Freeman

ARTICLE

There's No Philadelphia in Europe

The European Union Is Seeing a Steady Accretion of Power to Brussels

FEBRUARY 01, 1999 by NORMAN BARRY

The late Norman Barry was professor of social and political theory at the University of Buckingham in the United Kingdom and was the author of Business Ethics (Macmillan, 1998).

The member states of the European Union, in their struggles to find some form of international authority, are going through debates that have a strange resonance with America’s arguments about constitutional forms in the late 1780s. However, there has been no Philadelphia—no equivalent European city at which the fundamental issues of freedom and constitutionalism have been thrashed out. Instead, there has been a steady accretion of power to central regulatory authorities in Brussels, either by international treaty or even more significantly, by innovative and creative decisions of the European Court of Justice, which is rapidly becoming what its U.S. equivalent took some time to achieve—the de facto creator of a constitutional order.

Even in its original structure the European Union (it’s had various names in the past) was markedly biased toward the executive. The European Commission, executive arm of the EU, has always been more than a civil service. It actually initiates legislation, which is almost routinely passed by the Council of Ministers, the nominal legislature composed of representatives from the member states. The Commission keeps a close watch on them to prevent the emergence of any independent, competitive, and innovative actions. It normally wins cases against member states that it brings before the European Court. Indeed, Brussels, headquarters of the main governmental institutions, is rapidly becoming the capital of a new superstate.

In theory, the original Treaty of Rome (1957), which bound the creators of an economically integrated Europe, was not especially illiberal (in the classical sense). It embodied the “Four Freedoms”—of movement, of goods and services, of capital, and of labor—that constitute the sine qua non of a market society. International regulation was originally limited to the enforcement of the common rules of practice necessary for free economies. True, there were regulations that had immediate legislative impact on member states and directives that were adopted by local legislatures to fit particular circumstances. But in its early days, European-wide law did not automatically take precedence over the laws of member states; so there was some similarity with America’s Articles of Confederation, which required the agreement of all states for laws to be nationally applicable. Unanimity was never achieved, and that is why the framers of the Constitution aimed to make federal law directly applicable to all Americans, as well as to permit direct taxation by the proposed federal government.

The End of Competitive Governments

In Europe, there was still the possibility of jurisdictional competition, which is the essence of federalism, up until 1964, when the Costa v. ENEL case was decided; the European Court held that European law was superior to any domestic law with which there might be a conflict. Nothing in the Treaty of Rome validates this legislative capture by the central body. It was simply another example of a centralized court asserting its power to create constitutional law. Ever since, the Court has expanded the power of the Council of Ministers and its legislation. As the American authors of the Anti-Federalist Papers said, a federal court is bound to augment central power at the expense of local autonomy: it reduces the effectiveness of “exit” (that is, voting with the feet), and eventually the domain of individual liberty is diminished. What is the value in moving to another state if all the laws are more or less the same?

Although the European authorities in Brussels have no direct taxation powers (they do have the power to set a minimum level of value-added tax) and the budget is financed by subventions from each member state, one doubts that this will survive very long. Encouragement toward a European-wide income tax will come about through the new European currency, which is under the control of the European Central Bank, an institution that will set an interest rate for all member states that join. (Britain negotiated an opt-out under John Major’s Tory government, but this is not likely to survive the newly discovered Euro-enthusiasm of Tony Blair’s Labour government.) With a monopoly currency, a central bank, and treaty obligations to maintain various fiscal targets, the tendency toward the promotion of European-wide economic policies will be irresistible. The power to tax, exercised in effect by a centralized state, will complete the European project.

It is a project that subjects European citizens to common economic standards, welfare arrangements, civil liberties, and ultimately most aspects of law. From its inception as the European Economic Community (a mere free-trading area with elementary uniform rules), each stage in its progress has been toward increasing centralization. The major developing institutional arrangements, from the Treaty of Rome itself through the Single European Act (1986), the Social Charter (1989), the Treaty of Maastricht (1993), and the Treaty of Amsterdam (1997), attest to this.

