I would like to break out a comment posted in response to my arguments against Sweden joining the EMU from a few weeks back. Gustav Holmberg writes, among other things, “As a no-sayer, I think you must come up with a constructive alternative to the European Union.” I’m not sure if that burden is mine; I am quite content with the present setup for Sweden — in the EU and outside the EMU. However, implicit in Gustav’s criticism is that if Sweden does not eventually join EMU, the EU will become an unworkable proposition for Sweden, outcast that it will beMeanwhile, Anders does some great line-by-line refuting of pro-EMU arguments on his blog, here and here [Swedish]..
So, against my better judgment, here is a constructive alternative to the EU: Basically, it’s an EU where you can be an EMU outsider and an EU insider. Is that too much to ask? Why would that not be feasible, given that monetary policy is officially divorced from the political sphere anyway? For the near to medium-term future, this is what the EU will be in any case; the slew of new countries joining will be doing so only on a political level, not on a monetary level. And both the UK and Denmark have opted out of EMU for now.
It is possible that the UK and Denmark eventually join, as do the newcomers, and that the EU’s mandarins remain adamant that all members join EMU. What should Sweden do then? It should join, then, and it should do so for the wrong reason, which is that it will otherwise be politically marginalized (go ahead, you may call this bullying). Luckily, PM Persson has stated that Swedes will get to keep voting to join EMU until they get it right, so there will be plenty of opportunities in the future to give in and adopt the euro.
But why wait? Why not just vote to join now, and reap the prestige of being an early adopter? I have two reasons why not, although the first one alone should suffice: First, because I think the euro is an economic experiment that will fray at the edges over time. I think that in the next 10 years, the euro will be tested in ways that make clear it is not a good idea for Sweden and other non-core members to be part of EMU. Better, therefore, not to rush into something that is practically impossible to undo. Better to watch and wait; if the eurozone is not the optimal currency area for Sweden, then this will become obvious over time. If I am wrong, Sweden can join with the likes of PolandI am willing to wager 50 euro that Sweden and the UK outside EMU will grow faster than the eurozone average over the next 10 years, mainly because I think Germany is experiencing an economic malaise and has no action plan, and ECB policy will need to take this into account..
The second reason involves where the EU is going at the moment. Both sides have made this referendum a vote of confidence in the political project that is the European Union, even though it should not be. But because it is, a yes vote would be seen as a great boost to the EU as a political project.
But what kind of political project is it? Well, Gustav mentions that the EU’s Common Agricultural Policy is a problem. To me, however, it’s a deal breaker. CAP eats up 45% of the entire EU budget — 45 billion euro, or the cost of a Gulf War every other year. In other words, almost half of all EU monies is spent on something that actively contributes to third world poverty and delays modernization in Europe proper, in order to buy the political support of narrow rural interest groups. 35% is spent on structural and cohesion funds, compensating, if you will, for the negative effects of CAP. That leaves 20% of the funds doing something useful. Whatever the intentions may be, this is a catastrophic waste of money.
Voting yes would amount to an applause for this state of affairs. That is exactly the wrong message for Sweden to send. Sweden can and should use its considerable moral authority to tell the French (mainly) that this is not okay; that if they expect Sweden’s full commitment to the EU, the EU should stop spending 45% of its money on patronage activities, clear bribes to get rural interests on board. This is not the kind of legitimacy the EU as a project should be seeking, nor should Sweden be rewarding this kind of behavior.
Not that I like the Euro (as has been noted before, its a sign of something when there isn’t even enough common feeling amongst the participants to agree a set of real buildings, let alone real people, to stick on the notes), but this anti-CAP stuff is all a bit ranting. While it does squit for most of the EU, it really does help keep lots of cute litte French farmers in brie, making the French countryside that much prettier than the the factory-farmed US Midwest, for eg. And talking of the US, it would be US farmers who would be by far the biggest beneficiaries of an end to CAP, rather than the small African farmer, who is even more inefficient that his gallic counterpart. About the only crops that African countries can successfully export to the West are ones that the West can’t grow…
Charles:
I don’t see how you can enumerate the beneficiaries of the end of the CAP without including European consumers, who will have a greater variety of less expensive food to choose from. You may say that everyone will be forced to eat tasteless factory farmed food, but I think that the US experience is rather that there will remain a large and lucrative market for non-factory farmed foods that will let precious small french farmers who also happen to be good business people to remain afloat.
You’re all wrong, obviously.
First Charles:
you fail to see the most pernicious aspect of the CAP which is to prevent e.g. African farmers from getting efficient and properly getting any benefits of their comparable advantage from freer trade in agrigoods and the concomitant specialisation and scale returns that would follow. Saying African farmers are inefficient and wouldn’t benefit from freer trade is like saying to someone who can’t drive they shouldn’t have a car because they can’t er drive. It’s circular. And you can help the “poor” French farmers through direct payments not linked to production and thus target the ones with the prettiest thatched cottages rather than the huge hyper-efficient enterprises in the Paris basin. So down with the CAP. I now wipe my hands with you and move on to
Ben:
What exactly is the US experience that is sooo superior to the Europeans? So far as I remember there’s no qualitative difference at all in the support that US farmers get, and the quantitative difference in terms of spend is just a function of having got rid of your smaller family farmers much faster than the Europeans have managed thus far. The food, frankly, isn’t that great either — if you can call the swollen genetic monstrosities on supermarket shelves “food”, and the only type of small farmer you get nowadays is someone who made his money somewhere else and wants a lifestyle option. Dubya type ranchers. Your smaller farmers with tastier food are indeed generally good businessmen (or silver spooned born again happy-clapping warmongering belt-sized IQed arab-hating stooges) but only in areas other than growing food.
Stefan:
I and the rest of Europe obviously live for Sweden’s approval. Were Sweden to cast doubt on the historical inevitability of the European project and go their own way — the consequences don’t bear thinking about. Don’t worry, I’m being sarcastic. Your vision of Europe as a “two speed Europe” — again, hasn’t that been tried before?
Eurof– My point is that African farmers couldn’t compete even if the trade barriers were lowered. And no, you shouldn’t give a car to a blind man who would just drive it off a cliff. Or me, if my performance in GTA is anythig to go by.
Ah the overweening arrogance of the Washington Consensus. Get back into bed with the IMF and settle in to your tax free sinecure.
How do you know if African farmers couldn’t compete? They’ve probably never had the opportunity. At worst, it would mean the chance of more inward investment and creating an export industry in Africa, as EU-US agribusinesses taken off the teat of corporate welfare have to actually try and turn an honest buck where the climate and soil is better and labour is cheaper.
And who said anything about them being analagous to “blind” drivers? Really, Charles, I am shocked at your cynicism. How changed you are from the sensitive boy I knew at school.