Why democracy won't work at the European level
Some who know these arguments will object that democratic
accountability for the European central bank's decisions could and
should be established at European level through the European
The point demonstrates the success that Monnet and his successors have
had over the years. In the period following the war it was impossible
to find many followers for the visionary notion of a United States of
Europe. But the pioneers of European integration patiently made what
progress they could with smaller scale projects in the economic field,
leading in due course to the idea of a single currency. The single
currency. however, requires the centralisation of decision making on
issues that are so very important, that even those who oppose the whole
idea may cry out for the creation of centralised democratic
to provide some element of people's control.
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 of
democracy, for the formation of the institutions of centralised
The European parliament is not presently perceived by the British
people. perhaps not by any other population either, as a
body invested with much democratic trust and authority.
That is not merely because it is in its infancy. Democracy requires
not only the cracy but also the demos, not only the state but also the
people. You can create the apparatus of a state at European level,
a common frontier, a single immigration policy, a common foreign and
defence policy, and a single currency. All the attributes of the
state, all its functions, can be transferred to the European level
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.
If the Scots are now doubting that a democracy spanning from John o'
Groats to Land's End is capable of making every part of the country
properly represented, then certainly no parliament spanning from Dublin
to Athens, and being, charged with the critical decisions affecting
lives and livelihoods, is capable of satisfying the democratic
requirements and aspirations of each of our populations.
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
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. We should
not try to do at European level things that nation states should do.
Nation states should take the most sensitive policy decisions, because
they require democratic control, and democracy can work only with a
nation state where people share values, history and cultural tradition.
Looking back instead of forward
One of the boldest efforts of propaganda by the enthusiasts for
European integration, is the attempt to portray themselves as modem and
forwardlooking. They are the opposite. They are mainly motivated by
fear that the past may repeat itself, that is that Franco-German
or rampant German nationalism may re-awaken. They propose a
centralisation of power that runs flatly in the opposite direction to
the march of history. We can see around us that the old empires or
unions of states have collapsed in failure. The Soviet Union and
Yugoslavia both failed in their attempts, even using coercion, to
sustain a centralised system of governmental control over a wide area,
covering many diverse peoples and nations.
The European integrationists are out-of-date in another way too.
They see a European political union as a necessary response to global
competition, believing that we must react to the challenge posed by the
industrial and trading giants, like the USA and Japan by creating a
giant Europe. Chancellor Kohl has claimed that 'the nation-state ...
cannot solve the great problems of the twenty-first century- and that
Europe has to 'assert itself '. Dr Helmut Hesse has said that ' a
multiplicity of small states is not suitable for the world economy
Global competition is indeed between industrial giants, but they are
companies, not nation states. There may well be an argument for
industrial mergers in Europe, for example between defence contractors
France, Germany and Britain. But that is a completely separate agenda
from political integration. Paradoxically, some of the people who are
spurring us on towards political union are also those who still believe
in national protectionism, and therefore refuse to implement policies
that would bring about European industrial rationalisation.
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
sense, meaning a bigger role for the state, through more interference
and regulation. That frame of mind has produced the social chapter,
is a strong influence within New Labour. Such people believe that
global competition will whittle away worker protection and social
standards in the developed world, and that we must create a large
European corral in which they can be defended against the pressures
outside. New Labour, however, also spends a part of its time arguing
against that, advocating the spread of flexible labour markets instead.
In that second view they are right. Flexibility, along with rising
educational standards, will enable us to compete and to improve our
social standards. Excessive interference by governments, whether at
national or European level, is clumsy and unresponsive, and has already
played a large part in creating, unemploym
ent levels in Europe well above those of the USA.
We are being led towards a Europe which displays many of the
characteristics of Britain twenty years ago. It is populated with
overmanned and protected nationalised industries. In many places
private sector managers are in thrall to trade unions. Business is
down by government bureaucracy and interventionism. Public spending is
appallingly high. There persists the belief that Europe can go its
sweet way, unaffected by the assault from international competition,
provided that the fortress walls are built high enough. Twenty million
unemployed Europeans give mute testimony to the failure of those
To present any of that as forward-looking is indeed a triumph for the
Will the single currency be an economic success for Britain
There are those, no doubt, who would argue that even if it is true
that the single currency requires the centralisation of important
policy-making, and even if you cannot re-create at European level the
sort of representative democracy to which we have become accustomed in
our nation states, we are likely to get better decisions from a
central bank than we have had from governments in the past, and that
will make people happier.
That is hard to believe. Unaccountable bureaucracy does not produce
better decisions than democracy. The corruption and inefficiency in
CAP sufficiently tells us that. Furthermore there is no evidence that
single currency will lead to better policies, greater stability or
greater economic success for its members. It is pure conjecture. The
single currency will be traded in world markets against other
currencies. Whether it is more stable than the national the national
currencies it replaces will depend on how good are the policies of
who control it.
There has been no stability between the currencies of the USA and
Japan - the world's largest and second largest economies. Currency
stability is an illusion, and in Asia there is now on display many a
scalp of men who declared that their currencies would hold their
The case for Britain Joining a single currency has lost whatever
appeal it might have had when first presented a few years back. Five
ten years ago it was plausible to argue that Britain was forever dogged
by inflation, and doomed continually to resort to devaluation in order
to maintain competitiveness. Unemployment in the UK was stubbornly
high. By contrast, Germany appeared to have discovered the secret of
non- inflationary growth, and was able to compete successfully in the
world on the basis of quality, despite the strength of its currency.
How much better, the argument went, for Britain to give up control over
its own economy in order to reap the benefits of the German economic
Things look rather different now. 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
it is competing successfully. The current concern is not with
devaluation, but with the strength of the pound.
