Front Page Titles (by Subject) WHAT NOW FOR EUROPE? WHY THE PEOPLE FAILED THEIR MASTERS * - Political Economy, Concisely
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WHAT NOW FOR “EUROPE”? WHY THE PEOPLE FAILED THEIR MASTERS * - Anthony de Jasay, Political Economy, Concisely 
Political Economy, Concisely: Essays on Policy that does not work and Markets that do. Edited and with an Introduction by Hartmut Kliemt (Indianapolis: Liberty Fund, 2009).
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WHAT NOW FOR “EUROPE”?
France, one of the six founder members and the self-appointed leader of the European Union, has submitted to a referendum the proposed constitutional treaty, which is a four-hundred-odd-page effusion of verbosity. The political “elite,” nearly unanimously supporting the text, blithely made it known that if it is adopted, there will be a “Europe” and if it is rejected, there will be none. The unthinkable happened. Fifty-five percent of the electorate voted “the wrong way,” seconded a few days later by 62 percent of Dutch voters. Both electorates failed their political masters who had called a referendum in the confident expectation that it would endorse their goal of “building Europe” and give it legitimacy. By rights, the constitution is now dead, for its adoption is subject to unanimous ratification by all the member states. While states that ratify by parliamentary vote have approved, and will approve, it, states that submit it to popular vote now look likely to follow the French and Dutch example. Even if they did not, the French vote alone would suffice legally to kill it. I say “by rights,” because desperate attempts are now being made to resuscitate the treaty in some disguise, of which more below.
The motives for voting “the wrong way” were kaleidoscopic, but two major ones stand out. One was the idea, encouraged by the authors of the document and the media which assisted its birth with loud applause, that a modern constitution is above all a list of what people have a “right” to get from their government (and never mind where the government gets them from in order to give them to the people). Despite the mouth-watering list of good things promised them in the “Charter of Fundamental Rights,” which forms the most extravagant part of the document, the people were still disappointed: there were not enough “social” promises of levelling upward. The list was not rich enough. “Europe” was not going to be sufficiently insulated from “inhuman,” “blind” market forces. On the contrary, it was to be liberal or, as its critics insist, “ultraliberal,” enshrining rules of free competition and thus undermining even the present level of “workers’ rights.” In particular, it does not require all member states, notably the ten new east-central European ones, to raise their taxes and social welfare entitlements to the Franco-German level, thus allowing free rein to “social dumping” and the luring of productive business and employment from West to East.
The other and perhaps deeper reason for “rejecting Europe” was the ever wider gulf between the common people and those in politics and the media who make a living and a name from purporting to lead and inform them. The “elite” has never ceased to pour out a torrent of rhetoric about the sacred goal of a politically united Europe, forcing it down the public’s throat. A referendum on it was the perfect occasion for the common people to hit back at the Right without sparing the Left and to hit back at the Left without sparing the Right. Both halves of the political “elite” could be taught a lesson.
THE ECONOMY GOES ON MUDDLING THROUGH
Before the French vote, no less an authority than the prime minister announced that a “no” vote would lead to an economic crisis—a singularly irresponsible prophecy for a head of government to make. The crisis may come for all we know, but it is not likely to, and if it does, it will not be due to the “no” vote. Without the new constitution that would have given greater influence to common institutions including the Council of Ministers and that citadel of political correctness, the European Parliament, most of the important economic decisions now remain subject to state veto rights. While European economic policy cannot, for this reason, do much good, thanks to the sanity of the veto-bearing British, Irish, and the northern Protestant belt, it cannot do much harm either.
There is every prospect that the European economy will continue to underperform, dragged down by the near-stagnation of Germany, France, and Italy. Without quite radical structural reforms, these core countries will continue their decline relative to the rest. There is some chance of reforms starting in Germany with the foreseeable change of government in the autumn, a weaker chance in Italy next year, and no chance at all in France at least for the next two years until the presidential term of the “republican monarchy” runs out.
Some sections of opinion in Italy and Germany would like to shed the euro, returning to their original national currencies in the hope that this would raise their performance to the British, Danish, and Swedish level, countries that never gave up theirs. However, though a majority in Germany and a strong minority in Italy would welcome a return to the mark and the lira, there is no support for this among decision-makers, and it would in fact be a tricky undertaking with a high short-term risk of shocks to the dissident countries’ new exchange rates and bond markets.
“LITTLE MAN, WHAT NOW?”
Little Man, What Now?—the title of a popular German novel of the interwar years—would fit a book about the present predicament of the minor politicians, journalists, lobbyists, international functionaries of all kinds whose influence, income, creature comforts, and, above all, sense of self-importance have hung on the political “Europe” that the French and Dutch referenda seem to have now dispatched down the drain.
It is not only old-fashioned honest selfishness that drives them. If that were the case, they could all be installed at public expense in luxury somewhere in the South of France or Portugal to play golf and discuss Europe. Compared to the European budget of about 116 billion euros, let alone some national ones, the cost would be minute and probably worth it. The problem is that most of these people passionately believe in the dream of their “Europe” becoming a superpower “able to stand up to America” (though apart from flattering their pride, it is not clear what good such “standing up” would do anyone). This ambition cannot be bought off and is dangerous even if it remains a mere dream, let alone if steps are taken to realize it.
The “political class” is not taking its defeat at the hands of the people lying down. Instead of accepting that the European Union is destined to remain a free-trade area with some common regulatory bells and whistles and that the proposed constitution destined to transform it into a political entity is dead, they are busily trying to salvage something from the wreck. The plan seems to be to scrap the November 2006 deadline for ratification, have a pause in the process to allow the memory of the French and Dutch “wrongheaded votes” to fade out, and have some kind of fresh start in the expectation that some ingenious formula or other will be found and adopted to get round the obstacle of unanimous ratification. A modified formula, avoiding the ill-fated name “constitution” and sweetened with “fudge,” could eventually be concocted so that only the European Parliament’s vote would be required to pass it. The parliament would be as sure to approve it as mice are sure to eat the piece of cheese put before them. This is a longer-term plan that cannot be rushed, and it may not succeed. However, at least for the next couple of years we will not know that it has definitively failed.
[* ]First published by Liberty Fund, Inc., at www.econlib.org on July 4, 2005. Reprinted by permission.