duncanwhitmore

On June 23^rd of this year, Britain will hold a referendum on its membership of the European Union, voting either to remain (“Bremain”) or to leave (“Brexit”). The present author is rooting for a “Brexit”, which is unsurprising for a libertarian who detests any metastasised growth of the state that the EU certainly represents. Unfortunately, in spite of the passionate rhetoric that the issue tends to inspire in the so-called “Brexiteers”, from a libertarian point of view it is difficult to reconcile oneself with, or to endorse, some of the arguments that are emanating from the “Brexit” camp. In other words, it would be a mistake to characterise the debate as a defiant band of liberty lovers seeking to shake off the tyrannous ogre of a bloated, continental tyrant, although that is surely part of the motivation. Rather, many of the “Brexit” arguments, seeking to respond to the “Bremain” side, are couched in the same conventional, statist terms. They therefore lack any incisive bite that would provide a convincing case for withdrawing from the union.

The most prominent issues where this is visible are economic growth and trade. When it comes to the former, both sides fling at each other hypothesised GDP figures that show either a marked gain or reduction in the number. Obviously “Brexiteers” are attempting to show that the figures would be higher outside the EU whereas “Bremainers” are attempting to show the opposite. However, simply adding up flows of monetary expenditure (and then expecting the public to comprehend the methods and assumptions involved in doing so) in order to try and get a bigger, magic number than the other guy tells you very little. If you had a billion pounds yet the only thing to spend it on in the entire world was a loaf of bread then you would be in abject poverty in spite of your nominal wealth. The key to encouraging economic progress is increased investment in capital goods such as factories, machines and tools developed with ever better technology, which permits more consumer goods to be produced per worker, thus lowering prices and making more things affordable for everyone. The kind of economic system that best incentivises this accumulation is one of strong private property rights, minimal regulation and minimal taxation. GDP figures can be high in spite (or even because) of the fact that these things may be absent, as it is buoyed by monetary inflation and government spending. The relevant question, therefore, is whether the EU is likely to either promote or discourage this kind of environment. Instead of arguing over GDP projections the answer that “Brexiteers” should be giving is that the consolidation of states makes it more likely that property rights will be diminished while taxes and regulations rise. Smaller states do not usually possess within their territories all of the resources they need to build a strong economy. In much the same way as a single household or individual needs to go shopping at the grocers, the butchers, the bakers and so on, so too does an individual state need to go “shopping” in other countries, trading what they have for things they do not have. Burdensome regulations simply discourage this trade, while high taxes and insecure private property rights will deter foreign investment, all of which will seek more favourable markets as a result. Moreover, if the state becomes too onerous it is far easier for citizens of even modest means to leave a small state than it is for them to leave a larger state. Large, consolidated states, on the other hand, usually have access to a wide labour market and a greater number of resources, and are better equipped for a degree of autarchy. Moreover, the large state’s sheer, geographical size makes it more difficult for a citizen to emigrate to a similar country which is unaffected by the large state’s diktats. The large state will therefore step up its plundering of the citizenry as it is shorn of any real impetus to cease doing so. What produces trade and economic progress, therefore, is not consolidating states into one giant monopoly, which has a reduced incentive to relax its depredations upon its citizens. Rather, it is allowing states to compete with each other to attract entrepreneurial migrants, investment and trade. In other words, while creating a trading block may give the appearance of vanquishing border controls, tariffs and other trade restrictions it does not stop the trading block from imposing internal taxes and regulations that are more burdensome to trade and prosperity than those between independent states. Indeed, a high rate of internally imposed Value Added Tax (VAT) can be worse than a tariff. And, as the “Bremainers” trumpet, while it is true that within a single market companies no longer have to deal with a myriad of different tax rules, different regulatory codes, and so on, it is likely to prove less costly in the long run to deal with many light and fleeting taxes and regulations than it is to deal with one behemoth. Just to give an idea of how big and bloated the EU bureaucracy is, one source (Brexit: The Movie) lists a whole host of household items one encounters between waking up in the morning and eating breakfast:

