Thursday, April 15, 2010

Greece, Dred Scott, And The American Civil War

¹²Greece, Dred Scott, And The American Civil War

By Ambrose Evans-Pritchard, | 15 April 2010

Dred Scott's case was a significant staging post on the path to civil war in the US

Never underestimate the impact of supreme court rulings. The plan by a quartet of German professors to freeze the EU bail-out for Greece and block the European Central Bank's back-door rescue through lax lending has epochal implications. After talking to two of the four, Wilhelm Hankel and Karl Albrecht Schachtschneider, I am informed that the complaint is primed and ready to go to the Verfassungsgericht (constitutional court) in Karlsrühe days after the rescue mechanism is activated.

I have been scratching my head thinking about precedents and suddenly the light bulb went on: the Dred Scott case, the ruling by the US Supreme Court in 1857 that brought the simmering conflict over slavery out into the open. The forced resolution one way or another.

The case involved a Virginia slave— and please correct me if I am wrong— who moved around the US in the service of an army officer. Having spent time in Missouri and Wisconsin where slavery was not established, he launched a court challenge, backed by abolitionists, asserting that he and his wife and children had become free. The Supreme Court under Roger Taney issued the most infamous ruling in American history. The majority of Southern justices seized on the case to go far beyond Scott's complaint, exploiting it in a bid to crush the abolitionist movement once and for all.

The ruling set off a bond crisis— the 1857 Panic— that led to a crash of railway stocks and brought down part of the Northern banking system. The South's system of smaller branch banks survived better, creating the illusion that King Cotton was stronger than it really was. It was [perhaps] this illusion that emboldened the Confederate states to overplay their hand.

Chief Justice Taney wrote that blacks were not and could not be US citizens and had no protection under the Constitution (huge step backwards from the 18th Century when free blacks could vote in most states). Crucially, it said the US Congress could not prohibit slavery in the new territories of the West. This was seen as a precursor of a further ruling that would establish slavery as the dominant structure of the US, reducing the free North over time to a minority with diminishing votes in Congress. Hence Abraham Lincoln's 'House Divided' speech, where he raised the alarm that even a free Illinois risked falling under control of the slavers.

The Lincoln memorial in Washington. Lincoln announced the Emancipation Proclamation in 1862.

The ruling tore up the great comprise of the Continental Congress, that the 36th parallel should be the dividing line of slave and free. For the slavers, the Court ruling was a catastrophic error. It forced the North to respond. Gettysburg and Reconstruction were the results. So was the total abolition of slavery.

I do not wish to suggest that the judges of the Verfassungsgericht are men of Taney's stripe. Far from it. They have proved to be the only real defence of liberties in Europe, playing the role that the European Court of Justice has betrayed— by becoming the instrument of civil rights abuse instead (See Connolly, Andreasen, and Tillack), for which they have never been held to account by the respective sovereign democracies. The Verfassungsgericht is the only effective court of appeal against EU aggrandizement.

Nor do I wish to suggest that Europe will descend into civil war. That is obviously not the issue here, though political conflict of some ferocity is in the cards. My point is that this court challenge over the Greece may bring long-bubbling, long-suppressed tensions into the open.

It clearly poses risks that the media, markets, and South Europeans have failed to understand. Most appear to think that Chancellor Angela Merkel is being truculent because of the North Rhine-Westphalia elections on May 9. This presumption reveals more about them, and the legal-political cultures they come from, than it does about German affairs.

The German passion for sound money is not just the result of hyper-inflation in 1947-1948 and 1923. It stems from the deeper intuition that sound money and democratic freedom are inter-linked. Monetary disorder bled Weimar of legitimacy.

Of course, this complaint threatens to unleash havoc in all kinds of ways. "This may cause a great crisis in Europe but we already have a crisis," said Dr Karl Albrecht Schachtschneider, law professor at Nuremberg University and author of the complaint, when we chatted yesterday. He will ask for an injunction to freeze all aid for Greece while the case is pending, which may take weeks or months.

How will the Court rule? The breach of the no bail-out clause of Article 125 of the Treaties is so clear that it will be very hard to finesse. "It is a question of law— the duty of the court to defend the German constitution. They have no choice other than reaching a lawful decision," he said.

His fellow Musketeer, Professor Wilhem Hankel from Frankfurt University, is more sceptical. He tells me that the Verfassungsgericht is a "political court" that will try to wriggle out of a hot issue. He said a clear ruling that prohibits the bail-out is "unlikely", but the political fall-out will be great whatever happens.

German chancellor Merkel at the Getty Centre in California

There is a game of timing here. Will the quartet file the complaint immediately to freeze aid, or will it wait just long enough to allow the first tranche to reach Athens? If the professors wait, they may think they can strike a knock-out blow by arguing that Europe's monetary union is damaging 'monetary stability' and has therefore become an illegal undertaking in which Germany can no longer participate.

Much depends on this point, says Hans Redeker, currency chief at BNP Paribas. If the professors go for the jugular, they may force the Verfassungsgericht to pull the plug on the entire EMU Project. "This court hearing is going to be very dangerous. It could lead to Germany itself being catapulted out of the currency union. Once investors begin to fear this, there will not be a single euro in further financing for the EMU periphery."

He sees a 10% chance that this ruling will lead to German exit from monetary union. For that the four professors, Hankel, Schachtschneider, Wilhelm Nölling from Hamburg Univerity, and Joachim Starbatty from Tübingen University, have been fighting their lonely crusade for a long time. They battled the Lisbon Treaty and some battled the Maastricht Treaty as well.

They did not succeed in blocking these transfers of power to Europe, but they did extract rulings that established limits to the erosion of German sovereignty and democracy. Among them is the Maastricht decision of 1993 which said that a failure by EMU to ensure monetary stability would constitute a breach of the German Constitution. The Court kicked the issue into the future, and now the future has arrived. Will it be rope enough to hang the Project?

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