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Friedrich Hayek and the Void-oids

Greek Prime Minister Alexis Tsipras and his finance minister, Yanis Varoufakis, are argumentative. People like to point this out about the men who have been playing chicken with Europe and the IMF for the last five months, with the latest deadline for a Greek default looming. But economic pundits often miss a more basic point: that they have someone to argue with. What would a Europe look like in which there was nobody to attack?

It has become fashionable to see Europe as a lost cause. We are told that the game was rigged from the start. Europe was built to be a hopeless austerity machine. But was it? 

Another idea gaining in popularity, most recently in the work of German sociologist Wolfgang Streeck, is that Friedrich Hayek invented Europe. In an obscure text from 1939, the Austrian economist and father of neoliberalism argued that loose political federation combined with free trade and investment would guarantee a minimal social state. In the last few years, a series of voices have endorsed the idea that this article was a prefiguration ofif not a blueprint forthe European Union.

But was Europe really designed as an austerity machine? In fact, the Europe first created as the European Economic Community in the 1950s horrified the self-described neoliberals in Hayek’s circle. It protected European farmers. It encouraged planning and Keynesian spending. The German economist Wilhelm Röpke called the EEC the threat of “supercollectivism on a super-state level.”

If you went looking for a solid trace of a neoliberal pedigree for the European institutions, your best bet would be in 1992 with the decision to adopt the common currency with the Maastricht Treaty. As they promoted the adoption of the euro, central bankers used terms introduced by Hayek himself. The European Central Bank’s first chief economist even spoke at the neoliberal Institute of Economic Affairs to mark Hayek’s one-hundredth birthday.

It was with Maastricht that the ominous-sounding entity known as “the eurozone” was born—the shorthand term for the nations signing on to the new shared currency. And the Maastricht deal was what French economist Thomas Piketty had in mind when he said that in “creating the euro zone, we have created a monster.” The euro has acted as a means of imposing austerity on otherwise-unwilling polities—most especially, countries in Greece’s debt-ravaged condition, which desperately need to devalue their currency in order to make their exports more competitive and reduce their debts.

The irony, though, is that Hayek’s later writings ran directly counter to the idea of the shared currency of the euro. In fact, his name rings through hyperventilating techno-libertarian conversations about another currency: Bitcoin. When the German government became the first to accept Bitcoin as a unit of revenue in taxation, the Free Democratic delegate responsible for the law crowed on Twitter: “Hayek would be overjoyed.”

While other neoliberals, most notably Milton Friedman, believed that central banks were necessary to control the amount of money in circulation, Hayek dreamed of a day in which those anchors of national—and now continental—economies would vanish altogether.

When Blockupy protesters head to the European Central Bank in Frankfurt, they have a steely skyscraper to demonstrate in front of, and humans to pelt with glitter. If the European trading bloc truly did take embryonic shape in Hayek’s imagination, as some critics claim, the building in Frankfurt (designed by Viennese architects who started out in 1968 making foam parties and trippy, inhabitable bubbles) would not be there. One of the virtues Hayek saw in the free market system was that it left nobody to blame. “Inequality is undoubtedly more readily born if it is due…to impersonal forces,” he wrote in 1939, “than when it is due to design.”

In a truly Hayekian continent, Europeans would be left kneeling to the void, like the supplicants after the collapse of the global Bitcoin exchange, Mt. Gox. This, indeed, appears to be the version of the Eurozone that German finance minister Wolfgang Schäuble seems to think he lives in. “New elections change nothing in the accords struck with the Greek government,” he said last December. 

But in democracies, economic policies are always open to revision. If this was not true, postwar West Germany could not have received the biggest write-down of debt in history as a means of securing its own legitimacy—and its generous share of postwar productivity growth.

Germany should keep the history of its own prosperity in mind. And meanwhile, Hayek’s specter should help the opposition remember that’s it’s far better to be fighting for justice in imperfect institutions than in a libertarian institutional void.