America under the Articles of Confederation was a mess, not unlike Europe today. Could it lead to a stronger European Union?
German Chancellor Angela Merkel and French President Nicolas Sarkozy after a joint press conference at the Elysee Palace in Paris / AP
Monday, French President Nicolas Sarkozy and German Chancellor Angela Merkel spoke of their desire to change the treaties currently holding the European Union together, and to push the countries towards a tighter, more integrated federation. "We want to make sure that the imbalances that led to the situation in the euro zone today cannot happen again," Sarkozy said.
This would be a worthy project, of course, but treaty change and Union restructuring are about as big a political and legal headache as one could possibly imagine. With Europe this fractured, could leaders really agree upon a new setup? Is the political will present in the right states? Will the markets wait for the deliberations?
One always wants to be careful with historical comparisons: though TV pundits toss them around like party favors, their predictive power is limited. Looking to the Great Depression, for instance, doesn't immediately yield a solution or a timeline for our current economic woes. But there's another moment in American history that makes for a better comparison to Europe today: the 1781 signing of the Articles of Confederation.
There's something comforting about turning to a time when America was nearly as screwed up as Europe is today. Not only did the U.S. emerge from the tangle, but it emerged considerably stronger: the states' and nation's financial and logistical problems and mismanagement wound up pushing them to develop "a more perfect Union." So let's take a look for a moment at our own country's poor showing under the Articles of Confederation.
The Articles of Confederation, our pre-Constitution national legal framework, were drafted during the American Revolution and ratified largely in the late 1770s, Maryland finally signing on in 1781. By the late 1780s -- though historians may disagree over the extent to which the states were in actual crisis -- the Confederation and its members were looking pretty shabby.
American was then a picture of, at least superficially, fascinating disarray. Under the Articles, the federal government had no power to tax. It procured money through a "requisition" system, all states contributing, in theory, to the cost of providing national, public goods. In practice, this was a disaster. After only a few requisitions, as Keith Dougherty and Michael J.G. Cain recall in an article on "Marginal Cost Sharing and the Articles of Confederation" in the journal Public Choice, "states learned to withold their payments, leaving Congress without the resources to carry out its constitutional responsibilities. Lack of revenue prevented Congress from forcefully responding to British non-compliance with the 1783 Anglo-American peace treaty, reacting to the Spanish blockade of the Mississippi River between 1784 and 1787, enforcing treaties with the Indians by limiting western movement of settlers, and averting the piracy of the Barbary states."
A pretty little arrangement, no? Much has been written about the Articles' failings, but what Dougherty and Cain point out is that they "failed to organize a union where state and national interests coincided." In practice, "states fully complying with [...] requisitions, when others did not, incurred a greater portion of the national costs than originally intended." Game theory 101.
Another set of problems, of course, came from the fact that the states were proving truly terrible at handling issues of taxation on their own. In fact, though the particulars differ, the strong financial and debt-driven component to the Confederation's problems really does prompt images of Athens in the past year.
The American Revolution, after all, was a war, wars being so famously costly that historians like Charles Tilly have argued warmaking and its associated taxation were the main drivers of state formation in Western Europe. The American Revolution had been financed through loans, bonds, and poorly conceived paper currency. States then took on this debt. Historians Oscar and Mary Flug Handlin estimated that Massachusetts in the 1780s owed over $5 million to the Confederation, its total debt around $14 million -- enormous numbers at that time. The taxes imposed as a result proved extremely burdensome, one of a few factors leading to unrest in Massachusetts culminating in the armed uprising known as Shays' Rebellion, which then became one of the factors in the general consensus that a new system might be a good idea.
Causation is tricky to establish: Robert Freer argued forcefully in The New England Quarterly back in the '60s that "in all likelihood, the Constitutional Convention would have met when it did, the same document would have been drawn up, and it would have been ratified even if Shays's Rebellion had not taken place." But one of the reasons Freer argued that we would have gotten the Constitution anyway is that there were plenty of other examples of financial and political disorder, like failure to pay federal requisitions and the states of Maryland, Virginia, and Rhode Island mucking around with paper money.
America under the Articles of Confederation, in short, was a mess. And though you could debate the details endlessly, there's little doubt that the extent of that mess was in political leaders' minds when they started talking about reconfiguring things and calling the Constitutional Convention. Thus far, the Constitution has had a better track record than the Articles in keeping order.
What does this mean for Europe today? There are a number of cases in both American and European history where a non-lethal screwup -- say, the Articles of Confederation -- has provided the necessary impetus to establish a more screwup-resistant setup, as with the Constitution. So, while the ratings agencies seem to get more pessimistic by the day about Europe's prospects, maybe European leaders could pull out of this with something even stronger. Merkel and Sarkozy likely have a very nasty path ahead of them, if, indeed, either of them manages to stay around to push the treaty modifications through -- France, recall, has elections scheduled for next year. But there's a universe in which Europe exits this crisis in a better position than that in which it entered.