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The Libertarian Case for the European Union

September 9, 2014 in Economics

By Dalibor Rohac

Dalibor Rohac

Advocates of free markets harbor a well-justified distrust of the European Union (EU). I, for example, have spent a fair amount of time criticizing  its populist overregulationmoral hazardthe damage created by the common European currencyEU structural funds or Common Agricultural Policy. Like many, I am convinced that the EU is a deeply flawed organization and that it mostly deserves much of the criticism that it receives from pro-market circles. At a more fundamental level, I also think that institutional competition and ‘voting with one’s feet’ is important, and see the thoughtless ‘harmonization’ of legal and regulatory regimes across the continent as extremely damaging.

However, I no longer think, as I once did, that the EU is the single biggest threat to freedom and prosperity in Europe. Neither do I believe that an exit from the EU — either by the United Kingdom or some of the smaller central European states, such as my home country, Slovakia — would make these countries, or the continent as a whole, more libertarian. If a break-up were to occur, it would likely push Europe towards nationalism and protectionism, and undo some of the real benefits of European integration.

First, whatever one thinks of the EU, it has sometimes been a force for good. It would be foolish to take the free movement of goods, capital, people, and also — to a more limited extent — of services, for granted. Vicious protectionism, not free trade, has been the historical norm. The second half of the 19th century, is often cited as a counterexample, culminating in the ‘first age of globalization’. But one should not succumb to retrospective optimism — due to measures such Germany’s ‘iron and rye’ tariff of 1879 and France’s Méline tariff of 1892, fin-de-siècle Europe was no free-trade zone. Or, for a different example, think of the transitional economies of Central and Eastern Europe. Whether one likes the EU or not, the prospect of membership was clearly one of the engines of economic and political reforms that would have been otherwise very difficult.

EU break up would lead to more nationalism and protectionism.”

Second, it is helpful to keep a perspective on the magnitude of the problem. The EU’s annual budget amounts to one percent of its GDP. Even the structural funds, which I recently blamed for the rise in corruption in some of the Central …read more

Source: OP-EDS

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