Mises Wire

Decentralization: Why the EU May Be Better Than the US

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Over the years, I’ve been pretty hard on the European Union. Both as an editor and a writer, I’ve published articles criticizing its central bank and its unelected, bureaucratic central government. Especially objectionable is the EU ruling class’s propensity for cynical politics built around threatening and intimidating voters and national governments who don’t conform to Brussels’s wishes.

Recall, for example, how the EU threatened the United Kingdom with retaliatory tariffs and legal action to dissuade the British from voting to pull the UK out of the EU.

Many within the EU continue to push petty anti-British policies to this day.

Moreover, the Brussels government has taken steps to force into line various EU member states that don’t conform to EU edicts on immigration or internal politics. For example, over the past year, Brussels has launched legal proceedings against Poland because of steps taken by Poland’s elected government to reform the regime’s judicial system. The EU has also taken legal action against Poland, Hungary, and the Czech Republic over immigration policy.

Even worse, many within the bloc continue to push for a so-called United States of Europe, which will presumably drive the bloc toward far more political unity and control by the Brussels regime.

Simply put, the EU is a force for political centralization which threatens to further abolish what remains of more localized autonomy in Europe.

The United States Is Even Worse

Yet, for all of the EU’s insistence on moving in the wrong direction—that is, the direction of political centralization—the EU remains remarkably decentralized by American standards. Indeed, when it comes to its degree of centralization, and the degree to which the central bureaucracy exercises control over member states, the EU is far superior to the United States.

This is evident in several ways. When it comes to border control, welfare programs, and control over each member state’s political institutions, the EU is clearly far more decentralized than the United States. Best of all, it is still possible for EU member states to actually leave the union, as demonstrated by Brexit.

Indeed, for those of us who favor greater political decentralization in the United States, a step toward the EU’s current situation would be a move in the right direction for the US—at least in terms of its political structure—even if the EU itself is presently trending in the wrong direction. 

The European Welfare State Is More Decentralized

One key area in which Europe is more decentralized than the US is its welfare state. European member states are fortunate in that their welfare programs remain decentralized, and that the bloc does not have any social benefits program comparable to the US’s Social Security program.

This isn’t to say the EU doesn’t have any social-spending programs administered in Brussels. The EU bureaucracy takes in tax revenues from member states and then redistributes those funds around the bloc. In practice, this means wealthier EU members are net payers while poorer EU members are net receivers. Funds largely go toward “economic development” projects and agriculture.

Although transfer payments are a reality in the EU, the EU has nothing like the US’s system of a single nationwide program that directly taxes individuals and then pays that money back out directly to individuals.

For example, with Social Security and Medicare, individual workers in the US are directly taxed by the central government and then those funds are transferred by the central government from wage earners to retirees. Other similar programs include food stamps and Medicaid.

This means millions upon millions of Americans look directly to the federal government for a “check in the mail.” Although all US states have their own welfare programs of various sorts, these tend to be very small compared to the federal welfare apparatus. Naturally, this tends to give the federal government far more control over the lives and personal budgets of Americans than if the welfare system were funded and administered at the state or municipal level.

In Europe, by contrast, the welfare state is administered and funded overwhelmingly at the level of the member country. Britain’s National Health Service—even when the UK was part of the EU—has always been a British program. The same is true of the UK’s pension programs.

Other member states function in a similar fashion. France, for example, has an immense welfare state, but those who receive transfer payments through the French system do not ultimately depend on the Brussels government for these payments.

The political implications of this are immense. The national nature of the American welfare state acts as an enormous impediment to any effort of an American state to break away from the union. Any American state that seeks to leave the US would, for instance, likely face opposition from voters who fear the loss of benefits—especially Social Security—doled out by the central government. Indeed, were the European welfare state unified to the degree that it is in the United States, it is extremely unlikely that Brexit would have ever happened. British pensioners and recipients of “EU welfare” payments would have been too fearful of losing their benefits—just as many opponents of Scotland’s independent referendum feared the loss of transfer payments from London. It’s not a coincidence that elderly residents of Scotland (and “out-of-work benefits claimants”) lopsidedly voted against Scottish independence.

The Member States’ Legislatures Still Dominate Lawmaking in the Bloc

Government regulation in Europe is increasingly a matter for politicians in Brussels. Yet, for the most part, the administration of government continues to be dominated by the governments of the member states.

Although the tug-of-war between Brussels and the national legislatures continues, the fact is member states generally retain unilateral control over national budgets, law-and-order issues, and over social policies like abortion. There is no European equivalent of the FBI, for instance. 

Moreover, as conflicts within the bloc between east and west over migrants continues, we see that member states are both more willing and more capable of pushing back against edicts from the central government than is the case with American states.

Member states even have unilateral control over their own national borders. While most members of the EU are subject, de jure, to the Schengen Agreement and its successor agreements, member states still maintain the de facto unilateral control. This was on clear display during the early months of the covid-19 panic, when numerous member states within the EU closed down much of the travel across their borders.

Exit Is Still Possible

Nothing better illustrates the EU’s greater level of decentralization than the fact that member states can still peacefully and legally leave the bloc.

This was demonstrated when the United Kingdom finally left the EU after several years of negotiations following the national referendum on Brexit in 2016. Although the Brussels government sought to make it as difficult as possible for the UK to withdraw, it was nonetheless impossible to deny that the UK could legally do so. Moreover, in the practical sense, there was ultimately nothing the EU could do to prevent the UK from leaving, largely because the other EU members were not willing to support military action to force the UK to continue within the bloc.

We could of course contrast this with the United States. In the case of the US, anytime Americans hint at the possibility of secession, opponents of secession chortle that “the secession question was solved by the US Civil War!” Those who invoke this phrase, of course, are signaling that they believe any attempt at secession justifies military invasion and occupation.

Fortunately for the Europeans, the EU has yet to progress to the point where it can take military action against its own people with impunity. In America, on the other hand, any overture toward asserting independence from Washington brings veiled or not-so-veiled threats of violence.

What Brussels Bureaucrats Really Want

None of this is to say that the bureaucrats who run the EU in Brussels wouldn’t love to have all of the powers the US government currently enjoys. For years, the EU has been moving toward expanding its military capabilities, while calling for greater fiscal controls to expand the European Central Bank’s monetary policy. Some now call for using the covid-19 crisis as a justification for creating a “stronger EU.” 

But, however strong Europhiles’ calls are for political unity, old habits die hard. Many Europeans still aren’t willing to turn their national legislatures into mere adjuncts of a central government that will rule from Brussels. 

Americans, on the other hand, have historically had no such qualms about empowering a central state to a level that would delight any Europhile bureaucrat. It’s too late for American member states to assert independence from the central government without facing an avalanche of legal, political, and even military opposition. Europeans would be wise to not put themselves in a similar position.

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