Europe plus Hayek

Since the time when Solidarity elites came to conclude that the process of system change in Poland was permanent – which I guess was in the spring of 1990 – the EU/EEC integration   has become the axis of Polish foreign policy. It propelled actions, and the course of events (commencing negotiations, the association agreement, reaching successive negotiation stages, the referendum, 1^st May 2004, negotiating the financial prospects, the Schengen Agreement, Polish presidency) marked successive, palpable stages of Poland setting roots in the sphere of West European inter-relations. For some years, the European Union has been the victim of a crisis, which is an offspring of a global economic collapse. Its future has been questioned and though time keeps running, the questions remain without satisfactory answers. The leaders of member states, dreading the immediate emotional reaction of the voters, are playing it safe and steer clear of making a radical step towards a comprehensive reorganisation of the Union. Only critical decisions concerning the current crisis are made, fearing the reaction of infamous financial markets.

Meanwhile, the diagnosis concerning the most immediate dangers of the EU functioning has already been made many a time and is the subject not so much of a heated debate as of a clandestine consensus. It turns out that the help needed to face those dangers and how to dismantle them may also be obtained from the suggestions – very liberally interpreted here – that originate from the papers of one of the most renowned liberals of all time, Friedrich August von Hayek. So let us attempt, for the sake of intellectual entertainment, to map the diagnosed ailments of contemporary European Union with the declared aim of maintaining it alive and returning its inspirational vigour (its credo of the time-immemorial project at the service of eternal peace and inter-European dialogue), with a sort of therapy – undoubtedly radical and demanding – drawn from Hayek’s views.

Friedrich says: Abwarten und Tee trinken![1]

A recurrent problem, whose perception is twice more acute and evidently intensified in the times of debt crisis, is a lack – or a glimmering remnant at best – of the feeling of European unity, of one great European demos. In the long run, that kind of additional identity of auto-identification seems to condition a successful integration. Additional – that is not competing with the national and local identities. Whereas, the present political reality of the Union appears, quite distinctly, to resemble a bundle of a few national demos sharing limited knowledge of one another. And social life in the EU is hardly existent. The crisis and discussions about money cause this feeling of a union – unsurprisingly so – to regress, since national egotistical sentiments are intensified, and opposite interests become more pronounced. What would Friedrich suggest?

Just wait. Actually, do nothing except for preventing inadvertent (or hard to advert) changes that formal termination of co-operation would cause. And the reasons are two-fold. First of all, because the current economic crisis will end. Its end will come about most speedily and effectively when the countries and politicians limit their efforts to end it, and allow the natural economic cycle to take its course and produce effects. Secondly, and more importantly, neither the official institutions, both the state and the EU ones, nor planning sections are able to influence the spontaneous identity shaping processes in a strictly determined way. And even if it were possible, it would only be achieved by recurring to methods that are highly controversial in terms of personal freedom.

It is thus better to come to terms with the fact that crisis has its own rules. Yet, the crisis will not change anything with respect to the fundamental meaning of the idea of European integration. When the crisis is over, the reality of the world yielding to globalisation and geopolitical trends will remain a real force, and it will become obvious yet again that only a united Europe will be able to face the challenges coming from all four parts of the world. It all means that a rational analysis of the present situation, clouded for the time being by the crisis and creating movement outwards and generating ruthless skirmishes for political and economic interests, will one day make political elites and the public opinions of nation states close ranks. The formation of the European demos, a stronger sense of common lot and solidarity in the face of external forces growing in strength will be a long-term gradual and naturally activated result of these processes, including a growing anxiety about the success of Europe.

Friedrich says: Mittendrin statt nur dabei![2]

The most acute problem of the EU today is the low level of legitimization of many decisions which have a perceptible impact on the everyday lives of citizens. This problem centres on the European Commission, which is a body chosen in a non-democratic fashion, not accountable for its actions and performing in a non-transparent manner – which gives an impression of being swayed by behind-the-scenes impulses. Additionally, the relationship between the three major institutions seems complex, which raises suspicions of ducking unequivocal responsibility and leaves the citizen lost, which in turn adds to his or her frustration and Euroscepticism. The citizen has every right to feel a spectator – like a pawn set aside – and incapacitated.

In his criticism of the economic planning and excessive tendency of the state to intervene, Hayek noticed that in a liberal and democratic country there is a loss of real control over the decision making process by the true sovereign and its take-over by well-organised pressure groups, which use a natural tendency of politicians to transfer the maximum competence from parliament over to the executive bodies, which operate using administrative decisions. He cautioned against the delegitimization of such a system, as well as against a danger to freedom thus created and caused by reducing the capacities of real control of the ruling group.

That is what the present day European Union is plagued by. With the exclusion of certain crucial areas (see below), Hayek’s cure to the crisis of legitimization would be comprehensive restructuring of the system and an emphasis on the democratic element. It would entail a tedious process of signing a new treaty on the EU “political system” aiming at the same time to base the system as faithfully as possible on the reliable liberal and democratic systems of the nation states.

