Letter to the editor

Citation

Hampton, C. (2002), "Letter to the editor", European Business Review, Vol. 14 No. 6. https://doi.org/10.1108/ebr.2002.05414fab.006

Letter to the editor

May I congratulate you on the latest issue of New European? It is really excellent, packed full of good things. The articles about Polish agriculture and war reporting were especially readable and interesting. The article about trial in Spain was compelling reading, though disturbing.

However, I did find myself disagreeing – mildly – with the editorial and article on the euro in Part 1. James Robertson deals with the euro from a retail/consumer viewpoint and at the political level. I have no problem with this, but an equally strong motivation for the euro's introduction was at the level of the capital market. Not to mention it at all seems rather unfair to the euro – however imperfect it may be. The euro is creating a single coherent capital market approaching the size of the US market. Once the inconsistencies in national laws that make it hard to go outside one's own home market have been ironed out (the programme aims for completion in 2005), it will be possible for an entrepreneur anywhere in the euro-zone to raise money from far greater resources than are available in a single national market. The founders of the euro have great hopes for the effect that this will have on the European economy generally.

The size of the euro-zone in the money market must also be relevant, bearing in mind the tides of money swirling around the world. I have tried to work out roughly how much money is traded simply for money, not for the things of real value that underlie the need for exchange. Regrettably, the numbers are somewhat imprecise.

The total volume of goods and services traded under the World Trade Organisation umbrella is approaching $8 trillion a year (2000 figures). Trade outside this (non-WTO countries and items like tourism) probably comes to as much again ($8 trillion). Based on $1.3 trillion outflows from the dollar area in 2000, investment is clearly another major item, say, $8 trillion a year. Then illegal trades, such as narcotics and arms, represent something – another $6 trillion at a guess. This gives a total for trade that has a tangible quid pro quo for the passing of money at $30 trillion. To err on the side of caution, I will round this up to $40 trillion.

Meanwhile, the total volume of currency traded each day is $1.6 trillion (City of London Statistics for 2001). (This does not quite match the BIS's figures of $1.2 trillion in traditional currency trading and $1.5 trillion in derivatives trading, but I will take the $1.6 trillion figure to be on the safe side.) If $1.6 trillion is multiplied by five working days, and again by 50 working weeks, the total is $400 trillion a year.

This means that every dollar exchanged for a benefit of a non-monetary kind changes hands ten times. Some hedging of currency risk is necessary, but one does not need to do it ten times over. It seems to me that the imbalance can be explained either as a global casino (there is no added value in trading money) or by money laundering on a heroic scale, or a blend of the two.

It is surely surprising that so few Baring-type crises have happened, given the lack of proportion between real value traded globally and the churning of money for its own sake. No authority in the world could cope with total meltdown, but the ECB would be in a much better position to orchestrate the rescue of lesser catastrophes than the 12 national banks, all with ideas of their own, would be.

Still on the subject of money, I must say I thoroughly enjoyed the editorial. But I would like to put in a word for us ordinary folk. I do not think that people are greedy – they are fearful. St Paul no doubt had something to say about that too, and I seem to remember something about the lilies of the field. I am convinced that most people have no desire for much more than they have, let alone for riches (the lottery is only a game based on a harmless fantasy). On the other hand, they are terrified of losing what they have.

Most of us fear losing what we take for granted, like indoor warmth in winter, and growing old in poverty. When negotiating a pay rise, people can sound greedy, but they are more likely to be trying to overshoot their current spending so that they can feel safe for a while, even save something. It would be hard to feel safe in London unless one earned three or four times the national average. We tend to conduct our lives solely in terms of money because few of us work at something that yields its income direct, like the Polish smallholder selling his eggs. This is true of writers more than most. But counting our survival in money terms does not make us mercenary. It just makes everything that bit more scary.

As far as the leaders of political thought are concerned, I do not like to think of any religion as coming to the rescue, and would rather treat Europe's Christianity in a purely historical/cultural context. There has to be something more real and less divisive than religion that could take the place of brute capitalism. But national politicians are powerless in the face of the tidal wave of money, and the people who ride that also pursue their own agendas at political level. I don't think for a moment that the New Labour government set out in 1997 to become the poodle of big business, yet they now seem to be making a fair job of it.

Celia HamptonFreelance Legal Writer based in London