euROPE or euHOPE: How integrated should Europe get?
A quick guide to European economic, currency, social and political integration

By: Simon Buckingham: simon@unorgan.com

Also at: www.unorgan.com/europe.htm

	Positive?
Single European market	YES
Widening EU membership	YES
European monetary union (EMU/ euro)	NO
Common Agricultural Policy (CAP)	NO
European social charter	NO
Central European institutions	NO
European political union	NO

Why? Because organized policies hemorrhage in today’s unorganized Europe

Introduction

The European Union (EU) is a group of European countries that has increased in both size and cooperation over the past few decades. Today’s 15 member states are integrated closely in economic terms in the shape of the single European market. As we move towards the year 2000 and beyond, the EU authorities want to expand this cooperation beyond the economic, to encompass currency, social and political union.

Summary

There is great variety in today’s Europe among government policies, people, languages, economic circumstances and currencies. Such diversity is increasing in today’s global uncertain, unstable, complex unorganized world. As such, the stability and certainty that disappeared with the old orderly organized world cannot be bought back by eurocrats promising social and political integration.

The world we all live in, inside and outside of Europe, is getting more unorganized. Despite this, politicians in Europe are trying to organize Europe’s political and social policies with universal policy directives and all powerful institutions. They have failed to recognize or acknowledge that the world has changed and continue to wrongly view the unorganized world in organized terms. Whilst the world including Europe unorganizes, eurocrats insist on organizing institutions, policies and economies. They see Europe in straight lines, when the reality is waves, and they cause conflict by trying to straighten out the lines.

We will see how intervention organized by European government institutions sends the wrong signals to economic actors and so prevents markets such as those for labour, agriculture and currencies from clearing. Rigid policies and rules hinder the efficient allocation of resources between countries and industries. The actual result is often the complete opposite to the official intention, with surpluses of labour and food, for example. Intervention that failed even in the old organized world is even more damaging in today’s unorganized world.

We need to limit the extent of integration to measures that benefit individuals rather than institutions. European citizens benefit from a widening of the EU and the European single market, but suffer from their reliance on governments in common currency, political and social policies. If we persist in pursuing artificial convergence where there is natural divergence, and move beyond the single market to monetary, political and social union, we are stimulating probable conflict, and possible war in Europe in the twenty-first century.

All European people must recognize the folly of organized policies in the unorganized world, and distinguish between great-sounding government promises and policy reality. Voters should exert influence through democratic methods such as political elections and referenda to ensure that these pan-European institutions and instruments are avoided. This is the only way to ensure that the future of Europe is one of euHOPE and not euROPE.

Let us now justify this view by using economic analysis to consider the desirability of each of the key European policies in the unorganized world.

Single European market (is positive)

The end of 1992 saw the introduction of the single European market, with the goal of free movement of goods, services, capital and people within the European Union.

The single market is positive for European Union citizens; who have the freedom to travel to other EU countries and study, live and work there. The single market also benefits business by eliminating barriers to trade between member states.

Problem: The single European market has not yet been fully implemented. Markets such as telecommunications should be fully deregulated because they are important enhancers of mobility and contact, as should the energy market, where European people face high fuel prices and consequent high travel costs.

These economic measures such as deregulation and privatization need to be implemented before political measures can follow, because centralized European policy limits the decision independence and flexibility of national governments.

Preferred unorganizing solution: Complete the implementation of the single market by introducing freer markets and conversely reducing (national and supra-national) government intervention in economies, privatize, deregulate markets and increase competition.

Widening EU membership (is positive)

The European Union is expected to expand beyond its current 15 members to encompass countries from Eastern Europe in around the year 2000. Preparation for full membership is likely to take the form of potential members first integrating into the single economic market.

Fact: As more member states are accepted, it becomes harder to get a consensus on any policy measure, due to different interests, beliefs, abilities and circumstances. This increased diversity makes the successful implementation of policies such as a single European currency still more difficult to achieve in practice.

