It is a foolish man who wades into the present British debate on European Monetary Union (EMU) and tries to be clear-headed. This is now witch-hunt country, where the ducking stool awaits anyone who offers a reasoned view. If you basically favour the idea of European coinage, even with 100 provisos, you are a Euro-freak. If, after careful reflection, you decide against it, you are swept into the Tory Party's National Liberation Front. So here goes: every reader will find something to detest in what follows.
Kenneth Clarke argued the other day, in a speech that still loudly reverberates, that it was possible for Britain to join a European currency without sacrificing much sovereignty, and without taking a "huge step on the path to a federal Europe". He is logically wrong on both counts. But the practical significance of his mistake is dwindling to the point where he is right to favour a single European currency.
Mr Clarke claimed that Britain had pegged the pound sterling to gold for many years, and subsequently pegged it to the dollar, under the Bretton Woods agreement, without loss of sovereignty. He forgot that sovereignty is the authority of a nation to make choices - even futile ones - not the possession of power. Britain chose to adhere to the gold standard, chose to exploit it to pay for the First World War, chose disastrously to pretend it had not, suffered dire unemployment as a result until it chose a lower standard, financed another war and finally chose to link sterling to the dollar (which then proceeded to go through similar delusions of grandeur itself).
Sovereignty includes the right of a government to fly in the face of reality. Most of the time that right is not worth much. Under normal conditions, political leaders are probably best deprived of tempting options that amount to promises of a free lunch. How reassuring, to offer a whimsical example, that the Conservative government cannot devalue the foot, as a painless way of increasing both its stature and the distance between Britain and the Continent. The foot remains pegged to Napoleon's dastardly metre, and not even George Soros can do anything about it.
But, in extremis, the sovereign right to suspend reality comes into its own. Going to war is the ultimate exercise of sovereignty, one that can require a total mobilisation of a country's resources. The right of a government to issue and debase its own legal tender then becomes a crucial weapon. Seignorage (the revenues from printing money), debasement of that money, and legal tender (the obligation on traders to accept the result), make a powerful trio in war. They offer an unblockable way of drawing upon people's savings and buying their labour for very little.
The scenario may be extreme, but the underlying truth is telling. When and if European countries link currencies and throw away the key, they will, for good or ill, be greatly reducing their individual ability to wage total war. Few things are, at the ragged edge, more sovereignty- sapping than that.
For a less cataclysmic example, take Germany at the time of its unification. Unsure of the future friendliness of Russia, Chancellor Helmut Kohl wanted to sew up the economic merger with East Germany fast. Overriding the Bundesbank, he announced that the D-mark was worth an ostmark. This was lousy economics but a clear exercise of monetary sovereignty. Mr Kohl would have gone purple with frustration had he had to haggle for a valuation of the ostmark in ecus in the European Council of Ministers, and then watch the council persuade the governors of a European central bank to oblige. You may think it would have been better for the rest of Europe had he done so, but you cannot claim Kohl made no use of monetary sovereignty.
What about Mr Clarke's other claim: that one currency need not be a big step towards Euro-federalism? This could be true, but under one hugely demanding condition. …