European Union: Creative Destruction Wave?

Some thoughts in reply to Edwin’s recent very interesting piece on the European Union.

The Greek crisis, the refugees crisis and the recently announced German suspension of the Schengen agreement on free movement are all very testing for the European Union. I certainly agree with Edwin that ideas of a highly integrated European Union superstate are in a bad state, but that has been the case for some time now, it is just that some European Commission people and ‘federalist’ enthusiasts have been very slow to realise this. I put ‘federalist’ in the scare quotes because ‘federalist’ can mean so many things as a form of relation between existing states and should not be only identified with highly integrated forms of federation in which the central state is dominant. Any such idea was effectively killed off  years ago by a mixture of British opt outs from the Maastricht Treaty and the Danish referendum rejection of that treaty.

Of course these were thought by some to be secondary events which could be given temporary ad hoc solutions while the integrated superstate juggernaut rolled on. It is worth remembering that the phrase ‘ever closer union’ was in the Maastricht Treaty as a substitute for ‘federalism’ at the insistence of John Major (the then British Prime Minister) as a way of signalling the end of federalist ambitions. Since ‘ever closer union’ is open to not just integrated federalist meanings, but even unitary state interpretation, this is perhaps a bit strange, but the fact is the phrase signalled an end to integrationist federalist dreams in which John Major was probably quietly supported by some other states (including the Netherlands I believe) which did not want to stand out as anti-superstate. All this created the illusion of a process that only the UK and Denmark were standing aside from and they could be expected to join in later.

However, the integrated superstate model of federalism was already a paper tiger, a rhetoric only used as a way of legitimising a Franco-German dominated Europe, in which EU unity was heavily dominated by the wish to keep the French-German partnership going and offer everyone else the hope of a voice in an essentially Franco-German dominated process in which the two key states sought trade offs between individual national goals. Events since then have unravelled the superstate ideology as the French-German partnership has been reduced in importance by German unification, with some help from French failures at internal reform. The emergence of a reality concealed by the older sort of ‘federalist’ language can be seen in the referendum ‘no’ to the Lisbon Constitution in a few countries and the move to a Treaty. The Lisbon process was one of shifting power to the Council, to the place where intergovernmental decisions are made. The Eurozone upheavals have made it clear that Germany has a role in the EU unmatched by France.

On the current refugee crisis, the suspension of Schengen free movement is very disappointing, but an unavoidable response to such a massive tide of refugees. To my mind it may well be possible to integrate them, but clearly it is a challenge and clearly it is a challenge that public opinion does not seek, or not beyond some defined number of the most ‘real’ refugees. Anyway, this is not a completely new problem for the EU, France for example, has previously imposed border controls to deal with migrant influxes and deported unemployed migrants from eastern EU member states. This is a crisis situation which would exist with or without the EU and would lead to exceptional measures with regard to external border controls and internal security measures, including checks on identity papers. So I suggest it is not in itself an end to free movement within the EU, but more an indication that free movement will be subject to qualification in any foreseeable future. That still leaves the very real achievement of the EU in making movement between states easier, with all the attendant benefits for individual liberty and prosperity.

The Greek crisis has emphasised a form of economic integration in the Eurozone dominated by Germany, which is not what anyone would have put on paper as a federalist dream, but the reality is that the Eurozone was always about turning the Deutschmark into a European currency in which all members would benefit from the German reputation for sound finances and a strong currency, and therefore a de facto agreement to be subject to German economic discipline. No one used those words in public and everyone hoped that the crisis situation in which someone would have to impose order would never arise, but it has and we can see what was really been agreed to in the first place. That arrangement has worked at least moderately well so far. Ireland has actually done very well out of going along with German economic discipline. Italy, Spain and Portugal at the very least seem to have got past the worst. Greece is the most dubious case, but wild left populism has now receded in that country and that must be a success for the German led Eurozone. We are waiting to see whether the deal works in the long term in Greece. This does not have to be a complete German hegemony. In defence and foreign affairs, for example France and the UK are still strong compared with Germany.

The current regional tensions make it unlikely to my mind, as Edwin suggests, that the EU will not develop in the foreign and defence spheres. It would be more accurate, I believe, to say that the EU will develop an opt in personality in these areas in which not all states participate, but the core makes the EU more important in that field. Putin’s direct and indirect provocations, the nightmare in Syria and Iraq, and the threat of Islamist fundamentalism in west Africa, have all pushed EU states and previously neutral European states to become more engaged with security and defence issues. Now of course NATO is important here, but US willingness to look after Europe’s security for it is in decline and rightly so.

