Compare and contrast

by Henry on July 8, 2003

Via “Harry Hatchet”:http://hurryupharry.bloghouse.net/archives/2003/07/07/talking_bloggocks_2.php, this “piece”:http://www.samizdata.net/blog/archives/003862.html#003862 by Libertarian Samizdata‘s Andy Duncan on the new European Union (EU) requirement that all businesses with more than 50 employees have work councils. Duncan (and Perry de Havilland in comments) see this as a step on the path to compulsory workers’ Soviets, and the subjugation of employers to their paid employees. Compare this however, with the Socialist Worker Party’s rather different “take”:http://www.socialistworker.co.uk/1853/sw185312.htm on the EU. The SWP claims that the EU is all about creating a “bosses’ Europe,” which allows “market forces to let rip.”

Now clearly, both can’t be correct. Either the EU is a worker’s paradise in the making or it’s a playground for global capital. So who’s right? In one sense, of course, neither; they’re both exaggerating for effect. But the Socialist Worker crowd are probably closer to the truth than the British libertarians. Like it, or like it not, the European Union’s driving force is market creation.

Wolfgang Streeck provides a good account of the reasons why, in this “paper”:http://www.mpi-fg-koeln.mpg.de/pu/mpifg_dp/dp98-2.pdf on industrial relations in the EU (readers be warned: Streeck has a distracting fondness for italics). As he says, major changes within the European Union require the consensus of all fifteen member states, especially when they touch upon sensitive issues such as workers’ rights and the organization of companies. It’s rather difficult for all fifteen to reach agreement on any but the most anodyne proposals in these areas (the workers’ councils in the Directive are rather limp by comparison with their German equivalents). In contrast, member states do usually agree that market integration is a good thing; they’re more likely to reach consensus quickly on measures that promote liberalization. Thus, proposals for works councils and the like get trapped in the legislative pipeline for decades, and finally emerge (if they do emerge) as pale and stunted things, blinking in the sunlight. Proposals to liberalize markets, in contrast, are usually (though not always) easier for member states to reach agreement on; they come out of the process as altogether beefier creatures. The bosses don’t have much to be worried about.

{ 13 comments }

1

pathos 07.08.03 at 5:13 pm

Let’s not dive head first off the slippery slope here. There’s quite a difference between being pro-union and being pro-Communist. In Poland, at least, the labor unions were the greatest anti-Communist force in the country in the 1980s — and with good reason.

And this directive is not even “pro-Union” in the sense of supporting the union position. It is merely pro-Union in the lesser sense of supporting the existence of a union.

I don’t know where Samizdata jumps from “Union will exist” to “Unions will be more powerful than management.”

Pension reform in France shows that slowly, slowly, Unions are losing power in Europe, not gaining them.

2

Bob 07.08.03 at 5:55 pm

We need to discuss the EU’s obsessions with pervasive mandatory regulation without getting sidetracked into subsidiary debates about whether or not the EU is collectively intent upon becoming increasingly like the old Soviet command economy. Such hysterical comparisons are apt to divert attention from real and important issues, such as the causes of the persistently high unemployment rates in the major Eurozone economies and the historically miserable rates of net new job generation compared with America.

In the EU’s enthusiasm for adding to employment rights it tends to get overlooked that these rights impose additional real costs on businesses which have to be recovered through higher prices or through impacting profits and wage settlements, as well as having consequences for attracting inward investment. It also tends to get overlooked that businesses, especially small businesses, are apt to take counter-vailing actions to minimise the costs of complying with the regulations – like avoiding growing beyond 50 employees when onerous new regulations start to apply and in hiring practices. The fundamental question, as always, is whether the benefits of the regulations are sufficient to compensate for both the intended additional costs and unintended consequences.

3

Maria 07.08.03 at 6:17 pm

Henry seems to be saying that the liberalising proposals are more likely to succeed as they’re equivalent to the lowest common denominator of member states. But there is another point/tangent at play here; i.e. what sort of proposals get on the EU legislative agenda in the first place.

