The Bulgarian government recently announced that it was suspending its plan to join the euro. This emerged through interviews in Sofia with Boyko Borisov, the Bulgarian politician who has been the country’s Prime Minister since 2005, and Simeon Djankov, the Bulgarian economist who acts both as the Minister of Finance and the Deputy Prime Minister. These were then published in the Wall Street Journal in an article by Joe Parkinson entitled, “Bulgaria Shelves Plans to join ailing Euro Bloc”. The rejection of Bulgaria to adopt the euro currency coincided with similar actions by other emergent eastern European economies, notably Lithuania, Poland and Croatia and has been portrayed in the media news cycle to signify a blow in the EU governments’ attempts to rescue the present financial crash in Europe. advertisement
The Bulgarian government’s move not to use the euro is certainly a significant signal in relation to the financial crash within the Europe and the collapse of the euro, but not necessarily in the manner in which it is was portrayed within the media at large.
The Wall St. Journal’s follow-up article was entitled, “Bulgaria’s Lessons for Euro-Sceptics” and it quite accurately dismantles the over-simplifications and generalities of the media news cycle about this event. But what it does fail to recognise is a patterning that can help unlock a clearer understanding of the present financial crisis that confronts our generation in Europe but also around the world.
Johns Hopkins University’s Steve. H. Hanke is intelligently used in this article as its parting blow to dispel the over-simplifications: he himself set-up the currency structures in Bulgaria (along with other Eastern European countries) in the 1990’s and so knows what’s going on. He actually does endorse that Bulgaria stays out of the euro. Hanke clarifies: „The lev [the Bulgarian currency] is a clone of the euro…It's the same as the euro. This is not a no-confidence vote on the euro, it's a reaffirmation of their own sovereignty to control their own monetary regime“. This is very true.
But here’s the catch. Simeon Djankov, Bulgaria’s influential Minister of Finance is a highly accomplished and successful economist and is actually no even a member of the ruling GERB political party but just a member of its cabinet. He read his Master's and PhD degrees in International Commercial and Financial Relations at the University of Michigan. Djankov was for fourteen years a chief economist on finance and private sector affairs at the World Bank from 1995 until his election as Bulgarian Minister of Finance. While at the World Bank, he worked on regional trade agreements in North Africa, enterprise restructuring and privatization in transition economies, corporate governance in East Asia, and regulatory reforms around the world. In 1997, he participated in a World Bank enterprise-restructuring project in Georgia. Since 2004, after the so-called Rose Revolution, he has visited Georgia frequently and worked with that government to reform the business environment. He is currently ranked 151st on the Most Cited Economists Today list by the organisation Research Papers in Economics.
Steve H. Hanke as well as being a Professor of Applied Economics at The Johns Hopkins University in Baltimore, is also a Senior Fellow at the Cato Institute, a Distinguished Professor at the Universities Pelita Harapan in Jakarta, Indonesia; a Senior Advisor at the Renmin University of China’s International Monetary Research Institute in Beijing; a member of the National Bank of Kuwait’s International Advisory Board (chaired by Sir John Major the ex-Prime Minister of Britain); a member of the Financial Advisory Council of the United Arab Emirates; and a columnist at Forbes magazine. Hanke was a Senior Economist on President Reagan’s Council of Economic Advisers 1981-82; a State Counselor to the Republic of Lithuania in 1994-1996 and to the Republic of Montenegro in 1999-2003; an Advisor to the Presidents of Bulgaria in 1997-2002, Venezuela in 1995-96 and Indonesia in 1998. He played an important role in establishing new currency regimes in Argentina, Estonia, Bulgaria, Bosnia-Herzegovina, Ecuador, Lithuania and Montenegro. He has also advised the governments other countries, including Albania, Kazakhstan and Yugoslavia. Dr. Hanke is in addition to all of this a reputed currency and commodity trader and is currently chairman of the macro hedge fund the Richmond Group Fund Company. Impressive resume.
Both Djankov and Hanke are highly competent people and at the top echelon of their field. But crucially, neither predicted or spoke out against the practices that led to the 2008 Financial Crash, like the once little known economist named Nouriel Roubini did. Roubini, too, is of the academic-policymaker-economist fold and has taught at Yale in the past, currently teaches at the New York University and has been employed by The IMF, the Federal Reserve, the World Bank and the Bank of Israel. Yet he was one of the few of this kind who saw what was going to happen and spoke up. These two academic-policymaker-economists form part of the class that were complicit in the events that led up to the financial collapse of 2008/09 and are continue to bring no clarity of thinking or action to the euro zone crisis today. This is not a Recession. It is a financial collapse. It is real. But it is not being confronted.
One of the key issues both of the US financial crash of 2008 and the present meltdown in Europe is the categorical lack of discourse, discussion or critique about the medium of exchange – fiat currency – in mainstream media. Any attempt at intelligent discussion, debate or investigation into potential alternatives are ridiculed, slammed, berated and belittled. It is time that intelligent men and women have the courage to explore the uncomfortable possibility that the seemingly titanium-like assumption that the euro as currency and the present economic system will somehow survive, is actually wrong. This is not a moral issue but one of practical intelligence. If the Titanic is to sink, surely the intelligent will want to be away on a lifeboat – away from the inevitable destruction and with some semblance of economic and civic wealth, autonomy and security?
Yes, the lev is a clone of the euro. But these decorated economists could not foresee the 2008 Financial Crash and worse, still believe in, practice and preach the same failed system. Why do we allow them to continue to advise our governments today and why do we still accept them? This issue demands further investigation.
Related links: The Wall St. Journal’s article ‘Bulgaria Shelves Plans to Join Ailing Euro Bloc’ Wall St. Journal’s article ‘Bulgaria’s Lesson for Euro-Skeptics’ World Bank paper ‘Debt Enforcement around the World’ co-authored by Simeon Djankov
