Tuesday, 2 September 2003

European Unification as the New Frontier of Collectivist Redistribution

The case for Competitive Federalism and a Free-market Economy

“Frankfurt, Bremen, Hamburg, Luebeck are large and brilliant, and their impact on the prosperity of Germany is incalculable. Yet, would they remain what they are if they were to lose their independence and be incorporated?” (Johann Wolfgang von Goethe, Maximen und Reflexionen, 1828).

“From the extent of our country, its diversified interests, different pursuits, and different habits, it is too obvious for argument that a single consolidated Government would be wholly inadequate to watch over and protect its interests; and every friend of our free institutions should be always prepared to maintain unimpaired and in full vigor the rights and sovereignty of the States and to confine the action of the General Government strictly to the sphere of its appropriate duties” (Andrew Jackson, A Political Testament, 1837).

“One essential of a free government is that it rests wholly on voluntary support. And one certain proof that a government is not free, is that it coerces more or less persons to support it, against their will” (Lysander Spooner, No Treason No. II, 1867).

One of the most important contemporary debates is the one on the European unification and the project to create a centralized State: with a single currency, a democratic parliament and a monopolistic government. In this context, the current failure of the EMU is used as a good argument in favor of an even more accelerated path toward the transfer of powers from the old Nation-States to Brussels and Strasbourg. According to many economists and political scientists, the bad performance of the European single currency is the consequence of a lack of institutional unity. Hoping for a reversal in the declining power of western socialist ideals they want more and more political centralization and economic planning.

These discussions are plagued by four main superstitions, and in the first part of my lecture I will try to show how irrational it is the idea of unifying this continent. Europeans seem to have accepted the idea of a “European democracy” without analyzing its implications. Not only do they underestimate traditional and extraordinary differences among European societies, but they also ignore the benefits of competition between institutions and they are totally unaware of the distributive consequences of a large, massive democracy. 1

In the second part of my analysis I will try to point out the advantages of a true federal alternative, based on local autonomies and communities by consent.2

Federalism, correctly understood, is firmly in the tradition of classical liberalism and libertarianism. In the logic of radical and authentic federalism, political communities are “federations of individuals” and these institutions develop new voluntary relationships establishing “federations of federations”. Thus, I think that the term and concept of a “federal State” is a sort of paradox, or a contradiction in terms, because a state always suggests the notion of a chain of command, incompatible with federalism. In fact, federalism is a set of voluntary relations working whithin communities as well as among individuals.

American history offers us a tragic example of it. In fact, a political theorist such as John C. Calhoun considered the Union as a federation (namely a free compact), and for this reason he defended the southern point of view; but President Lincoln and all the other heirs of the Hamiltonian tradition were persuaded that the United States was a single State: a perpetual and unified democracy. We can consider the bloody struggle opposing northerners and southerners from 1861 to 1865 as the most dramatic consequence of the absurd effort to link the conflicting notions of “State” and “federation”. 3

Europeans have an opportunity to make good use of the American experience. In other words, we must avoid the consequences of a vague definition of the federal compact. Our task is to build federal institutions and, for this reason, we must reorganize our Nation-States and coordinate a strong resistance against this rising centralism.

In order to pursue this objective, we must elaborate a new vision of Europe: based on property rights and institutional competition, individual liberty and freemarket. This is our past and this can be (while the age that saw the triumph of the modern State and totalitarian ideologies seems to be fading away) our future.

1. Four superstitions entertained by the dreamers of a centralized superstate

1.1 Superstition n.1: Individual liberty and juridical polycentrism cause tensions and ultimately wars.

During last centuries, European countries have been engaged in many wars. Imperialism and statist ideologies have been the chief causes of the conflicts.

Nevertheless, these tragedies are often explained with recourse to the notorious Hobbesian argument. For many contemporary intellectuals and politicians, in the past we were enemies because we were free and independent. Consequently, we can achieve a future of peace only if we will be able to build common institutions for Mankind. In this philosophy, European unification is only a step in the long path towards the unification of the whole World.