Looking at the (draft) Directives and other proposals I’ve spent the last couple of years working on doing advocacy for business organisations, (and admittedly that viewpoint comes with its own prejudices) it seems to me that to get onto the agenda in the first place, a proposal will more often be ratcheting up government intervention in a given millieu.

The argument goes like this; ‘in X country, we have a higher level of protection on Y issue. For the internal market to function, we need an equivalent measure of protection throughout the EU. Therefore here is Z Directive to increase regulation in all EU member states.’ I see this over and over again in my issue area alone; the data protection Directive, aspects of the e-signatures directive, the ill-starred e-confidence initiative, and so on. Of course, there are two factors here. Firstly, there seems to be a driving imperative amongst ‘high regulation’ countries to share the love as it were. Secondly, it probably helps that it is institutional heavyweight Germany that is most often making these proposals.

Of course the punchline is that we then get a Directive intended to harmonise things and further the internal market, but that ends up making things more confused than ever! Each country goes off and implements the Directive in its own way. The Germans goldplate it. The UK leaves it to the market/common law decisions to decide. The Italians transpose a draconian version and never enforce it. The Irish worry that it will scare off US FDI and have to be hauled up in front of the ECJ before they get around to it at all. And at the end of it all, we’re back to square one with the high regulation states fuming that the low regulation ones aren’t playing by the rules, the low regulation states spitting while they impose measures they never wanted, the EU institutional wheels spinning in the air, and the citizens, businesses etc. hopelessly confused and wondering what it was all about in the first place. The only winners are the lawyers.

BTW I wouldn’t be so sanguine about pro-employer policies prevailing. Just check out the successful land grab DG Employment has made in getting the all clear to introduce a new data protection directive for the employment context. Nothing much online yet, green paper expected in September.

4

Doug 07.08.03 at 9:02 pm

To Maria’s splendid thoughts, I’d only add that the potential regulations for allowing a company to incorporate across the EU with incorporation in a single country (it’s called “Europa AG” here in Germany) – a classic item on the business wish-list – are now well into their second decade of discussion. The overall trend may be market integration, but significant items spend many years in pre-publication Purgatory. Then add Maria’s points on implementation.

It’s a very slow bicycle.

5

Bob 07.08.03 at 9:10 pm

Maria’s description of the EU road to regulation is broadly accurate from my own more limited experience at the front line too. The historic roots of this dirigiste course go back to Colbert and Mercantilism, and to Napoleon and the Continental System, not to Marx or Lenin or some other stream of socialist ideology.

The credit for first introducing state pensions goes back to Bismarck, first Chancellor of the German empire, whose political inclinations were anything but socialist. It is precisely because the deeply embedded traditions of dirigisme in Europe have origins in what are usually considered rightist or conservative ideologies that what is called the European Social Model has proved so resilient to pressures for market liberalisation reforms.

There is much accumulating and persuasive evidence for this interpretation. Von Stackleberg in the 1930s, one of the early pioneers of the theory of oligopoly, came to regard the authoritarian fascist state as the preferred way for resolving the unstable outcomes of competition between oligopolies. Leaping forward some decades, we have this: “For example, take a peek at a 1993 interview given to the Financial Times by Edouard Balladur, prime minister of France and now the favorite to succeed Mitterrand in this spring’s presidential election. ‘What is the market?’ asked Balladur. ‘It is the law of the jungle. And what is civilization? It is the struggle against nature.'” – quoting John Andrews at: http://www.wired.com/wired/archive/3.05/culture.html

6

Pathos 07.08.03 at 9:35 pm

Note, though, that unlike America, most of Europe’s population (especially its working age population) is expected to shrink over the next several decades.

Knowing that, it seems rational to focus on bettering the lot of the workers that exist, rather than fuel job growth for future workers who demographically won’t exist.

There is unemployment now, but in the long term the problem may more likely be too few workers.

7

Bob 07.08.03 at 11:58 pm

Pathos – Do you mean Europe is being driven by short-termism when that is the very charge levelled by radical critics of the Anglo-Saxon values and ways said to characterise American capitalism?

8

Adriana Cronin 07.09.03 at 12:33 am

We are not all libertarians at Samizdata.net and we are not called Libertarian Samizdata but Samizdata.net.

