Socialism’s Farewell Note

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.

Marian L. Tupy is associate director of the Project on Global Economic Liberty at the Cato Institute.