Introduction Over the past decade the European Community has made great strides towards becoming a fully unified economic entity. Border obstacles and regulatory barriers to an integrated market for goods and services have been removed in the drive towards 1992; now, as the economic and monetary union (EMU) moves forward, an integrated capital market and eventually a common currency seem all but assured. By the end of the twentieth century Europe should, in many respects, constitute as unified and integrated an economy as the United States of America. Most economists (myself included) view this as a generally good thing. Yet at any given time not everyone in the USA is entirely happy to be part of such a unified, integrated economy. In particular, over the past decade several regional economies within the United States have been subject to large adverse shocks — shocks which have arguably been so large precisely because the US economy is so integrated — for which they have had essentially no policy recourse simply because the US already has the common currency that EMU is supposed to produce for Europe. The most intellectually influential of the regional crises in the US has been the recent slump in New England — the events are dramatic enough to be worth noting in any case, but proximity to certain univerisities has not hurt their academic visibility! The New England story is by now familiar in the US, but may be worth reviewing for Europeans.
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