30 DECEMBER 1972, Page 10

Creeping into Europe (1)

Risks and opportunities of joining

Russell Lewis

How can a Conservative of free market convictions possibly support the policy of entering the Common Market and what on earth have we to look forward to after January 1?

It has been unfortunate that some of the most notable free marketeers, in particular Enoch Powell and Harry Johnson, have been equally notable anti-Common Marketeers. Both belong essentially to the Friedman dominated Chicago school of economic thinking which objects to the Community mainly on the grounds of its monetary and agricultural policies which conflict with their ideal of a liberal international economic order. My own view is that the only way for us to speed progress towards a system of free world trade and payments is by joining the Community and urging its policy in that direction. Proposed alternatives such as NAFTA have never been on and have dangerously diverted the intellectual energies of many people of liberal outlook.

Doubts may now afflict many thoughtful Conservatives because in the interests of keeping a united front the marketeers from the right and from the left have in the past kept their differing views about the future of Europe to themselves. There has been a tacit conspiracy among the supporters not to air their undoubted differences about the future shape of Europe in the interests of succeeding in the immediate task of joining, without which none of their hopes for the future could be more than fantasy. What marketeers were agreed on was that whatever the risks and, as we shall see, risks there were and are in unifying Europe, they were less than commensurate with the risks of keeping it divided. They could agree that when even the largest of European national states had no more than an eighth of the American national income then, without some means of effectively expressing a common European will, the collective interests of the free European states would go by default.

This was the message, surely never to be forgotten by all Tories of the Suez episode when the capacity of any war-torn European country to act on its own — or even of two western European countries to act together — was shown to be almost nil if the United States disapproved. The Suez

episode may seem to be simply a dated folly — and, indeed, looking back one does

wonder what in the world Eden and Co thought they were doing. Yet the vital material interests of the West European countries in the Middle East are in some ways greater than at any time since the second world war because they are collectively the world's largest importer of oil.

It is all very well to object that the Common Market is not a political combination, for in the strict sense it is an economic grouping (though a great deal of politics in the materialist age is applied economics). Yet the object of the Common Market idea since its inception has been to create the economic foundations of a political union. Like Karl Marx in his manifesto, the original architects of the Community scorned to conceal their purpose which was to establish as strong a foundation for a European federation as the Zollverein provided for the German fatherland in the course of the nineteenth century.

The Common Market again is not a defence Community but it can provide the underpinning of a defence community. And that in no way implies any desire for the Yanks to go home. On the contrary the formation of a strong West European political grouping ready to pay its proper share of the NATO defence budget is the best way to persuade the Americans that it is worth their while to stay and to take the steam out of the campaigns for American withdrawal of such as Senator Mike Mansfield. This is without mentioning the advantages of economic cooperation in such matters as common arms procurement and standardisation of weapons and training, all of which are easier within a framework of economic unity where the effects of these policies, for example on employment, can be taken into account.

So much has been common ground between most of the supporters, from the left and from the right, of the policy of Common Market entry. One might add the economic argument that a big market without impediment to trade or the movement of people and capital with common standards and the same commercial law must promote prosperity. The only division is that socialist supporters tend to stress the economies of scale, while free market capitalists emphasise the beneficial effect of extending the area in which free competition reigns. Yet the economic argument, though I believe important, is not necessary, but is a bonus.

The essential arguments are, first, about organising ourselves on the scale demanded for protecting our interests in a superpower world and, second, about security. It is worth adding that unity would hardly be a practical objective without some sense of identity but if all the evidence of history, all the common inheritance of literature, architecture, art and science cannot convince people that we in Western Europe have a common civilisation, I can't explain it to them. Equally to those who suggest that Russia is part of the civilisation of Europe and, should be allowed to join a' wide Community (which I believe is roughly Peter Shore's position) it seems pretty useless explaining that you don't let burglars join the police force.

Even so, the policy of unifying Western Europe carries with it a risk inseparable from the concentration of power, Only those who wish to deceive themselves can long believe that it is possible to bind so many nations together in a single continuing purpose without the emergence of .a centralised authority. The dilemma IS that authority, once created, can be used for good or ill. It could be the vehicle of a new European socialism or it could be the means of establishing an economic and political order: this because as its own authority extends the powers of the constituent national authorities diminish more than correspondingly.