• There are 109 regulations for pillows, and 50 for duvets and bed sheets;
• 65 EU laws cover bathrooms;
• 31 for toothbrushes and 47 for toothpaste;
• 172 laws for mirrors, for some reason;
• 91 for showers, 118 for shampoo, and an incredible 454 for towels;
• At the breakfast table, there are 1,246 regulations for bread, 52 for toasters, 64 for fridges, 99 for cereal bowls, 201 for spoons, and 625 for coffee;
• Far ahead, however, is milk which has been deemed to deserve an incredible 12,653 EU regulations.

None of this is to imply, of course, that a world without the EU would be wholly unregulated. Rather, regulation will come from the market place and it is consumers who will decide whether products should meet certain standards. Moreover, increased quality and better safety comes about through the wealth creating endeavours of free individuals so that these things become more affordable, not through the wealth distributing fiat of faceless bureaucrats in Brussels.

Concerning specifically the issue of trade is the argument over whether Britain would, outside of the EU, be able to negotiate so-called “trade deals” without the backing of the EU. In his final visit to the UK as President of the United States, Barack Obama indicated that Britain would be “at the back of the queue” for trade deals owing to what is presumed to be its diminished influence outside of the EU (although this attitude did not stop him, in the same trip, from preaching to an audience of young gullibles an instruction that they should “reject pessimism and cynicism”). The response of “Brexiteers” has been to try and demonstrate how trade agreements would, in fact, be possible and how Britain would open itself up to being able to deal with other large markets, such as China and India, independently. While the latter is certainly true, all of this is wide of the mark. For trade agreements between states are precisely what we wish to avoid. Trade agreements do not open up trade at all; rather they stifle it. Genuine free trade can be accomplished by adhering to a single principle that can be written in a single, short sentence: no restriction of trade across borders. Trade agreements, however, which frequently masquerade as free trade agreements, are simply government managed trade. The North American Free Trade Agreement (NAFTA), for instance, runs to more than 1,200 pages across two volumes of government imposed rules and regulations, usually in order to grant protectionist privilege to a handful of powerful firms and interests. Indeed, one of the motivations for “Brexit” is for Britain to avoid the Transatlantic Trade and Investment Partnership (TTIP) between the EU and the US, which is seen as giving too much power to overseas corporations and ignoring environmental concerns. However, “Brexiteers” do not augment this rejection of a specific trade agreement to a rejection of trade agreements as a whole. One possible retort to this argument is that, in the absence of any kind of trade agreement, other countries could simply whack enormous tariffs and regulatory burdens on imported British goods, almost like some kind of punishment. In the first place it is, of course, far-fetched to believe that every one, or even most, of the significant markets with which British companies trade would do this. If a state shuts off or otherwise burdens trade from another state it ultimately harms itself as much as it harms the state upon which it has imposed the restriction. For if, prior to the elevated tariffs or increased regulations, certain resources or products were purchased from Britain it is because Britain produced these products at the best value compared to anyone else. Therefore, after the restrictions, the citizens of the other state must now pay more to produce the same goods internally or buy them from an alternative state, or must be content to purchase goods of lesser quality. Moreover, shutting off imports weakens a demand for a state’s exports as ultimately all imports are paid for with exports. It would, therefore, be foolish for states to respond to a “Brexit” in this way. The same argument applies to the EU itself. Another of the arguments from the “Bremainers” is that if Britain left then the EU would still be Britain’s largest trading partners with the power to impose its regulations on trade entering the block, in addition to newly imposed tariffs. Britain would be shorn of any influence whatsoever to change these rules, and would end up in much the same condition as some of the proximate outliers such as Switzerland and Norway are alleged to languish (never mind, of course, that GDP per capita in those countries is markedly higher than in every EU country). In the first place this argument shows just how few clothes the emperor is wearing. On the one hand, the EU is supposed to be committed to promoting trade and commerce yet on the other hand, if you dare to leave it, you will be shut out by tariff walls and have to suffer whatever burdens the EU rains down upon you. Clearly, therefore, the EU is far from being a promoter of peaceful trade and prosperity. Rather, it is really nothing more than a protectionist club, like a gang of bullies in the school yard who look after each other yet terrorise the other kids. That aside, however, Britain’s “influence” does not come from its membership of the EU – rather, it comes from the value that the EU places on its partnership with Britain, which will ultimately boil down to Britain’s economic clout. If trade with Britain is valuable to the EU then Britain will have as much real influence outside of the club as it does inside; you do not stop talking to someone you need simply because you are not in a political union with them. If, on the other hand, Britain was a tiny, unproductive state that produced little then it would be ignored as a member of the EU just as it would be largely ignored as outside. That is why the larger, more prosperous states in the EU, such as France and Germany have most of the influence. Most of the arguments concerning the loss of any “influence” for Britain, both within the EU and on the so-called “world stage”, do not refer to the diminished influence that the average British citizen would have in improving his life and furthering his goals. Rather, it refers to the diminished influence that the British politician will wield following “Brexit”. Being a representative of a large territory such as the EU gives the state’s lackeys a much more prominent position at the table when they jet off, at taxpayers’ expense, to their plush conferences and summits to devise an ever increasing number of predatory ways in which they can burden the real wealth creators. In any case, however, the “loss of influence” argument seems to have received the final nail in its coffin in early May when it was alleged that Germany had a de facto veto over Prime Minister David Cameron’s renegotiation of Britain’s terms of EU membership. However, even if we imagined the worst case scenario where all of the countries of the world, including the EU, imposed punitively high tariffs and onerous regulations on British imports and refused to engage with Britain in any way shape or form, the latter would still benefit from making a universal declaration of free trade – no tariffs on imported goods and little or no regulation. This sudden reduction in cost would then make Britain a highly competitive market, reducing costs of inputs for British businesses, attracting investment, expanding output and lowering prices for British consumers.