In the 17th century, Hobbes, frightened by religious divisions, conceived Leviathan as the only possible apparatus capable of imposing peace. The social contract was the device by which individuals lost their freedoms, and got back peace and life as a trade off. The State affirmed itself as the condition to avoid chaos, wars, and anarchy. Its first justification was the individual’s fear of being killed by a fellow man. This interpretation continues to be well accepted, with the implicit idea that the State can be a “neutral” power, having no ideology of its own and thus competent to nullify any kind of “religious”, social and ideological conflict.

In my opinion, these arguments are feeble. The religion wars faded away only when a new sort of religion (statist ideology) imposed its power over civil society and over traditional faiths. At the beginning of modern history, secular power became “sovereign” and it lost all moral bounds (Machiavelli’s Prince opened the road to this solution). But the success of this kind of peace marks the beginning of a more and more important statist aggression to free confessions and it was the precondition for implementing contemporary totalitarian regimes. 4

The Hobbesian notion that a spontaneous order (such as a free market of institutions) is a theoretical impossibility must be recognized as the most important cultural factor. It is this idea that pushes continental leaders toward the increase of political cohesion and the reduction of economic competition. On the contrary, growing unity is a sure way to have more and more conflicts. As an illustration, the case of agricultural decisions of the EU – with their outcomes – is very emblematic. Besides that, the creation of a European democratic power would reduce competition. If the German government is now expected to cut taxation because it fears that capitals and firms might want to leave the country (in order to exploit new opportunities in France or in the United Kingdom), in a European unified State even this remote possibility will not be there anymore. In fact, “harmonization” is the catchword most utilized by the militant unificationists.

Global economy is a space of peace and exchanges, because in the market we have only voluntary relationships and every actor agrees to participate, while global politics generates countless conflicts.

In addition, the process of European democratization might also signify a more important presence of European armies around the world. The consequence would be a new form of imperialism, and thus we
would copy the worst things of recent American history.

1.2 Superstition n. 2: The market is a reality requiring the State: it is the result of the juridical order created by the State.

It is quite evident that one does not have to share libertarian ethical principles in order to accept that we can have a juridical order also in absence of a common policy. Roman Law, Lex Mercatoria and Common Law are some important examples of rules emerging in a social, rather than in a State oriented order. For centuries and in many different contexts, people lived together in well-defined juridical systems.

As Bruno Leoni pointed out in Freedom and the Law, “the Romans accepted and applied a concept of certainty of the law that could be described as meaning that the law was never to be subjected to sudden and unpredictable changes. Moreover, the law was never to be submitted, as a rule, to the arbitrary will or to the arbitrary power of any legislative assembly or of any person, including senators or prominent magistrates of the state”. 5

We must understand that the State is not the protector of our rights and liberties, but rather their worst enemy. Its existence is a continuous aggression to our liberty, property and autonomy. Accordingly, in western societies free-market relations don’t exist because of the State, but in spite of it.

Classical liberals and libertarians are aware that the roots of our history of freedom are in the Middle Ages and in its institutional pluralism. As Boudewijn Bouckaert wrote, “polycentric extended orders, such as Medieval Peace of God (1100-1500), do not conform with the Hobbesian intuition about power and order. (…) The Medieval order was an order without a sovereign power in the ‘modern’ sense of the word, i.e. a central power disposing of a monopoly of a coercive power enabling it to rule a whole nation and to act as a conflict-solver of the last resort”. 6 And Leonard Liggio remarks that after 1000 A.D., “while bounds by the chains of the Peace and Truce of God from looting the people, the uncountable manors and baronies meant uncounted competing jurisdictions in close proximity. (…) This polycentric system created a check on politicians; the artisan or merchant could move down the road to another jurisdiction if taxes or regulation were imposed” 7.

