Bloomberg
February 1, 2012
We usually don't think of the U.S. as a monetary union, but early in its history it essentially was. Unlike the crisis-wracked euro zone, the dollar zone survived its first few decades without a major crisis, providing the fragile young republic with a period of relative stability during which it began to congeal culturally, economically, politically and militarily.
European policy makers hoped that the euro would serve as the unifying and integrating force of the European Union much as, they believed, the dollar had for the early U.S. What the Europeans failed to appreciate was that early America's real glue was not its dollar union but its fiscal one.
The EU today and the U.S. in the last quarter of the 18th century are not so different, really. Like many Europeans today, most early Americans saw themselves as citizens of their state of birth first and of the wider union second. For them, the U.S. was a compact between sovereign states. General Robert E. Lee joined the Confederacy because he wanted to protect his homeland, which he considered to be Virginia.
The flow of human capital between the states was legally open but in fact limited by cultural considerations. Ethnically and linguistically, early America was diverse but also insular. Most folk preferred to stay with their own, be they Dutch, Forest Finns, Germans, free blacks, Welsh, Scots, Scotch-Irish or one of four flavors of English, each with their own distinctive dialect and religious, marital and childrearing customs. Even movement to the frontier didn't become vigorous until roads were built and military victories against the natives were won.
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