Milton Friedman expresses his sympathy for Syriza supporters and his dislike of the “gnomes in Brussels”

BREAKING NEWS! I have found a comment from Milton Friedman on the present Greek crisis in, which he expresses, his sympathies for Syriza supporters:

It is not the announced intention of our present arrangements, or of any of the various proposals for strengthening international monetary cooperation, to delegate significant political power over internal economic policy to foreign central bankers or officials of an international agency. But that is unquestionably their effect.

That this is a very real issue was illustrated dramatically by the recent experience of the Greeks, just after the Syriza government came into power. Personally, I disagree sharply with the particular policies that the newly elected Syriza government apparently wishes to follow, and regard the policy changes imposed on Greece by the EU as the price of the rescue of euro membership as very likely far better for Greece itself.

Yet that does not alter the fact that Greek internal policy was shaped by officials who were not responsible to the Greek electorate and in directions that had not emerged through the regular political process. In this respect, I find myself in complete sympathy with those Syriza supporters who regard it as nearly intolerable that the “gnomes in Brussels” should have a veto power over internal Greek economic policy.

Ok, I cheated. This is really from Friedman’s paper “The Political Economy of International Monetary Arrangements” from 1965 (re-printed in “Dollars and Deficits”, 1968, see page 272) and I have altered the text slightly (the bold text is my changes).

Originally it was about “Britain” rather than “Greece” and “Labour” rather than “Syriza” and the ‘gnomes’ were from “Zürich” rather than from “Brussels”.

But the lesson is the same – In-Optimal Currency Union will lead to balance of payments crisis, which will necessitate an income transfer from the centre to the periphery, which in turn will lead to the demand for political centralisation.

Britain felt the consequences of that within the Bretton Woods system in 1964. Greece is facing similar consequences today as a result of euro membership.

It seems like policy makers in Europe are totally incapable of understanding and learning anything from monetary history. Do I need to remind anybody what happened with the Bretton Woods system?

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  1. samo794

     /  July 24, 2015

    Poor Harold Wilson could talk about it.
    But as the Euro is a new gold for Greece, I worry that Greeks is going to suffer much longer than British at those times. Or next government will be more radical, as there will be literally nothing to loose. Or there will be some external event (US) which changes everything.

  2. nickik

     /  July 24, 2015


    Dont compare Brandon Woods to ‘gold’. Brandon Woods was a horrible system based on gold more in name then in fact.

    Look at how well the classical pre WW1 peformed. In that system the flow of gold between banks in different countries worked simularly to floating exchange rates.

    I would wager that Lars would agree with this statement.

  3. samo794

     /  July 27, 2015

    Look at pre WW2 what happened to countries pegged to gold, like France.
    I am not against gold or stable hard currency, but you need balanced foreign trade, fiscal transfers inside your country /or currency area/ and you need balanced public budget together with some social justice /middle class/. All of these things you can manipulate with floating exchange rate, in case there are some powers which you cant deal with the other way.
    Without your own currency and option of floating exchange, you give up your political system to hands of those keeping the gold or hard currency. Whether inside or outside of your country. And that’s the government without representation, which is – at least – unsustainable.


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