Open Europe hosted a debate in Brussels last week, looking at the future of the EU in the wake of the eurozone crisis. “Superstate or disintegration?” was the deliberately polemic question to be answered.
The ever-eloquent Dan Hannan, a UK Conservative MEP, warned against further harmonisation by pointing to Europe’s history. It was the competition, he argued, arising from various independent European powers co-existing that made Europe take off post-1500.
Giles Merritt, the amiable secretary-general of eurofederalist Friends of Europe, said it was just the opposite; Europe only gained its influence through the Treaty of Westphalia, which involved European powers coming together, collectively hammering out a common rule book for how relations between (from then on) sovereign states should work.
This is no doubt one of those long-standing debates, but the evidence from economic history is difficult to ignore. As David Landes sets out in his seminal work The Wealth and Poverty of Nations:
Fragmentation gave rise to competition and competition favored good care of good subjects.. . . European rulers and enterprising lords who sought to grow revenues . . . had to attract participants by the grants of franchises, freedoms and privileges—in short, by making deals. They had to persuade them to come.
The Treaty of Westphalia locked in this order, ensuring that sovereign states could continue to compete – also leaving them free to copy the advances of those that had enjoyed greater economic and social success.
In contrast, China – with its once scientific and naval superiority – chose the path of a single, unified empire; a heavily centralised regime whose autocratic rulers faced little pressure to change their ways. Ambition was not rewarded and there were few escape routes for those with a desire for economic or scientific progress. The consequences are well known: China’s economic revolution was delayed by some 500 years.
The Economist breaks it down in its Millennium issue:
China’s rulers could ban some advance, and their ban was obeyed. Europe’s regimes might try such things. Some did: Florence issued an edict in 1299 forbidding bankers to use Arabic numerals; in 1397 Cologne ordered its tailors not to use machines; after the invention of the ribbon loom in 1579, the city council of Danzig is said to have ordered the inventor to be drowned. But their efforts were in vain, indeed self-damaging: a rule that hurt the economy hurt the state that made it, as against others economically more enlightened. In Europe, rivalry among governments wore away at the interests opposed to economic growth.
(Other works emphasising the importance of “institutional competition” along the lines of Landes’ thinking, include, for example, “How the West grew rich” by Nathan Rosenberg, “Law and Revolution: The Formation of the Western Legal Tradition” by Harold J. Berman; and on the importance of institutions, Douglas C. North’s “The Rise of the Western World: A New Economic History“)
But there’s also another aspect of the Peace of Westphalia that is too often overlooked. The nation-state – the idea of territorial integrity and sovereignty – paved the way for the concept of popular sovereignty in Europe. The state became the unit around which democracy – the pre-condition for which is a demos – could be organised.
Europe’s history is of course much more complicated than this – geography is key, for example, religion is a major factor and the rise of the nation-state was coupled with wars and, at times, nasty expressions of nationalism.
Still, EU leaders would do well to glance backwards for a few minutes before deciding what do to next. The eurozone crisis is once again begging fundamental questions about Europe’s past and future.
First, if the EU continues on its path towards more and more harmonisation – on regulation, law and fiscal policies – it undercuts one of Europe’s greatest recipes for success.
Secondly, continuing to erode the link between the nation-state and democracy could prove hugely problematic. As has been stated over and over again: democracy without a demos is bound to fail. No amount of money from the EU to various cultural projects and citizenship campaigns will be able to artificially inject a demos into the European Project. And again, this must not be considered a bad thing – Europe’s diversity harbours tremendous strength.
Alas, with a €500 + €110 billion EU bailout package on the table, and more money potentially from the IMF, the EU’s infamous democratic deficit has taken a quantum leap in the wrong direction. Taxpayers in one country are now liable for the mistakes of a government in a different country – but without the opportunity to throw the ‘rascals’ (who they are underwriting) out of office. This broken link breeds contempt amongst people. Push it too far and EU leaders could see the rise of the very forces that they’re professing to fight.
Thirdly, do not take away the “right to exit” – free movement is what the EU does best (preferably through mutual recognition rather than harmonisation) and is in many ways the modern facilitator of the political and economic competition that produces the best result for Europe as a whole. But too much harmonisation offsets the benefits of free movement – the natural exit route will not be another European country, but probably to the US or the emerging economies to the East.
(The sharp-eyed will spot a potential contradiction between points 2 and 3, which needs to be taken seriously as well).
