Executive Summary

Robert Mundell was an accomplished scholar, famous economist, and the “Godfather” of the euro. From his beginnings in Kingston, Ontario, to a man who would pioneer the work of the Optimum currency area theory which would lead into the creation of the euro; Mundell has lived the life most dare not dream of.

The creation of the euro is one outcome of Mundell’s work. Overall, there is nothing wrong with Mundell’s theory that a group of countries centralized in one geographical area could adopt a single currency; it is the aspect of already prosperous countries taking on the same currency as not so prosperous countries, creating a debt crisis. Most underdeveloped countries cannot grow due to frivolous government spending, wage increases, and government mandated benefits. If these issues are not corrected, Europe could be in worse trouble than it already is.

One solution to bringing Europe back to prosperity is to let the euro run its course. If the countries who adopted the euro give it some time, labour unions will be forced to stop increasing wages and the economy will stabilize. One issue right now is that underdeveloped countries are paying citizens too much, and wages rise faster than prices, where Germany for example, pays people less, and is overall more productive. For a country like Germany who was doing well before the euro came into play, is now paying the price for underperforming countries.

The Second solution is for weaker European countries to adopt a different, lower value form of the euro. One that is worth less, but will allow these underdeveloped countries to grow prosperous once again, then adopt the regular value euro in the future once things have stabilized.

As a successful Canadian economist in today’s era, Robert Alexander Mundell will be remembered as a Nobel Prize winning economist for his work in monetary dynamics and optimum currency forms. This work would also credit Mundell with being the “Godfather” of the euro and was one of many who started the movement of supply-side economics. During the course of his life, he is responsible for introducing the economic terms the Mundell–Fleming model and Mundell–Tobin effect (Wallace, 2006). Currently, Mundell is the Economics Professor at Columbia University. This paper will explore the life and times of this inspiring figure.