This EU Won't Work

Commentary on Brexit focuses mainly on the attractions of independence and on the risks that are inherent in separating the country from a 44-year ‘engagement’ (the ‘pull’ of exit). In this post we ask why so little attention is being paid to the ‘push’, the reasons that the EU offers such an insecure future to its members.

In June last year, just before the Referendum, we asked the question, “Why do supporters of the EU not factor the possibility [that the EU may break up] into their economic arguments?” Remainers continue to focus on a “Leap in the Dark” when Britain leaves; they assume bad outcomes and feed these into their models. Where is the full story?

The EU will change; the heads of its institutions have a plan, and have had the same plan for decades. (for an update of the plan see the Five Presidents Report from 2015, the more recent White Paper and our commentaries on these). The quotes below in A give a fair taste of their Plan; how does the plan compare with reality and the desires of EU citizens? See B for links to our posts that pick up this question.

Evidence for the structural weakness of the EU, which makes its future uncertain and continuing membership risky, can be gathered under two headings, which highlight the contradictions. Here is a summary:

A: Overweening ambition

• Four strands of ever-closer union (economic, financial, fiscal, political – “all euro area Member States must participate in all Unions.“)
• Unbelievable goals (“A complete EMU is … a means to create a better and fairer life for all citizens … and to enable each of its members to prosper.”)
• Unsubstantiated claims (“a deep and genuine EMU would provide a stable and prosperous place for all citizens of the EU Member States that share the single currency“.)
• Disdain for democracy (“intergovernmental solutions were chosen to speed up decisions and overcome opposition.”   “The President of the euro group, and he alone, should represent the euro zone.”)
• Distrust of divergence (“… to address the still significant margin for discretion at national level.”   “Today’s divergence creates fragility for the whole Union. We must correct this divergence and embark on a new convergence process.“) 
• Contradictions (“Our European Union is not in a good state.”  The EU “has achieved this by acting with one voice on the global stage.”   In the “international financial institutions, the EU and the euro area are still not represented as one.”)
• Lack of critical reflection (“My first priority will be to put policies that create growth and jobs at the centre of the policy agenda of the next Commission.” from Jean-Claude Juncker, ‘My Priorities’, http://juncker.epp.eu/my-priorities)

B: Underwhelming achievement

• Absent is empirical evidence that a supra-national entity can manage national economies well (see Economics, A Draghi on Reform, To See or Not to See?)
• Also missing is an agreed theoretical foundation for the economic claims (see Economic Forecasts are Wrong, Betting on Brexit?)
• EU peoples and businesses suffer from massive legislative and regulatory over-kill (see A playground for squabbles and cheating) 
• The EU claims credit for achievements properly attributable to other organisations (see An Alternative for Europe)
• When things go wrong Eurocrats blame member states for insufficient dedication to ‘Union’ (see Still More Juncker, State of the Union-2)
• The EMU economy produces poor results (e.g. youth unemployment in Italy is at 40%) (see Good intentions and bad outcomes)
• There is declining popular support for the project (see Other European Views)
• Increasingly people declare discontent with the mismatch between ambition and achievement (see Other European Views)
• Britain is not committed to core features of the EU, including EMU (see The UK is different)
• Those countries which do not participate in EMU are resented by senior Eurocrats (see More Juncker) 
• Southern, weaker economies are seeing a rise in left-wing populism (see Syriza, Podemos, 5-Star Movement and Left. Out! Right?)
• Northern, stronger economies are seeing a rise in right-wing populism (see EU in Crisis? and Resurgent Right)

A project such as the EU should be firmly underpinned by sound economic theory. It is not. There is no broad consensus in either economic or political theory, so there is no widely accepted foundation that could support the argument for economic and political union.

Because it is inconceivable that the EU/EMU as currently structured will be able to deliver jobs and growth, which are always created at a sub-national level, its failures are experienced by those who do not get jobs or see the benefits of growth, and those who are dissatisfied will continue to drift towards populist ‘solutions’ on the extremes of right and left.

The central problem is that the EU project, subservient as it is to EMU, is misdirected. It is about centralising power and as such it is doomed to fail, like all previous empires.

The case to remain is based on fear but the greatest fears should arise from the risks and uncertainties of remaining, in whatever form.