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Czech Republic at the Gates of EU

English Pages, 4. 3. 2002

Notes for Madrid

Discussing Europe in March 2002, two parallel, directly non-connected issues should be analytically strictly distinguished. The first one is the discussion of the process of the European integration itself, of its forms, its speed, its phases, its costs and benefits, its spontaneous character and/or its political constructivism. The second one is the discussion of the possibilities of a small country, located in the heart of Europe, which was out of this process for half a century, to rationally participate in it. This is the issue of enlargement.

To openly discuss both issues is rather difficult, especially for a politician, because this is not a free, unbiased, non-aprioristic academic debate. The European intellectual space is dominated by one view which succeeded in caricaturing all other views as wrong, reactionary, nationalistic and undemocratic. This is very unproductive and can lead us to wrong ends.

Because of the unforgettable experience of my country with communism and - in this context - with the communist manipulation of words (in the true Orwellian sense), we are oversensitive to the methods and procedures used in the current European debate, and I suppose you may have similar feelings. My evaluation of the current stage of the European integration - at least I hope - is based not on propaganda and wishful thinking, but on rational analysis and on the use of methods of economics and other social sciences.

The original foundation of the European integration (as well as its consequent important turning points) has been a political act, not a spontaneous evolution of a social institution. It was projected as a human design, it was not a result of human action (to use Hayekian terminology). It has always been controversial because it was full of political ambitions. It has never been a technical, organizational or administrative issue, it was much more. It has its critics and its enthusiasts. It has its undisputable successes and its failures.

There are problems. The integration process doesn´t address two main economic problems of our times: high unemployment and expensive and demotivating welfare state. Its impact upon freedom is not clear either - looking at it from the European classical liberal tradition. We are witnesses of contradictory developments. I have recently come across an old monograph entitled "Rome or Brussels?" published 30 years ago by the Institute of Economic Affairs in London. These two cities demonstrated already then the dual character of EU, or, to put it differently, the contrast between its original motives and purposes and its current form, between its liberalizing and dirigistic character.

I believe that the original idea was to establish free trade, together with free economy, in the territory of its members and that the optimistic hope was that more economic interdependency as well as mutual economic improvement would diminish political and economic tensions and would create closer union of the European peoples. The parallel, but - at the beginning - weaker and only supplementary idea was the retention and expansion of the European interventionist welfare state. If we ask which one of these ideas and tendencies is dominant now, I am afraid we have to answer that the second one.

We see it in the Common Agricultural Policy, in various nonviable development projects, in limits on competition and market pricing, in restrictions on the movement of people, in regulatory restraints on trade, commerce and business, in granting privileges to special groups, etc. It is not only a product of a hidden, creeping bureaucratization. It can be seen in the EU programme documents as well, e.g. in the EU Charter of Fundamental Rights. The Charter contains some fundamental civil, political and economic liberties but, at the same time, interventionist and welfare state privileges and entitlements (in the role of trade unions, in labour legislation, in the dismissal mechanisms, in the right to a life of dignity, in the right to participate in social and cultural life, in social security, in medical care, in unemployment compensations) which are considered "fundamental rights", instead of ideology-dependent forms of social policy. 

Although communism is dead, the EU ideology - I call it Europeanism - prefers a system where increasing range of human actions is becoming subject to collective, politicised procedures. It is based on the social market economy (soziale Marktwirtschaft) paradigm, on the idea of unification and harmonization instead of on competition of legal and bureaucratic power structures and procedures, on antifederalism (in the meaning of the federalist vs. antifederalist debate at the end of the 18^th century) instead of on competitive federalism (to some extent existing in the United States) - without taking into consideration the well-known arguments against supranationalism, e.g. in the public choice theory (rational ignorance, voter apathy, etc.).

Paradoxically, the Single European Act of 1986, instead of producing free, competitive markets across Europe, "produced" harmonization and the so-called acquis communautaire which do force less developed member states, and, what is more dangerous, less developed applicant countries to adopt the more costly environmental rules as well as prohibitive welfare and working practices. This move was based on the belief that markets need state, that more market must imply more state and that bigger markets require bigger states. Efforts are constantly being made to "standardize", "harmonize", or, in a different terminology, to rule, regulate, intervene. But europeanising government and bureaucracy does not mean unifying Europe.

Different issue is EU enlargement. Many people in Europe believe that the higher number of member countries means less centralized and less unified Europe, but I think they are wrong. It will, instead, lead to accelerated unification, to further elimination of the veto power and to "enhanced cooperation" (as it was named or renamed in Nice). It’s considered to be a method for creating an avant-garde (J. Delors), or for making it possible for "a certain number of countries to show others the way" (J. Chirac). The EU Commision Report of July 1999 made it even more explicit - enhanced cooperation is prepared "not for those who want to reduce integration or extract themselves from certain policies".

