11 December 2011

What's going on in the EU? Part One - What's good

Finally, the UK government's rejection of a pan-EU treaty to create effectively an EU megastate, has started debate, albeit with many European politicians pointing fingers at British PM David Cameron for not playing ball.

Quite right, it is about time.

The tensions and politics around the EU are complex, so do try to resist the inevitable efforts of journalists across the political spectrum to over-generalise about what is right and wrong about the EU.  It isn't all bad and certainly isn't all good.  The Euro is not the key source of the problems facing the southern European states, but the EU is also not the source of peace in Europe since World War 2.  The EU does have several very good features that have promoted freedom and prosperity in Europe since the 1950s, but it also has carried some that have done the opposite.

What the terrible twosome of Angela Merkel and Nicholas Sarkozy are trying to do is paper over the tensions created by a union and project that has positively protected those governments which have embarked on decades of deficit spending.  It is seeking to combine the political goals of both Germany and France in a new EU - one that does not fundamentally accommodate the economic policies of many EU Member States and which replaces the flawed, limited but still real democratic accountability of Member States with an EU/EC/Council of Ministers led accountability.

In the next few articles I hope to present a step by step explanation of the EU - the good, the bad and the ugly, and present an alternative for the UK, and any other EU Member State that doesn't want to be part of a pact of central control, with socialism running right through it.

To outsiders the EU can look quite marvellous.  After all, if you produce goods in one part of the EU you can sell it anywhere else, with no customs barriers, tariffs or import restrictions.  Well, except for alcohol, tobacco, audio-visual services, literature subject to censorship, oh and quite a few services.  Free trade within Europe has promoted prosperity since the internal barriers to trade started tumbling down in the 1960s, and most recently the massive expansion from 15 to 27 Member by incorporating all of the former Eastern Bloc states, plus Slovenia and three former occupied Soviet Republics, has done wonders to improve competitiveness, create new markets and spur growth.   No Eurosceptics I know of want that to change, except the far left in the union movement and the British National Party.

Free movement of people has produced similar benefits, albeit with greater controversy.  Citizens of any one EU Member State can live and work in any other, creating a massive labour market and massive education market as people live, work, learn wherever they choose.  The controversy has been that this has allowed many from lower income Member States to work in higher income ones undercutting local labour.  For overpriced builders and plumbers in the UK, the arrival of hard working enthusiastic Poles has not been good for them, but it has been good for the Poles and their customers.   

Thirdly, with these measures have come the means for the European Commission to force countries to abide by rules to ensure open borders and competition between countries remains so.  Domestic markets in services such as telecommunications, bus services, banking, electricity, insurance, supermarkets, postal services, airlines and the like have been required to be opened up to create a single European market.   Low cost airlines would not have succeeded in Europe had the likes of Ryanair and Air Berlin not been able to open bases in other countries and fly from wherever to wherever in the EU in competition with national carriers.  Attempts to subsidise, regulate or otherwise interfere with some sectors have faced European Court action.  

If it all stopped there, then I'd be very happy with the EU.  Breaking down barriers and markets, enforcing deregulation and even stopping national governments from offering subsidies to protect domestic businesses (but not if the subsidies are available to any EU businesses) is a good thing.  To be fair, efforts in some of the newer Member States to tackle corruption, organised crime and the like in those countries at government levels have also been positive (although Bulgaria is hardly a model of government without links to organised crime). 

The thing is that you don't have to be in the EU to get most of that. Three European countries are not in the EU, but have free trade and free movement of people with it.  Iceland, Norway and Switzerland all have almost the same freedoms with the EU and each other, as Member States of the EU.  Their own domestic reasons for rejecting EU Membership are unimportant (protect fisheries from subsidised EU competition, protect oil incomes from funding EU transfers to poor countries, protect national sovereignty and independence), but notable for being inconvenient to EUphiles.  The European Free Trade Agreement (EFTA) which paralleled the EU, has provided a treaty bound mechanism to enjoy freedoms within Europe without the bureaucracy or the commitment to fund he EU.  Remember that, because it is important.  There is an alternative to the EU to get most of the benefits of the EU.

The downside of all of this comes with certain obligations which I will write about later.  These are:
- Welfare tourism.  Don't like the housing, health care, education or welfare benefits in your own country within the EU?  Move to another EU Member State and enjoy all it has to offer, without having had to pay for it.
- Fortress Europe.  Try getting goods or services into the EU from outside the EU/EFTA area.  Tariffs, import controls and other mechanisms means the EU has raised walls around itself as much as it has destroyed them internally.
- Common Agricultural and Fisheries Policies.  Call it, how to sustain the grossly inefficient farming practices of France and Spain (and fishing practices of Spain) using British, Dutch and German taxes, whilst impoverishing farmers from poorer countries in Latin America, Africa, Asia and Australia/NZ.   Nothing quite like having European taxpayers subsidising the properties of the British Royal Family though, especially when it is so unaffordable that farmers in the newer Member States are only offered one-third of the equivalent subsidies of those in the West.  There ARE walls within Europe, including the one that means a Greek farmer doing the same as a Bulgarian farmer gets three times the subsidies of the Bulgarian one.
- EU common regulatory framework.  The number of laws Member States must pass to meet EU wide obligations on everything from labour laws to protecting "human rights" (which are not all bad to be fair).  Micro-managing domestic legislation to iron everyone flat.
- Joining the EURO.  Other than Denmark and the UK, other Member States joined or are committed to joining the EURO.  That's a whole other story, for although it is much maligned, it is more a problem for being a transnational fiat currency than being a single currency.   Think of why Greece felt it could borrow endlessly from a high value low interest rate currency that was largely supported by German economic productivity.
- EU vanity megaprojects.  The EU has pursued more than a few large scale multi-billion Euro vanity projects to put Europe on a level with the US and other very large economies.  These have all proven to be wealth destroying political projects driven mostly by the Franco/Latin bloc of countries seeking to outdo the US.
- EU wealth transfers.  The massive set of subsidies, funds and loans from richer EU Member States to poorer ones, to lift them up to wider EU income levels without actually making them be more productive and to buy subservience from relatively low tax, open, ex. communist bloc countries to accept the socialism promoted by France and Germany
- EU arrogance.  Time and time again the European Commission and those pushing the EU project have implicitly recognised they could never get consent for the project from voters directly, so have resisted referenda or even making the European Commission or Council accountable to the European Parliament (which cannot actually initiate new laws itself).  If voters say no, the EU expects them to try again and give the right answer.  The entire project reeks of bureaucratic insistence of its own superiority over its subjects.  Those who reject what it wants are wrong and must be made to submit.   Worst, those who reject the EU are painted as wanting out of everything, as being nationalistic, narrow minded, parochial, even risking war and conflict.

In a later article I will also write about why things are the way they are, and what national interests and drivers motivate the biggest players, but also why it should be possible for the far more numerous others to get things to change, if they weren't all being bribed implicitly by the system that will ultimately harm their interests. 


Anonymous said...

What's going on the EU is simply: the death of the welfare state. It was always unsustainable and now the bill is coming due.

People just aren't going to pay for bludgers & codgers any more.

As for Cameron, well he's nicely f**ked the city --- he's guaranteed that hedge funds trading in the Euro, and the Euro successor currencies --- will be required to be run from the Euro area --- Paris or Frankfurt, rather than London. The good news is that as the EU & Euro collapses there won't be many of those. So London will lose some business, but much much more will be lost due to the general implosion of the EU and its social model.

Dave Mann said...

Thanks for the informative article. It's good to read something which discusses both the pros and the cons of the issue and I'll be interested to read more from you on this. Cheers.