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The Eurodebate Today: Liberalizing the European Continent or Re-Regulating It?

English Pages, 18. 1. 2002

When discussing Europe in January 2002, two parallel, directly non-connected issues should be strictly distinguished. The first issue is the discussion of the process of the European integration itself, of its forms, its speed, its phases, its costs and benefits, its spontaneous character and/or its political constructivism. The second issue is the discussion of the possibilities of a small country, located in the heart of Europe, which was out of this process for half a century, to rationally participate in it. To openly discuss both issues is rather difficult, especially for a politician, because we do not live in the world of a free, unbiased, non-aprioristic academic debate. We do live, on the contrary, in the era of dominance of one view which succeeded in caricaturing all other views as wrong, reactionary, nationalistic and undemocratic. This is very unpleasant and unproductive.

On the basis of the tragic experience of my country with communism and with the communist manipulation of words (in the true Orwellian sense), some of us are oversensitive to the methods and procedures used in this debate, and I suppose some Germans may have similar feelings. We, nevertheless, have to ask ourselves where we are and where we are supposed to go? We have to ask how ourselves to characterize the current stage of the European integration. Should we use propaganda slogans or serious empirical analysis? My position - at least I hope - is based on my (and our) experience, on rational analysis and on the contribution and conclusions of social science studies. In spite of it, European integration is not easy to describe because it is a multidimensional process which cannot be captured, condensed or summarized into one word, one label, or even one sentence. We have to accept its heterogenity and deal with it.

I have long doubted the direction it took but it is here and its existence is undeniably historic. Its original foundation (as well as its consequent important turning points) has been a political act, not a spontaneous evolution of voluntarily arisen social institutions. It was projected as a human design, it was not a result of human action (to quote Hayek). It has always been controversial because it was full of political ambitions. It has never been a technical, organizational or administrative issue. Because of it, it has its critics and its enthusiasts. It has its undisputable successes but not everyone is happy with it. We have to admit that it doesn´t address two main economic problems of our times: high unemployment and expensive and demotivating welfare state. Non-negligible is also its impact upon freedom looking at it from its original, European, classical liberal tradition. I have recently come across an old monograph entitled "Rome or Brussels?" published 30 years ago by the Institute of Economic Affairs in London. Those two cities demonstrated already then the dual character of EU, or, to put it differently, the contrast between its original motives and purposes and its current form.

I believe that the original idea was to establish free trade and free economy in the territory of its members and that the optimistic hope was that more economic interdependency as well as mutual economic improvement would diminish political and economic tensions and would create closer union of the European peoples. The parallel, but at the beginning weaker and only supplementary idea was the retention and expansion of the European interventionist welfare state. If we ask which one of these ideas and tendencies is dominant now, I am afraid we have to answer that the second one.

It can be demonstrated with the help of many examples from reality - the Common Agricultural Policy, various nonviable development projects, limits on competition and market pricing, restrictions on the movement of people, regulatory restraints on trade, commerce and business, granting privileges to special groups, etc. It can be seen in the EU programme documents. The problem is very clearly demonstrated especially by the EU Charter of Fundamental Rights. The Charter contains fundamental civil, political and economic liberties but, at the same time, interventionist and welfare state privileges and entitlements (in the role of trade unions, in labour legislation, in the dismissal mechanisms, in the right to a life of dignity, in the right to participate in social and cultural life, in social security, in medical care, in unemployment compensations) which are considered "fundamental rights", instead of ideology-dependent forms of social policy.

Although communism is dead, the EU ideology - I call it Europeanism - brings about that increasing range of human actions is becoming subject to collective, politicised procedures. It is partly connected with the fact that instead of competition of legal and bureaucratic power structures and procedures, EU prefers unification or harmonization. Instead of competitive federalism (to some extent existing in the United States), Europe adopted antifederalism - in the meaning of the federalist vs. antifederalist debate at the end of the 18^th century - without taking into consideration the well-known arguments against it, e.g. in the public choice theory (rational ignorance, voter apathy, etc.).

Paradoxically, the Single European Act of 1986, instead of producing free, competitive markets across Europe, "produced" harmonization and the so-called acquis communautaire which remove the advantages of competitive federalism by forcing less developed member states, and, what is even more dangerous, less developed applicant countries to adopt the more costly environmental rules as well as prohibitive welfare and working practices. This is based on the belief that markets need state, that more market must imply more state and that bigger markets require bigger states. As a result of it, efforts are constantly being made to "standardize", "harmonize", or, in a different terminology, to rule, regulate, intervene. We all know that Europeanising government and bureaucracy does not mean unifying Europe, as it is often claimed.

Different issue is EU enlargement, which will have consequences both for old and new members. Many people in Europe believe that higher amount of member countries means less centralized and less unified Europe. Some of them are happy with it, some are unhappy, but I think they are both wrong. It will, instead, lead to accelerated unification, to further elimination of the veto power and to "enhanced cooperation" (as it was named or renamed in Nice) as instruments for creating an avant-garde (J. Delors), it will make it possible for "a certain number of countries to show others the way" (J. Chirac). The EU Commision Report of July 1999 made it even more explicit - enhanced cooperation is prepared "not for those who want to reduce integration or extract themselves from certain policies".