Looking more broadly, what are we to make of the argument that the EU was the supposed solution to centuries of war and human rights abuses? Strictly speaking, the human rights obligations of European states depend not so much upon the EU but, rather, upon whether they sign up to the European Convention on Human Rights (ECHR), which dates from 1953. The Convention is used as a convenient short hand for states to demonstrate their commitment to human rights, which is a condition of EU membership, and jurisprudence from the European Court of Human Rights normally plays an important role in determining how member states should implement EU law in accordance with their human rights obligations. Nevertheless, even though, as libertarians, we must be suspicious of any kind of government implemented human rights charter, which simply cherry picks certain pleasantries, subjects them to state regulation, and calls them “rights”, it would be possible for a member state of the EU to leave and still remain a party to the ECHR. Somewhat perversely it is, in fact, prominent “Bremainers”, such as Home Secretary Theresa May, who are campaigning for Britain to withdraw from the ECHR while remaining in the EU. The possibility of war however, is an important issue, with Mr Cameron himself having argued that leaving the EU would increase the risk of Europe descending into war. In the first place we have to wonder why, if the situation was that grave, Mr Cameron’s commitment to the EU was so ambiguous before he achieved his so-called “reform deal”, which renegotiated Britain’s EU obligations in areas such as welfare and immigration. Prior to this he supposedly had no “emotional attachment” to the EU and at least gave the impression that he may campaign to leave if the reforms failed. Mr Cameron was effectively saying that if he was devoid of an “emotional attachment” to the EU he was also devoid of an “emotional attachment” to avoiding war, the latter of which is surely more important than tweaking the conditions of EU membership. That aside, however, we have to wonder what this argument – the possibility of European war – makes of the so-called “democratic peace theory”. This is the idea that democracies are less likely to go to war with each other, and is peddled by pretty much the same people who crow for political unity. Weren’t the continent’s wars started by despotic monarchs and crackpot dictators? Surely now that we all bask in the bliss of democracy we won’t be so eager to fight each other? Why do we need something more? Regardless of this, however, the argument that a diminution of the EU will lead to war is ridiculous – indeed, it is the opposite that is more likely. Wars are started and fought by states; human rights are abused by states; the state, in the twentieth century alone, caused more deaths than private criminals in the whole of human history. Even the greatest efforts of sub-state, politically motivated actors – i.e. “terrorists” – pale in comparison to the carnage and destruction wrought by states. If this is true, it stands to reason that the solution to preventing this is to make states smaller and weaker, not bigger and stronger. The most destructive, and most potentially destructive conflicts we have ever experienced – the two world wars and the Cold War – occurred after the consolidation of smaller states into large territories, namely Germany, Italy and the Soviet Union. The origins of both of the world wars is complex, of course, but a fundamental cause was the drive of the unified Germany towards autarchy. As an industrialised country, Germany relied upon the import of food and the export of manufactured products in order to pay for it. The costs and burdens heaped upon German industry in order to fund the Bismarckian welfare state hampered German production, leading to fewer exports and fewer imports of food. Thus Germany looked to conquer the agrarian lands of Eastern Europe to overcome this self-inflicted handicap. What is clear, however, is that this problem was facilitated by the unified state, which was endowed with the wherewithal to grow the depredations of the state upon its industry and the might to launch invasions. Later, the persistent nuclear terror that was extant during the Cold War was made possible because territories as large and as rich as the United States and the Soviet Union could afford to fund things such as the Manhattan Project. The most aggressive and belligerent state today is the United States, which, together with its fawning collection of NATO allies, is driven by the neoconservative foreign policy agenda that seeks a unipolar world of American dominance. The greatest threat to peace is that such ambitions emanating from a large, rich and powerful state run head first into the ambitions of other large, rich and powerful states – namely, China and Russia, as we are seeing lately with the expansion of NATO to Russia’s border, the demonization of the Russian president and the altercations in the South China Sea. The worst case scenario is that the world will be vaporised in a nuclear holocaust, something which is likely to get worse if the next US President, who will be elected in November of this year, continues down this path. It is clear therefore that the consolidation of states may reduce the number of potential warmongers – but the stakes are far, far bigger. The key to achieving peace and prosperity is free trade in a sound money environment. You do not have to point a gun at your butcher or your baker in order for him to hand over what you want; you simply have to offer him something that he wants and then you both get on with the rest of your day. Exactly the same is true on a global scale; individuals engaging in voluntary exchange without interference across borders will not fight each other. War and conflict result only when states infringe this harmony.

