Well, I think that there is a chance that the UK will end up leaving the EU. Firstly, the EU is increasingly unpopular with the British public and it is a major problem as the Eurozone moves towards a tighter union, and perhaps even a fiscal union with massive tax transfers from the richer countries to the poorer countries – this kind of closer union is extremely unpopular with the British public. And there is probably actually a majority now who is in favour of leaving the EU.
But the UK is not a member of the Eurozone, is it?
No, but the problem is – if the Eurozone becomes a block on its own, then the UK will find itself with decreasing influence on the other members of the EU. So, the problem there – if you get regulations and policies being imposed from the center that the UK doesn’t really have much influence over, so if the other countries go towards a very-very close union, then the UK could be increasingly marginalized.
I think last week Angela Merkel said something like she would like to ask the British public to reflect that they are not going to be happy “if they are alone in this world.” That’s the way she put it. So, is it really that bad, I mean being alone, why alone?
I don’t think that’s really the correct way of putting it, I mean the main concern is probably with the costs associated with the EU membership. So, there are these huge regulatory costs from things like the common agriculture policy which puts up the prices through by 2000 pounds a year for the average British family, then there are all the energy regulations – so, British consumers are going to be forced to pay 200 billion by 2020 to reach the European climate change targets for example. So, the EU and its regulations now pervade the whole British economy. In this situation where we are basically in a prolonged recession and the recovery is desperately needed, then a lot of these measures are increasingly unpopular and not just with the public, also with companies, firms, big businesses and so on.
But Dr. Wellings, can you see logic behind increased integration of the EU because it looks like huge integrated entities are less viable in this world?
I think the arguments for increased integration are very weak. The problem of course is that integration would mean the rich northern European countries having to subsidize the weak southern European countries. And this actually weakens the stronger parts of the EU. So, countries like Germany and the Netherlands will be weakened by having to subsidize southern Europe. At the same time southern Europe would actually lose because it would become dependent on handouts and that would become a massive obstacle to any meaningful reform. So, really I think it is a lose-lose situation of greater integration. Obviously, free trade is a good idea but when it comes packaged with all these fiscal transfers and huge amounts or regulations – it becomes a negative.
But then, why would Mrs. Merkel press so hard for the integration of the EU?
Well, the problem is – the European elites have put immense efforts into the project over the last 40-50 years and it is very difficult for them to let go, I mean a sensible option for them will be to say – well, after a few years of treading water let’s perhaps go back to the situation at the EU we had in the 1990s which probably worked a lot better, a looser union that embraced some of the benefits of free trade without all the political integration and central control. But there is just an immense political capital invested in this thing and that means it is very difficult to let go.
Does it mean that we are running into something like liberal political values?
This is the problem, and particularly for the UK. There is the sense that political values are very different on the continent than in the UK and indeed in North America. For example, on continental Europe there isn’t really a strong classical liberal tradition. So, the idea that the state should really have a very small role, just doing the basic, such as law and order and defense – on the continent the tradition is quite the opposite that the state should be hugely interventionist. And let’s remember – a lot of these countries in the EU, places like Greece and Portugal and also Spain, they were military dictatorships just 30 or 40 years ago. So, there is a huge gulf in the political culture and these countries are very-very different from the UK and the other Anglo-Saxon nations.
Do you happen to feel that there is a certain resistance to liberal economic ideas overall?
Yes, there is a huge resistance, particularly in some of the southern European countries, but also in northern Europe where the tradition is for very strict state regulation and, if you like, a state managed economy, a corporatist economy, with the governments and big companies working together. So, really there is a massive cultural gulf with the Anglo-Saxon countries. And in southern Europe it is even more dangerous of course because really the tradition is between political extremes of either fascism or communism, with old-fashioned liberalism really not getting a look in at all.
So Dr. Wellings, as an expert, which way out in this situation would you suggest for the continental Europe? Should they integrate further? Or perhaps do you see another way out?
Personally, I think if they do integrate they’ll end up with the stagnant continent that continues to decline rapidly in terms of its relative economic strength with the rest of the world, I mean at best we could be looking at a Japan-style situation with 20-30 years of stagnation. So, I really do think they should consider hitting reverse gear, possibly letting several countries leave the Eurozone and moving back to some kind of common market or sort of free trade zone. I think that will be the healthiest option.