On the Referendum #3: The errors of Steve Richards

It will be useful to catalogue pundit comments on the EU and the referendum.

I just saw Steve Richards’ latest column. In it he writes:

‘Step back from the party-wrecking, PM-destroying obsession with Europe and the EU would have to be invented if no one had already done so. Most sceptics hail the single market. The single market needs rules. Elected politicians must agree the rules. Criminals move between borders. In order to catch them, co-operation and common practice is required. Again there needs to be democratic accountability. It is called the EU. There are many other examples of why we need to be part of it.’

This is badly flawed logic and a very misleading elision of concepts.

Most sceptics hail the single market.’

Wrong, but never mind the sceptics. Most businesses do not. Polls going back to 2004 show that most British businesses think the costs and problems with the Single Market outweigh the gains and would prefer Britain to regain the power to make our own trade deals and retake our own seat on the WTO – which would bring real influence, rather than the chimera of influence chased by the Foreign Office from meeting room to meeting room. (Cf. ICM poll of 1,000 businesses, April 2004, reported p1. of The Times.) You will rarely hear a hint of this on the BBC which is repeating its terrible mistake of the euro campaign, conflating the remarks of very political businesspeople running the CBI with the ‘voice of British business’.

Many CBI bigshots have very important interests in keeping in with their regulators in Brussels. This partly explains why they cheated their membership surveys on the euro before they were exposed by Business for Sterling in 1999, after which they rapidly had to pull out of the euro campaign in January 2000. BBC interviewers should ask Adair Turner, responsible for some of the dodgier CBI surveys, more about all his rubbish predictions about the euro, particularly his predictions about how the euro’s low interest rates would be great for Ireland (Mandelson ditto).

The public does not buy the Single Market rationale either and hasn’t for at least a decade. In a September 2004 ICM poll, the public were asked which of the following is a more persuasive argument:

a) ‘Common EU rules make trade and business easier, and the Single Market is good for jobs and living standards.’

b) ‘We can trade and cooperate with Europe without giving away permanent control over the economy to politicians we can’t vote out.’

The public agreed with (b) by 72:24. This view was consistent across all demographics.

Outside the fifth of the country who consistently tell pollsters they would vote to join the euro tomorrow, support for staying in the EU now rests almost entirely on fear of the unknown and not on any positive emotion about its benefits.

The single market needs rules. Elected politicians must agree the rules.

What is the Single Market? It is not a free trade area. It was created mainly by Delors in order to spark further political integration in the EEC, as Delors said himself on many occasions. It was sold in Britain as a trade liberalising project, partly because of the cunning of Lord Cockfield and the Foreign Office in presenting it as such to Thatcher who did not listen to John Hoskyns on the subject. SM rules were created to fulfil a primarily political purpose, not an economic one. The Foreign Office’s propaganda campaign on this subject has many useful idiots.

In my previous blog in this series, Professor Epstein explained the many differences between i) a free trade area based on non-discrimination and ii) a Single Market based on regulatory harmonisation. You do not need ‘rules of a Single Market’ in order to promote trade, as all the other countries in the world know. In many fields, the regulatory harmonisation of the Single Market is far more extreme than that imposed by the federal government on US states.

Many of the rules are there to please big business lobbyists who want to crush their competition – one of the many reasons Adam Smith rightly warned against the power of big business. These rules apply to 100% of businesses despite EU trade accounting for only ~15% of GDP.

The SM has hardly inaugurated the great boost to European growth that was promised. Many attempts to prove its success have failed. Economists have no reliable way of proving whether the theoretical gains outweigh the regulatory costs. A small proportion of companies would suffer problems if we were to leave the Single Market without any transitional arrangements. Others would gain.

Further, membership of the EU and Single Market are different things. Norway, for example, is a member of the SM but not the EU. I am not saying that this is a preferable relationship to EU membership, just that it is a fact that one can be part of the SM without being a member of the EU, so Richards is wrong on another level.

‘Criminals move between borders. In order to catch them, co-operation and common practice is required. Again there needs to be democratic accountability. It is called the EU.’

Many countries have agreements with EU countries on dealing with criminals. Membership of the EU is manifestly not needed to cooperate on international crime, terrorism etc. In fact, by far our closest allies in chasing terrorists are those countries we have had intelligence sharing agreements with since 1945. The intelligence services of these countries meet each other every week in London to discuss such issues – none of the participants are members of the EU and intelligence is shared on condition that it is not passed to EU members.

‘The EU would have to be invented if no one had already done so.’

There are reasonable grounds to prefer to stay in the EU though I do not agree with them. As Blair admitted in the privacy of his notes to Gould, they are primarily political – not economic.

Particularly given modern technology, there are strong reasons to support international cooperation and all sorts of joint efforts. One can support such goals while also thinking that the EU overall undermines effective global cooperation, economic growth, democratic accountability, and the rule of law. One can think, as I do, that one of the reasons why it would be good for Britain to leave the EU is that we could thereby increase valuable international cooperation, and that an entity very different to the EU would do far better at advancing peace and prosperity.

Reasonable people can be pro and anti the EU. Considering it as if it is a priori obvious that the EU is the best way of organising things is a mistake. It is far from obvious. Given the vast corruption, volume of regulation, bought influence by multinationals and trade unions, and the damage to democratic accountability, there are, a priori, many reasons to think a very different institution would be preferable.

