Monday, January 12, 2015

Euroland


Some thoughts on the European Union, provoked by their losing the plot in the upcoming transatlantic treaty (Transatlantic Trade and Investment Partnership).

The Union started out as the more restricted European Coal and Steel Community (ECSC) in 1952. This had the laudable aim of integrating these two sectors, so vital in war, across the economies of those Western European states which had been involved in two world wars and were then only emerging from the second of those.

That war had essentially been Germany against the rest and after the war the occupying forces made sure, as they saw it, that Germany would never rise again to dominate the continent. They wrote a constitution that was so involved that it is a wonder that Germany was able to do anything at all under it.

But beyond this others saw the need to neutralise the war industries and so the ECSC was born.

It was originally intended that the UK would participate but they were still suffering from the delusions of empire and did not have much respect for the other potential members. So they stayed out.

The next major leap was in 1958 with the Treaty of Rome (European Economic Community - EEC). Again the British stayed out and eventually set up their own European Free Trade Area (EFTA).

Also lurking in the background was the British perception of their "special relationsip" with the USA, which they valued above all else.


When they eventually decided to apply to join the EEC they were repulsed as likely spoilers. I think De Gaulle got that about right.

The lack of British membership meant that the Community was dominated by the French and adopted a very French character. For us it also meant that Ireland was not a member as our very high dependence on British trade would not have made much sense of our membership without that of Britain. Meanwhile, we set about reforming our own economy in anticipation of joining at some future date.

When the immediate post-war rationale for the Communities had more or less run its course, a new rationale emerged. Europe was now to further integrate to respond to "le défi americain", or the postwar dominance of the USA on the world stage. This dominance was seen to be facilitated by the scale of USA production and of its home market, along with the dollar assuming the role of a reserve currency.

Britain and Ireland finally joined in 1972. Britain ditched its old economic allies in EFTA which became very much a shell organisation.

Ireland's heavy dependence on the UK in the trade and finance areas were cited in support of our paralleling the UK application. But Ireland was also sold the idea on two added scores.

One was the benefits which would accrue to the agricultural sector from the EEC's Common Agricultural Policy (which was the only common policy in force at the time). That policy was based on income and market support and offered a way of escape from Britain's cheap food policy which had crippled our agricultural sector. Significant benefits were expected to accrue to individual farmers and the ensuing wealth trickle through the economy.

The other was the promise of a market of around 250 million people which would allow Irish industry to benefit from niche markets and long production runs.

The then Irish Foreign Minister, Patrick Hillery, expressed these benefits as "the CAP and the long runs".

There does not seem to have been any significant ideological or political motive to Ireland joining. This is borne out by the way the case for subsequent treaty and other amendments was presented. It was either in terms of financial benefits or losses, pure and simple.

A number of things have happened since those days. The policy remit of the Community has expanded enormously. The Commission which was designed as the guardian of the "Community Spirit" and the interests of the smaller members, has been captured by big business at the same time as its powers relative to the rest of the institutions have expanded, particularly in the area of external trade.

The powers of the European Parliament have increased from being purely consultative at the outset to its current participation in co-decision making across a widening range of policy areas. It is not, however, a sufficient counterweight to the centralised powers of the Commission and the Council of Ministers.

As the Community further evolved into a Union (of sorts), decisions tended to be taken on "political" grounds without due attention to economic logic or long term consequences. The Union prided itself on its respect for democracy and the rule of law, but in its rush to expand it admitted some dodgy states, consoling itself that membership itself would bring them to, and keep them on, the path of virtue.

Then there was the very premature launch of the Euro. This was a single currency area comprising economies at different stages of development and with varying dependencies outside the Union, and, worst of all, the area did not have any institutional redistributive mechanism built in. Economic integration at least had a vigorous regional policy behind it. Studies from earlier decades had made it clear that any currency union would need a similar structure with the possibility of providing significant financial transfers.

In the event, there was no such thing. The ECB was not structured to allow for this and has been going through contortions since the start of the current crisis bending the rules in an attempt to simulate this effect intra vires.

Nevertheless, as we saw in Ireland, Community solidarity was non-existent when it came to the Irish state being faced with stratospheric levels of compensation when an, admittedly over-expanded, banking sector went belly-up in an international meltdown. Although the blame could be widely spread, the remedy was forced on Ireland as the fault lines in the constitution of the European Central Bank became apparent.

Now we have this unbelievable treaty to be signed between the EU and the USA. Whatever about any of its more orthodox free trade provisions, it is ceding complete sovereignty, at both national and EU level, to the big corporates.

In what may soon become the "old days", a nation state could take unilateral action on, say, health grounds, or to protect some vital interest such as the environment. If commercial interests suffered as a result of these actions then it was just too bad. The wider interest had to prevail. Now, as I understand it, when a state, or the Union, takes a decision which affects the interests, or even the potential interests, of a commercial entity it has to compensate that entity. This effectively means that lots of actions in the public interest will simply become unaffordable. It is a sellout to big business along the lines of that already ceded to the banking sector and which was no small factor in the recent global financial meltdown.

The Union has shown it is not up to protecting itself from le défi americain, quite the reverse. It is now getting into bed with the enemy (within and without). The Commission has been captured by the over-financed lobbies of industry and this has to be rolled back. The Union needs to take back from the Commission its delegated powers to negotiate trade agreements and the objectionable aspects of this emerging deal need to be rejected by the Council of Ministers and the European Parliament.

And the Union itself then needs to take stock of why it is there in the first place.

3 comments:

Póló said...


Why the deal should scare you (UK based article)


Póló said...

Some good news, for the moment at least.

The controversial international disputes settlement clause of the TTIP has been shelved for now in response to massive public pressure within the EU.

Report

Póló said...

And, just by the way, I haven't even mentioned Cyprus where the Euro Council agreed to confiscate private individuals' small bank deposits which it had already GUARANTEED.

Nor have I mentioned Greece where the Euro Council and the ECB appear to be taking a hard line which could bring the Nazis to power in that country. Hardly in Europe's interest.

The current unresolved financial (economic, social and political) crisis is not just a Greek problem. It is a European problem which has been kicked down the road rather than faced.