Monday, 7 April 2014

Europe: In or Out?



I just got around to watching the Nigel Farage vs. Nick Clegg debate on Europe. It was a bit like watching a herbivore and a carnivore arguing over an over-done pork rind; one has no interest in having it, and the other knows that he'll never have the political teeth to bite into it.

To convey the key point I think Nigel Farage got right in the debate, I shall refer you to an earlier blog entry of mine, in which I considered the nature of alcohol, its effects on society, and whether it would be legal if it were invented next week….

"Pretend there's never been any such thing as alcohol.  Tomorrow someone combines ethanol with other compounds and proposes to trial on the market this new product call 'alcoholic drinks'.  The Government monitors its effect on society, filming those effects on the first night of public consumption.  Numerous drunken people go out on the town, losing their inhibitions, peeing in doorways, hurling abuse at passes by, having fights, trying to coax staggering drunk girls into bed, and throwing up all over the streets.  Next day a committee looks back at the effects of this new product called 'alcoholic drinks'.  It would never get past the trial stage - they'd stamp it 'illegal' right from the off.  So ‘effects vs. legality’ doesn’t always pertain to prudent practices or sound foresight."

Imagine if we'd never had alcohol and were asking about its potential legality today as a new thing under consideration - I'll bet there would be a lot of people who, upon seeing the negative externalities on society, would call for it not to be introduced into the market
. Asking the question with the signs reversed enables us to consider more than just past legacies and social habits - we can consider the merits and demerits of a proposal in prospect.

The way we framed the question of alcohol's desirability, in prospect, is exactly what we should do with the EU. Nigel Farage asked the question in exactly the right way - not simply considering the EU from the point of having it and coming out, but as though we didn't have it and were considering going in. That best helps people formulate a proper consideration of the merits and demerits, and not be susceptible to the endowment fallacy that comes with considering things we already have.

It is clear that there are costs and benefits to being in Europe - the question is whether there is a net benefit to being in. This is complicated by the fact that it is very hard to know about the true inter-connectivity between the costs and the benefits, and whether the UK needs to be 'in' to reap those benefits.

Take, for example, the European Arrest Warrant - here there is connectivity between European nations that enables criminals to be brought to justice by being returned to their place of trial. Not having that would be a loss to European countries, but then one wonders why such a connectivity has to be contingent upon being 'in' a stultified, bureaucratic, undemocratic Union of the kind we have. Given that it is mutually beneficial to all participants, surely we would have a similar European Arrest Warrant coalescence whether we are independent from Europe or not. After all, Britain has a similar arrest warrant coalescence with the United States, and they are not in any kind of Super State Union with us.   

That issue and many others like them are very much central to the debate - the putative benefits of being 'in' should be able to be enjoyed without the construction of this Super State Union run by charmless un-elected bureaucrats who, judging by many of the regulations, fail badly at efficient economics.

This seems to be a common theme - what proponents cite as benefits are, to me, benefits that could still be reaped as part of a European coalescence that didn't involve such a bureaucratic core. For example, one of the great things about the EU is that any member can work or travel anywhere else in Europe. With sensible immigration policies that remains a wonderful thing, just as it is great that Brits can leave the UK for Europe anytime they like (within reason). I see no reason why such a mutually beneficial set-up could not remain, irrespective of EU trade dogmas. The reason being, when it comes to liberty, freedom, trade, allocation of resources, and market potential, there is little a State central planner can do that a libertarian can't do on his or her own.

Thus, it seems clear to me that the big issue with the EU is the issue to do with trade. On that front there is no question that a lot of the EU top down management of the numerous regulations is bad for free trade, and hence, bad for economies. Here's an example; the EU's dreadful tariffs on non-EU agriculture dampens the price signals of agriculture and creates trade barriers that hurt much poorer non-EU countries like those in Africa. The result is not only an unnecessary disadvantage for those who desperately need more trade opportunities, it is a wasteful misallocation of agricultural adaptation as it effectively subsidies EU farming against those whose goods are more cost-efficient. It is disgraceful that that happens, just as it is dreadful that EU regulations prohibit so much business with the likes of India, China and Brazil.

