The Euro and the Battle of Ideas

The Euro and the Battle of Ideas
Author	Markus Brunnermeier, Harold James, Jean-Pierre Landau
Country	United States
Language	English
Genre	History
Publisher	Princeton University Press
Publication date	2016
Pages	448
ISBN	978-0691172927

Last updated November 19, 2019

The Euro and the Battle of Ideas is a book by Markus Brunnermeier, Professor of Economics at Princeton University; Harold James, Professor of History at Princeton University; and Jean-Pierre Landau, a former Deputy Governor of the Bank of France, a member of the Board of Directors of the Bank for International Settlements (BIS). The book is about the philosophical differences between countries in the European Union, particularly Germany and France, and how their contrasting outlooks on political philosophy have shaped the Eurozone. The book also provides context to how the ideas that led to the creation of the European Union have influenced and been influenced by ideas in the United States, the United Kingdom, the International Monetary Fund (IMF), and the European Central Bank (ECB).

Markus Konrad Brunnermeier is an economist, who is the Edwards S. Sanford Professor of Economics at Princeton University. He is a faculty member of Princeton's Department of Economics and director of the Bendheim Center for Finance. His research focuses on international financial markets and the macro economy with special emphasis on bubbles, liquidity, financial crises and monetary policy. He promoted the concepts of liquidity spirals, CoVaR as co-risk measure, the paradox of prudence, and the I Theory of Money. He is or was a member of several advisory groups, including to the IMF, the Federal Reserve Bank of New York, the European Systemic Risk Board, the German Bundesbank and the U.S. Congressional Budget Office.

The Princeton University Department of Economics is an academic department of Princeton University, an Ivy League institution in Princeton, New Jersey. The department is one of the most premier institutions for the study of economics. It offers undergraduate A.B. degrees as well as graduate Ph.D. degrees. It is considered one of the "big five" schools in the field along with the faculties at the University of Chicago, Harvard University, Stanford University, and MIT. According to the 2018 U.S. News & World Report, the department ranks as No. 1 in the field of economics.

Harold James is an economic historian specializing in the history of Germany and European economic history. He is a Professor of History at Princeton University as well as the university's Woodrow Wilson School of Public and International Affairs. He currently writes monthly columns for Project Syndicate covering economic history. He is also a senior fellow at the Centre for International Governance Innovation.

Summary

The book begins with the historical roots of German-French differences, highlighting the cultural and philosophical aspects which distinguish the two nations. Their divergent systems of philosophical thoughts have spurred differences in economic ideologies in regards to federalism versus centralism, monetary and fiscal policies, and austerity versus stimulus. The authors argue that "there is no single, coherent economic philosophy within Europe. Rather, different nations have retained their own distinct economic philosophers and view European-level institutions--and ways to improve them--in this light."^[1] The books continus with an analysis on how these philosophies have manifested themselves in the European Union, mainly through the Maastricht negotiations and the commitment to a currency union. They expound upon the divergent ideas of economics and politics have contributed to different models of governance within Europe, and that "the German view and the French view actually need each other to be sustainable."^[2]

Federalism is the mixed or compound mode of government, combining a general government with regional governments in a single political system. Its distinctive feature, exemplified in the founding example of modern federalism by the United States under the Constitution of 1787, is a relationship of parity between the two levels of government established. Federalism can thus be defined as a form of government in which there is a division of powers between two levels of government of equal status.

Monetary policy subclass of the economic policy

Monetary policy is the policy adopted by the monetary authority of a country that controls either the interest rate payable on very short-term borrowing or the money supply, often targeting inflation or the interest rate to ensure price stability and general trust in the currency.

Fiscal policy use of government revenue collection and spending to influence the economy

In economics and political science, fiscal policy is the use of government revenue collection and expenditure (spending) to influence a country's economy. The use of government revenues and expenditures to influence macroeconomic variables developed as a result of the Great Depression, when the previous laissez-faire approach to economic management became discredited. Fiscal policy is based on the theories of the British economist John Maynard Keynes, whose Keynesian economics indicated that government changes in the levels of taxation and government spending influences aggregate demand and the level of economic activity. Fiscal and monetary policy are the key strategies used by a country's government and central bank to advance its economic objectives. The combination of these policies enables these authorities to target the inflation and to increase employment. Additionally, it is designed to try to keep GDP growth at 2%–3% and the unemployment rate near the natural unemployment rate of 4%–5%. This implies that fiscal policy is used to stabilize the economy over the course of the business cycle.

