Canada, the United States, and the European Union: Neglected Lessons in Building a Currency Zone out of Separate States

25 08 2013

AS: This paper was presented at the EBHA.  You can read the full paper here. I’m going to publish a lengthy blog post with some thoughts on this paper in the next few days.

Christopher Kobrak, ESCP Europe/Rotman School of Management, University of Toronto
cpkobrak@aol.com (Contact author)

Joe Martin, Rotman School of Management, University of Toronto

Donald S. Brean, Rotman School of Management, University of Toronto

Abstract:
Recent tensions in the Eurozone have elicited relatively little public discussions of how large  federal systems grappled over time with forging a common financial and monetary system.  This paper draws on the disparate experiences of two North American countries from similar  traditions – Canada and the United States, with a view to putting that process in historical  context. Despite advantages which Europe does not enjoy, these countries’ efforts to build  their national banking systems and common currency as well as unify their national debt  followed a long and varied path. The paper argues that Europeans would profit from the  lesson that the process required many difficult political steps in order to build the necessary  consensus for these systems to function, with all their flaws, as a binding rather than divisive force. We contend that those who supported and implemented the introduction of the Euro  ignored much of the institutional and organizational infrastructure required to successfully run  an “optimal currency area.”

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