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BRITISH MANAGEMENT DATA FOUNDATION





'DEMOCRATIC VALUES AND THE SINGLE CURRENCY'

Speech by the Rt Hon Michael Portillo

14 Jan 1998



BMDF SYNOPSIS

The full text is attached of the lecture on 'Democratic Values and the Single Currency' given by the Rt Hon Michael Portillo to the Institute of Economic Affairs at Church House, Westminster on 14 January 1998.

The main thrust of Mr Portillo's remarks is that although the European Union is entirely made up of member states that are democracies the Union itself is not democratic - and the more we transfer decision making to European level the less shall we enjoy democratic accountability.

In a thoughtful speech he discusses how the ideal of creating a united Europe has developed in practice and refers to the two distinct approaches embodied by Spinelli, a federalist, and Monnet, a functionalist who believed that functions one by one, and therefore sovereignty, should be transferred from the national to the European level.

Among the points Mr Portillo makes are:

* 'The Maastricht Treaty appears to owe much to a functionalist approach with its proposals that Europe should acquire its own defence and foreign policies and its own currency. But federalists will be happy with that, since the result is the creation of a new political entity. It has the critical characteristic of a federation, in that the federation's laws are binding on the member states.'

* 'European integration is not the means to achieve the security of our continent. It is the wrong route. Integration is being designed in a way that sharply reduces democratic control.

* If we shoe horn the nations of Europe into an artificial union, we will not abolish nationalism, indeed we risk stirring it up. The danger is that we make people feel that their national interests will be overlooked, and that they cannot assert them through the ballot.

* That risks exactly what the architects of the new Europe say that they wish to avoid: destabilising Europe, creating tensions and releasing resentments that damage the present good relations between European nations.'

* 'The creation of the European state has been approached in reverse order to the creation of almost any other. Normally, a new state establishes its institutions of government first, and goes on to create its policies and its currency. In this case, the common European policies and the currency are being created first, with the intention that that should lead to demands, in the names of logic and democracy, for the formation of the institutions of centralised European government.'

* 'Democracy requires not only the cracy but also the demos, not only the state but also the people. All the attributes of the nation state, all its functions, can be transferred to the European level along the Monnet-functionalist model. But what we do not have and what we cannot conjure up is a demos, that is a single European people.'

* 'The peoples of Europe are too different from one another, their histories, cultures and values are too diverse, for them to be brought together into one state. We can work together and co-operate for mutual benefit, but Europeans do not have a common identity, or view of their role in world affairs. They do not constitute a nation, and since they do not we should not try to create a European nation state.'

* 'Global competition is indeed between industrial giants, but they are companies not nation states'

* 'Some of those who think that the right response to global competition is to create a bigger state, also believe in a bigger state in the other sense, meaning a bigger role for the state, through more interference and regulation. That frame of mind had produced the social chapter, and is a strong influence within New Labour.

* 'Excessive interference by governments, whether at national or European level, is clumsy and unresponsive, and has already played a large part in creating unemployment levels in Europe well above those of the USA.'

* 'Britain has gained control of inflation by its own efforts. Britain has lower unemployment than most of its European neighbours, and that is just one of many indicators that it is competing successfully. The current concern is not with devaluation, but with the strength of the pound.'

* 'It has been argued that the single currency is the logical completion of the single market. It is not. The greatest trading partners in the world, Canada and the USA do not have a common currency and have no plans to establish one. At present, none of the countries with which Britain trades has the same currency as we do, and yet our trade with them goes on rising.

British industry has to ask itself whether it really wishes to enter the next recession with the currency locked at its present level, and with the British government powerless to vary interest rates.'

* 'Those who are most influencing the progress of Europe believe that European integration is the only guarantee of future security. They are wrong. It is democracy that provides our greatest hope of future peace and prosperity. We should use our Atlantic and European institutions in every way we can to spread democracy and nurture it where it takes root.'

