the common currency, and the EU entering the greatest crisis in its history.
The only way out of this situation, as adequate flexibility will have been removed in the exchange rate by the single currency, and in the price mechanism by the entire economic development of the 20th century, is regional transfer payments — i.e. a regional budget of the EU. That is, part of the benefits gained by German/French firms from the single currency would be taxed and redistributed to regions which lost. Such a mechanism is, in principle, no different to a progressive income tax, or regional transfers, within a national economy. This type of flexibility within the real economy, for reasons outlined above, is the only means of adjustment possible in a large economic space in which a single currency operates.
The EU, of course, possesses regional transfer funds/budgets. But these are on a scale, capable of coping only with depressed regions of individual countries, or small states, and not with the scale of redistribution between major states which would be required by the economic! social consequences of a single currency.
Within national economies, the economic realities analysed above, are, of course, expressed. They explain the apparent paradox that despite, endless rhetoric (at least in the US and UK), about reducing the role of the state, transfer payments have continued to substantially rise as a proportion of the economy. Even in the U.S., government receipts, as a proportion of GDP, rose from 27.0 per cent in 1960 to 37.3 per cent in 1995 — the latter being higher than the 32.4% when Reagan was elected in 1980. In the UK, government receipts rose in the same period from 28.9 per cent of GDP to 37.6 per cent — the latter figure being virtually identical to the 37.7 per cent when Thatcher was elected in 1979.12 The problem is that while the mechanisms of transfer between different parts of national economies, including government decisions on final expenditure, are well advanced, no such mechanism exists on a European level.

8. Politics and Economics in EMU
The fundamental relation between economics and politics, in the process of creation of a single European currency, may now be summarised. The 20thcentury saw the transition from small scale production, to that on an enormous scale. This simultaneously replaced classical competition with imperfect competition/monopoly, and required markets larger than nation states for efficient reduction of costs. A necessary accompaniment of this, in the monetary sphere, was inflation — technically organised via substituting paper for gold based currencies. This, in turn, necessitated flexible exchange rates. The necessary flexibility, which had been driven out of various aspects of the prod
uctive economy, was se cured through the monetary sphere. This then required a new system of economic management, Keynesianism, with its concomitant of large scale state intervention in the economy, to replace the 19th century economic regulation of subordinating national economies to fixed exchange rates based on gold.
The fundamental errors of the Treaty of Maastricht are that it attempts to reverse the economic history of the 20th century. Adjustments based on exchange rate changes will be eliminated. But no budget adequate to large scale transfers via the state will exist. An attempt is to be made to organise a single currency area, almost as large as the U.S. economy, without anything like the U.S.’s federal budget. The entire weight of adjustment, in consequence, will have to be taken by the price mechanism. But both economic theory, and history of the this century, shows that it won’t work. For the reasons outlined above, the prices will jam, huge imbalances and inequalities will multiply, and the process will fall into deep crisis. An attempt will, therefore, be made to make real prices in the affected regions downwardly flexible by breaking up trade unions, cutting welfare benefits, attacking democratic rights — i.e. the entire process which has already started across Europe. However, even these measures, while destroying the quality of life, will not work, and economic stag nation will grip Europe — the losses via the errors of the Treaty of Maastricht will be far greater than the disadvantages of flexible exchange rates.
Maastricht is rather like king Canute telling the sea to halt its advance. If the real economy had remained as it was in the 19th century, there would never have been the necessity to go through the rigmarole of sustained inflation, paper currencies, flexible exchange rates, and the ‘Keynesian revolution,’ in the first place.
The only way out of this situation is that if flexibility via the monetary unit, the exchange rate, is removed, and flexibility via the price system will not occur on an adequate scale, then pliability in the real economy must be carried out via non-price means — i.e. by introducing transfer payments between regions of the single European currency area. The creation of a single European currency will only not have the most serious negative economic effects if it is accompanied by the creation of a European budget, with large enough resources to make substantial transfer payments between countries.

