Ask any European what happened in 1789, and invariably the answer will be “the French Revolution.” Many will even be able to name the day, July 14, when the Paris mob stormed the Bastille, the hated political prison of the soon-to-be headless Louis XVI – a public holiday in France to this day.
But the “new Europe” so proudly proclaimed with the Treaty of Maastricht in 1992, with its planned single currency, more powerful judiciary, and ambition to absorb more members, is now thinking hard about the other great event of 1789: the ditching of the weak and docile Articles of Confederation by the newly independent United States.
A growing number of academics, especially economic historians, have cottoned on to the analogy between the United States between 1777 and 1789 and Europe from 1992 to today, when the obvious solution required is a radical rethink, but all the elite could muster was more fudge. In both cases, an unprecedented effort to unite formerly separate states into a “more perfect union” was undertaken using rules written in such a way as not to offend the local sensibilities of various potential members.
In an episode many “strict constructionists” prefer to forget these days, the Second Continental Congress in 1777 appointed a committee to draw up the Articles that would govern relations between the various colonies after independence, as well as the relationship between each colony and the new national government. This was one of three committees—one, led by Jefferson, wrote the Declaration of Independence; another, led by Robert Morris, would draw up a “model treaty” that would lay out the terms of U.S. relations with the rest of the world.
The third, led by John Dickinson, drafted the Articles, which effectively governed the United States until Alexander Hamilton, James Madison, and a great deal of ensuing anarchy convinced Congress they should be replaced, in 1789, by a U.S. Constitution that created a stronger central government with taxation and treaty powers that superceded state powers.
Now that we’ve blown the cobwebs off that topic, I hear you ask: What the hell does this have to do with the dysfunctional Eurozone?
Well, sorry, more history: The country that emerged from the American Revolutionary War was deeply in debt, ravaged by a nearly a decade of fighting, divided on issues as basic as the need to fund a national army and navy, and, not incidentally, slavery. Congress, the only one of today’s three branches of federal government created by the Articles, could only request money from the states, and it had thus had no power to enforce any law it passed.
Empires, like nature, abhor vacuums, and so even after the war ended in 1783, Britain took advantage of the powerless state of the U.S. government by moving to divide various states by cutting separate trade deals with them. France and Spain did the same, and by 1786, efforts by Massachusetts to raise money to pay European war debts led to a violent rising known as Shays’ Rebellion, an existential moment for the young United States that led directly to the calling of a new Constitutional Convention.
So far, Europe’s faulty constitutional arrangement has spawned no armed rebellion, and compared with the conduct of U.S. states under the Articles, the countries of the Eurozone, even Greece, have been relatively true to their word.
But Greece’s impending default—and don’t kid yourself, it has already, in effect, defaulted—can be viewed as a Shays’ moment. The real question now is very much the same one facing the 13 colonies in 1786. Do they dissolve the dysfunctional union and re-enter the world as individuals, with Germany in the role of Virginia, France as Massachusetts, the Brits in a supporting role of the standoffish Rhode Island, and so on, or do they draw up a constitution that creates an actual union?
Going much further with the analogy strains reason: We live in much more complicated times, financially at least, and it may be that a European Union (or at least a Eurozone) that stops short of political union and merely fixes a consistent, unified fiscal mechanism can thrive.
But nothing could be more relevant reading for the German, French, and other European policymakers wending their way through the current thicket than an article written by James Madison in April 1787, as his new country teetered on the brink of financial doom and political chaos: “The Vices of the Political System of the United States.”
“It is no longer doubted that a unanimous and punctual obedience of 13 independent bodies, to the acts of the federal Government, ought not be calculated on. Even during the war, when external danger supplied in some degree the defect of legal & coercive sanctions, how imperfectly did the States fulfill their obligations to the Union? In time of peace, we see already what is to be expected. How indeed could it be otherwise?”
Come to think of it, reading Madison again couldn’t hurt the many states-rights advocates seeking to fatally weaken federal authority in America, either.