Following Britain’s Brexit vote last June, there has been considerable speculation, or indeed wishful thinking, that Brexit might be followed by the break-up of the European Union. However, many members of the EU would have nowhere to go if it broke up; they are too small to survive successfully in a dog-eat-dog world. For them, the solution is a reversal of the EU’s changes implemented since the 1990s, and in particular an abandonment of the crazy fetish of “ever-closer union.”
Britain is in a unique position to benefit from an exit from the EU. Its economy differs significantly from that of its European partners, being far more oriented to services and to worldwide trading links. It is also either the fifth or sixth largest economy in the world, with huge historic links to major producers of raw materials, its principal strategic lack. Finally, its political culture is much closer to that of the United States, Canada and Australia than to that of continental Europe – for one thing, it uses common law rather than Roman law. In summary, independence from the EU makes more sense for Britain than it does for any other EU member.
At the other end of the scale, there are several EU countries for which full independence, without membership of a trading bloc, makes no economic sense. These include the three Baltic states, Estonia, Latvia and Lithuania, but perhaps the quintessential EU members of this type can be contained in the phrase “former Austria-Hungary.”
Not counting parts of Poland and Romania, there are six countries that are today members of the EU which before 1914 were members of the Austro-Hungarian Empire, plus one country, Bosnia and part of another, Ukraine, that were also part of Austria-Hungary but are not part of the EU. Former Austro-Hungarian EU members include Austria, Hungary, the Czech Republic, Slovakia, Slovenia and Croatia. These countries were relatively prosperous as part of Austria-Hungary, but suffered severe impoverishment in the 1920s and 1930s after being forcibly given their independence at the Congress of Versailles.
With the exception of Austria, which made money as an entrepot between East and West, the former Austria-Hungary countries were then subjected to one form or other of central planning from World War II until 1989-91. Since that date, they have generally done quite well, with a flood of investment from the richer countries of Western Europe and necessary market reforms pulling up their living standards.
The lesson from the inter-war period is clear: these small countries need to be part of a larger entity, economically if not politically. Without such an association, they cannot acquire the economies of scale necessary to flourish in a modern economy, so their economies decline. Similar considerations apply to the other small but decently managed countries of Europe: the Baltic states, Scandinavia, Benelux and Portugal. Numerically, these cases represent a majority of the EU’s members.
In some other cases, notably Romania, Bulgaria, Greece, Cyprus and possibly Malta, the quality of governance is so low that even as part of a larger economic entity they cannot flourish. Being part of a large, rich market does not enable them to compete as low-cost providers for that market, but simply encourages them to leech handouts from the rich center, engage in corruption on a massive scale and act as a haven for the international criminal classes.
There is no great desire among the small-but-competent countries to be subsumed within a larger whole politically. If there had been such a desire, the constituent countries of Austria-Hungary would have reformed themselves into the empire after 1919, for example. Austria-Hungary was a less authoritarian, freer state than most of its successor republics, but the inhabitants of those republics felt that the combination of distance, inefficiency, language and cultural barriers imposed by the Imperial bureaucracy made the larger entity on balance unattractive.
This history makes it clear why the EU has caused such discontent among its peoples. It adds a layer of corruption and inefficiency to their government structure, and places many elements of decision-making in a location and by people completely remote from the citizens for whom the decisions are being made. There is no effective democratic control over its bureaucracy, and even referenda, which are themselves very blunt instruments of democratic management, are routinely evaded and ignored by the central apparatus.
Many years ago, when that country was just emerging from Communism, the Deputy Governor of the Bulgarian National Bank told me that dealing with the top officials in Brussels was like dealing with the old Comecon brass, except that Brussels had less understanding of Bulgaria’s needs.
The EU bureaucracy’s tyranny over even non-member countries has been evidenced in Macedonia, where under EU bureaucratic pressure (with help from the Obama State Department) the legitimate government was removed three years early. Then elections were repeatedly postponed, and when the election on December 11 produced a result not to the EU’s liking, a re-vote in one constituency was forced on Christmas Day, when only atheists and Muslim ethnic Albanians, supporters of the opposition, would be likely to vote. (The good guys won anyway, cheeringly.)
In such circumstances, discontent is inevitable, and will increase rather than die away. It will express itself as a violent reaction against centralization, manifest in the anti-government populism of UKIP, in the leftist anti-responsibility populism of Greece’s Syriza, Spain’s Podemos and Italy’s Five Star Movement and in the fissiparous regionalism of the Scottish and Catalan Nationalists. If the EU’s member state governments become a mix of UKIPs, Syrizas and regionalist governments fueled by resentment of their previous nation-states, civilized interactions will become impossible, prosperity will disappear and petty but highly destructive wars will break out.
