The Prime Minister’s decision to veto the latest move by the European Union to try and create a package of measures aimed at the solution of the Eurozone debt crisis has inspired many commentators - myself included - to new heights of hyperbole and ridiculousness in their responses. Now several days have passed and time has been had to catch a breath and think, we are left facing the future with the veto set in stone. One cannot “un-veto” a treaty - and even if one could, it is extremely unlikely David Cameron would be able to do so, given the feelings on antipathy towards anything European that dominate on the benches behind him in the Commons.
Of course, there are debates to be had about the future of the deal. Now I’ve calmed down, I feel it likely that it will die, as the past deals have done, in a hail of apathy and hand-wringing. I don’t feel especially well qualified to speak to what will take its place, or indeed prescribe specific policies to fix the Eurozone crisis. What I want to speak to is the idea of European union that has underpinned the EU project since its conception and why we need bodies like the European Union if we are to remain open to the world, rich and free.
There is a persistent myth about British membership of the European Union, and indeed the European project at large. Consistently, Eurosceptic commentators have argued that Britain signed up for a free trade deal in 1973 when it entered the European Economic Community on the third try. Whilst it may be tenable to argue that some pro-European politicians argued that was all that the EEC truly amounted to, both before and immediately after accession, the documentary evidence points to a very different path for the European project. The Treaty of Rome, one of the documents which Britain signed on joining, makes it clear from the beginning this is about more than just lowering tariff barriers:
- “The Community shall have as its task, by establishing a common market and progressively approximating the economic policies of Member States, to promote throughout the Community a harmonious development of economic activities, a continuous and balanced expansion, an increase in stability, an accelerated raising of the standard of living and closer relations between the States belonging to it.”
- Treaty of Rome, Article Two
The project has included from the start a significant element of integration that goes beyond lowering tariff barriers and closing border posts. There are provisions for the creation of common policies for transport, the development of a Social Fund for workers and a common policy on competition. There is a coherent argument that some of the provisions for commonality - such as that on agriculture - have manifested in ways that harm the common market as envisioned in the treaty, to the detriment of member states and citizens; as well as outsiders.
In the conditions of Europe in 1955-57, as the Treaty of Rome took shape and was signed, the call for integration was fed by a great urge to avoid the horrific catastrophes that had engulfed the continent over the previous half century. Seeking a more peaceful and prosperous Europe would take more than lowering trade barriers; countries had to be tied together and people brought together in fundamentally unbreakable ways. But it goes deeper than this - to understand why, we must go back through Liberal thought to a shining light, often kidnapped by those who see the state as a road block to economic liberty.
We must go back to that oft-misquoted and misunderstood giant of Liberal philosophy, Adam Smith. What is first worth noting about Smith’s most famous work, The Wealth of Nations, is that he speaks about “self-love” more than he does “self-interest”. Second, it is worth noting that Smith does not believe that the state should be as small as possible; indeed, he argues that it must provide defence, law and order, justice, education, infrastructure and for a certain degree of ceremony in order to allow for a truly prosperous and successful country. In this, Smith is building upon his earlier work, The Theory of Moral Sentiments. Smith is not interested in simply building free markets; he is interested in building good markets as well.
Smith’s argument in The Theory of Moral Sentiments is that for markets to work well, actors must share a sense of commonality. They must trust in each other that the transactions are being carried out in good faith, that the goods are not shoddy and that the whole thing is fair. They must share these instincts with one another - a sense of community. Without them, markets cannot operate to their fullest potential in assigning goods and services to individuals with efficiency and effectiveness. Further more, the state can underwrite some of this commonality - though it cannot replace it - through the provision of the services outlined above.
In this, we see the Liberal kernel embedded in the Treaty of Rome and the entire European project. Avoiding war would be brought about by bringing together people and building common institutions and ideals; but better markets that benefit all the actors in them can be brought about by the same. By building a sense of commonality through common policies; by providing the security to business and individuals that they were going to receive the same basic level of justice regardless of which border they had crossed and by underwriting business through provision of greater certainty, the European project seeks to make us all richer and closer together - and recognises that the two are not mutually exclusive.