Mr Blair has said that he wishes to decide whether to enter a single
currency solely according to an assessment of whether it is in
economic interest to do so. As will be clear from what 1 have said
already. 1 think that misses the point of what is really involved in
the decision. But anyway, the economic case appears very weak. 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. 1 can see that there will be a small saving on transaction
costs for companies trading with Europe if we all have the same
currency, but it will be marginal. Against that, British industry has
to ask itself whether it really wishes to enter the next recession with
the currency locked at its present le
vel, and with the British government powerless to vary interest rates.
The grave danger for Europe, economically speaking, is to introduce a
single currency where no single labour market exists. A single
means that, in future, variations in economic performance between one
region and another cannot result, as they do today, in a downward
adjustment of the currency in the less successful areas, and interest
rates must reflect policy established at the centre, not local
conditions. The full impact of recession will therefore fall on
In the USA, a vast area covered by a single currency, people who lose
their jobs in a depressed area can move to another state in search of
job, however inconvenient it may be. But people cannot move at will
within our continent to find new work. They face barriers related to
language, qualifications,, local culture and plain prejudice. Some of
those can be reduced with the passage of time, but most will prove
intractable. Indeed, with the so-called Posted Workers Directive,
approved under the Social Chapter, European Union labour ministers seem
determined to reduce labour mobility across borders.
There is another danger. Britain presently receives a notably high
proportion of the inward investment attracted into Europe. Those
investors clearly see value in Britain's membership of the EU and free
access to its markets. But they also see it as an advantage that the
British economy is more flexible and de-regulated than some others in
Europe. In other words, Britain derives an advantage from not
all European economic policy. Investors know that wherever they invest
there is an exchange rate risk. But British economic policy over the
last 18 years has offered them stability and reassurance.
But if we Join the Euro, economic policy in Britain will be
determined principally by events in the geographical centre of the
European Union. There may well be a mismatch between conditions in
Britain and Germany. Interest rates could be inappropriate to British
economic circumstances, as they were when we were in the ERM That
represents a bad risk for investors. It may then make more sense for
them to invest where local economic conditions and interest rates
are-most closely related, that is, in Germany.
Imagine the impact upon British public opinion if unemployment is
high, and inward investors are drifting away, the government is
powerless to vary interest rates, and the electorate is unable to
anything by electing a new one.
The real questions of security
I began this lecture by recognising the importance of European
security. All other objectives are secondary. The principal guarantor
of peace in Europe has been NATO. It has provided a wholly credible
deterrent against attack. With American troops positioned in Europe,
any potential adversary was wise to believe that America really would
to war to preserve the territory of its European allies. America's
awesome military capability was evident.
Incidentally, the establishment of NATO did not infringe the
sovereignty of its members. Its Treaty is explicitly an agreement of
sovereign states who undertake under Article 5 to regard the violation
of the territory of another member state as though it were a violation
of their own and to respond with such action as they deem necessary.
NATO has no federalist destiny. In the near half century since it was
founded, unlike the EU, it has passed no laws that bind its member
states, and no court has extended its influence. In no way has it
increased its powers since 1948. The democratic accountability of
governments has not been affected.
NATO is now responding to the new situation created since the end of
the cold war, recognising that the greatest contribution it can make to
security is to strengthen the new democracies of Europe. Membership
either NATO or the EU or of both can help underpin those democracies.
The EU should follow NATO's example. It should be trying to lower the
barriers for entry by the countries of Eastern Europe, rather than
creating an inner core which requires qualifications that they cannot
hope to attain. Negotiating admission for new members looks like being
a protracted, and maybe cantankerous, business.
The EU must also address itself to the remaining security issues in
our continent. We need to do all we can to make Russia feel welcome in
the family of western democracies. Membership of either NATO or the
is impractical, not least because Russia is a vast Asian as well as
European power. But again the EU ought to be demolishing fences rather
than continuing to develop its fortress.
In the case of Turkey, the EU seems to be almost careless in its
relations. The EU has made it clear to Turkey that although it applied
for membership years ago, there is no early prospect of admission.
Meanwhile countries that have only recently become democratic and
pro-western are politely ushered to positions higher up the queue. Few
things could be more important for our security than that Turkey
remain democratic and well-disposed towards the West. Turkey is being
kept at bay, partly because some European leaders apparently see the EU
as a subset of Christendom; and partly because with its manifest
problems, Turkey's inclusion certainly would create substantial
of integration. We have had to put heavy reliance on Turkey as a NATO
ally during our conflicts with Iraq. It is difficult for the Turkish
government to sell to its people the merits of being a good member of
NATO, and it is difficult for us to persuade Turkey to be reasonable
over the Cyprus problem, if it is off
ered so little by the EU.
Here is an instance where the EU has a clear choice between on the
one hand maintaining its preoccupation with achieving 'ever closer
European union', and on the other hand using its enlargement to enhance
the security of its members. It appears to have made the wrong
It falls to think strategically.
This case serves to illustrate a broader truth. Those who are most
influencing the progress of Europe have become dreadfully confused.
They believe that European integration is the only guarantee of future
security, and they are pursuing the objective with a single-mindedness
that borders on fanaticism.
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
Moving away from democratic control is retrograde in itself, but it
is also highly dangerous, because disillusion and grievance provide a
breeding, ground for nationalism and extremism. In the interests of
security, of tolerance and harmony between nations. in the interests
preserving the most valued gain of the post-war period which is
democracy, we should turn from the headlong rush towards European
political integration, in which the single currency is a decisive step.