Alternative political and economic futures for Europe.

• Author: Niskanen, William A.

Defeat of a proposed constitution for the European Union by voters in France and the Netherlands in 2005 should have provided an opportunity to reflect on a broader range of alternative political and economic futures for Europe. But it did not. For the Lisbon Treaty, which became effective in December 2009, implemented most of the provisions of the proposed constitution that the voters rejected more than four years prior. It was important to reconsider the major current European political and economic institutions as well as alternative steps toward further European integration. For the major current institutions were created under different conditions, and the experience suggests that they may not best serve the peoples of Europe under current and expected future conditions.

The major alternative political and economic futures for Europe are nationalism, selective functional integration, an association of European states, and a European state. This article addresses the considerations that bear on the choice among these alternatives. Vaclav Klaus, the president of the Czech Republic, may have provided the best general guidance on how Europeans should make this choice:

We must first make clear what kind of Europe we want. Using understandable language, we have to say what the future Europe should look like and what costs and benefits such a solution would have. It must not be about turning in on ourselves. It must not be about hindering spontaneous integration or globalization processes. No costly, freedom-constraining uniformity, harmonization, and centralization should be part of it, nor any obligatory "European" ideology [Klaus 2005].

Nationalism

For understandable reasons, Europeans have become wary of nationalism because, for too long, conflicts among national states made Europe a field of blood. And the first selective measures of European integration 'after World War II were primarily designed to reduce the prospect of another such holocaust. I will use the word nationalism merely to describe a system of independent national states. I need not remind you of the potential dangers that are inherent in such a system. At the same time, however, it is important to understand the reasons why national states have been the basic building blocks of most political orders.

First, the political loyalty of most people is to the state of an area with a common language, culture, and history. One should not dismiss this condition based on wishful thinking, for example, that the creation of a European state would create a European political identity. The breakup of the Soviet Union and Yugoslavia are only two of the many examples of the fragility of states without a common language, culture, and history.

Second, there are very few government services for which there are any significant economies of scale. There is no significant relation between per capita income and the area and population of a state. The per capita incomes of Singapore and Switzerland, for example, are about the same as that in the United States and are far higher than in the much larger states of China and India. Specifically, there are no significant economies of scale in the provision of such major domestic government services as education, the courts and police, public health, and transportation.

Third, the only major government services for which there are significant economies of scale over some range are defense, environmental policy, trade policy, monetary policy, and scientific research. Most of these economies, however, can usually be realized by voluntary alliances among national states without the problems of creating and maintaining a broader multinational state.

In summary, I suggest, Europeans should take nationalism--by which I mean a set of independent national states open to selective voluntary integration processes--as a serious alternative to what Klaus termed the "costly, freedom-constraining uniformity" of a European state.

Selective Functional Integration

As mentioned above, there are only a few government services for which there are significant economies of scale over an extended range. Moreover, in each of these cases, there is already a specific institutional arrangement among most of the European states, although the list of member states differs somewhat among these arrangements. But some changes in these existing arrangements should also be considered as part of the process of choosing a political and economic future for Europe.

Agriculture

One common function of the European Union, however, serves no common purpose: the common agricultural policy. There is no reason to coordinate agricultural policies across governments and no economies of scale in providing this function. One cost of this common agricultural policy is that it has delayed the prospect for of the Doha round of multilateral trade negotiations, since many of the poorer...