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 *

EUROPE’S SOCIAL-DEMOCRATIC “GOVERNMENT”*

If national-veto rights are eroded at the European Union’s summit in Nice this week, those who gave in to France will present Paris’s victory as a compromise. The veto—it will be said—has been saved for such important national decisions as the setting of personal income tax rates; qualified-majority voting will be used in other, less important areas. But such claims should mislead no one, least of all students of history. Qualified-majority systems have seldom resisted the pressures that in time turned them into the rule of simple majorities. In Europe, this will mean socialism for everyone, in fact if not in name.

France, the current holder of the rotating EU presidency, and the Commission maintain that with enlargement from fifteen to nineteen members, and then to perhaps twenty-four or more, decision-making will become as good as hopeless unless we do away with the veto.

But if today we won’t let one country stop fourteen, one day soon we won’t have seven stopping eight, or twelve stopping thirteen. Once things start being decided by a count of votes, they nearly always end up with bare majorities imposing their will on the rest.

Among leaders currently in office, only Germany’s Joschka Fischer is knowingly in favor of a European superstate, but he is way ahead of the more cautious official government position. At the other end of the spectrum, Britain’s Tony Blair is looking over his shoulder at his wavering electorate and talks of a Europe whose building blocks will remain sovereign states. (One could ask how sovereign are blocks once they are cemented in a wall.) The British public suspects that a mistrusted French bureaucratic grip over Brussels will be permanent, and it resolutely repudiates being governed by an unelected technocracy.

BETWEEN EXTREMES

But the decision will probably fall between these two extremes, where one finds most European governments. They still harbor the hope of having it both ways—retaining sovereignty where it matters and refusing supranational rule where it hurts, but making European cooperation “more effective.”

This is, alas, little more than a pipe dream. Once a government loses the ability to veto a decision, it is gone forever. And as the areas where qualified-majority decisions hold sway are gradually extended, we would also see a subsequent drift toward bare-majority rule. Power would slowly be drained from the states and flow to a superstate level in Brussels. This drift of power toward the center would increase the distance between government and citizens.

The EU powers that be, from President Romano Prodi on down, say they’re aware of this problem, which they see as a “democratic deficit.” Their suggested remedy is “more democracy.” So they propose transforming the European Parliament from a sinecure for politicians who failed to make it on the national stage into a body with real functions. This body would then elect a president of Europe (Jacques Delors, of all people, is already being tipped), and he would form a government from within parliamentary ranks.

Unlike the present Commission, such a European government would have the legitimacy that the expression of the popular will would have bestowed upon it. The “deficit” would thus be eliminated.

The threat is obvious. Libertarianism, or what remains of it, survives in Europe episodically. In large measure, it is kept alive by the fact that this continent is a decentralized, diversified place, where different laws and different political arrangements coexist. But there is no electoral majority for liberalism in Europe as a whole, and there is plainly no hope for one in the foreseeable future. An elected European government could only be a social-democratic government (even if it called itself something else), and this would likely remain so for as long as it took irreversibly to mold a European superstate in its image.

Electoral majorities are formed by offering various interest groups benefits whose cost will mostly be borne by those who remain outside the majority. After the election, democratic government is under almost permanent pressure to expand welfare provisions and entitlements, create new tax breaks, and generally intensify the redistribution that is the staple of all state activity in any case.

At present, the heavily distributive “European model” is deeply rooted in France and Italy, is somewhat less dominant in Germany and Spain, prevails in a rather antiseptic form in Scandinavia, and is in tatters in most of the formerly Communist satellites.

But an all-Europe government would, almost by necessity, have to be as generous as it is in France and Italy. Any party that sought to form a European majority would have to outdo rival bidders by offering ever more generous programs to all kinds of groups from Greece to Portugal and from Poland to Ireland. Current interstate redistribution programs—such as the Common Agricultural Policy and the structural funds—would pale when compared with what a democratic superstate would feel induced to do.

MEAGER TANGIBLE BENEFITS

There is a belief across most of Europe that progressive taxation, extensive social insurance, and strict labor laws (with, for good measure, a compulsory shortening of the authorized workweek) are good for the poor and the weak, and good even for prosperity and employment. Most of the poor and weak believe this because they see some meager tangible benefits but do not see the cost. But they bear this cost nonetheless in the form of high unemployment and a dependency culture.

Many of the not-so-poor and highly educated classes also believe in the value of these programs, partly because a strong welfare state provides them with roles they covet. Thus, a European federal government, pushing through one “social charter” after another, would have a ready-made constituency waiting for it.

Much of this sounds as though I believed that a conspiracy is being hatched somewhere. That’s not the case. The EU is not all bad. It often does useful work, such as in stopping anticompetitive policies by the members. The reality is that if anyone or any group were consciously trying to make any of what I have described happen, little of it would really take shape.

What makes it plausible—nay, likely to come about—is precisely that hardly anybody is planning it, but all but a few are moving toward this socialist superstate with their eyes wide shut.

[* ]First published in the Wall Street Journal Europe, December 5, 2000. Reprinted by permission.