A Benign Beginning

Much of this evolution proceeded under the suitably benign banner of elaborating on the originally modest liberal project of fashioning the principles of a free market as envisaged in the Treaty of Rome. Indeed, some steps could easily find a rationale in public choice theory. For example, under the original arrangements, when unanimity prevailed in the Council of Ministers, progress toward a free common market was successively blocked by member states anxious to preserve anti-market privileges (such as restrictions on capital movement). In good Virginia-school style, qualified majority voting was introduced under the Single European Act, although unanimity remained in certain areas. However, this modest and necessary constitutional innovation soon made possible a mania for “harmonization”: many competitive advantages were gradually eliminated so that every member state had to conform to uniform regulations on the environment, labor law, health and safety at work, and so on. A “social chapter” was introduced by which a common welfare policy was formulated.

Most of these standards were, in effect, set by the richer countries, especially Germany and France, which did not want competition from poorer countries anxious to attract capital by offering more favorable regulation. They were, in turn, “bribed” by significant financial redistribution. When countries attempted to avoid these standards, ways were found to thwart them. Britain tried to veto a directive limiting the number of hours in the work week (as proposed, unanimity was required), but it was carried as a health and safety measure, which can be passed under qualified majority rule.

Predictably, the European Court has been a complaisant actor in all this. It doesn’t proceed like a common law court, working from case to case and deciding by purely legal reasoning, rather than on political grounds. Instead, it tends to regard itself as being responsible for implementing the European “idea”; this of course lets almost anything in. Subordinate courts, for fear of being overruled, correctly anticipate what the European Court would do. Thus a British court struck down laws that exempted part-time workers from the anti-competitive requirements (including generous redundancy payments) enjoyed by full-time employees. It said that since most part-timers were women, the exemption was in breach of various equality provisions in European law. The court even had the audacity to add that this would have no effect on employment.

A great stride down the road to centralization was taken by the Maastricht Treaty (1993). This extended majority voting, introduced plans for a common currency (although not yet obligatory), and confirmed all the movements toward legal uniformity that had been previously established by the Court. The only interesting feature of the ratification process was the ruling of the German Constitutional Court in Karlsruhe. Although the legality of the treaty was upheld, (superficially) strict conditions were laid down for future European integration. Europe was declared to be a confederation of autonomous legal systems (to which European law was not superior), and no regulation or directive could abrogate any individual right protected by the German Basic Law.

This nicely contrasted with Britain’s much-vaunted sovereignty system, in which its citizens had no recourse to constitutional law once its parliament had signed away legal authority by treaty. (There never was a British constitution.) It may have been a good thing for liberty that sovereignty was effectively renounced, but its replacement is hardly a bastion of freedom. The European Court may have been quite efficacious at striking down some national laws that were obstacles to economic liberty, but it has been singularly ineffective at protecting European market freedoms from regulations and directives from the Council of Ministers; the similarity here with the behavior of the U.S. Supreme Court since 1937 is striking. Whatever the German Constitutional Court may have said about Maastricht, there is no evidence that it will take a stand against European legislation; in fact, with scarcely a murmur it upheld Germany’s abandonment of the mark on joining the European Monetary System.

What Is Federalism?

What the enthusiasts for Europe do not understand is that freedom is better protected by competition, both in economics and law, than by constitutional documents: “exit” always beats “voice” (democratic privileges).1 This would be so even if the embryonic European constitutional documents were themselves particularly friendly toward liberty. It took the U.S. Congress and Supreme Court about 150 years to integrate the country under one more or less uniform economic, regulatory, civil liberties, and welfare system; Europe has done the same in less than 30. The elimination of constitutional competition in the United States was formally recognized in the notorious Garcia v. San Antonio Transit Authority case, where the Supreme Court, in defiance of the Tenth Amendment, said that federalism consisted merely in the fact that the states were represented in the Congress.

Europe has repeatedly given formal obeisance to the (originally Roman Catholic) principle of “subsidiarity,” which in the Maastricht Treaty is held to mean that “in areas which do not fall within its exclusive competence, the Community shall take action . . . only if . . . the objective of the proposed action . . . can by reason of the scale of effects of the proposed action be better achieved by the Community.” Subsidiarity is a kind of surrogate for genuine federalism. But even as a “parchment” protection for local autonomy, it is feeble. There is nothing like the precision of the original American Constitution, which at least does specify the areas of competence for the federal government and leaves the rest to the states. In Europe there is not even wording that can function as a principle for demarcating centralized authority from local. In any disputed area, the European Court will always side with Brussels.

