Talking to the proponents of the European Union whose interest in every day politics is rather marginal (and their knowledge of political thought superficial) one could arrive at a conclusion that very often their support for the project is not fueled by some interventionist sympathies for social engineering but a simple desire for closer integration between nations not inhibited by state-imposed regulations rooted in a nationalist mindset.
Moreover, this mindset is consonant with the original plans for Europe conceived long ago by the spiritual founding fathers of the EU: Robert Schuman, Konrad Adenauer, and Alcide de Gasperi. As Philip Bagus claims in the The Tragedy of the Euro, their vision for Europe was initially liberal — i.e., in favor of free trade and relatively free markets — in nature. The views of these liberal advocates for a unified Europe, the whole continent was to be united by the principles of freedom for movement of capital, people, commodities, and services (also known as the four basic liberties).
In the Rome Treaty of 1957 these four basic liberties were promoted as ideals among the member states, but over the years, the project evolved into a monstrosity that no perceptive person can consider to be described as “liberal” today. Instead, European policymakers running Europe’s institutions have given in to the temptations of interventionism and currently the EU churns out loads of regulations burdening the economies of Europe, which are themselves already over-regulated at a national level by state parliaments.
Thus, one might claim the original intentions of Schuman et al. were worth advocating. Its execution, however, has left much to be desired.
Although the four basic liberties remain an ideal, gains in economic freedom have been prevented by numerous restrictions and obligations produced by the EU which distort economic cooperation. The post-war luminaries involved in the project chose to found an international institution whose task was to lead toward integration through political centralization. This solution may appear to be reasonable at first: when a few countries are united under the aegis of one government, it is rather unlikely that free movement of people between those countries will be restricted. In modern states, any restrictions imposed on the transfer of capital or commodities within the borders of one state are also improbable. Therefore, political centralization might appear to some to be the best method to create a free trade area between countries.
Political Centralization vs. Economic Integration
Political centralization, however, can also be an impediment to economic integration. As Hans-Herman Hoppe has argued, the bigger the state is, the fewer incentives it has to follow the principles of liberalism. Small states, surrounded by numerous rivals, feel a strong pressure to compete for taxpayers and investors with neighboring states. Because of their size, it is relatively easy and cheap to leave their jurisdiction area and move abroad. If a similar culture prevails in neighboring states — if the language and religion are similar, as was the case in many areas of Europe — the prospects of emigration seem even more tantalizing. Therefore, governments imposing high taxes and burdensome regulations are likely to suffer the consequences of depopulation and lose their sources of income. Under such circumstances, it is in the governments’ own best interest to tax and regulate moderately. Moreover, the tinier the states are, the less resources are to be found within their borders so such states have to be well integrated into the system of international trade and international division of labor. Micro-states, then, are going to abandon customs and other free trade restrictions out of sheer necessity.
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Huge states, on the other hand, are likely to act in the opposite way because they are more difficult to escape. Due to their extensive geographical size, it is troublesome to leave them. If one decides to try to leave, in many cases he will be forced to live in an area of totally different culture than the one he was brought up in. Moreover, natural resources are more easily controlled by larger states allowing them to more easily resort to a policy of high-customs-inhibiting trade with the outside world. While it is true, then, that generally there are no customs between countries ruled by the same authority, the government may compensate for this in its regulatory policies, high rates of internal taxes, and customs charged for trade with people remaining outside its jurisdiction.
All things considered, the extent of economic integration within a huge state can be lesser then among people scattered throughout numerous tiny micro-states which are not integrated politically at all.
While the EU is not a state as yet, it gradually assumes more and more characteristics of a state. Ultimately, its funding is also based on contributions extorted forcefully by the member states. Therefore, the Hoppean analysis summarized above explains why the EU has deviated from the liberal intentions of its most prominent founders and failed to promote values of classical liberalism, choosing social democracy instead. It stands to reason that the seed of future failure was planted future at the beginning, when it was decided that the way to achieve the goals defined by Schuman, Adenauer, and Gasperi was best achieved through political centralization. As early as in 1952, it was announced that the ultimate outcome is to be the “federation of Europe.”
What European Integration Should Have Looked Like
Instead of founding super-national institutions designed to fuel the process of political centralization, post-war politicians should have adopted an entirely different strategy. To guarantee the four basic liberties, it was enough to convene a congress during which the participating nation states would have pledged themselves to abstain from regulating movement of people, goods, services and capital between the states acceding to the agreement. It would have been nothing more than a treaty and no formal institution would have had to be founded. Member states would have saved billions of euros spent so far to maintain the European bureaucracy.
If European relations had been arranged in such a manner, it would have become quickly evident that the ensuing benefits resulted from economic integration, not political scheming. Also, having seen the benefits of non-political economic integration among a large number of nation-states, Europe would perhaps also be more likely to embrace secession as a solution intensifying competition. After all, there is no compelling argument as to why states should be based on a principle of national identity. In fact, nationalism as we now know it is a modern ideology, unknown prior to the 19th century.
It is sometimes maintained that the national sovereignty is one of the foundations of liberalism. In reality, however, the liberal doctrine holds that the right of self-determination is not a right reserved exclusively for nations but for every community, however small, willing to be incorporated as an independent state (even a micro-state, if they wish so), regardless of their national identity. As Ludwig von Mises put it,
“The right of self-determination of which we speak is not the right of self-determination of nations, but rather the right of self-determination of the inhabitants of every territory large enough to form an independent administrative unit. If it were in any way possible to grant this right of self-determination to every individual person, it would have to be done. This is impracticable only because of compelling technical considerations, which make it necessary that a region be governed as a single administrative unit and that the right of self-determination be restricted to the will of the majority of the inhabitants of areas large enough to count as territorial units in the administration of the country.”
On the continent where every region would be allowed to secede, governments would have to be extremely cautious not to lose their productive citizens striving to live in a business-friendly environment. Governments, thus induced to accept pro-market attitude, would further deepen pan-European economic integration thanks to internal reforms: scaling down, axing taxes, and loosening regulations. The great challenge facing European liberals is then to convince all those people who support the EU hoping for closer integration between nations that political de-centralization — and not political integration — is the most suitable method to achieve that noble goal.