At Open Europe’s debate, Dan Hannan quoted German economist Wilhelm Röpke, who once said:
to try to organise Europe centrally and to wield it into a block is nothing less than a betrayal of Europe and Europe’s patrimony, betrayal made all the worse by being carried out in Europe’s name.
Spot on.
#1 by Eurocentric on June 30, 2010 - 6:44 pm
I doubt it is as straight-forward as that. Different levels of technological development and economic circumstances mean that different solutions are more successful and suitable at different times. Would a nation state democracy be as successful or easy to maintain in the days of the great agricultural empires of Persia, etc? Probably not, as the lack of a national/terroritory-wide media and more locally bound economies would have made the building of such a nation state nigh-on impossible.
When it comes to the globalised economy and technologies of today, market size matters. Having a common mobile signal system gave Nokia and others a big boost (having a European “home market” compared to a Finnish, etc., one), and eventually such standards went global. Countries such as the US, India and China already have huge home market potentials as a nation state, because their states are so large; in Europe and elsewhere in the world, states do not have such an advantage.
If competition is what made Europe great, then we should be careful to equate that with dividing borders. The examples in your article need to be compared with the challenges we face today. In times past, censorship and tyrannical suppression of innovations is unlikely to happen in Europe now, either with or without the EU. Innovation needs a big home market to be tested properly with competition and to have the chance of “making it big” in a globalised world.
With regards to the free movement of people, it’s worth noting just how many barriers can stand in people’s way, and that harmonisation and simplification could spur greater movement and innovation – these need not be absolute harmonisation, but the setting of minimum standards in some situations.
A centre is needed to underwrite common rules and minimum standards. I agree that the power of the centre needs to be limited, but ensuring a strong internal market (and, speaking from the centre-left, good social rights for citizens who do exercise their free movement rights) is essential for innovation and creation. We should remember that the economy is much bigger than Europe, and that we’re in competition with other markets around the world.
And, finally, I think it’s worth noting that the European nation-state competition of the past was also bound up in large world empires that permitted access to resources and markets beyond the home country – a factor I feel you overlooked.
#2 by Kazimierz on June 30, 2010 - 8:42 pm
First, it is rather hard to figure out causes of why Europe developed her civilization ahead of other regions. Too many possible factors come to mind. As one of those factors we should include “accidents of history”, that is small accidental events that influence the course of history, including economic history.
Freedom and competition are good. Harmonization and simplification is also good. The key is a balance between those two, balance not in some abstract principle but in concrete details of economic life.
#3 by Patrick on July 1, 2010 - 9:56 am
Lucky for the UK and much of Europe that US taxpayers didn’t perceive the Marshall Plan as an undemocratic act. Ditto with the IMF whose finances come from member countries without the participation of the public. Who would get anything if finance packages would be subject to referenda?
It comes down to solidarity and working together. Those who oppose this on the basis that the world (or rather their little country) was somehow a better place when European states were busy fighting each other in the name of \competition\ will always come up with spurious arguments founded on historical nostalgia and antipathy towards foreigners.
The fact remains that Europe is enjoying its longest period of peace and prosperity since the Roman Empire, and countries are queuing up to join.
Interesting to note that all of these arguments could have been levelled in 1776 against the decision of the individual US states to come together, ditto the Italians and the Germans. Where would a fragmented US/Italy/Germany be now?
P.S. There’s not only a contradiction between points 2 and 3, but another between point 1 and the reference to China.
Further, Hannan’s reference to Röpke is misleading – he in fact was in favour of a common market without the central economic planning, which the Germans are still against. See: http://www.ena.lu/yes-common-market-central-economic-planning-zeit-12-december-1957-020204908.html.
#4 by RCS on July 1, 2010 - 2:26 pm
The EU is failing economically. There are many reasons for this but the euro, hailed as a great political acheivement, is now causing immense harm to the citizens of the eurozone. Sadly, we are supposed to trust the institutions that have created this mess by giving them more power.
Do the people of Europe seriously believe that the Commission has the competence or the democratic legitimacy to control the economy of Europe as a whole?
The flower of european acheivement has come from the nation states with which the majority of europeans identify themselves.
The size of the EU institutions should be shrunk and they should occupy themselves with international standards for the purposes of free trade. If they could do this properly, one might have more confidence in the EU. The expansion of the EU into economic governance, security, diplomacy is bound to fail in the long run because, during crises, national identity surfaces as the most important issue. There is no European identity, there is no demos and to pretend that there is by legislating for it will ultimately fail.