As defenders of this libertarian European heritage, we must rediscover this rational way to solve our conflicts and to arrange our quarrels without resorting to the State, that is, organized violence that most of our fellow citizens consider legitimate.

1.3 Superstition n. 3: The existence of a European identity calls for the construction of a single State in Europe.

I don’t deny that we are Europeans, that there might be such a thing as a European identity. There are different ways to be European and there are important differences among our societies, but it is enough to meet Asians or Africans (the case of America, of course, is totally different) to understand that Europeans have a lot of things in common. This fact, however, doesn’t imply the construction of a single European State.

On the contrary, one of the most important elements of this European identity is history. And history has not always been the Nation-State’s dominion. In fact, pluralism has been the key of our historical success, and such pluralism was the absence (at the end of Middle Ages) of a powerful center of political decisions. We had Church, Empire, a number of Kings and Princes, a multitude of feudal relationships and – in some regions – independent Cities, but we never had a small group of rulers able to organize economic life and civil society. As Jean Baechler noticed in his important study about the origins of capitalism and about the role of medieval anarchy in this extraordinary history 8, “the dark centuries have undeniably diffused a spiritual order, but also a deep disorder in politics and the economy9. This manageable chaos was the explanation of our success.

The will to unify Europe shows a misunderstanding of what the European identity is all about and a subversion of our deepest heritage.

1.4 Superstition n. 4: In a unified Europe we will have more harmony and we will be able to support the development of poor societies (Eastern Europe, for instance).

This idea of “forced” solidarity is not compatible with libertarian principles and with the notion that people must be respected in their dignity and liberty. The public redistribution of resources implies a strong centralized power capable to control the society.

Not only: recent Italian experience teaches that coercive solidarity creates hostility where there was harmony and respect. In my country, for centuries the North and the South had pretty good relations; traditional political divisions didn’t hinder cultural and economic exchanges, and we never had experiences of intolerance. Current social and cultural tensions between Northern and Southern Italy are the result of a unified policy, consequence of the birth of the Italian Kingdom (1861). At the end of the 19th century, protectionist governments aided industries (of the North) and damaged agricultural Southern exports. The situation changed in 20th century, when the creation of an important welfare State was the cause of massive redistribution from the rich North to the poor South. In addition, the various Italian peoples were forced to live together and to follow the same rules.

The first consequence of these political decisions is that now, in Italy we have a considerable and widespread hatred between Northern and Southern regions. And in fact, if free market has a tendency to bring together people, coercive politics tend to divide.

Not only that, the Italian experience of a political unification shows also that statist solidarity has not been a tocsin for poor economies. In the last fifty years, Northern firms and families have paid a lot of money to finance programs for the South. But if we are witnessing some encouraging evolutions they come only from local and spontaneous initiatives.

Welfare programs redistributed the money to big firms and the mafia, multiplied public employees, strengthened trade-union organizations, and reduced incentives for work. Particularly Eastern Europeans must keep this Italian lesson in mind, because they have to refuse a model of development based on political investments and bureaucratic regulation.

2. What can we do? Four ideas for the future

2.1. Refusing European unification, defending free trade and globalization

We must oppose the project of European unification, because the creation of this cartel of monopolist rulers would reduce institutional competition and individual freedom. In a large and unified country the welfare State will find no hurdles and redistributive policies will become the rule. Every government expenditure will affect a large number of people, but the single individual usually pays only a fraction and thus he prefers not to bother with organized a resistance. The consequence is the satisfaction of many lobbies and the increase of taxation.

Some economists believe that European unification brings about the abolition of all internal barriers to free trade, but this idea is not entirely true, and a lot of experience invariably point to the same direction. A directive adopted in 1973, for

instance, allowed the United Kingdom, Ireland and Denmark to make chocolate containing up to 5% of vegetable fats but not to sell it as chocolate in other Member States. As a result Italian, Belgian and French governments obtained to prohibit chocolate imports from other Member States; and through health and safety regulation we have similar directives against Spanish strawberries, French camembert and so on 10.