I am convinced that regardless their obligatory rhetoric, the member countries are interested to maintain in Europe the status quo. The candidate countries are, however, motivated to participate in the European integration and to enter the EU. Their motivation is not based on their excitement as regards the current model - as I suggested earlier, dualistic model - of the EU economic and social system. They historically belonged to Europe and believe that the only way to "belong" there again is to become EU member states. In addition to it, they have no feasible alternative how to institutionally disconnect themselves with their past. They understood very rapidly that they should not be the bridge between East and West because such position led in the past to tragedies which they do not want to repeat.

Their ambition to enter EU is, however, not the end of the story. They are afraid that their identity can be lost by far-reaching Europeanisation. They have historic experiences with Habsburg monarchy, with Hitler´s empire as well as with Soviet imperialism and quasi-internationalism. The identity issue is there, is relevant, and should not be caricatured as an obsolete, long-defeated or overcome nationalism. We should not mix identity with cultural issues because the applicant countries have always been European in the cultural sense of the world. If there ever was a need for some sort of cultural unification, this is happening regardless of formal membership. Identity means possibility to control one´s own destiny in a meaningful way, to have a sufficient degree of freedom for making one´s own decissions (vis-à-vis external constraints or decisions from outside), to have relevant political representatives within a "reach" (whatever it means with current information and transportation technology). 

It is fashionable now to argue that the word distance has become a meaningless concept. To accept such idea is another modern fatal conceit. The fact that spreading information as well as travelling are faster than in the past is an argument for world-wide integration (or globalization) of many human activities, for opening-up, for enormously productive exchange of all kinds of human products (in a very broad sense), for more specialization and division of labour, but it means nothing as regards political architecture, freedom and viable democracy, as regards the concept of political representation and of the relationship between individuals and the state. 

This is what the ideology of Europeanism does not take into consideration or, perhaps, assumes away by implicit belief in the state or, what may be worse, by explicitly promoting the idea of the omnipotence of political and bureaucratic elites functioning at the continental level.

It is necessary to point out that too much attention in the contemporary Eurodebate is paid to formal membership, which is not appropriate. The formal act of membership is a relatively minor event as compared to all the events between the end of communism and the date of entry into EU. The crucial moments were

-        the collapse of communist closed society and the following far-reaching opening-up of those countries in political, economic, social, cultural fields;

-        their own radical and historic transformation aiming at creating "normal" European free economy and parliamentary democracy and reflecting their own dreams and visions of a free society;

-        the memberships in other respected and important institutions and the compliance with their sometimes very demanding rules (IMF, World Bank, Council of Europe, WTO, OECD, BIS, etc.);

-        signing association agreements with the EU and following the obligations connected with them;

-        applying for EU membership and trying to harmonize domestic legislation with acquis communautaire;

-        negotiating membership by means of closing the so called negotiating chapters which implies accepting EU rules, norms, policies, etc.

The residual part is, I repeat, a rather smaller. By undergoing the above-mentioned steps we gained enormously and became a normal participant in all imaginable forms and fields of European relations but - at the same time - we paid very high costs which should be taken into consideration as well.

We willingly, without enforcement (domestic political squirmishes disregarding) accepted many external recommendations and obligations because we ex-ante took identical or similar views - price and foreign trade liberalization, rapid privatization (IMF), democratic procedures (Council of Europe), trade liberalization (WTO), etc. 

We had doubts about some other measures, but we accepted them - fixed exchange rate (IMF), capital account liberalization (OECD).  

Some of us, however, disagreed with suggested ways how to solve the current account deficit and the currency crisis (IMF), how to deal with the banking system in the era of transformation (e.g. capital adequacy requirements - BIS), how fast to disinflate the transition economy because we were aware of huge costs connected with accepting such solutions but even that was done.

Most of these issues were, however, policy issues, whereas the real trouble is the systemic one, reflected in the legislation, and, specifically, in social, labour, environmental, safety, etc. standards or requirements imposed upon us by EU.

Their problematic, and for us extremely costly character has two reasons:

-        some of them are associated with the stage of economic development and with the GDP level (what is normal in U. S. is not normal in India, and what is considered necessary in Denmark may not be relevant for the situation in Lithuania);

-        some of them are part of a different ideology than is dominant in countries with communist experience and with their distrust of masterminding the society from above.

Whatever is the motivation for their implementation these "standards" deprive us from our comparative advantages and we have to see them as protectionist measures and as costs (of non-negligible size). To our great regret, our arguments are not heard or are a priori discredited which reveals the lack of sensitivity on the side of those who demand them. (This is a problem for some current member countries as well, but it is a much bigger problem for applicant post-communist countries.) 

This issue can be made clear by using the terms nominal and real convergence and by explaining the difference between them. The applicant countries need real convergence, need catching-up, need to make up for half a century of communism. The question is whether nominal convergence (as regards legislation and single currency, something what the Germans know very well) helps to achieve real convergence or blocks it. The experiences of East Germany, of Southern Italy and - to some extent - of former Czechoslovakia tell us that nominal convergence may be a problem. Because of it, we live in an unfavourable constellation of "stars" - the original benefits connected with the dismantling of communism and with our successful minimalization of inevitable transformation costs in fragile and vulnerable economies was followed by costs of adjusting to EU standards. Some EU benefits may arrive only after formal entry, not before it. 

We do care about the future of Europe and of the West not less than the people living in Western Europe. But it seems to me that we understand more clearly the dangerous paradox of European unification: its belief in the possibility to preserve traditional European values when abolishing the original institutions that made victory of those values possible. That is the reason for our Eurorealism and for our warnings against Euroapriorism.

Václav Klaus, Notes for Berlin, Humboldt-Universität, Berlin, January 18, 2002