I am convinced that regardless their obligatory rhetoric, the member countries are interested in maintaining the status quo. The candidate countries are motivated to participate in the European integration and to enter the EU. Their motivation is, however, not based on their excitement as regards the current model - as I suggested earlier, dualistic model - of the EU economic and social system. They historically belonged to Europe and believe that the only way to "belong" there again is to become EU member states. In addition to it, they have no feasible alternative how to institutionally disconnect themselves with their past. They know that they should not be the bridge between East and West because such position led in the past to tragedies which they do not want to repeat.

They are afraid that their newly born and long awaited identity can be lost by far-reaching Europeanisation. They have historic memory full of experiences with Habsburg monarchy, with Hitler´s empire as well as with Soviet imperialism and quasi-internationalism. The identity issue is there, is relevant, and should not be caricatured as an obsolete, long-defeated or overcome nationalism. We should not mix identity with culture because the applicant countries have always been European in the cultural sense of the world. If there ever was a need for some sort of cultural unification, this is happening regardless of formal membership. Identity means possibility to control one´s own destiny in a meaningful way, to have a sufficient degree of freedom for making one´s own decissions (vis-à-vis external constraints or decisions from outside), to have relevant political representatives within a "reach" (whatever it means with current information and transportation technology).

It is fashionable now to argue that the word distance has become a meaningless concept, but it is just another modern fatal conceit. The fact that spreading information as well as travelling are faster than in the past may be an argument for world-wide integration (or globalization) of many human activities, for opening-up, for enormously productive exchange of all kinds of human products (in a very broad sense), for more specialization and division of labour, but it means nothing as regards political architecture, freedom and viable democracy, as regards the concept of political representation and of the relationship between individuals and the state.

This is what the ideology of Europeanism does not take into consideration or, perhaps, assumes away by implicit belief in the state or, what may be worse, by explicit promoting of the idea of the omnipotence of political and bureaucratic elites functioning at the continental level.

Too much attention in the contemporary Eurodebate about enlargement is paid to formal membership. The formal act is a relatively minor event as compared to all the events between the end of communism and the date of entry into EU. The crucial moments were:

-        the collapse of the communist closed society and the following far-reaching opening-up of the countries in political, economic, social and cultural fields;

-        their radical and historic transformation reflecting their own dreams and visions of a free society and aiming at creating "normal" European economy and parliamentary democracy;

-        their membership in other respected and important institutions and the compliance with their - sometimes very demanding - rules (IMF, World Bank, Council of Europe, WTO, OECD, BIS, etc.);

-        signing association agreements with the EU and following the obligations connected with them;

-        applying for EU membership and harmonizing legislation with acquis communautaire;

-        closing the so called negotiating chapters which implies accepting EU rules, norms, policies, etc.

The residual part between now and entry is rather small. By going through the above-mentioned steps we gained enormously and became normal participants in all forms and fields of European relations but - at the same time - we paid very high costs which should be taken into consideration. But it is not.

Willingly, without being forced, we accepted many external recommendations and obligations because we ex-ante took identical or similar views - price and foreign trade liberalization, rapid privatization (IMF), democratic procedures (Council of Europe), trade liberalization (WTO), etc.

We had doubts about several recommended measures, but we accepted them as well - fixed exchange rate (IMF), capital account liberalization (OECD).

Some of us, however, disagreed with suggested ways how to solve the current account deficit and how to avert the currency crisis (IMF), how to deal with the banking system heavily burdened by transformation (e.g. capital adequacy requirements - BIS), how fast to disinflate the transition economy. We were aware of huge costs connected with accepting such solutions but even that was done.

We are now in a different stage. Most of the past issues were, however, policy issues, whereas the real trouble is the systemic one, reflected in the legislation, and, specifically, in social, labour, environmental, safety, etc. standards or requirements imposed upon us by EU.

The costs, connected with them, have two reasons:

-        some of them are associated with a very high stage of economic development and GDP level (what is normal in U. S. is not normal in India, and what is considered necessary in Denmark may not be relevant for Lithuania);

-        some of them are part of a different ideology than prevails in countries with communist experience, especially with their distrust of masterminding the society from above.

These "standards" deprive us from our comparative advantages and we see them as protectionist measures and costs (of non-negligible size). To our great regret, our arguments are not heard or are a priori discredited which reveals the lack of sensitivity on the side of those who demand them.

The applicant countries need real convergence, need catching-up, need to make up for half a century of communism. The question is whether nominal convergence (the introduction of identical legislation and of single currency) helps to achieve real convergence or blocks it. The experiences of East Germany, of Southern Italy and - to some extent - of former Czechoslovakia tell us that premature nominal convergence creates problems. Because of it, we live in an unfavourable constellation of "stars" - the benefits connected with the dismantling of communism, with liberalization and with our successful minimalization of inevitable transformation costs in the first stage of transition were matched with costs of adjusting to EU standards. Some benefits connected with EU membership may arrive only after formal entry, not before it.

We do care about the future of Europe (and of the West) not less than the people living in Western Europe. But we understand more clearly the dangerous paradox of European unification: the belief in the possibility to preserve traditional European values when abolishing the original institutions that made victory of these values possible. That is the reason for our Eurorealism and for our warnings against Euroapriorism.

Václav Klaus, Business Leadership Forum, Instituto de Empresa, Madrid, March 4, 2002