* 'The European union is entirely made up of member states that are democracies. But the European Union itself is not democratic. Neither the Commission, nor the Council of Ministers nor the European central bank is democratically accountable, and neither can they be made so because Europe is not a nation. It follows that the more we transfer decision-making away from the democratic member states to the undemocratic European Union, the less shall we enjoy democratic accountability.'

BMDF Comment:
Mr Portillo reinforces and complements the warnings of the serious implications if UK joined EMU given by William Hague at the CBI Annual Conference [BMDF Note - 14 Nov 1997] and by Professor Martin Feldstein in his recent article 'EMU and International Conflict' in "Foreign Affairs" [BMDF Note- 24 Nov 1997].



* * *


'DEMOCRATIC VALUES AND THE SINGLE CURRENCY'

Rt Hon Michael Portillo

Lecture given to the Institute of Economic Affairs
Church House, Westminster, SW1 on 19 January 1998

I am honoured to be able to deliver a lecture to the IEA and I thank John Blundell for the invitation to do so. The triumvirate of Antony Fisher, Arthur Seldon and Ralph Ham's has provided a remarkable demonstration of the power and influence of ideas. They patiently expounded a remarkable combination of common sense and academic excellence; never afraid to yell out from the crowd, when, as was usually the case, the ruling emperor of conventional wisdom was actually wearing no clothes. Their thinking deeply affected the last Conservative government, many other governments around the world, and new Labour. I cannot think of a better forum in which to deliver what follows.

My object tonight is to discuss the single currency, but not as it is often talked of in Britain, as though it were merely an economic device which can be measured in terms of costs and benefits. I wish to examine it in the terms used by our partners. who see it as a project in re-shaping the way our continent is governed, to create a political union that can free Europe from the fear of conflict between the nations.

The cost and causes of war

In the last two centuries the peoples of Europe have paid a terrible price in wars. In World War I, fifteen million were killed, mainly soldiers. In World War II, the toll was at least 41 million, of whom most were civilians. Those terrible events have naturally and rightly led highly distinguished statesmen to dedicate their lives to creating conditions in which war would not occur again. There is no higher or more important objective for politicians in Europe than to work for policies that may better guarantee the security of our continent and avoid a repetition of the dreadful slaughter of our modern history.

We can distinguish two causes at the root of past conflicts in Europe. The first is Franco-German rivalry Prussia and Austria invaded France in 1793 and 1813. France occupied Prussian and Austrian territory between 1805 and 1813. Prussia dealt the French army a swift defeat in 1870, and went on to besiege the French capital causing many Parisians to die of starvation. Germany invaded France in the opening stages of both world wars.

Understandably therefore, much effort since the last war has been devoted to creating political institutions, and other links, to bind the former adversaries together.

A second cause of past conflict was the so-called Eastern Question in its various forms. There was the clash between the empires of Christendom and Islam, both ideological and territorial. The assassination in Sarajevo of an Austrian archduke, and Austria's revenge for it on Serbia, provided the spark for the outbreak of the Great War. But Germany's suspicion and fear of Russia, another part of the Eastern Question, were a more fundamental cause of that war. The mutual aggression between totalitarian regimes in Germany and Russia supplied the bitterest and most costly conflict of the Second World War. Comparatively little effort has been devoted to bringing Russia fully into the family of western nations, or to building bridges between Christendom and Islam in Europe, and I shall return to that later. First, let us look at how efforts to resolve the conflict between France and Germany have been taken forward.

The idea of a United Europe

The ideal of creating a united Europe, even a United States, grew up as part of the humanist-pacifist tradition even before the wars of the twentieth century, but until the end of the second war was largely confined to academics and dreamers. Thereafter, it was taken up by statesmen like Altiero Spinelli and Jean Monnet.

The two men embodied two distinct approaches to European unity, and the distinction is important even today. Spinelli was a federalist, believing that local, regional, national and European authorities should complement each other. Monnet did not describe himself as a federalist but as a functionalist, believing that functions one by one, and therefore sovereignty, should be transferred from the national to the European level.