The key problem is that the central dream of the EU, an “ever closer union” as set out in the Stuttgart Declaration of 1983 (but present as an aspiration before then) was a quasi-Marxist fantasy, inspired by historical determinism and dreamed up by bureaucratically minded statesmen after the devastation of world war. As Castlereagh and Metternich demonstrated after 1815, it was never necessary for Europe to unite in order to prevent war; it was simply necessary to devise civilized trading and conflict-avoidance arrangements. “Ever-closer union” imposes a centralized command-and-control structure that is both highly inefficient and naturally resented by the populace who see costs and regulations imposed on them by distant fiat.
The solution is to end the dream of “ever-closer union” and then reverse the EU’s excessive current centralization by an Anti-Maastricht Treaty, both undoing the 1992 Maastricht Treaty and indeed in some respects undoing elements of centralism that were present even before that treaty.
The most important institution to eliminate would be the European Parliament. It is a body that is completely superfluous for a customs union, and like all such bodies it devotes itself full-time to self-aggrandizement. Even when the European Commission proposes some liberalizing measure, which doesn’t happen very often, the European Parliament can be relied upon to fight bitterly to derail it. Inevitably, the forces of decentralization are less effective in that body than those of centralization, because they come from many different countries and political traditions, while the centralizers speak with one voice. In the same way, MEPs from small countries are hopelessly ineffective, because they have so few natural allies.
The European Parliament was given spurious legitimacy by the institution of direct elections in 1979. At that election, I supported the quixotic independent candidacy in my Cotswolds constituency of Air Vice Marshal Donald Bennett, who had led the “Pathfinder” bombing raids on the Ruhr in World War II — his campaign slogan was the truly beautiful: “Bennett knows about Europe – he bombed it flat!” Europe would be better off if he had applied his expertise one last time, to the European Parliament Hemicycle in Strasbourg.
Since we are devolving the EU to a simple customs union, all the centralized governmental bodies that have proliferated in Brussels, as well as the tyrannical European court system need to be disbanded, with the exception of a trade secretariat. Thus five of the current seven EU institutions would need to be eliminated, with only the European Council (a coordinating group of heads of state) and possibly the European Central Bank (more on that below) remaining. The Anti-Maastricht Treaty would also need to repeal the innumerable EU laws and regulations that have built up over the last sixty years.
The European Council would have no executive powers; it would simply function as a forum where the leaders of the member states would meet on a regular basis. Like the 1815-1822 Congress System, its principal function would be to defuse disputes between member states, so that war between them became impossible. (The break-up of the Congress System, engineered by George Canning, bears much responsibility for the outbreak of world war 90 years later.)
Finally, there is the question of the euro. This common currency has a great deal more benefit for small countries than for large ones. The countries of former Austria-Hungary, for example, find local commerce hugely assisted by having a common currency, just as they did when using the Austro-Hungarian thaler before 1914. To have 28 different currencies in the relatively small geographical area of Europe is impossibly inefficient. I would therefore propose that the euro continue, with the Maastricht Criteria of sound fiscal management being imposed on its members, but with no requirement, legal or informal, that any member of the customs union be a member of it.
If Italy wished to stop using the euro, for example, it could do so; equally Greece, which is hopelessly unable to meet the necessary budget disciplines, would be ejected by vote of the other members in a European Council meeting. On the other hand, countries like the former Austro-Hungarian Empire and the Baltic States, which find the euro convenient and are in any case prepared to accept budget discipline, would remain members. Ideally one large economy, such as Germany, would also remain a member to ensure that euro monetary policy remained sound (as it is not currently) and that the euro itself remained a major world currency in which large financings could be undertaken.
The only difficulty would then be those current EU members that suffer from poor government. However, since the Anti-Maastricht Treaty would have removed all central finance and subsidies, they would no longer have the option of remaining members for the sake of the slush funds. In this more free-market environment, they would either shape up or ship out.
By reversing most of the EU’s legal and institutional superstructure through an Anti-Maastricht Treaty, the countries of continental Europe could place themselves in a customs union with few central institutions and low costs, that would maximize their trading opportunities and guard against local disputes turning into wars. The dreams of the peoples of Europe would be realized, even if those of the centralizing founders of the EU were thwarted.
(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)