A More Perfect Union

   There are four elements to a full union of states (or nation-states, for the European Union). Broadly speaking, these elements are fiscal union, monetary union, political union and economic union.
   The U.S. to a large extent has all four, despite some rough spots that can still cause friction. The Declaration of Independence in 1776 referred to the "free and independent states" of America, but the first form of government for the new nation, the Articles of Confederation, quickly proved unworkable, so a new Constitution was proposed and adopted with a stronger central government. Later, it took a Civil War to solidify the union politically, and another half-century until the federal government was able to exert its monetary authority over the banking system. And because the Constitution established the federal government as the regulator of interstate commerce, forbidding the individual states from enacting tariffs on goods from other states, economic union was strengthened. Fiscal union was also strengthened by the Constitution, enabling the central government to enact and collect tax revenue for its operations. Previously, the Articles of Confederation required the unanimous approval of the states before the federal government could impose a tax.
   Much of this is covered in detail in a working paper from the International Monetary Fund titled "The Making of a Continental Financial System: Lessons for Europe from Early American History," prepared by Vitor Gaspar of the IMF Fiscal Affairs Department.
   So while the U.S. has achieved "a more perfect union" through its Constitution of 1789, the 28 members of the European Union have yet to agree on enough of the four elements to fully realize the benefits of a continental union. And unless the EU does this -- centralize monetary policy and get a strong enough central government to dominate fiscal policy -- political union may not survive, especially if fiscal policy (government spending) is still largely set by individual member states.
   Currently, Germany's insistence on austerity by other nations as the way to resolve economic problems will stall recovery and may well lead to collapse of the EU.
   History details numerous attempts to establish by force a dominant central government. All have failed. One answer, then, has been to establish a more perfect union through economics, removing trade and personal movement barriers among members of the European Union as a first step, then establishing a single currency to facilitate trade.
   However, only 18 of the 28 members of the EU have adopted the euro, and the European Central Bank does not yet seem to have sufficient authority to regulate the number of euros put into circulation by the various members, and thus their value.
   The U.S. solved this problem early on, designating the federal government as the sole issuer of dollars. Previously, banks in each state could and did issue their own currency, and people in one state would not trust the validity of money from an adjacent state.

   So the big question is this: Can Europe have economic union without fiscal, monetary and political union? Or will cultural and linguistic differences, along with historical distrust of neighbors, prevent a full union and bring a return to a fragmented continent and an attempt by one nation to dominate by force?
   Many of these issues were resolved long ago in the U.S., even as regional, cultural and language differences remain. And despite the praise by some of America as a "Great Melting Pot," the reality is that it never was. The great strength of America is that it is a kaleidoscope of cultures, with its citizens (most of them, anyway) accepting the many differences of others.