The Future of Europe—Yet Again

Yesterday, Henri Lepage gave a presentation at the PPE workshop on the future of Europe. Lepage’s books Tomorrow Capitalism and Tomorrow Liberalism, published respectively in 1978 and 1980, were among the first works in the world to present a clear explanation of Chicagoan economics and Virginia public choice (for the general public). He subsequently published two other books on property rights and on new industrial economics (i.e. the economics of contracts)—the last one being my favorite. A generation of young economics students in the 1980s (including Peter Boettke) learnt a great deal about free markets because of Lepage’s work. In the midst of the Reagan and Thatcher revolutions of the 1980s, Milton Friedman’s Free to Choose and Lepage’s books were among the best sources to understand the policy changes.

As Lepage explained yesterday, he doesn’t write books anymore. He is too busy working for the European Parliament; that is, understanding the “legislation machine” as he calls it. When he is done with his current job, I hope he will put his thoughts on paper and write a book about the future of the European Union (EU).

Among the issues he discussed, three struck me as immensely relevant to understand the future of Europe.

First, members of the European Parliament (MEP) have a double allegiance between their member country and the EU. This means that while some MEP may be willing to defend good policies when the EU at large is concerned, they become partisans when the legislation impacts their country. This creates a dynamic where good policy is often attacked by those you would expect least.

Second, Lepage believes most of the problems that the EU faces find their source with the Maastricht Treaty signed in 1992 that led to the existence of the EU as we know it today. Originally the European Community (EC) was mainly a free trade zone—even though it used the European Monetary System, established in 1979 (and which never worked), and it also had some judicial powers with the European Court of Justice. In two millennia, Europeans had (almost) never been able to trade freely; the EC, in addition to establishing lasting peace among European countries, put the free trade agenda on the table. This was laudable, even if one may argue that there was no need for another bureaucracy to implement free trade. Then, in 1992, Europe changed gear: it went from a commercial zone (the EC) to a political and monetary union (the EU). In essence, the EU became a supra-national government, and (therefore) a “legislation machine.”

Third, part of the EU role is to make sure that Europe is politically stable. This led to the idea of EU enlargement. Peripheral countries must be included into the union in order to make the frontiers stable and to export the European model of democracy to people who couldn’t figure it out themselves (e.g. Estonians—as if Estonia needed help from the EU). In the name of exporting democracy, this disguised imperialism extends EU influence by bribing surrounding countries (with EU structural funds). Ultimately, this reduces the competition that may come from the outside, and which could threaten the core. Once one realizes that among the reasons for Western development was jurisdictional competition, one sees that EU enlargement (if it succeeds) could become synonymous with suicide. (And this doesn’t even address the issue as to where the enlargement should stop.)

The future of Europe is not bright. Lepage recalls the days when Europe was catching up fast with the US in the 1960s and 1970s. It is now going the other way (see here). While some may think that the EU as it stands today is the logical outcome of what its founders, Jean Monnet and Maurice Shumann, wanted; this is far from certain. We should hope that French and German influence continues to abate in the EU, and that Eastern Europeans and Britain come to dominate entirely future debates. So far, I believe the EU has been a huge and costly mistake; it remains to be seen how the story will end.

Comments

[Nick]

I also hope that French and German influence continue to abate but unfortunately it seems very slow. France are currently trying to strengthen the barriers to economic integration on what they describe as 'strategic' grounds. For example Dominique de Villepin is attempting to upset a bid for Suez by an Italian company by merging it with another French utility (see this week's Economist).

[Kae]

Why the Esthonians ? The Esthonians understand democracy. The Slovaks have a more spotty record.

[frederic]

According to Lepage, it is getting more difficult for the French and the Germans to get their views accepted in the EU. Moreover, the French language is less and less used - this is a sign too.

On Estonia, yes this is precisely my point. The EU exports democracy even when it is not needed b/c the true goal is to limit competition, not to spread democracy.

[Meryn Stol]

interesting post.

"Once one realizes that among the reasons for Western development was jurisdictional competition,"

Do you have any references for that? I'd be most grateful if you'd let me know.

[Gem Hudson]

Yes when and where ever the one is free in their enterprise. They will produce the product that sells and the one do not need a permit to be profitable from any country.

[frederic]

In response to meryn. This is a reasonably common argument. You find it for instance in Rosenberg and Birdzell (How the West Grew Rich), Jones (The European Miracle), and the work of Doug North to some extent.

[kerrygoulde]

Call me biased, coming from Ireland, the country that has benefitted the most from EU structural funds, but I can't see this as such a bad deal for the Eastern countries. Also, when you speak of the 'suicide' of the EU, I think you are greatly underestimating the possibilities of internal competition, made all the more level by the free trade and labour movement provided by Union entry (or at least, which will be provided when the quotas against A8 countries are dropped).

You do, however, raise some good points, particularly about the double allegiance of EU representatives. Europe United, of which I am a member, aims for the creation of a fully internally democratic pan-European party to help ease these problems. You can check it out and have your say on policy by visiting www.europeunited.org

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