Dear Mr. Prime Minister:

A proud American of British ancestry, I am writing on American Independence Day, a date which I believe will have new meaning for you after your victory in your Party's leadership contest. I am a retired senior U.S. diplomat and university professor who has been much involved careerwise, and given much formal and informal thought to British politics and to the European Community (and latterly to the future of the former Iron Curtain countries, in one of which I am currently living). Indeed, an article of mine on the future of NATO is appearing in this month's Brown Journal of International Politics.

While a neutral in British politics, at one time I figured I'd spent a quarter of my life in Great Britain, have a son who was born in the same County as his Great Great Grandfather, a Coat of Arms granted in the quinquecentennial year of the College of Arms, and made a study of Parliamentary Systems as an area of specialization during my doctoral studies at Harvard University. So I have close affiliations and a lasting affection for the British Isles. It is one of only a handful of countries other than my own where I'd consider taking up permanent residence.

As one who has answered correspondence for a number of American Secretaries of State, I realize that it is unlikely that you will ever see this letter, or enclosure, but I hope that a two or three paragraph precis might find its way to your desk, given the importance of Britain's relationship with Europe and the single currency issue in setting off the recent leadership contest.

While I cannot say that the enclosed paper represents a formal State Department study, its original version was written when I was Deputy Director of the Department's Office of European Political/Economic Affairs, with responsibility for recommending American policy towards NATO, the EU (then still the EEC), and NATO. It was an attempt to set forth for the attention of senior Departmental officials, where matters at that time stood in the EU, where they were tending, and what U.S. thinking should be in that regard. Rewritten, the paper was later published in an American journal of political thought. And was revised, post-Maastricht, to reflect my thinking on the single currency issue (see final paragraphs).

I am sending it along for study by your Cabinet Office staff because, as a student (and university professor) of politics and economics, I find myself in general sympathy with your thinking about Britain's role in the European Union. I am convinced that Europe is in process of evolving an entirely new form of political association -- something more than traditional confederation, but less (or at least different) from traditional unified government -- and that this is entirely in accord with the revolution in modern transportation and communication. It would be a mistake to settle for a conventional less. And this includes avoiding falling into the trap of adopting a single currency, just because this has for traditional thinkers become the capstone symbol of political unification.

Professor Robert Mundell, a Canadian who, when I last heard, was teaching at Columbia University in New York, wrote an article published in the American Economic Review some thirty years ago called The Theory of Optimal Currency Areas in which he argued that there were not too many currencies, but too few. And that nations with large and diverse internal economic regions, such as the United States and the USSR, would benefit by accepting the minimal inconvenience of internal exchange of currency in favor of the greater advantages of being able to manipulate monetary policy to manage differences in macro-economic performance among different regions. The notion is directly applicable to the large and enormously diverse E.U. If Europe settles for a single currency, the only ones who might be satisfied (for a time) would be those whose thinking is wholly conventional. A single currency would prove a distinct handicap to future European economic performance. While most opponents of a single currency seem to be operating mostly on instinct, their instincts are directing them right. The thought of practitioners often precedes theoretical explanation. In this regard, I think you might find helpful tthe heoretical ammunition in the Mundell paper (and perhaps in mine). The enclosed paper also contains some thoughts about the future of the European Parliament and Council of Ministers.