A New Perfect Union

It happens to me, fairly regularly. When in the company of a group of people, someone will notice my non-Anglo name and darker skin color and ask, “Where can I get some good Indian food?” Of course, I choose to provide the correct answer, “There is no such thing as Indian food.”

India and China are probably the only two countries in the world that is not representative of the rest of the counties. In all counties (except India and China) of the world, there is one recognized dominant culture. This culture has its language, cuisine, festivals, religion, and many other idiosyncrasies. Food is one of the most prominent indicators of the dominant culture. There is no such thing as European food; there is French food, Italian food, Spanish food and some people call English food an oxymoron. Similarly there is no such thing as Indian food; there is Punjabi food, Tamil food, Gujrati food, Goanese food and so forth.

The diversity of cultures, cuisine and languages form a colorful backdrop to the world community, but most people find another barrier quite intimidating—money. While there is no such thing as Indian food, there sure is Indian money. Whether you choose to have Vindaloo in Panaji or Uttapam in Madras, you can pay the restaurant bill in Rupees. However, if you have Cacciatora in Naples or Quiche in Leon, you must conjure up some Lira or Francs respectively.

As one travels from a country to another, not only we find cultural or racial differences, we find banknotes and coins of different designs and value. Each country has its monetary system, anchored by its currency. The currency has exchange rates tying it to other myriads of currencies. The laws governing the exchange of one currency to another range from non-existent to draconian. Actual physical monetary conversions are handled by retail traders, who extract a pound of flesh every time an exchange takes place. The exchange of currency places significant barriers to trade and tourism, which are two major underpinnings of the global economy we live in. In this tower of Babel, the US dollar holds the enviable position of the common currency. That may change.

On a recent trip to New York, I had spent a morning working with a colleague of mine from China. At lunchtime I was hungry and asked him, “Where can I get some good Chinese food?” I should have anticipated the response I got, “There is no such thing as Chinese food.”

An empire divided is the continent of Europe. Europeans are deeply split on the need for unity. On one hand the unification of Europe as one single country has its textbook advantages, but deep-rooted differences in the cultural makeup of people makes that impossible. One man who attempted a disastrous barbaric attempt at unification was the infamous Adolf Hitler who considered the rest of Europe to be just an extension of Germany. In the aftermath of the war, attempts to unify Europe are treated with suspicion at best and outrage as the norm.

Nowhere is money a more significant barrier than in Europe. Since the lifting of travel barriers (passport controls) over the European Union, people and goods move freely over the land as if it was one country. But, Europe is dotted with many countries. France and Germany are behemoths in size and economic might. Switzerland is isolated, proud and powerful. The UK is physically small but still believes she rules the world. Belgium, Denmark, Netherlands, Austria and especially Luxembourg are quite puny. Spain, Portugal, Italy and Greece are quite different from the rest in their happy-go-lucky southern cultures. The existence of a mosaic of cultures should not have to lead to the use of Drachmas, Escudos, Francs, Guilders, Liras, Marks, Markkas, Pesetas, Punts and Schillings.

Living in the deep rooted divide, Europeans has always toyed with the idea of economic unity—and this idea has moved in starts and spurts, ever since the treaty creating the European Economic Community in 1967. In 1979 the European Community formalized the idea of a unified currency, and created the European Monetary system or EMU, The currency, called ECU would be underpinning of the monetary system that would fix all exchange rates and create a common denomination for trade. Later, in 1986 political cooperation was added to the monetary unification. The final dreaded decree came in 1992 when the Maastricht treaty went into effect. This treaty dictated that the common currency called the Euro would go into effect in January 1999 for all trade and in January 2002 for all public purposes.

A common currency amongst countries is a radical concept and brings with it severe loss of sovereignty. No longer can a government devalue a currency to tide over times of economic hardship. No longer can a government control the money supply (as in “printing money”). The loss of sovereignty is countered by the ease of trade and the unification of the economy. Is it a good idea? No one really knows, as no one has ever done it. Till about now.

Many expected the Maastricht treaty to collapse. The UK had spent a lot of time infighting and agonizing over whether to join the EC or not. They joined in 1973, had cold feet in 1988, joined EMU in 1990, and then chickened out in 1992 rejoined in 1993 but never quite made it to the end. Other counties were surprisingly committed to the common currency idea despite enormous fear and hurdles. Eleven countries reached the final frontier and adopted the Euro.

Quietly, after a decade of dreams, in January 1999 the “Euro” became a semi-reality. The Euro was a set of numbers existing in the belly of computers. All the currencies of the eleven member counties became fixed to the Euro. Large companies and stock traders used Euros to settle monetary transactions. The Euro was a traded currency but it was not used in reality. It was a background currency that everyone had heard about but no one had seen. In 2001 Greece joined the party, becoming the twelfth pioneer.

A year later, on January 1^st 2002 came the big bang, the real birth of a real new and powerful currency. A currency designed to overshadow the power and acceptance of the US dollar. A currency hoped to become the de-facto world currency.

The Euro took the shape of real money—paper currency notes and metal coins. It was a logistic nightmare of historical proportions. To make this possible, about 15 billion banknotes and 50 billion coins had to be minted and transported to towns and hamlets in twelve countries. The probabilities of chaos and mayhem bore on everyone’s mind, but the miracle was, nothing happened.

The Euro is now legal tender. All non-cash transactions must be done in Euros. Cash transactions, for now, can be done in either Euros or the older currency for a limited time (till the end of February in most cases). All older currency must be converted to Euros by the middle of 2002. That is a tight and mandatory schedule.

Of course there was confusion and there still is, but surprisingly little panic. Initially stores marked prices in both Euros and old currency. Shoppers were worried about “rounding off” which could raise prices without being noticed. In most cases the shopkeepers did the opposite—reduced prices to ease in the transition. The paranoia reached the levels of pre-year 2000 doomsday predictions. All those who were disappointed by the Y2K non-event came out in force predicting everything from crashed computers and bank failures to famine and carnage.

The biggest story about the conversion to Euros is—nothing. Nothing went wrong, nothing happened, very boring! The smooth rollout of the Euro was the result of years of meticulous planning and a fine execution of a massive undertaking. Transcending the logistics of managing the distribution of currency, the Euro is a “triumph of political will over practical objections.” The news starved media printed stories about how a robber robbed a person of marks and thought he took too much and gave back a few Euros—net result the robber took less than what he gave back.

The only sector hurt by to the Euro is the “gray money” market. Some hoard money in cash because they do not trust the banking system. Many more have a need to hide money. The amount of cash hoardings is estimated to be a staggering $1,000 billion. This money has to be converted, or spent before June 2002, when it will turn worthless. A spending spree is expected.

The Euro is a testament to many visionary leaders who pursued a dream, often against the grain of public opinion. The preamble of the United States Constitution starts with  “We the people of the United States, in order to form a more perfect union, …” That was written in 1788. Two hundred and fourteen years later, we have witnessed the birth of yet another more perfect union. Yet, not a musket was fired.

Partha Dasgupta is on the faculty of the Computer Science and Engineering Department at Arizona State University in Tempe. His specializations are in the areas of Operating Systems, Cryptography and Networking. His homepage is at http://cactus.eas.asu.edu/partha