9

Perry de Havilland 07.09.03 at 12:52 am

Like it, or like it not, the European Union’s driving force is market creation.

Huh? The idea of the EU being a “bosses’ Europe” that the Socialist Workers Party foresee is quite correct actually, though that would also include those eminently corruptible Labour Union Bosses… which is of course the antithesis of a market Europe. The modern social democratic state loves bosses for exactly the same reason fascist states love bosses. Bosses can be favoured with regulatory barriers to new market entrants, they can be co-opted and convinced to run their businesses in accordance with National Objectives.

Adding workers councils just adds another burden to medium sized businesses that can simply be dealt with by big business by throwing patronage and money at in ways smaller business cannot match.

The EU is an ‘established players protection society’. Were you under the impression the CAP was about creating new markets? Were you under the impression ‘workers councils’ are about making market decision making more rational? Market creation? Don’t make me laugh.

10

Henry 07.09.03 at 1:06 am

Perry

I agree on one point – nobody in their right minds would say that the CAP is about creating new markets – it’s a thinly disguised version of farmer’s dole. But if you look at the day to day business of the Commission – the day to day regulations, directives etc – it is all about market creation. Likewise the European Court of Justice – which has had a strongly pro-market bias in its rulings. I recommend that you read some of the lefties who get upset at the ways in which the EU undermines national forms of social democracy. They’ve got some quite good empirical evidence to support their views. There’s a reason why _The Economist_ is broadly pro-Europe. I recommend in particular the work of Streeck, Philippe Schmitter, and Colin Crouch.

11

Bob 07.09.03 at 12:16 pm

Henry – The Economist is broadly pro-European, as I am, because it supports the causes of trade liberalisation and reducing impediments to market flexibility.

Sadly, the EU’s record on those counts is not good – “While Western Europe reported no net new jobs from 1973 to 1994, the US generated 38 million net new jobs.” [Lester Thurow: The Future of Capitalism (1996), citing the Economic Report of the US President, 1995] Despite that, we have: “. . in March 1996 . . the Belgium Finance Minister said baldly that monetary union was about ‘preventing the encroachment of Anglo-Saxon values’ in Europe.” [Bernard Connolly: The Rotten Heart of Europe (1996)]

The CAP is not some minor aberration to be dismissed as just farmers’ dole. The cost of CAP takes up almost half the entire EU budget. The unending flow of Directives which add to business costs are hardly “market creating”. Nor are many of the “anti-dumping” duties applied to EU imports more in response to pressures from internal vested interests than any well-founded trade case. Nor was the bananas trade scam, which went to the WTO a few years back, where most of the financial benefits went to European traders awarded import licenses.

Would that the EU did more to create a European Single Market when financial and professional services are still subject to national trade barriers. Instead, in today’s news, we have calls for a European finance minister with more pressure for a “multilateral” tax policy – meaning tax harmonisation by another means – and for an even “tougher” Stability and Growth Pact in the Eurozone to rein back the burgeoning budget deficits of the major Eurozone economies. Not much subsidiarity with all that.

What Europe needs is rather less of the yawning gap between the virtuous rhetoric and the stark realities. A good start would be the EU’s accounting system. The UK’s National Audit Office has just reported to Parliament on The European Court of Auditors for 2001. It says, “the Court drew similar conclusions to previous years and for the EIGHTH year in succession qualified its opinion on the reliability of the Community’s accounts.” – from: http://www.nao.gov.uk/publications/nao_reports/02-03/0203701.pdf

Back to basics, anyone?

12

Edward Hugh 07.09.03 at 12:25 pm

“Note, though, that unlike America, most of Europe’s population (especially its working age population) is expected to shrink over the next several decades.”

This seems to be the point, all the rest more or less follows from this. Anyone interested in an interesting theory could follow this link:

http://www.framtidsstudier.se/aktuellt/SSHApaper001.pdf

Institutional decision making operates in a context more-or-less well defined by other parameters like technology, demographics and communication systems.

13

Bob 07.09.03 at 11:51 pm

For the latest on the scale of fraud in the EU Commission, see: http://www.euobserver.com/index.phtml?sid=9&aid=12040

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