Preferred solution: Continued widening of the European Union to expand the single European market, increase diversity and facilitate closer contact between people of different nationalities.

European social and political policies (are negative)

The 1992 Maastricht treaty set the goals of implementing a single European currency, a common foreign and security policy and closer political union.

Problem: The European Union (EU) has increased the freedom of individuals with the single economic market. However, just a few years later it is intent upon taking this freedom away with European currency, political and social integration. The EU wants to centralize policy making thereby increasing institutional influence over individuals.

Preferred unorganizing solution: Europe needs more "subsidiarity", which simply means doing things together only if they can be done better together than separately. In today and tomorrow’s unorganized diverse world, this typically means avoiding implementation of the policies proposed in the Maastricht treaty.

European Monetary Union (EMU) (is negative)

The European Union wants to introduce a common EU currency called the "euro" in 1999. To this end, the EU authorities have set deadlines and pre-conditions and introduced a "stability pact" to try to get the national economies, economic variables and currencies to converge before the euro is introduced.

Problem: A single European currency sounds good in theory, with the convenience of a single currency for business and travel, but is impossible to realize successfully in practice. The economic opinions and circumstances in different EU member states diverge too widely for a single common interest and exchange rate to suit all member states. There is no way of ensuring that these criteria are set at the appropriate level. Meeting the criteria may not ensure that the single currency will work, or that once met the member countries will be able to maintain these targets throughout a full economic cycle. External disturbances (requiring flexible responses from floating exchange rates) occur more frequently in the complex, global unorganized world. As such, the proposed single European currency will inevitably break down as economic circumstances in the different diverse member states diverge and national priorities take precedence.

The single currency is simply too organized an idea for our unorganized world. In the unorganized world, there is no such thing as stability in exchange rates or anything else: those who promise stability are liars, those who seek it are human. I will always remember a university professor in Germany telling me that if national governments did not meet the pan-European criteria, the result would be poverty. People predominate over currencies, individuals over institutions. People’s prosperity should depend on their own efforts and not be reliant upon (far from guaranteed) financial discipline from centralized monetary authorities including a newly created single central bank. We want "ER" to stand "Exchange Rate" and not "Emergency Room"!!

Preferred unorganizing solution: The best exchange rate policy in the unorganized world is one where currencies float in free markets. The various EU currencies such as the pound, deutschmark, franc and so on should float against one another, such that as economic variables differ, exchange rates can fluctuate to take these differences into account.

Common Agricultural Policy (CAP) (is negative)

The EU has an interventionist agricultural policy called the Common Agricultural Policy (CAP) which both expensive and inefficient. The CAP increases food prices, ensures the allocation of too many productive resources to agriculture rather than other industry sectors, and causes too much food to be produced. By artificially setting prices above their market levels, the CAP encourages farmers to produce more of the higher priced foodstuffs and thereby causes more farming to be carried out than is needed. This is a vicious cycle caused by government intervention.

All of these costs are incurred just to benefit the small but powerful vote-rich agriculture lobby. As a result, the CAP consumes the majority of the EU’s total budget whilst accounting for a minor proportion of its actual output and employment.

As such, the CAP must be capped now, let alone before further enlargement of the EU beyond 15 members can successfully take place. The relative importance of agriculture in candidate member states for widening the EU such as in Eastern Europe means that were they to join under the existing CAP, the EU budget would be consumed whole by agriculture alone.

Preferred unorganizing solution: The impact of the CAP must be reduced- food prices should float freely in free markets so that we do not continue to end up with mountains or shortages of food.

Social work charter (is negative)

Situation: The social work charter comprises of a raft of directives concerning working time and conditions such as part-time working and health and safety regulations.

