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Don't Cry for the European Union -- Nor Emulate Its Mistakes
AmericanEconomicAlert.org ^ | Friday, June 03, 2005 | William R. Hawkins

Posted on 06/04/2005 9:03:02 AM PDT by Willie Green

For education and discussion only. Not for commercial use.

The rejection of the proposed European Union constitution by the French people on May 29 and by the Dutch people on June 1, in high-turnout referenda, is a clear indication of the sad state of Old Europe. Many pundits have claimed that the negative vote in France, the country that created the EU as a way to harness German energy to French ambition, has thrown the continent into disarray. The causation runs the other way. The popular rejection of the constitution is the result of the failure of the "European model" on many levels; failures that should serve as a warning to the United States.

The caustic opposition to U.S. policy voiced by France and Germany on the UN Security Council in the runup to the Iraq War led many on the left in American politics to argue that the European model was more enlightened and "progressive" than the aggressive and "barbaric" attitudes of the Bush administration. Many saw the 2004 presidential election as a contest between the European and American models. Though the American model has its problems, conditions in the United States would only have gotten worse had the attempt been made to transplant core notions of the EU here. Indeed, many of America's current problems stem from the fact that EU ideas have already been implemented on this side of the Atlantic.

The EU is based on 19th century classical liberal ideas as interpreted by 20th century democratic socialists. The result has been a structure that combines the worst of both schools of thought. The classical liberal view of utopia has three pillars: economic integration, a supranational authority, and resultant general peace – the first two "guarantee" the third. It was assumed that a Europe without trade barriers would do better than a Europe fragmented into relatively small markets. The elimination of barriers between states enshrined in the U.S. Constitution created a continental market that sustained the rise of America to world preeminence. A major goal of the EU was to create a similarly large economy that could compete with the United States and a rising China. On this foundation could be built a new EU government that would drain sovereignty from the individual European states and beat down any lingering sense of national identity.

Professor Alan S. Milward, an economic historian at the London School of Economics who wrote extensively about the origins of the EU, observed, "Until the early 1950s, historical experience seemed to offer no solid guarantees that freer foreign trade would make national economies prosper." Indeed, the major continental European powers had abandoned their experiment with free trade in the mid-19th century to return to protectionism, a shift which boosted their economic growth at the turn of the century. But the EU was going for more than free trade, it was aiming at economic integration, and this seemed to work.

Roughly 60 percent of the trade of the EU's core 15 countries was carried on among themselves in 2003. The EU-15's external trade led the world, with $1.1 trillion worth of goods exports compared to $724 billion for the United States. Germany alone exported more goods than the United States in 2003 ($748 billion), though this included exports to other EU members as well as to the world outside. U.S. goods imports, however, were higher than the EU's, at $1.3 trillion compared to $1.1 trillion, giving the EU a small trade surplus with the rest of the world of $13.7 billion, compared to the massive U.S. deficit of $579.3 billion in goods.

The EU is much more dependent on trade than is the United States, however, in large part because its individual domestic economies are smaller and so stagnant, and loaded down with high-cost social programs and mind-numbing regulation. This is reflected in the EU constitution, which runs to 300 pages and is incomprehensible to the average voter. As a result, European firms are looking to move their operations out of the EU core and into the newer EU members in Eastern Europe, which have much lower labor costs and a more open business environment. This has helped cause rising unemployment in the EU-15.

In Germany, unemployment stands at 12% and annual economic growth has nearly ceased. Chancellor Gerhard Schroeder, who barely won re-election in 2002 (by opportunistically switching his position on the Iraq War), is now gambling on early national elections after his Social Democrats suffered a humiliating defeat in North Rhine-Westphalia, Germany's hard-hit industrial heartland.

In France, conservative President Jacques Chirac has seen his approval rating drop sharply as the economy has slowed and unemployment has risen above 10%. Silvio Berlusconi, Italy's right-wing prime minister, is also plagued by a stagnant economy. His government is now expected to lose the next national elections set for May 2006. To court public opinion, the Berlusconi government has blamed Italy's economic woes on the constraints the EU and the euro place on Italy's ability to deal with its economy. On June 3, Welfare Minister Roberto Maroni, from the populist Northern League party, said Italy should hold a referendum on whether to abandon the euro and go back to its own national currency.

Economic growth in the Netherlands has virtually come to a standstill and the number of jobs has fallen. Unemployment is particularly high among Dutch youth, and the approval rating of the Christian Democratic-led government has dropped to a mere 20%.

Yet, economic decline in Western Europe has not produced a boom in Eastern Europe. This is because many firms – led by German companies, are leaving Europe all together to use the even cheaper labor of China. Thus in Poland and the Czech Republic, the former Communist parties clinging to their majorities in parliament also face the prospect of sweeping loses in upcoming elections.

Public opinion in Old Europe holds the EU leaders in Brussels—and those who support them at home, to blame for too rapid an expansion of the union to encompass underdeveloped regions. The doctrines embedded in the EU also recognize the right of immigration from any member country to any other member country: So not only are jobs moving east, but unemployed workers from the east are coming to the west to compete for scarce jobs there. Add to this the massive immigration of Muslims into France and of "guest workers" from Turkey into Germany (who never go home) and there is understandable popular resentment towards current policy. (Chirac tried to assure the French that France would oppose bringing Turkey into the EU, but the voters, already weary of too much immigration, didn't buy it.)

It doesn't matter whether the ruling governments are of the right or the left. They have all been discredited by shifts in the regional and global economy that now threaten domestic employment and wage levels. People want their national governments to put their interests first, not surrender sovereignty to alien institutions and elites who are beyond their control and whose intentions cannot be trusted.