As economic integration proceeds, there asserts itself what one might call the principle of diminishing autonomy according to which harmonisation of policies in one sector reduces independence of action in another. Thus if there is monetarY union, and "money creation rests with the federal authority (this could happen in present plans by 1980), and' supposing also that tax rates are equalised and fiscal harmonisation has proceeded to the point where both the type of taxes and tax rates are equalised, then at that point the budgetary independence of the member states would disappear and any extra expenditure could only come by arrange' ment with the federal authority. Full employment policies, let us say by pumP priming, would be a matter of decision In Brussels. Or again let us assume that if the harmonisation of social policies Is interpreted as equalisation, and further that the trade unions take President Mansholt's advice and go multi-national, thus establishing community-wide baSI° rates, then the result would be that locational disadvantages would be et‘' pressed not in wage inequalities but 10 different levels of unemployment. Naturally enough many continental socialists are aware of the logic ni European integration and see it as e° opportunity to bring in socialism at the federal level. This particularly applies t° French and Italian socialists who have little prospect of attaining office at home' The Commissioners' proposals for extend: ing common policies in social affairs an° transport have been extremely collectivist and bureaucratic. But on the bright side, broadly it is the free market aspects of the Rome Treaty which have to date succeeded — that is to say, the free movement of goods, capital and labour' The major exception is the farm polic.Y which is centralist and dirigiste but this Is' after all, little more than the sum of th.et preceding national policies. Moreover I, shows signs of moving (if rather slowly) towards more liberal ways. Then the Political complexion of the original six countries is rather more favourable to free competitive capitalism than here. France and Italy may have large Communist Parties but the parties of the centre and Moderate right are strongly entrenched. Western Germany has a Social Democrat government but then they are social democrats who have repudiated the doctrine of nationalisation; they have as it Were abolished their clause four. With the coming into force of the provisions for free movement of capital between member countries, the opportunities of British socialist governments to plunder the British people must be limited, for if their depredations become too extortionate the golden geese will take 'flight and fly across the water carrying their eggs with them. Indeed while joining the Community Should defeat the extreme dangers of socialism in this country, the corollary nlay be true that the socialism of the nastier kind would come from adopting a go-it-alone, inward-looking policy. We Should not forget, also, the natural conservatism of federations — as American experience has shown. It is seldom Possible for agitators to rouse support for radical policies in all parts of the federal union at the same time. The normal tendency therefore will be to avoid big or violent change.

The basic political conditions are thus favourable. What we must do is recognise the inevitablity of the growth of federal Power but determine that this power shall develop not in a bureaucratic centralist Style but that it shall be subject to Institutional lirhitations of law and market forces. The Common Market may provide the means of scaling down the bureaucratic power of the corporatist states of Western Europe while building up a constitution for Europe distilling, in a rnodern context, the principles which the founding fathers wrote into America's constitution two centuries ago. Why should not the geographical extension of power go hand in hand with its functional limitation? This admittedly may sound a bit highflown so here are ten practical Policy points which our representatives InIght watch. 1. The most effective free market influence is foreign competition and the highest Priority must be given to reducing the external tariff, unilaterally if necessary, since tariffs (as Adam Smith long ago said) are self-inflcited wounds and lead to the misallocation of resources. 2. Don't let the Eurocrat bureaucracy get away with their plan for imposing an official monopoly of unemployment exchanges. 3. The completion of the programme for free captial movement is among the most urgent tasks. Remember that the better Europe's capital market (which must surely concentrate in London) the more surely it removes the main excuse for indicative planning — it provides for the large-scale mobilisation of capital. 4. The free movement of services and freedom to establish businesses must be extended and not allowed to be Jeopardised by such schemes as the Commission's highly restrictive pro posals on insurance.

5. The Common Agricultural Policy will have to be revised to take account of a world heading into surplus. It must move away from indiscriminate price supports, towards using subsidies exclusively to deal with rural poverty.

6. Competition policy must not be turned into its opposite of promoting mergers, ostensibly to be able to compete with American multinationals. Unions must be actively discouraged from going multinational themselves or they will ruin all the good work in spreading technology and know-how, which the American companies are doing over here.

7. In the debate on states' rights which will surely come, the most important national right is the right to tax revenues. This will need to be defined with precision as were states' rights under the Zollverein in the last century. The other important limitation to establish in a revised Rome Treaty should be an anti-supranationalisation clause (suitably wrapped up to save socialist faces if necessary).

8. At all times it will be necessary to be on the qui vive to stop any attempt to translate harmonisation of social charges into equalisation: this apart from other evils, would reduce the cash wages of the poor workers.

9. In education, health, housing and pensions also we must avoid standardisation on the basis of the best (i.e. most expensive) community country. Instead the aim should be to enable people increasingly to make their own provision as incomes rise.

10. We must watch that European agencies for all sorts of apparently worthy purposes (like say joint procurement of publicly owned computers) do not proliferate out of control. Alternatively, if control of these activities is ultimately vested in the European Commission, the Commission must not be allowed except within strict limits to forward its favourite package deals — for these institutionalise the politics of the begging bowl.

Some of these suggestions look far beyond present commitments but, for reasons stated earlier, the likelihood is that European unity will develop a good deal faster than many now suppose. It should be the special task of British conservative parliamentarians now about to take off for Strasbourg, to keep a watching brief on these developments. Coming as they do from a comparatively powerless Westminster it might heaten the mto reflect that they have the opportunity to recreate in Europe our old ideal of what Parliament should be — the final repository of the people's sovereign power.

Russell Lewis is head of the Conservative Political Centre.