The Online Library of Liberty

A project of Liberty Fund, Inc.

• Introduction
• Part 1: Rights, Property, and Markets
• Property Or “property Rights”? *
• “design Faults” In Locke’s Theory of Property Taint Ownership With Guilt *
• Is Ownership a Myth? *
• How to Get a Free Lunch? Just Apply For It *
• The Problem of Contract Enforcement *
• The Public Goods Dilemma *
• Trying the Free Market *
• The Statist Legacy *
• Part 2: The Common Sense of Non-economics
• The Yakoubovich Syndrome, Or Lies, Damn Lies, and Economic Policy *
• Winning Policy Battles But Losing the War Against Economic Realities *
• Paying Ourselves More of Their Money *
• The Doctrine of “unequal Exchange” the Last Refuge of Modern Socialism? *
• Corporate Managers Are They Going to Kill Capitalism? *
• When the Economy Needs Morals *
• The Political Economy of Force-feeding *
• Hostile to Whom? *
• Mannesmann’s Courtesy Could Prove Rare *
• Part 3: French and Russian Tragicomedies
• Can Putin Build a Real Economy From Oil and Rigor? *
• Russia and the New Europe Growing Apart *
• Russia Hopping Along On Clay Feet *
• The French Tragicomedy *
• How the French “social Model” Could Self-destruct *
• A Little Bit of History Repeating *
• There Is No French Exception *
• The Hobbling of Private France *
• Part 4: The Capitalism They Hate
• The Capitalism They Hate *
• Striving to Get Richer and Poorer *
• “bread and Circuses” In the Modern Welfare State *
• Who Minds the Gap? *
• Float Or Sink? the Millstone of the “social Market” In Germany *
• How Germany and France, the Sick Men of Europe, Torture Themselves *
• Shall We Borrow From the Children? *
• Low Pay *
• Freedom to Strike Or Right to Strike? *
• Part 5: Creating Unemployment
• Stamp Your Feet and Demand a Fair Deal *
• Paternalism and Employment *
• The Things Labor Unions Are Up to *
• The Instability of the Welfare State *
• Some Bad News Could Be Good News *
• Built-in Unemployment Social Protection Costs More Than It Is Worth *
• Let ’s Throw This Model Away *
• How to Stifle Employment By “social Protection” *
• Workable Alternatives *
• A Tale of Two Models *
• A Vicious Circle of Social Kindness *
• Part 6: The Future of Europe
• The Economic Consequences of a United States of Europe *
• A Giant Free-trade Area Or a Political Counterweight to America? *
• European Crosscurrents and the Federalist Drift *
• How Confederacy Could Turn Into a Federal Superstate *
• Majority Rule By Any Other Name *
• What Now For “europe”? Why the People Failed Their Masters *
• Free-riding On the Euro *
• Some Democratic Economics *
• The Soviet Legacy *
• A War of Attrition Between Economic Reality and Political Dreams *
• A Brightening of the Economic Skies Over Brussels? *
• Turkey Knocking On Europe’s Door *
• Turkey and the Eu Club *
• Europe More Secular and More Islamist *
• A Bill of Rights Europe Did Not Need *
• Europe’s Social-democratic “government” *
• Power Corrupts, So Let ’s Make It Less Absolute *
• Part 7: Economics, True and False
• On the Economics of Protecting Employment *
• The Costly Mistake of Ignoring Opportunity Costs *
• “globalization” and Its Critics Mutual Gain Vs. Cloud-cuckoo Land *
• Are High Oil Prices a Form of Exploitation? *
• Immigration What Is the Liberal Stand? *
• More Nonsense On Stilts Mr. Bentham Is At It Again *
• Risk, Value, and Externality *

A BRIGHTENING OF THE ECONOMIC SKIES OVER BRUSSELS?*

There is a new Commission of the European Union in Brussels. It is taking office next month. Nearly every member of it is new. The well-meaning but bumbling and often confused-looking president, Romano Prodi, has been replaced by the former Portuguese premier José Manuel Barroso, who is not only smoother, younger, and more articulate, but also a man largely freed from the numbing intellectual ballast of Latin social ideology. For someone who was a Maoist in his student days, he is modern and economically literate. His tactical skill in allocating portfolios in a way that radically reduces the influence of the French and to some extent also of the German commissioner has earned applause from lovers of judo.

Each of the twenty-five member states has one commissioner, compared with two for the larger members and none for some of the small ones in the previous Commission. Many of the member states habitually nominate commissioners to reward politicians who for one reason or another must be put out to grass. Barroso on the whole managed to give such people portfolios of minor, in some cases only of symbolic, significance. The half dozen really important portfolios have gone to men and women of high caliber and liberal convictions. (The confusion of tongues between American and English English calls for making sure the reader remembers that an American liberal is a European social democrat.)