Americans should rejoice rather than be troubled by the collapse of the EU constitution. Before the French vote, Chirac argued in a national television address that a strong EU would be better able to compete with the United States and "project its values and interests around the world." He gave as an example the success of Airbus, the heavily subsidized rival of Boeing, and a part of the EADS defense conglomerate, which is working to undermine the U.S. military industrial base. Since the vote, Chirac has named Dominique de Villepin his new Prime Minister. De Villepin became known to most Americans as the French Foreign Minister who so stridently denounced U.S. foreign policy and our intervention in Iraq..

But Americans should be concerned when their own leaders embark on the same policy adventures that have crippled the EU. Integration with underdeveloped economies as advocated by the Bush Administration and embodied in the Central American Free Trade Agreement (CAFTA) and the proposed Free Trade of the Americas Agreement (FTAA) encompassing all of Latin America would open a wage gap for American workers even larger than that being suffered by workers in Western Europe versus Eastern Europe.

In addition, President Bush seems determined to keep the southern border wide open to illegal immigration. And like those elites who have pushed EU membership by parliamentary votes rather than setting them before their respective publics in referenda, Bush hope Congress will ignore public opinion and vote for CAFTA and his proposed amnesty for illegal immigrant labor.

There are still too many Americans under the spell of classical liberal ideology. They apparently have no concerns about the United States becoming as dependent on trade and as vulnerable to economic disruption as Europe has become. Indeed, if the Republican Party does not reverse course on the disastrous trade policy that has blighted American industry and decimated manufacturing employment, it could be facing by 2008 the same grim prospects of massive defeat at the polls that most of Europe's ruling parties face today – and unfortunately, the Democrats do not seem to have much in the way of a strategic economic vision either.


TOPICS: Business/Economy; Culture/Society; Editorial; Foreign Affairs; Government
KEYWORDS: cafta; euconstitution; eurofreude; euroweenies; ftaa; globalism; illegalimmigration; nafta; thebusheconomy

1 posted on 06/04/2005 9:03:03 AM PDT by Willie Green
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To: AAABEST; afraidfortherepublic; A. Pole; arete; billbears; Digger; Dont_Tread_On_Me_888; ...

ping


2 posted on 06/04/2005 9:04:23 AM PDT by Willie Green (Go Pat Go!!!!)
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To: Willie Green
Integration with underdeveloped economies as advocated by the Bush Administration and embodied in the Central American Free Trade Agreement (CAFTA) and the proposed Free Trade of the Americas Agreement (FTAA) encompassing all of Latin America would open a wage gap for American workers even larger than that being suffered by workers in Western Europe versus Eastern Europe.

Whaddya know? Someone is finally admitting this.
3 posted on 06/04/2005 9:11:51 AM PDT by hedgetrimmer
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To: Willie Green
The EU is based on 19th century classical liberal ideas as interpreted by 20th century democratic socialists. The result has been a structure that combines the worst of both schools of thought.

An excellent article and should be made required reading by everyone in Congress.

4 posted on 06/04/2005 10:31:18 AM PDT by stripes1776
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To: Willie Green
not surrender sovereignty to alien institutions and elites who are beyond their control and whose intentions cannot be trusted

Like, for instance, the so-called "American" Carlos Gutierrez who is the Commerce Secretary of the United States. A man who passionately argues for "integration" with the Central American states. For the best of reasons, of course.

I mean, having never really been in the U.S. for more than a few minutes as a kid, and then being brought up in Mexico City, and spending most of his career there, I'm sure - absolutely sure - that his only interests are in seeing that the Americans - people he never met, and has no connection to - do well.

Right. Sure. Undoubtedly.

5 posted on 06/04/2005 10:41:33 AM PDT by Regulator (When Hell Freezes Over)
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To: Willie Green
They apparently have no concerns about the United States becoming as dependent on trade and as vulnerable to economic disruption as Europe has become. Indeed, if the Republican Party does not reverse course on the disastrous trade policy that has blighted American industry and decimated manufacturing employment, it could be facing by 2008 the same grim prospects of massive defeat at the polls that most of Europe's ruling parties face today – and unfortunately, the Democrats do not seem to have much in the way of a strategic economic vision either.

I believe this "let them eat cake" philosophy would eventually cost our heads. We have to find a way to raise the economic well being of the rest of the world, simply because if we don't we won't be able to go to any country without bodyguards, and we'll have to station millions of troops on the border to keep people out.

In other words, it is wise and in our LONG TERM interest to help poor countries develop, even if in the short term there will be some dislocations. In the fianl analysis this is the real solution to illegal immigration. People that have work and are happy in their country, are not going to be interested in the hardships of being an illegal.

Of course we have to do this gradually and in a way that makes the disruptions manageable. I believe the political process will take care of that. If it starts getting too painful, the more protectionist candidates will get elected. In the final analysis, amazingly enough, this messy and chaotic system of ours, works.

6 posted on 06/04/2005 2:03:06 PM PDT by aquila48
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To: Willie Green
In addition, President Bush seems determined to keep the southern border wide open to illegal immigration. And like those elites who have pushed EU membership by parliamentary votes rather than setting them before their respective publics in referenda, Bush hope Congress will ignore public opinion and vote for CAFTA and his proposed amnesty for illegal immigrant labor.

Sorry to say this but he has it right here. Bush does seem soft on illegal immigration. He is seeming to do all he can to hurt the lowest class Americans as well. This will burn our party at some point. These lower class Americans vote conservative for the most part. They can only be fooled for so long. They will eventually have to vote DNC if the Republicans keep lowering the minimum wage by never raising it and helping Wal*Mart et all oppress the poor here.

7 posted on 06/04/2005 7:29:07 PM PDT by ImphClinton (Four More Years Go Bush)
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