EU needs time to evolve Feb02

Centuries of conflict in Europe precipitated the need for co-operation between nation states in order to create an environment of peace and prosperity. Fifty years ago, six countries (France, Germany, Italy and the Benelux states) established the European Economic Community (EEC) to guarantee free and open trade between them. Today, the European Union embraces 15 European nations. Citizens of these countries, with different languages and traditions, have reached agreements on a wide range of matters which have facilitated trade, travel, employment of EU citizens across borders and reciprocal rights to reside in any Member State. Twelve of the Member States use the Euro as their common currency. A further ten countries will join the EU in 2004, adopting the Euro and making the EU a union of 25 nations. This is a great achievement that Europeans can be proud of.

Can such an achievement be sustained given the old rivalries, continued socio-economic diversity and the exceptional challenge of a single currency for so many Member States? Can the EU be compared with the USA? Can it compete as effectively, globally?

From 1776 to 1865, most Americans referred to their country in the plural – the United States “are” not the United States “is”. Americans were loyal to their State and their region – particularly in the south and the west. The “institution” of Slavery, its practice and eventual abolition, highlighted the deeply divided American “nation”. The rural and agricultural economy of the south depended on cheap slave labour whilst the more urban and industrial manufacturing economy in the north needed infrastructure and a pool of readily available labour.

It took Senator Henry Clay (“the great compromiser”), numerous compromises (Missouri Compromise of 1820 and the Compromise of 1850) and the death of almost 600,000 Americans in the Civil War (1861-1865) to achieve unity. The US Constitution did not specify if any State could secede. It has been suggested that if it had, the US would have disintegrated on a number of occasions in its first 100 years. It was not until 1862 that the US adopted a single currency – 86 years after independence! Andrew Jackson had opposed a national central bank seventy years before and so there was no real central bank until the Federal Reserve Bank was created in 1913. Even to this day, each State has its own requirements for establishment of any Bank on its territory – American or foreign. 

The US, with a population of 280m , European and ethnic, continues to invite and settle 500,000 immigrants a year from all over the world. It has established the North American Free Trade Area (NAFTA) with Canada and Mexico who preserve their political sovereignty and national currencies. The US economy outperforms that of the EU because it is managed more competently on the basis of an open competitive single market where capital, goods and labour are fully free to move. The US economy thrives on entrepreneurship sustained by financial and tax incentives.

The EU, with 380 million people today (475m in 2004 after enlargement) will also need time to exploit the potential of its diverse geography, people, languages and traditions, yet it continues to strangle its economy with unnecessary legislation, high taxes and bureaucracy. The EU must establish a truly single, open, competitive market for goods and services, including financial and labour. It must attract captains of industry with a track record of successful management of private sector corporations to manage its institutions. Only then, will the European Union be able to compete and compare with the United States.