Who will control a European budget?
But the above leads directly to the sphere of politics. Who will control such a budget? It cannot be any of the individual countries — otherwise the budget will simply end up benefiting the states which control it. It must, clearly, be a supra-national body, composed on some proportionate basis from the EU member states. Whether this is called a federal European body or not (for fear of shocking Europhobes of a nervous disposition), is not important. Any institution controlling a substantial European budget, on a scale capable of overcoming the inflexibilities that will be produced by a single European currency, is, in reality, a European federal body. The existence of such a body, in turn, will produce all the normal political questions of control of a budget — the well rehearsed problematic of ‘taxation and representation’. A powerful European parliament would be required to supervise this budget. In short, the creation of a single European currency, if economic disaster is to be avoided by its introduction, requires substantial steps towards the creation of a single European state.
This returns to the starting point. Maastricht tries to have its cake and eat it. It wants a single currency, but without significant steps towards a single state — in the form of a substantial European budget. One half of the cars will drive on the left hand side, of inflexible exchange rates, and the other half will drive on the right hand side of no state transfer payments. The traffic lights, known as prices, which are supposed to direct the resulting chaos won’t function adequately because, in a twentieth century, imperfectly competitive economy, they are significantly jammed, give green lights only in one direction, and work either too slowly or inadequately. Traffic will move increasingly slowly, and the passengers will become increasingly angry. Fights will break out between some of them, and the traffic jam will be coming increasingly overrun by pickpockets and criminals. An increasingly authoritarian police, originally called in to try to get the traffic moving, will try to do so by beating up increasing numbers of the drivers. All these symptoms are already present.
As for the UK, the problem will be far more serious than for the core states such as Germany, France or the Netherlands. These have far less unevennesses between each other, because they have relatively equal rates of investment. However, the UK, due to its far lower rate of investment, has a far greater uneven ness compared to the core economies, and the strain placed on the jammed price system will be far greater — as the debacle of UK, and Italian, ERM membership demonstrate. In the absence of a European budget, with regional transfers, the results of the UK joining a common European currency would be disastrous.
The ‘democratic deficit,’ therefore, turns out not to be a small mark on the cloth after all. It is the point from which the whole fabric will unravel — a fatal lagging of political structures behind economic processes. For it is not possible to introduce, without immense damage, a single European currency without a significant European budget. And a real European budget requires democratic control of it.
There are, as stated, and for economic reasons analysed at length above, only two viable ways for ward. The long term one is the creation of a European federal state. The transfer payments this makes possible will introduce, by different means, the flexibility which the unchanging exchange rate will block off. But if this political step is rejected, and no such budget established, then it is vital that the flexibility of variable exchange rates be maintained.
Maastricht has to be rejected, not in the utopian and reactionary name of little England, but because it is based on erroneous principles which reject the entire historic development of the 20th century economy. The huge scale of production which determines the specific character of our century’s economy, both creates the internationalisation of production and the drive towards a single European currency. Its consequences for prices and money, simultaneously, make it impossible to beneficially create a single European currency by the means Maastricht proposes. Maastricht is, in the last analysis, the attempt to impose a 19th century monetary framework on a 20th century productive economy.
That is why it is so dangerous.


 This article originally appeared in Ken Livingstone’s Socialist Economic Bulletin in September 1996.
1. Silver was also, during various periods, and in various countries, used as a primary basis of money. However, the overall historical primacy of gold is clear.
2. The main problems which exist are created by phenomena such as adulteration of the currency.
3. Given gold’s universal acceptability, national costs of production cannot significantly affect its price
4. Such price reductions were inevitable if an industry’s cost of production, for example due to technological progress, fell, under competitive conditions, relative to the cost of producing gold.
5. Introducing changes in velocity, for present purposes, merely complicates the argument without changing anything essential. However, this is not a general acceptance that velocity remains constant.
6. The theore
tical counterpart of the latter within economics is technically known as general equilibrium theory, but more popularly as ‘classical/neo-classical’ economics.
7. It is by well established that even if the assumptions of perfect competition are made the associated neo-classical economics is theoretically incoherent, and cannot be accepted. However, for present purposes, what is crucial is not the theoretical refinements but the practical conclusions regarding price levels.
8. A proof of this may be found in any economics textbook.
9. In all analyses below, it would, strictly speaking, be more correct to utilise rates of change rather than reductions and increases in money supply. This would, however, require introducing differential calculus rather than simple arithmetical examples. Nothing in the fundamental relationships is altered by this simplification.
10. ‘The Fortune Global 500,’ Fortune 5 August 1996.
11. Nigel Spivey, ‘Hungry, but not for food,’ Financial Times 17 August 1996.
12. OECD Economic Outlook June 1996.

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