Mises Wire

The EU’s Woes Are a Political Problem, Not an Economic One

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The European Union, at least in theory, is designed to allow residents to avail themselves of what are traditionally known as the “Four Fundamental Freedoms.” These are usually defined as the freedom of movement of goods, labor, services, and capital within and among member states of the trade bloc. Preserving economic freedoms promotes peace and prosperity, an enlightened sentiment held over from the rebuilding of the European continent after the horrors of the Second World War.

Though the body of legal literature discussing the fundamental freedoms nowadays tends to broaden them in definition and scope—such as by expanding the importance of the freedom of establishment or by discussing when a good becomes a service in digital markets—the premise of preserving economic freedom and movement remains. While undoubtedly this base notion is a desirable end, there are a great many complications and issues that arise from the politics behind it all.

On the one hand, the preservation of economic freedoms as an integrated trade bloc comes with benefits for the citizens as individuals and even the member states as a whole. These come in the form of ease in seeking legal solutions to disputes over individual property rights and ownership. Another advantage is increased trade through more more easily accessible markets with established historical and cultural ties. On the other hand, the European Union has also faced a great many challenges and crises over the years in the political arena, such as issues regarding debt and migration. It now struggles to hold credibility as a political project in consequence.

Andrew Moran wrote an insightful article about how different European nations are currently coping with rising populism, a political movement commonly depicted as antiestablishment, radical, or undesirable by prointegration media. If European integration and these economic freedoms are such great advantages, then one probably wonders why there is so much negativity and criticism surrounding the European Union after all. Should Europe not embrace more integration at every turn? In reality, the problem might well be that while the economic ends are desirable in the eyes of many Europeans, the political ends are not.

One argument against the European Union hinges on the fact that it is not merely an economic union, but a political one. Nigel Farage summarized the sentiment well in a speech at the European Parliament, when he said that the European Union is a “political experiment that the British frankly have never been very happy with” and then continued, “My mother and father signed up to … a common market, not to a political union, not to flags, anthems, presidents … and now you even want your own army!” Indeed, the difficulty is that while people could agree on the undeniable benefits of economic freedoms being protected, the reach and power of the political machine backing them up became unacceptable to many, ultimately culminating in dramatic events like the United Kingdom actually leaving the bloc via Brexit.

Merging Economics and Politics Is a Bad Idea

An isolationist or protectionist economic policy for the United Kingdom, or any other country in the world today, is quite economically undesirable. However, understanding the motivations of people who are positive about leaving the European Union adds depth to an issue that is extremely polarized. It should not be painted as a simple issue of independent nationalist policies versus a trade-promoting supranational entity.

It is a case of state sovereignty and economic interdependence becoming linked together, forcing a debate on just how much integration is really needed to truly maximize economic freedom. While the European Union often does work internally in lowering regulatory barriers that hinder the fundamental freedoms, the planning of policies that affect other areas in the lives of its citizens may be called into question. People want to have economic freedom, but not necessarily with the level of centralization that policymakers often insist need to go with it.

Trade Bloc or Protectionist Bloc?

Another objection is that while the internal market might enjoy such freedoms among its own citizens and member states, that does not mean that the rest of the world gets the same treatment. Lipton Matthews argues that regional free trade agreements are also a polite form of protectionism, meaning that the integration of the European Union’s internal market certainly does not mean that it has an equally open policy with all other countries outside of it.

A deeper commitment to economic integration within the continent is a good thing, all else being equal. But if this integration occurs alongside an exclusion of goods from outside the bloc, this is problematic, to say the least. Without that, the same system that enforces the preservation of freedom through the bloc also becomes a power tool for states vying to increase their bargaining strength and political influence on the world stage. 

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