This leads us on to the so-called “democratic deficit” argument – the idea that the EU’s governance and institutions somehow lack democratic legitimacy. It is true that if the EU is perceived as beyond the control of the voters then tolerance for it will dissipate quicker than if they believe they are “having their say”. On the other hand, however, democratic legitimacy is something of a red herring. People possess a de facto control over the state, with or without democracy, the smaller and more local it is. Even if the EU reformed all of its institutions in order to eradicate the “democratic deficit”, the EU would remain as a vast territory in which the individual voter vanishes into an ocean of 500 million others and its institutions would still amount to a vast bureaucracy awash with special interests that speak umpteen foreign languages making it impossible for the voter of any individual country to understand precisely what is going on. This can point can be made without us having to resort to the wider libertarian critique of democracy as an enabler of, rather than a restriction upon the state.

In drawing all of what we have said together, we will conclude with an observation that is likely to resonate with libertarians. When it comes to the big issues such as economic progress, trade, and promoting peace and prosperity, all of the arguments in favour of the EU boil down to the assertion that the EU makes it easier to get rid of state imposed restrictions and to vanquish ills that are created by the state. In other words, the EU is supposed to be good not because it actually achieves a positive accomplishment over the restrictions imposed upon humans by nature (such as a new product or service), but because it clears away artificial roadblocks that states have put in the way. If this is true, perhaps it would be better to address the question of whether we need the state at all, rather than whether we need a giant one such as the EU.