Debating the European Union

May 6, 2023 by Dan Mitchell @ International Liberty 

(Editor's Note:  Dan is a prolific writer, and I love much of what Dan publishes, but he ends this commentary saying: It’s good to favor globalization, but that does not imply support for global governance.  I posted this comment:  If you favor globalization it means favoring global governance, since that’s the intent behind globalization. Here’s reality. If you play straight with cheaters, you lose, whether it involves economics or politics. If countries aren’t playing straight, then don’t play. Because if you do, they get bigger, richer and more dangerous, and the straight shooters get poorer, smaller and defenseless.  Nixon and Kissinger opening China to the world is the perfect example. After Mao’s Cultural Revolution China’s economy, and the Chinese Communist Party was heading for the ash heap of history. Nixon prevented that and now we’re seeing the consequences. RK)

Most Americans pay little or no attention to the European Union and its various bureaucratic and political arms in Brussels. 

But that’s unwise. What happens in Europe can have an impact on policy in the United States.

For instance, I have been very critical of the European Union because the bureaucrats and politicians in Brussels push for dirigiste policies such as tax harmonization and climate protectionism.

And I was a huge fan of Brexit (the United Kingdom voting to leave the E.U.).

On the other hand, I have tepidly written that E.U. membership may make sense for nations from Eastern Europe.

It seems like I can’t make up my mind, but my views are simple and (I like to think) very rational.

• If E.U. membership will push a nation in the right direction, I’m for it.
• If E.U. membership will push a nation is the wrong direction, I’m against it.

Given my interest in Europe and the European Union, I was understandably interested when I saw that Reason published a pro-con article on the topic.

Dan Hannan, a former member of the European Parliament from the U.K., argues that the E.U. was a mistake.

Unlike NAFTA or the European Free Trade Association (EFTA), the EEC was not a free trade area but a customs union, controlling all commerce on behalf of its members and artificially redirecting trade away from the rest of the world. …it was a club of nations rather than a superstate. …That changed when the Maastricht Treaty came into force in 1993. …it stopped being the EEC and became the European Union. …A big polity can prosper, but only if it behaves like a confederation of statelets. The supreme exemplar is the U.S., the only large nation that gets anywhere near the top of those GDP rankings… I’m not wild about the direction the U.S. has been taking… But the U.S. is starting from a much better place. It was designed according to Jeffersonian principles. Power was dispersed, decentralized, and democratized. The E.U., by contrast, was designed to weld nations into a supranational bloc. …Where the Declaration of Independence promises life, liberty, and the pursuit of happiness, its European equivalent, the Charter of Fundamental Rights, entitles people to “strike action,” “affordable housing,” and “free healthcare.”

Dalibor Rohac of the American Enterprise has a more optimistic assessment.

The Brussels machinery is bureaucratic and largely insulated from accountability. When it comes to new markets and new technologies, European institutions regulate first and ask questions later. The E.U. controls a sizable budget, part of it wasteful—including generous agricultural subsidies and transfer programs… Yet the E.U.’s existence is infinitely preferable to its absence. …The relevant comparison is between the E.U. and the politically plausible alternatives. Those alternatives almost certainly involve protectionism, heavy-handed industrial policy and planning, or state aid to politically connected companies… If it weren’t for the pressure of the European Commission in the late 1980s, it is fanciful to think that Italy or France would have just given up state ownership of utilities, banks, or their industrial giants. …Conversely, the United Kingdom has not become a free market paradise after leaving the European Union. Quite the opposite. …the E.U.’s “single market” is far from perfect. …it often goes hand in hand with harmonized European rules rather than with simple mutual recognition of national standards. …Has the E.U. lived up fully to the ideals of Hayekian international federalism? Of course not. But it is blindingly obvious that it has performed better than the relevant alternatives.

What’s my two cents.

I’m on Dan Hannan’s side and I think he made good points, but I would have made different arguments. My main concerns with the E.U. is that it is not only a protectionist club, but it also is far too supportive of harmonization, centralization, and bureaucratization.

Simply stated, the culture in Brussels is dirigiste and “public choice” tells us that it will get worse over time.

Dalibor Rohac made good points, to be sure, and he is right that the E.U. has been a net plus on some issues. And he’s also right that some nations might be further to the left if the E.U. didn’t exist.

But, on net, I think it leads to more statism rather than more markets.

P.S. Here’s a description of why “mutual recognition” is a good framework for international economic relations.

P.P.S. It’s good to favor globalization, but that does not imply support for global governance.

P.P.P.S. Rohac is right that the U.K. has not prospered in the post-Brexit years, but leaving the E.U. was a way of creating the opportunity for a better approach. The fact that British politicians have been increasing fiscal burdens simply means that the U.K is not taking advantage of the opportunity.