I had the pleasure this evening of listening to John Peet, the Europe editor of The Economist, giving a brief yet insightful talk on the future of the euro and how it relates to the future of the “European project” – the political and economic institutions that comprise the European Union. Sadly I didn’t take any notes during the talk and subsequent discussion, but here are a few thoughts.
Mr Peet was correct in saying there seems to be something perverse about poorer countries paying to bail out those with more wealth – countries that have already been bailed out (notably Ireland and Portugal) have been asked to contribute billions of euro to a fund that will likely come tobe used to “rescue” the Italian government and European bankers and bondholders.
Another interesting fact briefly alluded to was that traditionally the European elite have been – either intentionally or otherwise – oblivious to their own role in the crisis. Countries – in particular Greece – were allowed to join the euro even though they failed to meet the fiscal and monetary conditions set out under the Maastricht Treaty of 1992. Moreover, many countries had imposed upon them enormously pro-cyclical monetary policies that caused unsustainable booms – here, Ireland is a principal example. Yet Jose Manuel Barroso has laid the blame for the ongoing sovereign debt crisis almost entirely at the feet of the “markets” and speculators, apparently refusing to contemplate the idea that the eurozone optimal currency area was nothing of the sort.
There are however areas where I found myself in disagreement with Mr Peet. I will do my utmost to represent as faithfully as I can his arguments, but I apologise if my recollection overlooks various nuances in his argument.
The prospect of a Britain largely excluded from the decision making process of the European Union (a scenario envisioned by some commentators in the wake of Mr Cameron’s “veto” of fiscal pact negotiations for the currency bloc) is, in Mr Peet’s view, a troubling one. I agree virtually without reservation that decisions imposed upon Britain without British input is a situation that should be avoided, but I don’t think that this entails the need for greater integration of Britain in an increasingly federalized Europe. Indeed, if the goal is for Britain to have as much influence as possible in the decisions that affect it, then the logical solution would seem to be to withdraw from the institutional structures of the Communities and regain “complete” influence on policy.
It was also said that should the euro fail, it would also be the end of “Europe”. It’s not necessarily true that a catastrophic failure of the single currency would lead to a disintegration of the political settlement that governs the twenty-seven members of the Union and political integration existed long before the euro, but Mr Peet is right to say that it would be made likely, with the single market weakening as national governments attempt populist economics in an effort to restore a semblance of stability should national currencies be reintroduced. Where my own assessment differs from the speaker’s is whether this would be a catastrophic event. I don’t think that it would be. Over the past century, the world has seen a trend toward ever-lowering barriers to trade between economies (notwithstanding the currently-stalled Doha round of trade talks) with free trade taking preference over protectionism. There’s no reason to think that, in the long run, this trend would be counteracted by a potential but by no means guaranteed increase in obstacles to trade between European Union members, most of whom recognise the benefits of such policies entirely independent of the existence of the political Union.
I can do little better than link to this post on the Telegraph‘s blog section, criticizing the Deputy Prime Minister Nick Clegg for attacking the House of Lords for being undemocratic whilst speaking unfalteringly in support of his own special interest, the unelected bureaucrats at the European Commission.
It was not the Lords who decreed that many fishermen will be prohibited from going to sea for more a one day a week, nor which helps itself unasked to money from our taxpayers. Nor was it we who imposed requirements on our NHS to employ foreign doctors unable to speak English and which discriminate against British born and trained young doctors. Like the restrictive employment laws which are now costing jobs here in Britain all these interferences in our country and many more come from the apparatus in Brussels of which Mr Clegg is a one-time employee.
So we might ask our Deputy Prime Minister: “What about the Eurocrats?” Are they not a closed society in which power is entrenched in the hands of an unaccountable elite? Indeed, so much power that they have recently carried out coups d’état against the elected governments of Greece and Italy.
The European Union has unveiled a complete overhaul of its Common Fisheries Policy, designed to prevent the endemic over-fishing of marine stocks in European Union waters. The previous incarnation was a centralised, distant and ineffective mess which did little to conserve fish stocks and much to line the pockets of special interests. In the 28 years it has been in effect, European boats have been forced to cast over the side thousands upon thousands of tons of dead fish to avoid exceeding set quotas, a move which has ultimately hurt fishing fleets both small and large. It is a relief that the Commission has recognised the abject failure of the CFP, with the Commissioner for Fisheries stating,
There is overfishing; we have 75% overfishing of our stocks and comparing ourselves to other countries we cannot be happy. So we have to change. Let me put it straight – we cannot afford business as usual any more because the stocks are really collapsing.
Indeed, the new policy has a number of features that are a vast improvement on the previous regulations. Specifics with regards to particular fish in particular seas will be largely devolved to individual states and the whole approach will mean a transition away from subsidy that has helped maintain inefficient fishing fleets and fishing boats. The proposals, however, do nothing to tackle the real reason for the seemingly terminal decline in European fish-stocks – that is, the lack of property rights and the strong economic incentives for conservation that come with them. Bureaucrats in Brussels, or London, Paris or Vilnius have no financial incentive to conserve fish stocks, and have no way of knowing whether their diktats lead to an efficient resource allocation. In other words, they are distanced from the impact of the decisions they make and face no financial repercussions should they fail in the performing of their job. The new regulations fail to overcome what economists term the “tragedy of the commons” – where everyone is free to exploit an economic resource, then individuals will tend to fish as much as possible to gain what they can before someone else comes along and does the same.
This latter situation is avoided where clear property rights exist. If I own a certain resource and make my living from it, then I have an economic incentive to conserve fish stocks so I can continue to benefit from my property over the long-term. It is a misconception to think that businesses only think short-term when it comes to resource consumption – indeed, the reverse is true. Where I can exclude others from using my property, I will be able to prevent over-fishing and be able to tailor my fleet to take the best advantage of what I own. Moreover, and just as importantly, a business-owner who owns a resource will face the market test of profit and loss – where he does a good job, he is rewarded with profits. Where he fails to be efficient or effective in serving consumer demand, he suffers a personal financial penalty, unlike distant civil servants in the palaces and chancellories of Europe.
History is replete with examples of the over-consumption of resources thanks to “common” ownership – that is, where individuals have no direct personal stake in long-term resource conservation. It is also replete with examples of private owners ensuring that resources are used effectively and will continue to be so long into the future. Be it herds of elephant in Africa, forests or grazing land in the United States and Europe, the private sector has consistently demonstrated that it out-performs by a wide margin the state in attempts to ensure sustainability. Allow fishing stocks to be privately owned and the problem of over-fishing will all but disappear, all without burdensome regulation and crippling subsidies and diktats. Of course, such a policy is, sadly, unlikely. Property rights don’t help to line the pockets of special interest groups, do they? In European politics, it seems that this is, sadly, what ultimately matters.