Thursday, 20 November 2003

Constitutional Crisis

The European Union needs to focus more on creating a free market than on creating additional bureaucracy. The current European Constitution project is a relic of socialism, in the guise of the so-called “social market economy”. A better solution would be a natural development toward a common free-market instead of an artificial political integration.

The bureaucratic management that would be imposed by the Constitution project should be rejected. Economists say the European economy loses billions of euro in potential income because of its anti-market regulations. Its onerous bureaucracy costs around €100 billion a year.

Stagnation Guaranteed

The EU is in a long-term stagnation and what its economy really needs is the end of interventionism. Regulation of the European economy is becoming a disaster. The social systems of several EU countries are close to bankruptcy. According to the latest Eurostat data, the Euroland’s GDP shrank about 0.1 percent in the second quarter of 2003. The GDP of six EU countries — France, Germany, Italy, Holland, Denmark and Belgium — went down. But the Eurocrats do not want to back away from the high levels of irresponsible deficit spending. They want to separate the Common Market from the rest of the world by high tariffs and internal regulations.

Now, the EU is admitting new candidates, but discriminating against them with regulations which were made for Western European producers. The present long-term strategy is like the financial pyramid: the first guy wins, others pay the costs. European interventionism is the effect of the paranoia of protecting national markets that begun after World War II, and was fixed in the 1990s. The International Monetary Found estimates that more than half of world trade is regulated by means other than tariffs. Consumers pay too much for governments succumbing to industrial lobbies, trade unions and farmers.

Dangers of Centralization

There are no economic reasons for the centralization of the economy proposed in the European Constitution. European wealth could be created by free-market mechanisms: voluntary cooperation, free flow of work and capital and respect for the property rights. The 25 countries which will soon make up the new EU should create a new free-trade zone and cancel almost 100,000 pages of European Economic Area regulations. This is the only way in which countries from the West could prevent stagnation and countries from the East would not suffer from regulations.

The unification of Europe should be natural and economic, not artificial and political. When the European Coal and Steel Community — the forerunner of today’s EU — was created in 1952, financial goals could be reached without any intergovernmental bodies. But the Treaty of Maastricht in 1992 was a milestone on the road to a European superstate. Today’s proposition to the taxpayers is this: you will pay for three levels of bureaucracy: regional, national and international. The limitation of sovereignty means a dependence on the European superstate’s decisions. The promises of full employment and equal economic growth in the EU Constitution are nothing more than a socialist utopia. Politicians from Brussels should learn from their Central European counterparts. In many CE states, taxes are lower and economic growth is higher.

Economically, Not Politically

The EU should also be open to globalization and cooperate with other countries outside the regional agreements. An economic integration is more effective than a political one. In the non-EU countries of the European Free Trade Area (EFTA), citizens earn more and inflation and unemployment are lower. Free trade and voluntary economic cooperation are the keys to success. The European Economic Area is not a free-trade agreement, but membership in the EEA is more profitable than a full political integration with the EU. The EEA suppresses trade barriers, but this is not a union of tariffs. It lets countries make their own foreign trade policy. EFTA countries also participate in the Schengen Agreement. Members of the EEA do not transfer their legislative power from the national parliaments to the European institutions. They have the possibilities of making independent fiscal and economic policy. EFTA’s personnel number only 150 people. The EU bureaucracy pays almost 30,000 clerks.

European countries should work on economic integration first. Politicians should encourage natural economic integration without any imposing new regulations that discriminate against Central and East-European businesses. Creation of a new European free-trade area without political and bureaucratic structures would foster fast development of the region. Only a free common market can drive Europe towards realization of Lisbon Strategy – to create the most competitive world economy. But competitiveness is a result of human creativity, entrepreneurship and voluntary cooperation. Unfortunately, the European Constitution project rejects these elementary values of free-market capitalism.

Tomasz Teluk

This article first appeared on Tech Central Station.