Wynne Godley on the Euro in 1992

I mentioned Wynne Godley’s prescient observations about the Euro back in 1992 in a debate on the Mind Your Business program on Ireland’s RTE Radio 1 about half an hour ago. Godley’s remarks–no doubt seen as extremist when he uttered them–have proven to be utterly prophetic:

Some writers (such as Samuel Brittan and Sir Douglas Hague) have seriously suggested that EMU, by abolishing the balance of payments problem in its present form, would indeed abolish the problem, where it exists, of persistent failure to compete successfully in world markets. But as Professor Martin Feldstein pointed out in a major article in the Economist (13 June), this argument is very dangerously mistaken. If a country or region has no power to devalue, and if it is not the beneficiary of a system of fiscal equalisation, then there is nothing to stop it suffering a process of cumulative and terminal decline leading, in the end, to emigration as the only alternative to poverty or starvation.

The entire article can be read here:

http://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-all-that

I also wrote a feature on it for Business Spectator:

Leaving the Hotel Euro?