The European Parliament should become the real legislature. The parliamentary election would be based on unified electoral law for the whole EU, in which each country would be one constituency, but the registration of the party lists and setting the electoral threshold would have a pan-European dimension. In order to get parliament seats, a political party would have to obtain 4% of votes from the whole EU and in order to register the list – to collect a specific number of signatures earlier on in at least half of the states/constituencies. The Parliament would hold the sole right of the EU legislature in the scope of crucial competence transferred by member states to the so-called common EU area (see below).

The European Commission would retain the right of legislative initiative, but apart from that it would only be an executive body, without the capacity to issue directives and legal acts other than technical secondary legislation for the specific acts of EP. The procedure of establishing the European Commission would also change. It would be a cabinet supported by the majority coalition of the EP, whose commissioners would come from the coalition factions, resulting in the programme of the EP and EC being identical with that of the coalition members. The parliamentary election would constitute a real choice between different ideology and programme options (thus acquiring an essential meaning which it lacks today). The present Commission composed of the representatives of all fractions except extremists would thus regain its substance. The EC would be headed by one (possibly the strongest?) coalition member, which would have to be put forward as the head on the party list prior to the voting to the EP. The future head would need the vote of confidence. The EP would have the capacity to dismiss the entire EC through a constructive vote of no confidence and also its specific members through a non-constructive vote of no confidence. The number of portfolios of the commissioners would be limited and would not have to equal the number of member states. The choice of the commissioners would be dependent on the support of the coalition lists in different EU states, or a rotation (not very strict one), which would guarantee each member state a commissioner’s portfolio even if in every second (or third?) term of the EP/EC.

Making the EC entirely dependent on the body elected directly would take away from the hands of Eurosceptics the argument of non-democratic way of making decisions. The only decision-making body beside the EP would be the European Council, which, actually, is a summit of the heads and leaders of the member states who are elected, with no exception, in an immaculately democratic way on the level of nation states. The main responsibility of the Council would be deciding on the scope of competences transferred to the common EU area (sessions of EP and EC), the inter-governmental proceedings of the EU (the European Council sessions on different levels and in various member groups) and the area strictly for the member states, forming a part of the domestic policy of each state.

Finally, it is worth considering electing the president of the EU, who would head the Council sessions, and whose strong mandate and independence from the member states’ governments would enable him to transfer a wide scope of competence to the EP. The president would represent the EU outside; his election would follow the model in Poland, the Czech Republic or France (the EU as one constituency; the condition to obtain one vote more than 50%; a possibility to hold a second round of voting), or the American model. Following the American option would be justified in that it would draw an extra attention to smaller, less populated, countries. However, one obstacle in the implementation of this model would be the multi-, instead of a two-party system. It might be a good idea to apply the American system in the second round of voting, if there were just two candidates chosen in the first round. Also drawn from the American electoral system would be an optional primary presidential election – a tool engaging all citizens in the EU politics.

Additional, but quite obvious and classic, tools to inspire enthusiasm and interest in the EU politics among its citizens would be referenda (organised with reason), and lowering the required number of signatures under EU popular citizens’ initiative to e.g. 250 thousand.

Friedrich says: Weniger ist mehr![3]

One problem with how the EU is perceived is the lack of transparency of the decision making processes. It is caused by numerous factors, yet, again, the main one is the present institutional system. This time the symbol of this obscurity is the position of the “president of the European Council”, who is chosen by way of behind-the-scenes tug-of-war, and whose competences over the course of years since its creation have become blurred, overlapping if not doubling with those of the head of the EC. This person is in fact a “taskmaster” who, ordered by the most influential member states (whom he is totally dependent on), takes on many challenges. In general, the overlapping competences of different EU institutions are the source of its lack of transparency in the eyes of an average citizen.

With reference to the number of regulations, the size of the bureaucratic machine and its functioning, Hayek would always advise modesty, according to the thinking: less of all this means more tangible results. For the EU to function transparently, it is imperative to define the scopes of competence clearly (which was touched upon already). The Council, as the summit of those really in charge of member states, would be the one to retain the decisive vote in deciding on (transferring of) the competences. It is hard to imagine that this body would allow to let slip such a “master-competence” out of their hands. In that respect, a “natural” (primary) state of being at the dawn of the European Communities was that the states were in possession of all the competences. With time the scope of competences transferred to the Union level was constantly widened. Now it seems necessary to divide the EU competences into two categories: those transferred to be proceeded in the common area of the EU, and those to be proceeded in the inter-governmental area of the Union. This clear division would do away with the web of unclear relations, like when the EP conditions the decision on the acceptance of the Council or vice versa. As far as it’s possible, the thematic fields of policies should entirely be subject to the decision of the EP (and the execution of the EC) or the decision of the Council. In case of a greater complication of matter (which would be an objective fact) in a specific thematic field, it could be determined instead (but unequivocally) which elements would be transferred to the EP and which ones retained by the Council, in such a manner that the proceeding on both sides would still be autonomous and the scope of responsibilities could still be defined. The citizen must know for which (let’s say disastrous) decisions to criticize (punish) Euro deputies, and for which ones the members of the national parliament, the majority of whom support the cabinet forming the Council. The only area where the competences of both levels of the EU policy would meet is (and probably even should be) the control of their execution by the member states and agencies of lower level.