A response to the dangers I’ve just mentioned requires increased defence spending and and co-operation for European states and we can see this happening. Some of it cuts across the EU, as in co-operation between Nordic countries including Norway, which is outside the EU, but does not separate defence from the EU sphere. The membership of previously neutralist Sweden and Finland in the EU is clearly helping them co-operate with NATO countries. EU states are increasingly working with regard to a total European defence presence in which smaller states will limit the military spheres which the operate so that there is a co-ordinated division of labour. The UK is engaged in co-operation with the EU states on the border and hinterland problems in eastern Europe and the Middle East and this is likely to be a way over time in which the UK becomes more European oriented. This is a gradual process in which we will not see a Euro-army and a treaty in which the EU becomes sovereign in security matters, but we will see the EU mattering more in the defence and security sphere. One of the factors contributing to this is the refugee crisis.

Edwin raises some issue of (classical) liberal thinking in these areas and that is the final topic I will address, hopefully providing a framework for addressing the public policy and institutional issues above. Edwin is correct to say that voters want to see some important issues addressed on the national level and feel remote from the EU level, but let us be clear about what this means in reality. No individual voter has more influence over national policy that EU policy. Even in Luxembourg any one voter has no real voice, does not make a difference, in a community of three hundred thousand. There is no real difference between Luxembourg and the 500 million of the EU on this issue.

What people like when they think of the national level is that decisions are made by people like them, people with whom they can identify. Immigration and other forms of social change which undermine notions of self-contained homogeneity, such as the Internet, increased travel, decreasing identity with national religion, and regionalist movements, do not put am end to national identity, but they do qualify it. The recent EU crises have increased the visibility of European leaders across the continent, Angela Merkel must be more familiar to most Europeans than all but a handful of their own national politicians. The national level will  not disappear and we will probably seem more shifts towards national and inter-governmental decision making, but let us not ignore the qualifications and opposite tendencies.

The point of the above paragraph is that we are not returning to the time of absolutely sovereign national governments in Europe (and of course the sovereignty was always limited in practice, particularly for the smaller and poorer countries) and I dispute what I take to be Edwin’s assumption that this is what is happening and should be welcomed. Apologies for any misunderstanding, but it looks very much to me as if he is saying that classical liberalism has preferred and should continue to prefer interaction between sovereign states over federalisation of any kind. He mentions David Hume, Adam Smith and Friedrich Hayek in this context.

However consider this quotation from Adam Smith: ‘Were all nations to follow the liberal system if free exportation and free importation, the different states into which a great continent was divided would so far resemble the different provinces of a great empire.’ (An Inquiry into the Nature and Causes of the Wealth of Nations. IV.v.b). Surely this contradicts Edwin’s claim. Hayek was the author of ‘The Economic Conditions of Inter-State Federalism’, which advocates federation between democracies to entrench free trade and basic rights. Similar comments can be found in The Road to SerfdomNow maybe Hayek did not mean to advocate something like the EU as it is now, and even less what the most pure advocates for integrationist federalism wish for, but he did offer support to federation and constraints on national sovereignty.

Going back to the Enlightenment, Immanuel Kant, a liberal advocate of market economies, limited government and freedom under law, wrote essays favouring ‘federation’ or ‘confederation’ to enforce world peace. We can take it that Kant meant a kind of European federation as like most of the time he did not really regard non-Europeans as equals, even if he should have according to his own philosophical principles. Anyway, he had liberal arguments for constraints on national sovereignty, even if very limited in scope.

Edwin may perhaps feel that what Smith, Kant and Hayek said fits with what appears to be his desire for a European Union limited to free trade issue. However, it is important to establish that classical liberalism is open to federation or ’empire’ (which for Smith can be a confederation) and furthermore that a federation for very limited purposes is likely to spill over into other spheres. How do you guarantee peace, security and free trade without a lot of other connected  government functions. It could be argued that classical liberal federation is limited to pure minarchist functions of national defence, and enforcement of laws, but why should we expect transnational  federal states to stay limited within such a sphere when national states never do.