*

Finally, SR was a prominent pro-euro pundit. Like others he bought Blair’s propaganda about the wonders of the euro and how inward investment would flee. He wrote in 1998 that ‘I reach a confident conclusion: Britain will be in the single European currency early in the next century’ and he exhorted Blair to ‘start putting the case [for the euro] more enthusiastically’. It would be nice to see some self-reflection from such people about why they were wrong about the euro before they repeat all the same predictions about leaving the EU. (NB. Tetlock’s groundbreaking study – most ‘political experts’ are no more accurate than chimps throwing darts at a dartboard.)

Pundits like Richards are the first to complain when people make spurious arguments about immigration. They should avoid making similarly spurious arguments about the Single Market, international criminals, and the EU – and they should learn from their mistakes on the euro the danger of following SW1 conventional wisdom.

Updated 4 June

On Twitter, Steve Richards said:

‘1/ You were right about the Euro.Those who opposed it deserve huge credit – does not mean EU withdrawal should follow.

2/ UK is part of a bigger EU and no Euro:- The dream of anti-Maastricht rebels. You'[r]e side has won and shd be celebrating.’

Re 1 he is of course right. It does not follow and I did not say it does.

Re 2. I assume he means that the EU is bifurcating into a core-euro/non-core-non-euro organisation which represents a victory for a strand of UK eurosceptics.

While this is preferable to the entire EU = Eurozone, I would not define this as a ‘victory’ or cause for celebration. The problems of the euro are – exactly as they were intended to do by its architects – driving further political integration. While it remains possible that this will prove to be the wonderful success long promised, it is at least a dicey proposition. Many elements of the process seem to me clearly damaging. One that got little attention last year was the sacking of the EU’s chief scientist at the behest of various anti-science political groups. This hardly augurs well for the EU being the Kantian beacon that Brussels claims as its rationale. The enormous structural corruption, from the agriculture policy to Brussels lobbyists, is another reason to doubt the Monnetist claims.

Further, because the Eurozone dominates the EU and the UK is outweighed under majority voting, the Eurozone does many things it thinks are in its interests but which are not in our interests. I would prefer a situation in which we stopped (petulantly and embarrassingly) blocking the euro countries and let them do what they want while pursuing our own path, based on focusing on science and education and the big problems facing us and the wider world.

 

On the Referendum #2: The Lisbon Treaty compared with the Articles of Confederation & US Constitution

In 2004, I invited Professor Richard Epstein (Chicago) to London to give a lecture on the EU Constitution, which became the Lisbon Treaty. That lecture became this essay, PDF HERE. Professor Epstein is one of the foremost legal minds in America and one of the great experts on the US Constitution.

His essay is a fascinating comparison of the EU Constitution with the original American Articles of Confederation (after the Declaration of Independence) and the American Constitution that replaced those Articles. He examined how power became ever more centralised in the US federal government despite theoretical protections. For example, the Commerce Clause in the US Constitution (not in the original Articles) that allowed the regulation of trade between states was, by the time of the New Deal, profoundly re-interpreted by the courts to allow the regulation of trade within states.

Given the US Constitution had far greater protections than the EU Constitution / Lisbon Treaty, he predicted that the Lisbon Treaty would be more dangerous. While the Tenth Amendment to the US Constitution explicitly reserves those powers to the states that are not conferred to the centre by the Constitution, the EU Constitution allowed the members to do only what the EU does not. Given the objectives of the EU are so widely drawn, almost no activity can be confidently guaranteed to be outside the EU’s jurisdiction.

Unsurprisingly, the developments since Professor Epstein’s lecture have proved him right. The EU system has worked as intended to centralise power in Brussels and the European Court of Justice. Of course David Cameron famously made a ‘cast iron’ promise to give a referendum on Lisbon / EU Constitution because, he said, he opposed it. It is near-certain, however, that his renegotiation will not undo the main elements of the Lisbon Treaty. Almost all the dangers that Professor Epstein explained therefore remain relevant.

Epstein made a further argument of relevance to the question: what should the trading relationship between European states be? Epstein argued that Europe should replace its system of regulatory harmonisation (adopted to further political, not trading, ends) with a simple agreement on non-discrimination, along the lines of the Articles of Confederation. This would maximise trade gains without damaging markets, individual rights, or democratic accountability. The diversity of institutional structures and the competition between them that would follow would enable faster and more effective adaptation to globalisation’s challenges than bureaucratic uniformity.

His advice to Britain was:

‘For those who want a strong state with weak individual rights, then this Constitution achieves many of their goals. But for those who think that private markets and private property are the keys to social progress and stability, this Constitution should be stillborn. It promises little gain from the federation of defense that was so central to the American Founding, and its internal structures are sure to invite power dominance from the center…

‘My recommendation is therefore this: Opt for the economic free trade zone and consign the EU Constitution to the dust heap.’

I thought it would be interesting to repost the PDF since I cannot find it anywhere else on the web and this historical comparison is, I think, very useful.

His essay starts on page 9 and is preceded by an Introduction written by me in 2005.

Please leave comments below.