Problem: The social work charter reduces the flexibility of employers to employ different types of worker, and increases their costs. For example, social charter regulations give part time workers the rights to similar benefits as full time workers. This is the eurocrats observing the positive trend towards flexible, convenient part-time work, and stopping it by legislating an organized policy. These measures distort the labor market by encouraging people to pursue part-time work whilst simultaneously encouraging employers not to take on part-time workers because of their expense.

Social contracts between workers and companies reduce the flexibility of both parties. Unemployed people are immobile because they get generous benefits from the welfare state. They have little incentive to get jobs because of the high level of welfare benefits and cannot get jobs because they are too costly to employers.

Those employees who are in work are immobile and locked into hierarchies because membership, however repressive, has its privileges. It is not worthwhile for individuals trapped in hierarchies by organizational benefits to move, because the employment related benefits such as company pensions accrue ONLY to those with jobs.

Companies are obliged to provide expensive and compulsory benefits to employees. Such benefits mean that the total labor cost far exceeds the wages paid. This increased cost of production increases the price of the goods, reducing demand for them, and consequently the demand for and employment levels of the employees who produce them. The European social charter hinders member states from deregulating their national labor markets. European firms cannot compete because of the higher social costs from the social charter, therefore they protest against deregulation that would increase competition. Employees have the right to work anywhere in Europe, and yet the social charter hinders labor market flexibility. This is a vicious cycle caused by government intervention.

As a director from the Confederation of British Industry explained: "The problem is that social policy has been too much concerned with the rights of those in employment and too little directed towards what would help the 20m out of work in the EU find jobs. The result has been both inflexibility in labour markets and high social costs for every person employed across much of Europe." (GILBERT, FT, 30/12/94).

Europe’s high unemployment rate "seems, moreover, to respond little to changes in the rate of economic growth and in the business cycle. The main cause lies not in an excess supply of labour, nor in a lack of demand for labour, nor in immigration, nor in lack of technological progress, nor in excessive imports of South-East Asian products, nor in the cheap labour of Eastern Europe. The factor that comes closest to explaining the problem is the excessively high rate of domestic wages relative to workforce productivity." (KLAUS, ECONOMIST, 10/09/94).

"The wage-rate is high because it has broken from its microeconomic foundation at the level of the firm, to be determined instead at macroeconomic level between the state and labour unions; and it is then raised higher still by the addition of mandatory costs imposed by the state. Put simply, Europeans have to reconcile their rewards with their achievements, otherwise some of them will be out of work forever." (KLAUS, ECONOMIST, 10/09/94).

Workers who are mobile and flexible are best placed to benefit from the fleeting opportunities in today’s unorganized world. Yet the social work charter leads to static labor markets, inconsistent with dynamic product markets. These days, very few workers stay with one company during their entire working life. As such, a dynamic labor market is needed if people are to be able to find jobs in different organizations. The social charter is an outmoded organized policy designed for an obsolete organized world where there were stable industries with static workers in stable industry environments. The former British Prime Minister John Major accurately described the social charter as "stuck in the groove of the old corporate, centralised, over-regulated Europe." (FT, 2/6/94).

Preferred unorganizing solution: Labour markets should be deregulated, the power and influence of trade unions reduced, the non-wage costs for employing people should be reduced as they act as barriers to job entry, minimum wage schemes abolished, greater flexibility in terms of when and for how long people can work should be introduced by abolishing regulations in the social charter.

Conclusion

Please do not make the mistake of assuming that I am racist or nationalist or call me by some other outdated label just because I oppose currency, social and political integration in Europe. I have travelled, lived, studied, worked and met people throughout the European Union. In fact, I oppose ever closer union for the very reason that in practice it adversely affects the prosperity of individuals, the people and citizens of Europe. It is they I am concerned for, not institutions, instruments, or politicians. Lets ensure that we the citizens of Europe take every opportunity to vote against further integration so that we can live together in euHOPE not euROPE.

I want to end on a positive note- I believe that the world we all share, Europe included, has better potential now than it has ever had. If we can guard against interventionist politicians, the people of Europe share great opportunity for prosperity.

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