Ron Paul, that cult-favourite Libertarian is now little more than a quirky footnote to the 2012 American presidential race. For a while, back in January, Paul’s campaign seemed promising after winning third place in the Iowa Caucus then second in New Hampshire. But then Santorum dropped out, Gingrich abandoned the race, and Paul is hanging in there only technically having quit active campaigning. The race is decided and Romney’s place on the GOP ticket is fixed. Despite his impending defeat, Paul’s campaign has made perhaps more waves in recent GOP thinking than anyone else. For a time, Paul was nothing short of a phenomenon, inspiring a kind of messianic frenzy – US economist and commentator Paul Krugman claimed during Paul’s peak that “his economic doctrine has, in effect, become the official GOP line”. These days however, Paul trudges on with no hopes of election, in a bid to get his voice heard at the Republican convention, still espousing that favourite word from both sides of the political divide – “freedom”. Freedom is a concept that appeals with good justification and it is easy to see why the line of reasoning freedom = good, more freedom = better leads to libertarian leanings.

In American politics however, it can sometimes get a little tricky trying to keep up with the secret code, universally accepted amongst professional politicians, the public and the media, that seems utterly at odds with our own political lexicon. In a country where, “communist” means moderate socialist, “liberal” is used to mean “left-leaning” and “conservative” means economically liberal, perhaps we need to reflect a little deeper on what “libertarian” might truly be saying.

Not all of Paul’s policies are specifically libertarian, such as his largely discredited belief in a return to the gold standard (Krugman commented “Unfortunately, Paul has maintained his consistency by ignoring reality, clinging to his ideology even as the facts have demonstrated that ideology’s wrongness”). His libertarianism however seems to consist of two essential strands – the first is a massive reduction in central, federal power, and the second is the transfer of this authority to the level of states. Paul’s rhetoric seems agreeable enough to begin with, until we start properly listening. His is a platform that has won a strong and extremely loyal following, primarily among the fringes of the Republican party, but also amongst Democrats, disillusioned with Obama, disgusted by most of the Republican party and sympathetic to a more hands-off form of government. Paul has, to quote Forbes, “captured the imagination of young people” and “built a movement”. He wants to end the federal war on drugs. Great we think. He wants to remove federal influence over sexuality, marriage and abortion. Wonderful. But the key word there is federal – Paul does not promote the decriminalisation of drugs nor the legality of gay marriage, he simply wants Washington to stop talking about it. In 2007, discussing US drug policy, he argued that he wanted “the federal war on drugs to stop” – so far so good – “and that states would take care of it”. Oh.

You don’t need an AS-level in political philosophy to understand the concept of a tyranny of the majority – when you give a group of people a choice over how best to govern themselves, then take the majority vote as a binding answer, this mass of people will rise up into a juggernaut crushing all those minorities voices and groups that stand in their way. When this majority has some kind of collective personality flaw or moral failing, ie racism, homophobia, extreme moralistic religiosity, a large and vulnerable minority stand to get very hurt indeed. According to Paul’s vision, powers such as the regulation of drugs, abortion, the legalisation of same-sex marriage and indeed the criminalisation of homosexual sex could be handed over to states. Yet many states have extremely diverse views on these matters, and despite some basic rights protection offered by the constitution, without the mitigating influence of centralised government control, this diversity could be reflected in the way each state treats its minorities. Let us not forget that it was only in 2003 that Texas, along with 13 other states, was forced to repeal their sodomy laws, after they were deemed unconstitutional through Lawrence vs Texas.

Discrepancy between states’ legalisation is not new of course, there already exists a degree of legal diversity across the USA according to local law; for instance gay marriage is recognised at the state level by only six states, whilst remaining illegal under federal law. Until 1984, remember, drinking ages varied from state to state. But under Paul, this strange form of inequality would be widely extended.

Freedom, it seems to me, means freedom for all citizens regardless of their location or local opinion. And the best way to guarantee these freedoms come from their rigid imposition and protection from a strong, central government. Moreover, libertarianism means complete freedom for individuals, protected from official power, rather than the complete freedom of smaller states to micro-regulate the lives of their citizens. To guarantee gay marriage for instance, it is not enough for Federal government to repeal the 1996 Defense of Marriage Act, it must instead re-legislate, guaranteeing the legitimacy of the union across the Union. Paul aims to get government out of private lives, yet strangely wants states – more easily influenced and determined by the less morally acceptable and more religiously zealous of their citizens – to get into them.