In addition, political leaders of a unified Europe might try to build a protectionist Europe, an unassailable fortress against Asian and American competitors. To pursue this kind of policy
would be impossible in a small nation (incapable of self-sufficiency), but a large area such as Europe can help to foster the illusion that protectionism will help the economy, defend wages and bring about fullemployment.

As Hans Hoppe emphasizes, “a country the size of US, for instance, might attain comparatively high standards of living even if it renounced all foreign trade, provided it possessed an unrestricted internal capital and consumer goods market”. On the contrary, in the small jurisdictions this error is less frequent, because “the smaller the country, the greater the pressure to opt for free trade rather than protectionism”.11 Swiss Cantons, San Marino, Liechtenstein, Andorra or Monaco never dreamed to obtain advantages by refusing international trade and free-market. These small political communities – the true and only heirs of the great European spirit – are interested in the diffusion of libertarian and free market principles, they want to export and to buy all the goods they don’t want (or can’t) produce. In fact, these small political entities are in the best position to teach a very important lesson: the international division of labor is a useful opportunity for individuals, families, companies and communities.

For this reason, it is urgent to reject the political project of a unified Europe and to adopt an alternative model (more flexible, based on pacts and contracts). If Europe exists (and I agree that a European identity is in our history and in our present), it can exploit the opportunity of economic integration (globalization) and free movement of information. In the international circulation of money, goods and ideas, we don’t see a “planner”: order emerges spontaneously as a result of voluntary cooperation.

In a free society it can be easy to satisfy our need to rediscover common historical heritage and to develop institutional and economic links. In a Europe based on property rights, the wall still dividing West and East could quickly disappear, and, free from the rigid constructivism of Schröder or Jospin, we could organize new and truly federal relationships.

2.2 Free European relationships in a polycentric world

For centuries, in the structure of Nation-State the idea of sovereignty guaranteed that the King and, then, the Parliament were able to control society. But this hierarchical construction was also the premise to an anarchical international order. The Kantian idea of a world federation, the distant progenitor of contemporary European unification, must be explained as the logical consequence of an international regime based on sovereign entities.

The paradox of the Nation-State is in its promise of law and order only within its borders: internal hierarchy and external autonomy (the so-called international anarchy). But if modern political culture preferred hierarchy to anarchy (and it adopted the Hobbesian framework), the result was that our international (dis)order had to be modified. If the State had the task to avoid violence inside the borders, Kant imagined a parallel solution to the problem of law and order in the international arena. In other words, the pursuit of peace and harmony among different peoples could happen only through a “higher” (both ethically and geographically) political center able to reduce conflicts to a minimum.

The Kantian dream of “eternal peace” is the politically correct version of the projects of Napoleon and Hitler, the political leaders more seriously engaged in the construction of a European State. Present-day prophets of a united world share with these statesmen a strong preference for a society directed, more or less violently, by a small political elite. Furthermore, they have in common the same distrust about human liberty.

One must also understand that European unification is only a step towards a global unification; and we must realize that the determination to abolish political polycentrism is the most important threat to freedom. Europe’s finest hour was characterized by a system of hundreds of semiautonomous entities with an open and free market 12.

At the same time, opposing European unification means to reject the neoprotectionism of the media heroes: the “Seattle people”. For this reason we must defend European traditional values: openness, competitiveness, respect of fellow men and of their rights, localism and free spontaneous commonality. But we must also be honest and acknowledge the fact that many important European values migrated to North America, in the ships carrying European colons and religious dissenters to the Atlantic coast. Our hope is that these traditional values have not left the continent for good.

