The Theory of Political Monetary (Dis)Integration; A Minority Report from the Perspective of Austrian Economics

The issue of monetary disintegration gains an increasing place in the interest of political economists and policy makers alike. Until recently, the process through which two states that previously shared a common currency decide to abandon it and choose national currencies instead was a marginal and accidental event in history. It was met in the case of political disintegration of state constructions such as Czechoslovakia, Soviet Union or Yugoslavia, typically built through military aggression and experiencing widespread economic planning. Today, world may experience another type of monetary disintegration. In this case, it is the result of a deep economic crisis affecting the democratic process of integration in Western Europe. The difficulties experienced by some of the member states of the Euro-zone as well as the debate around the correct path towards solving them has raised the scenario that at least some of these countries will abandon their membership of the European Monetary System. The hallmark characteristic of these states is their open and predominantly market-oriented economies. Their return to a planned economy as well as complete autarchy from the rest of the global and regional economy is highly improbable. But they have also a monetary system based on political money and massive wealth redistribution is possible through the monetary mechanism.