Critical response

Ben Bernanke, former Chairman of the U.S. Federal Reserve praised the book for its insightful contribution to the history of economics: "International divergences in economic policy are as much the result of differences in intellectual frameworks as of variation in economic circumstances. This valuable book explains the critical differences in national economic philosophies and how they have conditioned policy choices over the past decade."^[3]

Ben Shalom Bernanke is an American economist at the Brookings Institution who served two terms as Chair of the Federal Reserve, the central bank of the United States, from 2006 to 2014. During his tenure as chair, Bernanke oversaw the Federal Reserve's response to the late-2000s financial crisis. Before becoming Federal Reserve chair, Bernanke was a tenured professor at Princeton University and chaired the department of economics there from 1996 to September 2002, when he went on public service leave.

Lawrence Summers, former United States Secretary of the Treasury, claimed that "This is the best and most important book so far on an experiment with profound economic and geopolitical implications."^[4]

Lawrence Henry Summers is an American economist, former Vice President of Development Economics and Chief Economist of the World Bank (1991–93), senior U.S. Treasury Department official throughout President Clinton's administration, and former director of the National Economic Council for President Obama (2009–2010). He is a former president of Harvard University (2001–2006), where he is currently a professor and director of the Mossavar-Rahmani Center for Business and Government at Harvard's Kennedy School of Government.

The secretary of the treasury is the head of the United States Department of the Treasury which is concerned with all financial and monetary matters relating to the federal government, and, until 2003, also included several major federal law enforcement agencies. This position in the federal government of the United States is analogous to the minister of finance in many other countries. The secretary of the treasury is a member of the president's Cabinet, and is nominated by the president of the United States. Nominees for secretary of the treasury undergo a confirmation hearing before the United States Senate Committee on Finance before being voted on by the United States Senate.

Awards

The book has been a recipient of a number of awards, including Bloomberg’s Best Books of 2017, Project Syndicate’s Best Reads in 2017 (chosen by Jean Pisani-Ferry), The Financial Times' Best Economics Books of 2016, and The Economist’s Economics and Business Books of the Year 2016.^[5]

Bloomberg News, is an international news agency headquartered in New York and a division of Bloomberg L.P. Content produced by Bloomberg News is disseminated through Bloomberg Terminals, Bloomberg Television, Bloomberg Radio, Bloomberg Businessweek, Bloomberg Markets, Bloomberg.com and Bloomberg's mobile platforms. Since 2015, John Micklethwait has served as editor-in-chief.

Project Syndicate is an international media organization that publishes and syndicates commentary and analysis on a variety of important global topics. All opinion pieces are published on the Project Syndicate website, but are also distributed to a wide network of partner publications for print. As of 2016, it has a network of 459 media outlets in 155 countries.

The Economist is an English-language weekly magazine-format newspaper owned by the Economist Group and edited at offices in London. Continuous publication began under its founder James Wilson in September 1843. In 2015, its average weekly circulation was a little over 1.5 million, about half of which were sold in the United States. Pearson PLC held a 50% shareholding via The Financial Times Limited until August 2015. At that time, Pearson sold their share in the Economist. The Agnelli family's Exor paid £287m to raise their stake from 4.7% to 43.4% while the Economist paid £182m for the balance of 5.04m shares which will be distributed to current shareholders. Aside from the Agnelli family, smaller shareholders in the company include Cadbury, Rothschild (21%), Schroder, Layton and other family interests as well as a number of staff and former staff shareholders.

Related Research Articles

Political philosophy, also known as political theory, is the study of topics such as politics, liberty, justice, property, rights, law, and the enforcement of laws by authority: what they are, if they are needed, what makes a government legitimate, what rights and freedoms it should protect, what form it should take, what the law is, and what duties citizens owe to a legitimate government, if any, and when it may be legitimately overthrown, if ever.

The eurozone, officially called the euro area, is a monetary union of 19 of the 28 European Union (EU) member states which have adopted the euro (€) as their common currency and sole legal tender. The monetary authority of the eurozone is the Eurosystem. The other nine members of the European Union continue to use their own national currencies, although most of them are obliged to adopt the euro in the future.

Ricardo A. M. R. Reis is a Portuguese economist and the A. W. Phillips professor of economics at the London School of Economics. In a 2013 ranking of young economists by Glenn Ellison, Reis was considered the top economist with a PhD between 1996 and 2004., and in 2016 he won the Germán_Bernácer_Prize prize for top European-born economist researching macroeconomics and finance. He writes a weekly op-ed for the Portuguese newspaper Jornal de Noticias and participates frequently in economic debates in Portugal.

The President of the European Central Bank is the head of the European Central Bank (ECB), the institution responsible for the management of the euro and monetary policy in the Eurozone of the European Union (EU).

In economics, an optimum currency area (OCA), also known as an optimal currency region (OCR), is a geographical region in which it would maximize economic efficiency to have the entire region share a single currency.