2.3 Federal Europe, free communities and the right of secession

Against the pseudo-federalism of Maastricht, classical liberals and libertarians must speak up on behalf of the true federal tradition. In the West we have a lot of historical experiences: Jewish tribes, Greek poleis, ancient German communities, Italian and Flemish medieval Communes, Hanseatic League, Dutch United Provinces, Swiss Confederation and the early republic in Jeffersonian America. We also have classical liberal and libertarian thinkers who paid attention to this topic: from Althusius to Jefferson, from Calhoun to Lord Acton, from Spooner to Nock.

Furthermore, there is a small group of social theorists working on a correct vision of federal theory. In this sense, for instance, the ideas of Bruno Frey can be useful to show a possible evolution towards a society more and more free and competitive. The project of FOCJ (functional, overlapping and competitive jurisdictions) and the idea of a solid utilization of the “right of secession” (with the purpose to create nations by consent and a true market for institutions, where individuals can shop for the best political arrangements) are the prerequisites for constructing federal relationships among individuals and groups. 13

But a federal Europe is exactly the opposite of a unified Europe. When I emphasize the need to develop negotiated connections among small political communities, I want to stress the difference between the existing Europe and this voluntary political order favored by European libertarians. As Roland Vaubel wrote, in a true federal institution “each member state would have the explicit right to leave the union at any time, if a simple majority of its population voted in favor of secession”.14 The possibility for any community to dissolve the federal compact (the right of exit) is the only condition that can force the central power to respect the rights of the members of federation (states, regions, cities, individuals).

In this sense, we must also defend the idea that federalism can be a strategy to imagine and achieve political relationships without State (or beyond and after the State). In fact, federal pacts imply mutual agreements and horizontal contracts. Federalism is the theory of political pacts and it demands a new elaboration of the notion of political community. In a true federal society, the right to abandon the union must be preserved and this is the most important guarantee that the federal authority will respect different realities.

If European politicians and bureaucrats are in fact impatient to destroy our right to abandon the secular Paradise they are planning for us, the reason is that they want to be free to make it as close to Hell as possible. The Euro nightmare under construction will be a land with an Italian bureaucracy, a French regulation, a Scandinavian taxation, German trade unions, and no right to opt out.

2.4 Solidarity: free or compulsory?

Against socialist solidarity (in nationalist or internationalist version), classical liberals and libertarians must protect the dignity of human beings and their right to not become objects of political and coercive decisions.

We have to defend our experience of true solidarity: in families, associations, churches and so on. We must understand that St
ate charity is a pretext of political rulers eager to increase their power at the expense of the people’s. Furthermore, we must explain that the political machine operates a redistribution that never helps the poor. In general, redistribution is for the benefit of the strongest lobbies and it helps the rich, intelligent and sophisticated citizen. In brief the people who know how the system really works.

Even in this case, a comparison between Europe and America can be useful. In the United States there is a net of mutual aid private associations because the government is less invasive and property rights are more protected. Our ability to attain a sense of community and true solidarity rests directly on our freedom. Against the new socialism of Philippe van Parijs (who proposes that everyone – and Californian surfers too – should be paid a universal basic income, though at a subsistence level)15 and against Habermas’ idea of universal democratic integration16, it is important that we preserve the individual’s right to reject political obligation. Honest men don’t respect unjust laws.

But in the next millennium only a radical change in our vision of society might bring about a rebirth of European liberties. As Étienne de la Boétie pointed out in his masterpiece 17, the power of political elite can be explained only by the fact that people accept to obey the laws (he called it the mystery of civil obedience). Consequently when we will cease to obey, unjust power will disappear and we will have the opportunity to build a more civilized way to live together.

During the modern age, Europeans have considered as natural the existence of a two-class order, with the rulers and the subjects. Only a small group of libertarian thinkers expressed their dissatisfaction for this situation and engaged a cultural campaign about the liberation of the new slaves of monarchical and democratic regimes. But present unqualified acceptance of despotism is also the consequence of a lack of ethical responsibility. This European crisis, generated by the widespread acceptance of aggression and the refusal to resort to self-defense, has moral origins.

