The proposed European Constitution represents the last gasp of
European socialism. With its 260 pages and 70,000 words, it is one
of the longest and most uninspiring farewell notes in human
history. Like the Roman Emperor Diocletian, who tried to avert the
demise of his weak and economically mismanaged empire by carving
his absurd decrees in stone, Giscard D’Estaing and his fellow
all-too-conventional “conventionalists” labored for months to
codify Europe’s venerated model of “social market economy.” History
suggests that their efforts will have been in vain.
There are two ways to deal with increasing competition: one is
to become more productive and the other is to form a cartel. The
first way encourages economic and social progress, while the second
enforces the status quo. By creating the “United Fortress of
Europe,” the European Convention opted for the latter way of
dealing with the forces of globalization.
The European decision-makers could have tackled the challenges
of the new century by transforming the EU into a vibrant economic
powerhouse. They could have liberalized the rigid European labor
market, eased the weight of a plethora of high taxes and reduced
the 97,000 pages of regulations.
Instead, they chose to withdraw behind a wall of high tariffs,
buttressed by a panoply of subsidies and fortified by prohibitive
labor and environmental standards. Worst of all, the prosperity of
the European peoples will increasingly be subjected to the whims of
a multitude of central planners in Brussels.
Drawing on the intellectual legacy of the proponents of the
Scottish Enlightenment, the Austrian economist Friedrich Hayek
showed that it was not possible to centrally plan complex social
systems because the planners in charge did not have sufficient
information. Soviet central planning, for instance, was
unsustainable because it could not rely on the price system to
point out the real needs of the economy. The best social systems
develop through a process of trial and error called
“evolution.”
Such evolution, however, is exactly what the European
Constitution undermines. With the exception of direct taxes and
foreign policy, virtually all of the social and economic policies
of the EU states will be “harmonized” at the pan-European level.
Whatever Schumpeterian “creative destruction” of the competitive
process remains among the European states, will be eroded through
recourse to the concepts of disloyalty and competitive distortion
— those Trojan Horses cleverly included in the Constitutional
draft.
From an economic perspective, it is not clear why the EU should
be heavily centralized. The free market is perfectly capable of
increasing European standards of living without the need to
regulate the shape of bananas, the size of peaches, and the width
of carrots, as some of the more infamous EU laws do. If, on the
other hand, the reason for the European Constitution is a political
one — namely to check the power of the United States — then there
are clear lessons that the Europeans ought to learn from the
American Founding Fathers.
The American Constitution has 4,500 words, barely enough to fill
17 A-4 sized pages. Remarkably, it has been relatively successful,
undergoing only modest changes over the past 200 years. It was
under the authority of that sparsely worded document that the
United States emerged as the world’s only economic and political
superpower. But the difference between the two documents goes
beyond their respective lengths. Instead of proscribing
competition, the American Constitution encourages it. The powers of
the central government are “delegated, enumerated, and thus
limited.” There are few loose ends.
Why did the Founding Fathers go to all the trouble of
delineating the powers of the central government so precisely?
Because they understood only too well that the biggest obstacle
to humanity’s material and social progress was a distant and
unaccountable government. It was that form of government that the
Americans fought during the War of Independence. It is that form of
government that will now be imposed on the European public. What a
pity that Europe could not produce the likes of Jefferson and
Madison to guide them into the future.