One solution repeatedly recommended to stem the growing bureaucratization of Europe is the closing of its “democratic deficit.” It is true that European governmental institutions are not subject to much democratic accountability. The parliament has little or no formal legislative role (in fact, it is a rent-seeker’s paradise, as is much of Europe), and the members of the Council of Ministers are only indirectly elected. But more “democracy”—that is, legislative authority for the directly elected parliament—is not the answer. People who make this case repeat the error of Madison, in Federalist 10, on the grand scale. He thought that the “extended republic” would remove the danger of faction because a federal system with divided legislative power would dissipate the malign effects of otherwise unrestrained majority rule. But he neglected the fact that modern-day factions, coalitions of interest groups, would form to plague the central legislature with sectional demands, and dispersed voters would have little rational incentive to control them. The same public choice considerations tell against a democratized Europe, for well-organized and committed minorities always have an interest in formulating (normally redistributive) policies that are inconsistent with the long-run aims and purposes of an apathetic and rationally ignorant populace. Only the objective enforcement of a universal rule of law, which protects property rights as well as civil liberties, can restrain potentially predatory government. Conventional majority-rule democracy is quite inadequate to the task.

One crucial feature of a genuine federal system is the right of exit from the constitutional arrangement: this is justified not merely on the ground of local autonomy but also as a prudential device to restrain the seemingly inevitable centralizing tendencies of all forms of government. For if enough provinces/states object to the actions of the general government, then that government will find it has very little left to govern over. There was always a great doubt about the constitutionality of secession in America, and a hypothetical federal government could go a great deal toward preserving that form by specifically acknowledging the right of exit.

It is continually debated now whether Britain (the least enthusiastic of member states) could legally leave the European Union. That question would appear to be answered by an obscure clause in the as-yet-unratified Treaty of Amsterdam, where it is declared that the Commission will bring actions against any member state thought to be in breach of its Treaty obligations; the case will be heard by the European Court. These are the two institutions least likely to be in favor of secession. There is, then, no right of exit; it is a permission that is never likely to be granted. Any such action by a member state will therefore be political, with all the adverse consequences that will follow from its exercise. Dover Castle may well be Britain’s Fort Sumter.

It is not the case that British Euroskeptics are necessarily fanatics for parliamentary sovereignty, the very system that has done so much to undermine the market economy and the rule of law in their country.2 What they fear most of all is the reproduction of that institutional phenomenon on a much more dangerous scale in Europe. There is no escape from its depredations except by the costly and time-consuming process of amendment by treaty. And the European rent-seekers will always be able to fend off any such move. The only virtue of retaining independent states (which could still bind themselves by minimalist general rules, mainly for promotion of free trade and protection of the right to free movement) lies in the possibility of preserving genuine institutional competition. This strategy has nothing to do with promoting grandiose schemes for a “more perfect union.”


Notes

  1. See R. Vaubel, The Centralisation of Western Europe (London: Institute of Economic Affairs, 1995).
  2. See my “Sovereignty, the Rule of Recognition and Constitutional Stability in Britain,” in Hume Papers on Public Policy, vol. 2, no. 1, 1994, pp. 10–27.

ASSOCIATED ISSUE

February 1999

comments powered by Disqus

EMAIL UPDATES

* indicates required

CURRENT ISSUE

November 2014

It's been 40 years since F. A. Hayek received his Nobel Prize. His insights, particularly on the distribution of knowledge and the impossibility of economic planning, remain hugely important today. In this issue, we look back on the influence of his work. Max Borders and Craig Biddle debate whether liberty must be defended from one absolute foundation, further reflections on Scottish secession, and how technology is already changing our world for the better--including how robots, despite the unease they cause, will only accelerate this process.
Download Free PDF

PAST ISSUES

SUBSCRIBE

RENEW YOUR SUBSCRIPTION