In the official European Community,' literature of the 1990s it is argued that 'Today the two approaches have been merged'. Perhaps so. The Maastricht Treaty appears to owe much to a functionalist approach with its proposals that Europe should acquire its own defence and foreign policies and its own currency. But federalists will be happy with that, since the result is none the less federation, that is the creation of a new political entity. It has the critical characteristic of a federation, in that the federation's laws are binding on the member states.

Those who support the creation of a federation sometimes argue that federalism is generally misunderstood in Britain, and tell us that in continental Europe it is about decentralisation, and that federal constitutions in a number of European states emphasise the devolution of powers to states or regions. But the federalism that is being unfolded at European level is not like that. It does not emphasise the devolution of powers to member states. The process of integration now being pursued from one inter- governmental conference to the next, is highly centralising and owes much to the Monnet- functionalist approach.

British policy on European security

While Spinelli, Monnet and others were advancing European unity by whatever means they could, which in their day meant mostly devising institutions governing economic and trading relations in Europe, Britain held aloof from that process, but committed itself directly to European security.

There is a myth that Britain has never cared about Europe. That is an extraordinary claim. The British Empire lost nearly a million combatants in the First World War, despite beginning the war with what the Kaiser called a 'contemptibly small army'. In the Second World War, hundreds of thousands of British people died at home, or fighting in and around Europe for the freedom of Europe.

Following that war, at a time when the nature of the Soviet Empire was becoming clear, the British foreign secretary, Ernest Bevin committed Britain to a Western Union, an alliance of European and non-European states dedicated to providing their peoples with security. In 1954, attempts to create a European Defence Community were scuppered by France at the Pan's Conference. But the British foreign secretary, Anthony Eden, made an historic commitment on behalf of this country to maintain land and air forces in Europe for the following forty years, thus providing a clear and unmistakable guarantee of Britain's willingness to fulfil its obligations if the security of our allies were ever violated. It was a remarkable undertaking for an island nation to make, especially given our traditional strategy of maintaining a small army and avoiding continental military commitments.

Different models for Europe We need to understand the history in order to understand how strong IS the impetus to European integration. The momentum derives from an understandable fear of war. That is what lies behind Chancellor Kohl's famous remark that European integration is 'a question of war and peace'. We all subscribe wholeheartedly to the objective of achieving peace and security 'vlore importantly, British foreign policy over five decades has been committed to that objective, and Britain's actions have followed its words.

Everyone can appreciate the terrible suffering experienced by Europe and share in the objective of never allowing it to happen again. Furthermore, Europe is right to sweep away barriers to trade, investment and mobility across the boundaries of the nation states of our continent. But there are many different means by which those objectives can be achieved. The functionalist, that is to say, centralising model now being applied by the Commission, and by most of our partner countries, is not the only paradigm that could be used. Nor is it the case that those who oppose the present course are anti-European, still less chauvinist or xenophobic.

General de Gaulle was famously in favour of a 'Europe des patries', and opposed the tendency of the European Commission to acquire new powers for itself. He employed rough tactics to establish the principle that nation states should not be over-ruled by majorities on matters of vital national interest.

How could it be that someone who valued Europe, who had fought for its freedom and knew as much as any about war, still nurtured a belief in the nation state?

The answer to that requires us to consider a little more deeply what are the causes of conflict. It seems that those who want to create a United States of Europe believe that nationalism has been the principal cause. They think that if you can replace the nation states, and make the nations of Europe dependent on each other in a new European state, you will have dealt with the problem of nationalism and therefore abolished the main cause of war.

But it is not enough to assert that European wars have been caused by rampant nationalism. Two other things have been necessary too: despotism and a sense of grievance. Take any of the wars of the last two centuries, and it will be seen that the aggressors were despots: French revolutionaries, kaisers, emperors, Hitler and Stalin. They capitalised ruthlessly on some supposed injustice done to their nation, some piece of territory that had to be restored to the mother- or fatherland, some minority that yearned to be set free from its foreign repressor.



The remainder of this speech can be found on Part 2 and Part 3



Last update: 25 March 1999

© Copyright Anthony Cowgill and Andrew Cowgill, 1999

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