1. The future of the European Community is in doubt at the present time after long slow development since the end of WWII becoming the European in 1993.
a. How did the European Community emerge?
The authors Yergin and Stanislaw suggest that the European Community started to emerge after World War II with the Italian Communist turned Democratic Socialist, Altiero Spinelli. Before that time the French FM Monnet had been influential in developing the plan. “In 1941 . . . (Spinelli and two of his fell prisoners) set out to write a manifesto for a new Europe, a united Europe” (Yergin & Stanislaw 6553). Spinelli was impressed with the American ‘Federalist Papers’ and the Founding Fathers of the United States. Although the manifesto of Spinelli and his co-prisoners did not bring results, the Marshall Plan made possible the serious organization of the European Economic Community in 1947, by allowing for the organization of the European Coal and Steel Community, a trade agreement between France and Germany. In the 1980s the European Economic Community (EEC) was doing well. (Yergin & Stanislaw 6576) The EEC facilitated trade opportunities within Europe while the nations still retained their sovereign control of their own economy. Approximately forty five years after the devastation of Europe from WWII, the continent was prosperous and the European Union was officially formed in 1993. Six European countries had jointed in 1957 with the first trade organization. Three more countries joined in 1973, the European Monetary System was created in the late 1970s and in 1986 three more European countries joined.
b. Is the Treaty of Maastricht proving to be adequate?
The Treaty of Maastricht was created in December 1991 and initiated the Euro as the currency for Europe. The Euro has replaced the national currencies which were phased out of circulation. The European Central Bank (ECB) gained quite a lot of power of the years. The Treaty of Maastricht, after all is just a contract. The will of the leaders in the nations of Europe and the cooperation of the ECB are two key players in making the Euro Zone a success or a failure.
c. What would be required politically for the Euro to survive?
The ECB needs to decide if the economy belongs to Europeans or to the bankers. Money cannot be squirreled away with the expectation the economy will be kick started from some miracle. Money needs to be circulating for the economy to run properly. Almost every county has been impacted negatively, including Germany and France, by the inaction of the ECB. Smaller countries are being asked to pay off ‘loans’ that are simply interest on original interest. For the Euro Zone to work the debts should be forgiven, the slates wiped clean and a new commitment to the European people and their well-being (or ‘welfare’) needs to be reaffirmed. (Some new hires at the ECB are in order.)
2. Russia made expansive transition to capitalism after 70 years of Communism.
a. What prompted the dissolution of the USSR?
The authors suggest that the failure of communism and the centralized control of the USSR’s economy led to its dissolution. State control did not work when what was needed was market economics and privatization. Although the USSR’s success against the NAZIs gave the USSR-style socialism some credibility, the fall of the Berlin Wall made that somehow unimportant.
b. Who played major intellectual and political roles?
Gorbachev played an important role in the 1980s allowing companies to become privatized. Yavlinsky the labor economist who was highly influenced by the economic reforms in Poland (he was employed by the Council of Ministers) brought them to Russia. Yavlinsky’s plan “Transformation to the Market” was also influenced by his study of Japan. Gaidar was the minister in the 1990s that placed the strict economic reforms on the Russian people, stated that Hayak was one of his great influences. Chubais had a three point design (a) people would use the rewards and organizations available, (b) the economy could not be helped by bureaucrats, and (c) privatization was essential and the private citizens should be stakeholders in private enterprise.
c. Who were the “Red Directors” and how did they hinder the process?
The Red Directors were the upper managers of the centralized manufacturing and industrial enterprises during the years of the USSR. They held the power in the old system and did not trust the reformers. They essentially did not want change. In other words they felt everything from publishing books to vehicles of transportation should remain under government control.
d. How did Boris Yeltsin manage to hold off the Communists in the 1996 elections?
Yeltsin accepted the support of the powerful business class, the business elites who received the chance to privatize the mines and other command resources of Russian. Potanin was an influential business who supported Yeltsin. He organized other rich people and they lent money to Yeltsin for his reelection. Potanin was interested in receiving payback in the form of stock in the Norilsk Nickel mine.
e. Was the emergence of the Russian oligarchs important for the transition to capitalism?
The ability of the Russian oligarchs to organize and share the same goal instead of competing made it possible for capitalism in the form of privatization to be started in Russia. Instead of lending money with the hope of capital plus interest in return, the oligarchs were well pleased with receiving shares in former communist industrial companies instead. In contemporary Russia the natural resources of oil and natural gas are strengthening the economy. They are also strengthening the ties between Russian and the former Eastern bloc nations, Turkey and Iran. Trade agreements instead of competition for control are working out well for Russia.
3. The US economy soared during the 1990s after recovering from a recession during the transition years from the first Bush to the Clinton Administrations. One of the major reasons was the so-called New Economy based on the Internet.
a. How did Wall Street contribute to the technology-based economic boom and subsequent bust?
Financial markets were closely interconnected with the Internet boom because of the excitement the fast rate of equity values growth. Wall Street first of all embraced the new technology by using it to gain knowledge and information more quickly from any part of the world. Wall Street bankers and investors supported the new technology because they saw a new way to make money. They were the people who were most invested in creating new partnerships between dot.coms. They also were involved in setting up the companies that evolved from the break-up of the AT&T monopoly. Wall Street was involved in a lot of speculation. The most interesting comment about the Internet from the authors was “While governments can promote the Internet, they cannot control it” (Yergin & Stanislaw 8211). They fully understand how there are no borders on the Internet just as the markets traded on Wall Street have no borders when the Internet is being used for financial purposes. Wall Street added to the boom and bust pattern whenever a priority was given to speculation rather than common sense investment.
b. What kind of warning did this boom-bust pattern generate for the George W. Bush Administration?
Deregulation can be a bumpy ride. The same boom-bust pattern was experienced in the housing market. The biggest tip off for the former President may have been the rise in mortgage rates. Rubin (from Chair of the Treasury Department) has said during the Clinton administration that “ultimately its interest rates that drive the economy” (Yergin & Stanislaw 8211). He was speaking about cutting the deficit. The way the deficit was cutting spending (especially in the area of the military) and jobs increased were by spending less and taxing more. (Yergin & Stanislaw 7534). Bush chose to do the opposite, he increased military spending and cut taxes.
Yergin, Daniel and Joseph Stanislaw. “The Commanding Heights: The Battle for the World Economy.” New York: Simon & Schuster. 1998. pp. 270-418. Kindle Edition. pp. 6553-8686.