Therefore, a complete change in the way we connect with other people implies a rediscovery of human dignity and a more vivid sense of responsibility toward our fellow men and ourselves. If Europeans will be more charitable and generous, the claims of public authorities to justify their role as social benefactors will appear to everybody as a tragic farce. And the Emperor, even the European one, will have no clothes.

Carlo Lottieri,
University of Siena

This article first appeared on www.mises.org
A PDF Printable version can be found here


1 For a strong critique of democracy from a libertarian point of view, see: H.-H. Hoppe, “Down with Democracy”, Enterprise and Education, summer 1995 (reprinted in RothbardRockwell Report, February 1996).

2 This expression is a free borrowing from the Rothbardian idea of “nations by consent” (see: M. N. Rothbard, “Nations by Consent: Decomposing the Nation-State”, The Journal of Libertarian Studies, vol.11, n.1, fall 1994).

3 For an interesting analysis of the peculiarity of the Jeffersonian tradition, with reference to the differences between European and American idea of “sovereignty”, see: L. M. Bassani, “Jefferson, Calhoun, and States’ Rights: The Uneasy Europeanization of American Politics”, Telos, n.114, winter 1999.

4 Persecution of Christians, Jews, Muslims or Buddhists in every communist and totalitarian regime (and also secular propaganda in many western democratic societies) shows the real “religious” nature of the Machiavellian-Hobbesian solution.

5 B. Leoni, Freedom and the Law, New York, Van Nostrand, 1961, pp.84-85.

6 We can find the same observations in Robert Nisbet: “medieval society, from the point of view of formal authority, was one of the most loosely organized societies in history. Despite the occasional pretensions of centralizing popes, emperors, and kings, the authority that stretched theoretically from each of them was constantly hampered by the existence of jealously guarded ‘liberties’ of town, gild, monastery, and village” (R. Nisbet, The Quest for Community, San Francisco, Institute for Contemporary Studies, 1990 [1953] p.99).

7 L. Liggio, “The Medieval Law Merchant: Economic Growth challenged by the Public Choice State”, Journal des Économistes et des Études Humaines, vol.9, n.1, March 1999, p.65.

8 Baechler wrote that “the expansion of capitalism has its origins and its rationale in the political anarchy” of medieval times (J. Baechler, Les origines du capitalisme, Paris, Puf, 1971, p.126).

9 J. Baechler, Les origines du capitalisme, p.111.

10 F. Aftalion, “Regulatory Competition, Extraterritorial Powers and Harmonization: The Case of the European Union”, Journal des Économistes et des Études Humaines, vol. IX, n.1, March 1999, pp.98-99.

11 See: H.-H. Hoppe, “Small is Beautiful and Efficient: The Case for Secession”, Telos, n.107, Spring 1996, p.100.

12 German history, in this sense, is very interesting. Before the Napoleonic wars, Germany consisted of hundreds of independent political units: there were important regional States such as Prussia or Bavaria, but also a multitude of free cities, knightly manors and other small territorial entities. Besides any other consideration, in that institutional context the rise of a Hitler was a logical impossibility.

13 B. S. Frey – R. Eichenberger, “Competition Among Jurisdictions. The idea of FOCJ”, in L. Gerken (ed.), Competition Among Institutions, London, Macmillan, 1995.

14 R. Vaubel, “The political economy of centralization and the European Community”, Journal des Économistes et des Études Humaines, vol.3, n.1, March 1992, p.41.

15 Ph. Van Parijs, “Why Surfers Should be Fed: The Liberal Case for an Unconditional Basic Income”, Philosophy and Public Affairs, vol. 20, issue 2, Spring 1991.

16 See J. Habermas, The Inclusion of the Other. Studies in Political Theory, Cambridge, Mit Press, 1998 (1996).

17 É. de la Boétie, Discours de la servitude volontaire, Puf, Paris, 1983 (1546-48).