Liberal economics leads us to regard upheaval, change and destruction as healthy, within the limits of law and contract, as this is how there can be innovation and prosperity. We can think of politics in the same way. Current crisis conditions will change the EU but are at least as likely to do so in ways which reconstruct its various activities, and the ways in which they are conducted, to the benefit of its health, as to lead to an EU restricted to free trade or in a state of complete collapse.


6 thoughts on “European Union: Creative Destruction Wave?

  1. Thanks Barry, good points. Two clarifications and a question are needed. The references to Hayek, Smith and Hume were meant to relate to the idea that people have strong feelings for their nation, yet not to a supranational organisation (here meant as a lose characterisation of the EU).

    Indeed my PhD thesis and subsequent book (Classical liberalism and International Relations Theory) It makes a strong argument for a classical liberal European federation. Both Hayek and Mises were strong supporters of this, because they thought and had experienced that a Europe of sovereign states did not work. Therefore a different solution was called for. Obviously, this would be a ‘small state federation’, with foreign and defense policy at the central level and most other issues dealt with at the national level. Hence, a bit like the current EU upside down 🙂

    The question is about defense cooperation. I strongly favour that, because I agree that the Americanns cannot take the burden all the times. There is no justice in that (I am not blind tot the simple power factors). The Dutch forces have an integrated brigade with the Germans and collaborate with Belgium in a few marine matters. All fine.

    However the question remains how far, or if ever, the big nations in Europe are prepared to really pool sovereignty or command structures when it comes to really significant parts of their military capacities. I doubt it…

    • Eddie

      I must get hold of your book, it looks great. On the non-defence and non-free trade functions of the EU, the reality is that capitalism is not as popular as it should be, as we all know here, so a free trade area has to be established and maintained by throwing other things into the mixi to make it all palatable to enough people. We have to try to push back as best as possible for an EU based more on minimum regulation and simplicity, mutual acceptance of standards rather than enforced harmonisation.

      I think we agree that the EU should have common security and defence along with free trade at its core rather than the upside down situation in which the core is increasing the administrative functions of the Brussels state. It would make more sense of have defence at the core, but an attempt at a Euro-army failed in the 1950s as you know, when it was rejected in a French referendum. So we have to start from where we are and keep building up the piecemeal co-operation you refer to, which is increasing, so that over time it converges with, starts to look something like a European army. There is as you point out a big issue with loyalty to nation taking precedence over loyalty to Europe, i.e. there is not much Euro-patriotism around. I have it, but I’m not typical. Still I think again small changes are pointing in the direction of a greater awareness of the need to co-operate to defend the Baltic states, prevent further destabilisation of Ukraine and so on. I just saw that the German airforce is flying missions in the Baltics, yes it’s a small thing, but lots of small things like that are happening. The idea is beginning to be normalised that freedoms in western Europe depend on a stable central/eastern Europe free from external pressure. We are a long way from completely integrated command structures, but we can at least expect to keep seeing more and more co-ordination, and at some point a Euro-army will start to be a real area of discussion. I think cautious optimism over the long term is reasonable here and I have found myself that the reaction to Putin’ adventures is stronger than I was expecting. Anyway, it us up to us to try to make what difference we can.

  2. Hi Barry, sure, real developments are taking place and perhaps they might lead to something substantial. The litmus test will be for France and the UK to share their nuclear capabilities, and that seems very far off. And the defense actions in the Baltics are mainly NATO-lead. We cannot do without NATO. You live in the most interesting NATO state, Turkey, so what is your take on that?

    A common external trade policy has been part of the EU Treaties from the start in 1957, which is interesting since there was no need then have additional policies to ‘sell it to the public’. Of course trade policy was a technocratic affair then, with politisation only occurring in the late eighties (the Latin American Dependecia movement in the 1970s excepted) and early nineties, when the leftists had to find a new target for their anticapitalistic anger.

    I used to be a huge supporter of the EU, and have been a member of several EU-committees as a representative of the Dutch government. Yet after the ‘treaty surge in the nineties’ I have changed position. So much policies were lifted to Brussles I now look with a lot of suspicion and some disgust to the whole project. I am now like Hayek in favour of a very small state European federation, because I still see the advantages of cooperation at the Europena level, at least for the really important policies. Not least given the turmoil at the world stage and the future prospect of the Asians taking over the second place position (after the US) in the world economy.

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