Now there is some fear that some corporations would be less likely to trade with the UK if they were divorced from the EU. To some extent that might be true. Usually free market supply and demand takes precedence over relative irrelevancies such as the European-status of the country, but I can conceive of exceptions. Suppose 15 countries left the EU - what you'd have is an additional 15 national trade regulations ratified by those independent States, whereby cross border trading is delayed, impeded and more costly than it needs to be. To that end, countries that filed for this divorce would in some cases disadvantage themselves.

But that only goes to show why libertarians like me have been complaining about nannified regulation impeding trade - this wouldn't be a problem if the monolithic regulatory protocols were relaxed - most of them are entirely unnecessary, and cross-national surcharges most definitely are.

David Cameron will probably look back and realise that one of his biggest mistakes in this term was not re-claiming the territory lost to the best parts of UKIP - most notably the libertarian values of free-enterprise and global trade, small State regulation, and standing up to the charmless, un-democratic bureaucrats in the European Union, many of whose laws are stultifying, economically inefficient and nannified.

All that considered, then, it would seem to me that the best outcome is a strong united Europe, with multiple nations able to be mutual beneficiaries in good cross-European protocols (freedom of work and travel, sensible judicial policies, etc) but without the stuffy, undemocratic, regulation-mongering charmless bureaucrats who sit in Brussels, Strasburg and Luxemburg earning lots of money for doing very little that benefits global trade.

Free markets are not likely to be impaired by a UK divorce because, as I say, they are driven by supply and demand. The immediate threats, though, are problematic - for example, the likes of Germany and France wouldn't be keen on us cherry picking our favourite bits of Europe, and they may even subject us to 'outsider' tariffs. But if such regulations can impede trade this way it only goes to show how rotten at the core it really is, and not as fit for purpose as it was when it was the common market. Of course, the plus side is British trade outside the EU would grow, but the one thing left to worry us would be that divorcing ourselves from other major EU countries would make it hard for us to positively influence Europe from the inside.

Just about every passage I've written here is screaming back at me that the problem with the EU is trade barriers…trade barriers….trade barriers. If they can be sorted, things probably will be better - whether we are in or out.

Once we see Europe for what it is the picture can start to become clearer - nations are artificially created States whose borders are demarcated by political protocols, not free market protocols. Excepting currency, which is only a unit of value, the differences between the UK, France, Germany, Spain, Finland, and so on are based on division of political units, giving each nation a political and cultural identity. Economies are not demarcated in the same way - as money flows all over the world in small and large quantities. The economy of London is more different from the economy of Leeds than it is the economies of Madrid or Paris. The economies of Berlin, Hamburg and Munich are closer to each other than they are most of the rest of Germany. There are fewer economic transactions between Germany's Berlin and Germany's Ingolstadt than there are Germany's Berlin and England's London or France's Paris. In every way that's relevant here, the artificial units of nationality are quite separate from economic connectivity through trade. If I went on Amazon and bought Les Enfants Du Paradis on DVD, it would make no difference to me whether I bought it from a cheaper seller in Marseilles or a cheaper seller in Manchester - the transaction transcends national borders.

So…Europe…in or out? Instinctively I say 'out' - but what's very evident to me is that until there is a referendum all the benefits of being 'in' (and there are plenty) are benefits that ought to be, and can be, enjoyed without the unnecessary anti-free market restrictions that stop EU countries freely trading with non-EU countries. Encouraging rich Tom to trade with slightly less rich Dick because regulations inhibit trade with poor Harry is not in the long run helping Tom, Dick or Harry. In all likelihood, though, if we want to make positive differences in reforming this protectionist monolith, we'll have a better chance doing so from the inside rather than as an ex-EU divorcee - so 'in' seems to be the better option.

* Photo courtesy of bbc.co.uk

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