Moreover, given that some portfolios matter far more than others, the influence of northern Europe—Britain, the Netherlands, the Scandinavian and the Baltic states—has grown and that of the “core” states, especially France, has diminished. To French indignation and dismay, Brussels looks less and less like an administrative annex of Paris. Though there are individual exceptions, the shift of influence from the center to the north is by and large a shift from the viscerally socialist to the viscerally liberal mentality.

The Prodi, and before it the Santer, and especially the Delors commission presided over a Europe that was in many respects deeply suspect; suspect, that is, when seen from the politically liberal and economically rational point of view. It was fond of regulating, uniformizing, and harmonizing. It sought to promote “workers’ rights” and a formal machinery of worker participation in management. It was often protectionist in practice even as it condemned trade barriers in theory—in this insincere stance it was a worthy rival of the United States. It fought against the insidious attempts of liberals, mainly the British, to “reduce the Union to a mere free-trade area.” Above all, it administered and often helped to defend the monstrous Common Agricultural Policy that brought to Europe dear food, an unpardonable waste of farm inputs, an endless succession of “crises” due to the overproduction of butter, milk, sugar, wine, pork, fruit, beef, and whatever else you care to think of, and untold environmental damage from the deluge of farm chemicals and manure upon the land, groundwater, and the sea. It must in fairness be said that in latter years the Commission has placed itself on the side of the angels and fought for a rational reform of the Common Agricultural Policy in the face of ferocious French, Spanish, Greek, and even German opposition.

There is, of course, no prospect of an immediate and radical sea change in European Union policy merely because the top men of the Commission have been replaced and the changes are mostly for the better. The Council of Ministers holds the whip hand over the Commission. The Council is still what it has always been, a committee where the voice of the powerful usually prevails even when majority voting is supposed to decide an issue. However, the Commission largely controls the cogs and wheels of the administrative machine, and the influence of the machine, mute as it is, should not be underestimated.

It is at the level of the machine that big changes that had been fermenting for several years seem now to have matured. For at least three decades, the Brussels administration had been something of a French fief. It was France that proclaimed which policy would qualify as “truly European.” The important directorates were mostly headed by Frenchmen, and the French administrative spirit and the French language dominated the Commission’s “culture.” Ten years ago, the bulk of draft directives and other working documents were originally written in French. Today, over 80 percent are drafted in English—with all the change in the spirit of a text that such a change of language involves—even if the English in question is sometimes merely Eurospeak. All commissioners but one speak an English of sorts, but only seven speak some French.

There remains in one corner of the Brussels sky the dark cloud of the new constitution. Several states, including France and Britain, have already announced that they will submit it to referendum, and others are likely to follow. Referendums will be held over 2005 and 2006. Other states will have recourse to ratification by their legislatures. Even if none of the twenty-five member states balk, the process is unlikely to be completed before 2007. At least some states—Britain, Denmark, Poland—may well balk, and some formula or other will have to be negotiated to sweep their opposition under the carpet.

For these reasons, the threat represented by the constitution (as it now reads) is not imminent. All the same, it is a serious threat. Nominally, it removes certain vital areas, notably income taxation, criminal law, and “social rights,” from the competence of the majority, so that any member state can veto pan-European legislative proposals in these areas. Britain, at whose insistence these issues were removed from the rule of the majority, is tipped to be prepared to veto both tax harmonization and advances in welfare provisions, as well as more restrictive labor laws. Ireland, perhaps the Netherlands, and some of the new member states from east-central Europe might also use the veto. For this reason, parts of the European Left are now agitating against the constitution, which they accuse of giving free rein to “savage liberalism.” They interpret it as blocking all progress toward a “social Europe” where no state would be allowed to lag behind in the provision of welfare and the widening of “workers’ rights.”

This is a bit like accusing the padlock, with its keys attached, for blocking access to the beautiful garden. The constitution furnishes the keys. They are wrapped in the Charter of Fundamental Rights and the cross-border implications of the common internal market. The latter has even wider potential effects than the commerce clause of the U.S. Constitution, while the former is so vast, so woolly and vague that under it the European Court of Justice would probably be willing, or could feel forced, to overrule British or other vetoes of proposed “social” measures. If ratified, the constitution would open the gates, not to “savage liberalism,” but to politically correct social “rightsism” with the economic stagnation and unemployment that are its concomitants.

It seems clear that the new Commission is not keen to go in this direction and would drag its feet if pushed. It is already doing so on corporate taxation. Left-leaning governments might go on pushing it, and so might the demagogy of the European Parliament. But by the time the proposed constitution becomes law—if it ever does—several years will have passed. The economic enlightenment and the better grasp of realities that have brightened up the sky over Brussels might, with a little luck, have made some more headway. As the saying goes: the worst is not certain.

[* ]First published as “Weather Forecast—A Brightening of the Economic Skies over Brussels?” by Liberty Fund, Inc., at www.econlib.org on October 4, 2004. Reprinted by permission.