David Marsh (2) (1952–)

For all its outdated quality and wrong prognostications, this account of the Bundesbank is still worth retaining. The author, David Marsh, was a senior Financial Times journalist with extensive experience of European economics. This book was written (1992) just as Europe faced the collapse of Sovietism.

The early chapters are rather unsatisfactory journalism but once Marsh gets into his stride with what amounts to a contemporary history of German monetary policy then the insights come thick show more and fast. He knows the personalities and the politics.

The misjudgement only comes from the subtitle 'The Bank That Rules Europe' because Marsh underestimated the political drive towards European monetary union. The Euro was adopted in 1995 only three years after the publication of a book downbeat about German acceptance of union.

However, Marsh cannot be blamed for not having crystal ball because no one has. Misjudgement is normal in international economic affairs as we know from observing the current Trump-led trade revolution which can be expected to develop fiscal and monetary aspects quite soon.

Where the book remains useful is, as we have noted, in the history it reveals, taking us from the errors of the First World War through those of the Nazi Reichsbank then onto the post-war federal settlement, the Bank's role in the wirtschaftswunder and so to German re-unification.

It is all interesting, if often technical, because Marsh is adept at revealing the personalities and institutional conflicts at the centre of the Bank and its relationships with the German political class. It worked because struggle took place within agreed rules but tensions were not abnormal.

The first stand-out era is, of course, the relationship between the Reichsbank and the Nazi regime where Schacht stood for sound money until obliged to stand down in 1939. His acquittal at Nuremburg was probably justified even if he sailed damn close to the wind as a German nationalist.

The surprise is the degree to which the Hitler regime accepted 'sound' financial and monetary principles until war made this impossible. Hitler was clearly as unnerved by the great Weimar inflation (1921-1923) as all Germans seem to have been until perhaps this year.

What is less surprising to the cynics amongst us is the degree of continuity between the Nazi and Federal regimes. In 1968, 53% of the Bundesbank's leading executives were former Nazi Party members. NATO too had its share of leading men whose war record would put Netanyahu to shame.

The Federal regime then ticks along as a constitutional democracy after the great currency reform of 1948 which liberated Germany finally from Allied control. A chastened elite separates out currency from the rest of economic policy much to occasional political frustration but it works.

The next 'world-historical' challenge was the unification with East Germany, in productivity terms a total economic basket case. Marsh gives us a blow by blow account of the process which was by no means a foregone conclusion in terms of its eventual success.

Many in the Bank and elsewhere considered the acquisition of the Eastern Lander to be a potentially disastrous mistake. Politicians who advocated re-unification badly underestimated costs and disruption but, regardless of their concerns, the Bundesbank showed its usual technocratic efficiency.

The books ends in the middle of the key issue of Marsh's day - European unification. The Bank, with an institutional interest in not ceding power, nevertheless identified the practical necessity of political union being intensified if German methods of sound money were to be transferrable to the EU.

This was, of course, before the arrival of the Soviet Union's delapidated empire. German re-unification had provided a trial run for wider integration and economic management. Germans were understandably nervous of having to pay for a dissolute Mediterranean long before this.

What Marsh perhaps failed to see was the absolute commitment of the German political elite to European unification. They demanded that the technocrats simply make it happen on lines driven by French technocrats but according to German rules. Franco-German planning created the new Europe.

Exactly how sustainable all this is remains to be seen. The Greek financial crisis in 2015 placed banks before short term popular needs. German ruthlessness, much castigated by Yanis Varoufakis, appears to have paid off but history plays a long game.

German unification, for example, did not actually unify Germany beyond the constitutional forms of unity. Recent elections have shown the East German Lander (excepting liberal Berlin) moving sharply to the AfD on the Right in protest at still being second class citizens.

It took some three decades for the East German revolt to unfold. On that time-scale we may be due a similar revolt emerging against European integration under conditions where the constitutional forms holding Europe together are much more complex and weaker than in the German case.

This review should not make the mistake of Marsh in trying to predict the future and getting it wrong but both the original instigators of the marriage of sound money and political integration, France and Germany, are in budgetary and economic trouble and political turmoil.

Lawfare in France against the Right and threats of banning the AfD in Germany are likely only to toughen resistance. There are signs of dissent from the plan for the next stage of Atlanticist European and NATO integration from several countries as different as Spain, Slovenia, Hungary and Slovakia.

History just never comes to a halt. Fukuyama now looks like a bit of a twit for suggesting it might. What happens next is anybody's guess but Marsh's book from over thirty years ago does help us to understand some of the continuities on at least the German side of things. show less

I had expected a sharply worded, highly controversial treatise on the euro and the eurozone. In a fast 120 pages, I expected new directions, new insights, and harsh accusations. But that's not what Europe's Deadlock is. It is instead a very competent, very quick history of the euro and what ails it.

We all see the headlines and the stories daily. We know southern countries suffer because they can't devalue. But while it is easy to say being in a common currency removes flexibility to act for show more your country, Marsh rightly points out the chaos created by weaker countries devaluing at will, bankrupting vendors in other nations. An example is the Italian lira, already nearly worthless, added more zeros after the decimal point when it devalued by 30% in the early 90s. The euro crisis is reminiscent of the gold standard, where individual countries could not bend the situation to their own advantage.

Nor is it any secret that instead of using their admission to the euro as the opportunity to rationalize their institutions and regulations, Ireland and the southern countries brandished it as proof they were quality players. Their narcissistic selfishness is costing everyone in Europe today. Marsh glances off that image.

The recommendations at the end are futile - things like full political union. Forgetaboutit. These are enormously proud countries, many of the postage stamp variety. They will give up nothing. Nor would any other in the world. Marsh acknowledges his recommendations are "demanding."

So we are left with is a competent history, right up to the Cyprus banking disaster, but really not much else. If you haven't been following the rise and fall of the euro since inception, this book is a fine refresher. show less

Frankly, I was expecting more. While I'm not as in the dark on the euro as I was going in to this, I certainly wouldn't consider myself much more adept at discussing it. I could give you a rough timeline of events in the life of the common European currency, but that's about it. There was no real 'narrative,' but instead what felt like a hastily-cobbled together bunch of quotes and never-before-disclosed snippets (something the author always pointed out). Perhaps I was just in over my head, show more economically and historically/culturally, but wow-what a letdown. If you're like me and simply wanting to understand the history and details of the coming of the euro... look elsewhere than this book. A no doubt fascinating and extraordinary story that will have to wait to be told in another book. show less

Good only to show how different thinking was about certain issues only a few years ago.