The Council would be the one deciding about the relocation (transferring) of competences from the area subject to member states’ decisions to an area of the EU competence scope, and also from the area subject to inter-government decisions to the area of the EU common competence scope. It would decide unanimously (or – in case of the majority voting – the states would need to enjoy the right of opting-out). However, after that decision has been made, at the stage when specific cases are decided, both in the EP and in the Council, the voting would be based on the majority (applying qualified majority voting in the Council for certain chosen thematic areas of policy). Importantly, the Council having once made the decision to transfer a given thematic area and decision competences to the EP would not be able to reclaim that capacity. In a similar process but the other way round, that is, to transfer a thematic area of politics from the common EU area to the inter-government one (from the EP to the Council), the European Parliament would have to decide with the absolute majority of votes. This way the Parliament would obtain full independence also from the Council in the scope of its transferred competences.

Worth highlighting is the fact that the above system of transferring competences would have two advantages. Firstly, for a future settlement or adjustment of new division of competences it wouldn’t ever be necessary to change the treaty. Secondly, such a system would satisfy both, the supporters of greater integration of the EU towards federation (like the author of this article) as well as the proponents of the more cautious integration by strengthening the inter-governmental area of the European Union. After all, it would depend on how much competence the Council would transfer to the EP. The hope that rationality will prevail in the consideration of the integration processes in Europe as the current geopolitical changes take place would have us believe that the general course of action (disregarding certain regression periods) tends towards closer integration.

The following are the two crucial recommendations that Hayek would make, in terms of the transparent functioning of the EU. First of all, the EU ought to aim at a sweeping reduction the red tape, limiting the number of full-time positions and handling the resistance of certain professions that would definitely come up. Second, while feverishly dealing with the dilemma of allocating specific competences here and there, it should not lose the reduction of the overall number of regulations out of sight. The EU regulates too much and in too much detail – it’s self-evident. It’s worth relying on peoples’ actions and the wisdom of spontaneously created socio-economic order, also in the EU dimension.

Friedrich says: Schuster, bleib’ bei deinen Leisten![4]

Populism threatens the EU decision making processes, especially now in the time of crisis, growing unemployment, mounting debts of the public sector, and when relative poverty and lack of hope for better prospects are looming larger. The above proposed democratization by increasing the powers of the EP, Hayek would modify by exclusion of certain crucial issues central to the macroeconomic situation that would better be left outside the power of the demos to decide.

If somebody cringes at the idea of democracy today, they cannot count on being popular. This, however, has never been a priority for Hayek, that is why he openly proposed excluding from the democratic model of governance those matters to which the natural populism of the governing institutions would do most serious harm. Everyone should concentrate on what they can do best, and an average voter and even their parliamentary representative have a very vague notion of macro economy. For this reason, Hayek proposed, among other things, the creation of a higher chamber for which the senators would be elected for a really long (e.g. 15-year) term, without the possibility to be re-elected. The senators would be of a certain age (in each term the power would be handed to the successive generations on coming of age).

In the EU this undemocratic element of good governance could be left in the powers of the Council. Its composition is exchanged according to the electoral calendar in the respective member states so it retains in its majority a great stability. The chances for a non-populist majority in the Council are quite strong. The best evidence here is the current situation: acute crisis accompanied by quite restrictive non-populist economic policy. It would mean that in practice the crucial macroeconomic decisions should remain in the inter-governmental competence of the EU. Hayek would certainly praise the rigorous budget discipline imposed on the member states and setting the reduction of the public debt as an aim. On the other hand though, he would oppose the harmonisation of taxes, which in many places means their raising and at the same time destroying the tax competition as a tool which, in many cases, constitutes a considerable incentive to lower fiscal burden.

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How will this crisis turn out for Europe? The dire straits that the EU has found itself in have most definitely cleared the resistance of those in power to reform, which was put up after the fiasco of the so-called EU Constitution in the middle of the last decade. It creates space for creativity, inspires courage to look for new and unconventional solutions that haven’t been considered before. It is vital to write and talk about it, and maybe an ingenious idea can be fished out from the sea of options. Because if the current crisis engulfed the Union, we would not have a new one during the lifetime of most of living Europeans, and the present global competition would leave us standing, like a curious remnant for visitors from other continents.