The collapse of the European Articles of Confederation

In 1783, the Peace of Paris recognized the rebellious American Colonies as free and independent states.  The States banded together under the Articles of Confederation.

The problem is well known to anyone who studied history when the school system was still functioning: the central government was very weak, with the States having essentially veto power over the central government on most things of import.  The new government's script (paper money) soon came under considerable pressure from the George Soros types of the day.  The American solution was to replace the Articles with a new Constitution which, while flawed, has performed more or less adequately for a couple centuries.

Ignoring a vast unpleasantness in the 1860s, with lesser unpleasantnesses scattered elsewhere.

The European Union looks to have reached that point now.  Their "last chance" to solve the Euro crisis ended not with a plan, but with a plan to make a plan.  The reasons are interesting, but entirely unsurprising to a student of American history.

The E.U. is famously undemocratic, with repeated refusals to allow popular vote by the respective national populations, or by do-overs when those populations vote the "wrong" way.  This has been discussed everywhere, so I won't belabor this.  It's also not the source of their problem.

The problem is the European States.  The E.U. works under the principle of unanimity - all of the 27 member states have to ratify any decision of importance.  When times are good, and there's enough money going around to buy off the disgruntled, it worked tolerably well.  But now the ratchet has to go the other way, with everyone giving something up.

And so it's supposed to be a surprise that nobody can come up with a plan?

Of course they can't come up with a plan.  So the interesting question is: now what?  There really are only two alternatives:

1. The status quo ante option:  Europe worked tolerably well before financial integration, and would work tolerably well with everyone reverting to francs, lira, deutschemarks, etc.  Since more and more transactions are computerized (essentially everything from government transfers to cross border corporate purchases to Briton's vacation credit card charges in Tenerife), this would work much better than even a decade ago.  You don't have to give up the common market, just the common currency.

2. The American option:  Get a real constitution, a workable one.  That's what we did, where the States ceded real authority to the central government.

Option one is clearly workable, albeit with some pain.  It has the disadvantage of demolishing the vision of the European elite, but that's probably not seen as viable these days, even by those elite.

Option 2 has actually been floated during the crisis discussions.  All that talk of fiscal guarantees, where Germany can take over budgeting decisions for other countries is actually the "strong center, weak periphery" approach that we ourselves took - although it took until 1865 for us to realize it.

But here's the rub - they need unanimity.  They don't have it.  Clearly, the southern European countries don't want to run their economies like the northern Europeans run theirs.  Clearly the northern Europeans are no longer willing to subsidize their southern neighbors "for the greater good".

And so forget the lack of referenda - they were never in the cards anyway.  Watch the Finance Ministers who "need to have discussions with their governments" - away from the European summit.  That's the sign that the European States still view themselves as the original American States did, unwilling (for now) to cede authority to the center.

So get ready to party like it's 1784.  The song has a good rhythm, but I can't say that I care for the lyrics.