The Trouble With the EU
With the enlargement of the EU from 15 to 25 countries earlier last month, "…the artificial division of
According to the EU itself, the organization
"is a family of democratic European countries, committed to working together for peace and prosperity. It is not a State intended to replace existing states, but it is more than any other international organization. The EU is, in fact, unique. Its Member States have set up common institutions to which they delegate some of their sovereignty so that decisions on specific matters of joint interest can be made democratically at European level. This pooling of sovereignty is also called 'European integration.'"
So goes the rhetoric of the European Union, an organization created in 1951 to keep
Unfortunately, the reality of this supra-state is far from its putative promise. Based upon the premise that peace and prosperity are somehow based upon increased size and regulatory conformity, what is left of economically viable
The German Miracle?
As with many commonly held notions, there is more myth than reality to this oft-told legend. Along with the benefits of a moderately free economy that the Erhard policies brought, they institutionalized the soziale Marktwirtscharft (socially committed free economy)—that is, "a covenanted as opposed to either a completely unfettered economy on the one hand or a steered or planned economy on the other," in Erhard's words. Not only has this third-way policy brought about the slow demise of the German economy over the past 60 years, the EU has now adopted the flawed German notion of "balance" between the unfettered market and full-blown socialism.
The Teutonic legend, however, does not end in the early years after WWII. The rise of soft-socialism in
It is clear, however, that this trend toward socialism is inherent in the words and policies of many of the German liberals. Erhard, for example, warned that
The influence of the Erhard Doctrine, or at least its mentality, can be seen throughout the theoretical underpinnings of the EU. According to European employment and social policy: a policy for people: "Thanks to what has become known as the 'European social model,' people in the EU are not left to the mercy of market forces. On the contrary, they have access to one of the strongest social safety nets in the world. This is because the European Union firmly believes that while strong competition is necessary to improve growth, strong solidarity between citizens is equally vital to create a stable society and widely shared prosperity." Erhard could not have said it better.
Another central plank of the Erhard Doctrine called for the management of trade to ensure "free competition." Accordingly, "The State must not only take a hand in the running of the market in so far as it is needed to uphold the mechanism of competition, or to supervise those markets where complete competition is impossible." Compare this statement with that of the EU's leading anti-trust regulator, Mario Monti: "The competition policy implemented by the [European Commission responsible for competition policy] and by the Member States' authorities and law courts aims to preserve and develop a state of effective competition in the common market by impacting on the structure of markets and the conduct of market players. Requiring firms to compete with each other fosters innovation, reduces production costs, increases economic efficiency and, consequently, enhances the competitiveness of the European economy…."
The twin goal of the EU, peace and prosperity, are certainly attainable for the European continent. They will not be reached, however, through the EU. The social market economy of
"The conflict between [the principle of capitalism and socialism is] irreconcilable and does not allow of any compromise. Control is indivisible. Either the consumers' demand as manifested on the market decides for what purposes and how the factors of production should be employed or the government takes care of these matters. There is nothing that could mitigate the opposition between these two contradictory principles. They preclude each other."
Jude Blanchette is a research fellow at the Foundation for Economic Education in Irvington-On-Hudson, NY. He can be reached at firstname.lastname@example.org. See other articles by him. Comment on this article on the Mises Economics Blog.