#5 by Desmond O'Toole on July 1, 2010 - 5:55 pm
We have the nation states of Europe to thank for much else besides the “flower of european achievement”, haven’t we?
The importance of the EU is that we can consolidate the “flowers” of European achievement, while guarding against those other “achievements” which we are much better off without.
#6 by JSBenton on July 1, 2010 - 9:38 pm
@Patrick
I suspect that the states, including my own, Wisconsin, with not many more people than Denmark, would be much better off without having unified with the rest of the states. The idea that we unification leads to success needs a lot more careful thought to identify the conditions that lead either to greater success or long-term failure.
There is little question here that the kind of unification represented today by the EU is not a workable model. But many of us are now asking the same question of the much more integrated model in the United States. Questions on that issue, and heated assertions as well, are coming from right across the political spectrum.
JB
#7 by Anonymous on July 2, 2010 - 2:36 pm
Extract from President Obama’s 2011 State of the Union address.
‘Madame Speaker, Vice President Biden, Members of Congress, distinguished guests, and fellow Americans: in the past year, we have faced many challenges as a nation. A profound study of the history of our European allies (with input from special advisor Hannan) has convinced me that the excessive competencies of the Federal government are exclusively to blame. Therefore, as a first measure I am proposing that the Federal budget be abolished, and federal programs be devolved to more responsible entities – such as the State of California. With states issuing their own debt, there will be no need for federal debt to be issued at such unsustainably cheap and affordable rates! As a result all monetary and fiscal stimulus will end forthwith, which will surely be necessary given gigantic private deleveraging and the unprecedented contraction in the money supply that is now occurring. If states cannot refinance under the new regime, they are free to leave the Union and have their own ‘state dollars’, as was the case before the federalising thrust that followed the US Civil War – a terrible event which marks a clear point of decline for our country. How much better things were before then! Cooperation between states has only weakened our great country.
Thank you. God Bless You. And God Bless the Confederal States of America.’
#8 by realistic dreamer on July 2, 2010 - 7:34 pm
“What made Europe great?”
Great question, but I won’t try to answer it. Instead I’ll muse about history and possible future.
Europe was the first local civilization that reached level of technological development allowing it to travel across the globe. In search of profits Europeans carried their civilization to other continents. But three young boys entered politics on June 28, 1914, and unintentionally started The Second Thirty Year War in Europe. After 1945 the power centers moved to USA and USSR.
Europe will not regain its dominant technological role but it may lead the world in social and political development. In uniting various countries. In that sense, EU, as I see it, is a prototype of future GU, Global Union. This prototype is being tested today. It must work well. We are responsible for its workings. We have to do it right! And if we do it right it will be easier to build Global Union.
#9 by Christopher Hill on July 2, 2010 - 9:58 pm
For so long as consumers can find cheaper, good quality goods made in Asia or the USA – Europe – (whatever that is) – has no chance of success in political union – unless of course one is a bloated, corrupt Commissioner or MEP.
#10 by Awouba on July 4, 2010 - 3:40 am
Eurocentric I think you touched on my point very slightly. What made Europe great was the deliberate and systematic exploitation and thievery of the resources and enslavement of other groups. As an African I cannot belive this article had no mention of this. To a very large extent the excessive poverty and deprivation commonplace in Africa today can be irreversibly linked to this phenomena.
#11 by Rick Daudi on July 5, 2010 - 7:30 am
I may be mistaken, but it seems the author is advocating political division by pointing to the advantages of economic competition. This is a false argument: political unity is not necessarily the same as restriction of economic freedom. At the contrary: the past 50 years have shown that more political unity can encourage more economic competition and thus bring us more welfare.
#12 by Marcel on July 5, 2010 - 8:40 pm
There is ZERO correlation between political integration and prosperity.
And countries only want to join in order to get ‘free’ money paid for by Germany and Netherlands, and politicians who want an EU unelected job with double pension paid for by Germany and Netherlands.
We’d not be worse off without the undemocratic EU, in fact without the EU we’d have parliamentary democracy again so the destruction of the undemocratic EU is very necessary.
#13 by Roger Cole on July 6, 2010 - 10:48 am
What made Europe “great” tends to imply that the imperial conquest of most of the rest of the world by states like Britain, France, Germany, Italy, Belgium etc was “great”. It is is a concept that is deeply flawed. The “great” concept should be rejected by those who envision the future of the EU as a Partnership of Independent democratic states without a military dimension no a centralised militarised superstate that seeks to regain its “great”
status.