Mario Draghi is an Italian economist who served as President of the European Central Bank between 2011 and 2019. Prior to that, he served as the Chairman of the Financial Stability Board from 2009 to 2011 and Governor of the Bank of Italy from 2005 to 2011.

The euro came into existence on 1 January 1999, although it had been a goal of the European Union (EU) and its predecessors since the 1960s. After tough negotiations, particularly due to opposition from the United Kingdom, the Maastricht Treaty entered into force in 1993 with the goal of creating an economic and monetary union by 1999 for all EU states except the UK and Denmark.

The Bernacer Prize is awarded annually to European young economists who have made outstanding contributions in the fields of macroeconomics and finance. The prize is named after Germán Bernácer, an early Spanish macroeconomist.

The Eurogroup is the recognised collective term for informal meetings of the finance ministers of the eurozone—those member states of the European Union (EU) which have adopted the euro as their official currency. The group has 19 members. It exercises political control over the currency and related aspects of the EU's monetary union such as the Stability and Growth Pact. The current President of the Eurogroup is Mário Centeno, the Minister of Finance of Portugal.

There are eleven currencies of the European Union as of 2018 used officially by member states. The euro accounts for the majority of the member states with the remainder operating independent monetary policies. Those European Union states that have adopted it are known as the eurozone and share the European Central Bank (ECB). The ECB and the national central banks of all EU countries, including those who operate an independent currency, are part of the European System of Central Banks.

The European debt crisis is a multi-year debt crisis that has been taking place in the European Union since the end of 2009. Several eurozone member states were unable to repay or refinance their government debt or to bail out over-indebted banks under their national supervision without the assistance of third parties like other eurozone countries, the European Central Bank (ECB), or the International Monetary Fund (IMF).

The Economic and Monetary Union (EMU) is an umbrella term for the group of policies aimed at converging the economies of member states of the European Union at three stages. The policies cover the 19 eurozone states, as well as non-euro European Union states.

Fiscal union is the integration of the fiscal policy of nations or states. Under fiscal union decisions about the collection and expenditure of taxes are taken by common institutions, shared by the participating governments. A fiscal union does not imply the centralisation of spending and tax decisions at the supranational level. Centralisation of these decisions would open up not only the possibility of inherent risk sharing through the supranational tax and transfer system but also economic stabilisation through debt management at the supranational level. Proper management would reduce the effects of asymmetric shocks that would be shared both with other countries and with future generations. Fiscal union also implies that the debt would be financed not by individual countries but by a common bond.

The Euro summit is the meeting of the heads of state or government of the member states of the eurozone. It is distinct from the EU summit held regularly by the European Council, the meeting of all EU leaders.

Luis Garicano Gabilondo is a Spanish economist and politician who is currently a Member of the European Parliament (MEP) from Spain since 2019. He is also Vice President of Renew Europe and Vice President of the European political political party Alliance of Liberals and Democrats for Europe. Before working in Brussels, he has been Professor of Strategy and Economics at the Business School of the Business Institute and at the London School of Economics (LSE).

Withdrawal from the Eurozone denotes the process whereby a Eurozone member-state, whether voluntarily or forcibly, stops using the euro as its national currency and leaves the Eurozone. As of May 2019, no country has withdrawn from the Eurozone.

The Julis-Rabinowitz Center for Public Policy and Finance (JRC) is a leading research center at the Woodrow Wilson School of Public and International Affairs of Princeton University. Founded in 2011, the JRC primarily promotes research on public policy as it relates to financial markets and macroeconomics. The center has also expanded its research and teaching to multiple disciplines, including economics, operations research, political science, history, and ethics.

References

↑ Brunnermeier, Markus; James, Harold; Landau, Jean-Pierre (2016). The Euro and the Battle of Ideas. Princeton University Press. p. 85.
↑ Brunnermeier, Markus; James, Harold; Landau, Jean-Pierre (2016). The Euro and the Battle of Ideas. Princeton University Press. p. 390.
↑ "The Euro and the Battle of Ideas: Review". Amazon.
↑ "The Euro and the Battle of Ideas: Review". Amazon.
↑ "The Euro and the Battle of Ideas". Princeton University Press.

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[1] Brunnermeier, Markus; James, Harold; Landau, Jean-Pierre (2016). The Euro and the Battle of Ideas. Princeton University Press. p. 85.

[2] Brunnermeier, Markus; James, Harold; Landau, Jean-Pierre (2016). The Euro and the Battle of Ideas. Princeton University Press. p. 390.

[3] "The Euro and the Battle of Ideas: Review". Amazon.

[4] "The Euro and the Battle of Ideas: Review". Amazon.

[5] "The Euro and the Battle of Ideas". Princeton University Press.