These good markets are, of course, not the be-all and end-all of the European project. The European project’s recognition that community needs to cross borders to make markets that cross borders effective and efficient also translates into another recognition - there are forces that cross borders that we dislike, may seek to control or need to respond to if we are to remain effective players in the world. A clear and prescient example of this can be found in British political history just a quarter of a century ago.
Margaret Thatcher’s government changed Britain forever in many ways - in 1986, there were two big events that changed this country in fundamental ways we are still dealing with. The first was the Single European Act, arguably one of the most integrationist pieces of legislation passed by any government in this country since the entry into the EEC in 1973. The second was the Big Bang, the lifting of financial controls and regulations on the City of London, leading to an explosion in size and wealth of the financial sector in this country. Both were conscious political choices and both had prices we are still paying, for good or for ill, 25 years later. I wish to focus foremost on the Big Bang, though I acknowledge the price from the SEA is also a matter for contention.
It was through the unshackling of the financial markets - the conscious unshackling and then keeping unshackled - that we have surrendered a large share of our sovereignty to unaccountable, unelected distant powers. Arguably, there is some justice to be found in the power of the financial markets; they ability to punish those who would spend without paying for it can be a useful warning tool. But these markets are now far wealthier, more powerful and faster moving than any state on the planet. Even America has been humbled by them with a downgrade and the runs on US banks that deepened the financial crisis in 2008.
The argument that new regulation is needed for the financial markets is one that many commentators share. Be that the prohibitive dead weight of old, or new structures designed to encourage transparency and accountability within markets, these regulations need to be created, imposed and then monitored above the level of states. If financial markets do not operate on a state level, why should their regulators? The Liberalism within the European project recognises this - a freer market, a better market, needs to have regulators who respond to the size and shape of that market in order to stay effective.
Of course, other forces in this world do not respect borders. Criminals actively disregard them; indeed, operating across several may give them greater security in their crimes. Refugees may flee across several as they seek to escape the catastrophe that expelled them from their homes in the first place. Acid rain and fish do not conceive of borders - indeed, acid rain does not conceive of anything at all. Whether it is pollution in our waterways or money flowing in and out of our bank accounts, the problems no longer confine themselves to single states, and thus cannot be addressed by single states. If we want solutions to this - Liberal solutions - we must look to the European project to understand that common responses; institutions, laws and agreements; are key to responding to these challenges to build the good and free markets we need to prosper.
Smith’s vision of markets as requiring commonality, therefore, is bedded into the European project in a surprising but critical way. As Liberals, we must respond to this and incorporate the European project into our intellectual framework in a stronger way. Yet it is because we view the project in this way and because we understand markets as being something that must be both good and free if they are to succeed that we can be the most effective critics of the European Union as it exists in its present form.
The need for transparency, for accountability and for legibility within the European Union is essential - European institutions must seek to ensure that the project can be nourished by giving up prized ways of doing things for the good of the project; arguably, for the good of Europe. European accounts must be approved every year by the Court of Auditors; the Parliament must be the first and last port of call on every law proposed by the Commission and the Commission itself must be as transparent can be. Only when the institutions are healthy can Liberals truly rest - as institutions tend to atrophy over time, this work is not one that we can say will be complete by a certain point. But it is a cause worth fighting for - a Liberal cause.
We must engage with the European project as a Liberal project and we must understand the common roots with our own ideological hinterland that it shares. Recognising that challenges cross borders is one thing - recognising that we need to build the institutions to make markets good across borders if we are to let them cross borders is another. We can tie these things together and bring to the people of Britain, and to our European allies, a vision of Europe based on an understanding that freedom and wealth are not exclusive; but that both are more complex and more dependant on a sense of commonality than others would argue.
This is a high challenge for all Liberals. I hope we can meet it - if not, then a lonely, cold, poor, shackled future awaits these islands outside Europe, or inside a gloomy, half-broken institutional wreck leeching off the fading remnants of that dream.