Monetary versus Political Unification in Europe. On Maastricht as an exercise in ‘vulgar’ political economy

The original conceptions of the EMU project widely recognized that removal of capital controls and centralization of monetary policy in Europe could but be envisaged at the end of a more advanced process of political integration. The Delors report and the Maastricht Treaty departed markedly from this view, which has been replaced by a concept of monetary integration as a ‘catalyst’ or ‘stepping stone’ to political integration. Such a concept is criticized in the present article and the contention is put forward that capital control, by allowing a country to have the appropriate rate of interest, may allow it to achieve such goals as a more equitable distribution of income, high levels of employment and continuous improvements in the standard of living, as well as a low rate of inflation. Only if these goals ceased to represent national concerns and became instead overall European concerns, would it make sense for individual countries not to struggle to preserve their monetary and fiscal autonomy. But undiluted support for a regime of free international capital mobility is not going to be easily disposed of, unless eventual emancipation from current orthodoxy goes so far as to question some of its very foundations.