Vaclav Klaus has some thoughts on the EU Posted by: McQ
on Tuesday, May 29, 2007
On May 18th Vaclav Klaus, President of the Czech Republic, gave a speech about his country after its transition from communism and integration into the European Union. It is well worth the read. He talks about how it wasn't easy or 'free', but, in fact cost quite a bit to make the transition from communism to a free society.
One point should be made strongly - the transition from communism to free society is over. We are not somewhere in-between. We rejected all kinds of third ways. The transition was relatively short, much shorter than most of the people here and elsewhere expected, and it was a costly process. As we - the pupils of Milton Friedman - know, there are no free lunches. Our experience tells us that there are no free far-reaching reforms, no free transitions, no free fundamental systemic changes either. To say that is rather simple, but important and non-trivial conclusion.
What he points too are the 'internal costs' of the transition. What I found interesting was how he characterized the external problems (costs) of this transition. He lists two:
As compared to the early postcommunist era, when we were basically preoccupied with ourselves, the external side of our economic performance becomes more important now, especially in two respects:
- the economic growth in the rest of the world, especially in our main export markets;
- the constraints connected with our membership in the EU, or to put it more explicitly, with economic growth restraining institutions and economic policies in the EU.
It seems that the second aspect is more relevant than the first one now. Due to our lower labour costs and due to our rapidly growing productivity we succeeded in penetrating even the very sluggish EU markets. The average annual rate of growth of exports in the last 10 years was 13,3%, of exports to the EU 14%.
Impressive economic growth, no? But keep an eye on that second external constraint. Klaus talks about that when he discusses what he terms the "EU integration model":
What I consider important is the fact that the concept (or model) of European integration has been fundamentally changing over time. With the benefit of hindsight, and with the courage to generalize, I see two different integration models (or methods of integration) in Europe in the last 50 years.
The first one I call the liberalisation model. It was characterised by an inter-European opening-up, by the overall liberalisation of human activities, by the removal of various, in the past created barriers at the borders of countries as regards the movement of goods and services, of labour and capital, as well as of ideas and cultural patterns. Its main feature was the removal of barriers and its basis was intergovernmentalism.
The second one, which I call the interventionist and harmonisation model, is characterised by enormous centralisation of decision-making in Brussels, by far-reaching regulation of human activities, by harmonisation of all kinds of “parameters” of political, economic and social systems, by standardisation and homogenization of human life. The main features of the second model are regulation and harmonisation orchestrated from above, and the birth of supranationalism.
Of course it isn't difficult, if you know anything about Klaus, to imagine which model he prefers. And he makes no bones about that preference as he continues his analysis:
I am frustrated that the people in Europe do not see this fundamental metamorphosis sufficiently clearly and especially do not think about its inevitable consequences. I am angry with politicians and their fellow travellers that they do maximum to hide it and to make it fuzzy.
I am – as it is well known – in favour of the first model, not of the second. I am convinced that the unification of decision-making at the EU level and the overall harmonisation of societal “parameters” went much further than was necessary and than is rational and economically advantageous.
I consider it wrong. I am not satisfied with making only cosmetic changes. I am, therefore, in favour of redefining the whole concept of the European Union.
Now that, boys and girls, is a radical suggestion. He's right, but he faces an intransigent and entrenched bureaucracy which has little if any interest in a purely "liberalisation model" for the EU. In fact, the entire recent thrust of the EU has been to standardize for all. And that requires a huge dose of intervention and regulation. So, unfortunately, I have a feeling Klaus' suggestions are likely to fall on deaf bureaucratic ears:
I suggest going back to the intergovernmental model of European integration. I suggest going back to the original concept of attempting to remove existing barriers among countries. I suggest going back to the consistent liberalisation and opening-up of markets (not only economic ones). I suggest minimising political intervention in human activities. Where this intervention is inevitable, it should be done close to the citizens (which means at the level of municipalities, regions and states), not in Brussels.
To summarize, I want freedom in Europe, not democratic deficit, I want democracy in Europe, not postdemocracy.
I love his politics and wish him luck, but I'm just afraid that his chances of seeing such a turnaround for the EU are akin to the survival of a snowball in that rather warm place we all hope to avoid. Pupils of Milton Friedman are few and far between in the EU hierarchy.
The EU has to change course. What was an heroic effort to overcome nationalism and war to create common economic interdependencies and give an example of how trade and cooperation can turn bitter enemies into friends with common interests risks losing itself in a maze of bureaucratic regulations and interests.
The key: they need to take subsidiarity seriously. They have it listed as one of their fundamental concepts: that decisions should be made at the lowest level possible (local, regional, national, suprnational) devolving power closer to the individual while some functions that requirement are done at the EU level. Unfortunately, the Eurocrats haven’t really accepted this. But I think it’ll come; they’re exploring a different kind of political organization, not a state, but not a confederation. The temptation is there to become a super state. If they can resist that and listen to criticisms like this (gee, one time I can generally agree with Klaus) they’ll get back on track. They also have to listen to their voters.
I was amazed during my recent trip to Ireland how many quota’s the EU installed. The Irish were doing great with their milk production, which made other members mad, so the EU put a quota on how much milk they could put on the market. The same was true for sugar beats, for canola oil and a number of other things. So much for freedom.
I think the current level of over-regulation is just a response to the national governments’ tendency to play the "national interest" card way too often in their game of point-scoring against Brussels. They’re the ones who want to "protect" their industries from the "threat of globalisation". Intergovernmentalism is nothing but diplomacy which can be done anywhere. What we need is a real federal, democratic system with accountable institutions and the proper checks and balances, not diplomacy. If this is what a "superstate" means, then that’s what we need. One thing is for sure, the dominance of the nation-states in Europe are a thing of the past.
I love his politics and wish him luck, but I’m just afraid that his chances of seeing such a turnaround for the EU are akin to the survival of a snowball in that rather warm place we all hope to avoid.
The dim chance fades entirely to black if he, and those who can see the dangers of which he’s repeatedly warned, just give up the game as lost.