Libertarianism is a seductive ideal, and yet Paul seems to butcher it. An America under Paul’s form of extreme negative freedom would not be a country in which all citizens could act as they wished. Rather it would be a divided country in which what is taken as an obvious right in Vermont would be considered an abomination in Texas, or where freely buying a legal drug product in New York could get you jail time in Alabama. It would be a country in which illiberal states were free to pursue their illiberal agendas, arbitrarily persecuting their minority citizens whilst federal government stood by. This, surely, is as far from an ideal of personal freedom as one could imagine. Paul’s campaign has been pernicious and slippery, masquerading dangerous conservative policies behind liberal rhetoric (by contrast with the other candidates who wore their dangerous conservative policies like a badge of honour). There is no doubt now that Mitt Romney will be the republican contender for the November election, so let us be grateful that Paul will not have the chance to put any of his policies into place.

Developments in the Eurozone threaten to plunge the continent into depression, as talk of Greece’s exit from the monetary union is gaining traction among Europe’s political elite.

In a sign of disorientation, there are conflicting messages emerging from Brussels. Last week, Karel De Gucht, the EU Trade Commissioner, revealed that contingency plans were being drawn up for Greece’s exit from from the Eurozone. This was immediately denied by his counterpart, Olli Rehn.

A Greek exit is likely to be eventful. Confidence is brittle, and economies do not work when there is doubt in its currency.  The euro can and must be saved but only with fundamental changes in economic policy.

Understanding the solutions to the crisis requires an understanding of its causes. Europe is where it is by design. The pretext for currency union was not just political integration; it was believed that a common currency would create a ‘convergence machine’, raising the living standards of the poorer states to the levels enjoyed in Western Europe.The idea was that a shared currency would encourage more foreign investment and trade to flow between rich and poor states, so that the poorer states had the means with which to exploit their comparative advantages, whilst using established know-how and technology from the richer states.

In a recent report by the World Bank entitled ‘Golden Growth: Restoring the lustre of the European economic model’, we discover that the adoption of the euro in 1998 actually hinders the convergence of the states in the southern periphery – the likes of Greece, Spain, Italy and Portugal. We can see this by looking at productivity for the two groups; growth in productivity is a sign of sustainable economic growth. For the stronger economies – Germany, France, Holland, Austria and Scandinavia – productivity grew consistently, whereas it actually fell in the southern periphery. 

It fell because the sheer inflow of finance from core to periphery from 1998 onwards, justified with the belief that the periphery would actually grow and repay debts, and supported by low interest rates, replaced domestic saving, encouraged unproductive investment in local, small-scale and internationally uncompetitive activities, and entrenched a culture of dependency on foreign funds, both privately and publicly.

However, simply disbanding the currency union is not an option because the euro has tied trade and debt contracts inextricably between member states. The euro must survive and policymakers will have to make unpalatable decisions.

Primarily, three things need to be done: help the periphery to compete by allowing inflation in Germany to rise, create a fiscal union in which sovereign debt is shared, and make the European Central Bank a lender-of-last-resort.

Firstly, Germany needs to stop resisting higher inflation and allow its economy to boom. At present, unions and government are essentially holding back a German boom by keeping wages down and imposing national austerity. But a German boom with higher inflation would help the peripheral states stabilise. States within the zone share the same currency, so the only way in which states can adjust their competitiveness with each other is if prices in the periphery become relatively cheaper than those in Germany.

Relatively lower Greek prices make Germans richer as they can afford more Greek holidays and feta cheese, whilst relatively higher German prices make Grecians poorer as they find BMWs and lederhosens more expensive, but this is exactly what is needed to balance trade. Companies will not significantly cut prices unless they can significantly cut their costs. This means lower wages, weaker pensions, and restraint in the public sector as firms and governments wean themselves off debt. With unions digging in and lifestyle expectations intransigent, these reforms will be fraught with resistance, but are inevitable, whatever the fate of the euro.

Secondly, European sovereign debt must be shared, which has to imply fiscal union. Joint-liability bonds could be issued for a certain portion of national debt, with any residual strictly covered by the country itself, similar to how it is in the United States with its federal and state budgets. However, this would be a huge political leap for a Europe which remains Westphalian, divided by language and cultural idiosyncrasies.

Thirdly, the ECB must be made a credible lender-of-last-resort to stop the speculative attacks on banks that may eventually set off a chain of devastating bank runs. It also needs to guarantee deposits at all European banks.  If the ECB makes these steps,  its actions will effectively be supported by all Eurozone taxpayers, and this is more a German concern than a periphery concern. 

Austerity alone is not enough, a point majestically made by JM Keynes in the Economic Consequences of the Peace, published in 1919. In reference to punitive German reparations demanded by the Allies, he wrote: ‘If Germany is to be milked, she must first of all not be ruined’. It appears these days that the boot is on the other foot, the German foot.