#14 by Rolf on July 6, 2010 - 12:14 pm
Marcel – It isn’t just Germany and the Netherlands who pay for the EU. The latest budget report from the EU shows that nett payments to the EU came from Austria, Belgium, Denmark, Finland, France, Italy, Cyprus, Luxembourg, Sweden and the UK.
#15 by Kallisti on July 7, 2010 - 3:11 pm
Silly.. utterly silly..
There are so many logical faults in the reasoning in this article, already mentioned above..
1. Using a rudimentary understanding of a model that was allegedly successful 500 years ago to say what is a good model today.
2. Neglecting that the “greatness” came directly from the oppression of most of the rest of the world (let’s try that again)
3. Equating lack of political and legal cohesion with intellectual and market competition when in fact political and legal cohesion is a fundamental requirement for investment, development and entrepreneurship.
4. Thinking that the “demos” is static, disregarding that they are constantly changing, and modern access to communication is always expanding the possible demos.
Just silly nostalgic fright of the unknown. Be constructive instead! Help make the Union a success by pointing out and proposing changes to the obvious flaws before we are relegated to the quaint West Asia that used to be relevant..
#16 by Anonymous on July 7, 2010 - 3:56 pm
Cheers Kallisti!!
#17 by realistic dreamer on July 8, 2010 - 2:55 am
It looks that Kallisti prefers his dreams to reality. We had Alexander The Great, Peter The Great, etc. and they were great for conquests and “oppression”. Call it evolutionary enforcement.
Those peoples who mastered better technology (better weapons), more efficient economy, better organization, selected more talented leaders, etc. etc. were rewarded with winning wars. It is they who contributed the most to history and to the development of human civilization. Without wars we would be living like people who lived 5000 years ago. Fortunately, mankind does not need any more military wars.
#18 by Greek taxpayer on July 10, 2010 - 12:30 pm
Anything that cites the lunatic Dan Hannan approvingly, especially in discussion on the future of Europe, cannot be taken seriously. It can only be laughed at.
#19 by realistic dreamer on July 12, 2010 - 12:45 am
“What makes Europe great?”
Could the author, or someone else, write something with this title?
#20 by Joe Noory on July 15, 2010 - 3:02 pm
Aside from a handful Europeans, who ever surmised by way of actual evidencs, or by proof of action, that Europe is great?
#21 by PeterMG on May 25, 2011 - 2:38 pm
Greek taxpayer. Not a helpful comment to this debate. Competition is at the core of economic development and democratic freedom. The EU is no longer democratic and therefore will fail; it’s no longer if but when. The euro was always doomed and many independent commentators foretold this. Just remember you cannot have monitory union without political union. And the EU has used every crisis since its formation to tighten Political Union.
But the problem is each country still pretends it’s a sovereign state, and many of the peoples of Europe thought they were joining an economic union, not a political union. Many people especially those in the UK lament the fact that they were not consulted on many aspects of the furtherance of the Political union. In the fullness of time which can’t be too far away those that ignored this call will be dealt a severe blow.
Economic development has all but been destroyed in Europe today with excessive regulation. Perhaps it’s a symptom of our western culture, but the country that shrugs off the shackles of todays over regulated market will be the one the progresses on all fronts first. We need the competition back.
#22 by jion@ sunshadeblindsjersey on June 14, 2011 - 7:16 pm
Such a great written article…blinds jersey
#23 by Ed on August 23, 2011 - 3:47 am
Good article. I agree with PeterMG, you cannot have economic or monetary union without political cohesion.
Each country demands sovereignty and that will create undue friction. Unless there is a central government or some type of political cohesion, I can’t see it working in the long term.
Ed
Webmaster, AutoDialingSoftware.net
Visit us at: Auto Dialer Software
#24 by Victoria Jones on September 4, 2011 - 1:20 am
Good article. For me, the biggest threat for European Union is Turkey. If we allow Turkey to be a member of a EU we will open the door for many terrorist organizations and radical muslim fractions.
#25 by Sarah on November 7, 2011 - 12:27 am
Written well over a year ago, what a prophetic this article has proven to be… “Taxpayers in one country are now liable for the mistakes of a government in a different country” – how true that bell is ringing right now.
#26 by Robert Sharp on December 15, 2011 - 6:59 pm
Thank you for the article. It still makes sense today. Just shows how much we have progressed over the year..