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Tuesday, July 19, 2016

The Libertarian/Popperian Case for Brexit: A Response to Professors Somin, Levy, Norberg et al.

The so-called libertarian case against Brexit works like this. Nations do bad things--e.g., tariffs. And the European Union (“EU”) blocks some (perhaps many of) those bad things. Indeed, the EU has set up a tariff-free free trade zone. That’s a good thing. Therefore EU-good & Brexit-bad. This position is not entirely wrong, but it is only half the story.  

First, the EU (and EFTA) free trade zone extends to EU (and EFTA) member states and their dependencies, and also to a few nearby non-member political entities (e.g., San Marino, Andorra, etc). This tariff-free free trade zone does not extend to the world. So when foreign goods are imported into the “tariff-free free trade zone” across the EU’s external borders, EU law mandates a “Common Customs Tariff”. In other words, hand-in-hand with the absence of tariffs among member states is a fixed EU-wide and EU-imposed tariff against non-members’ exports. Whether this situation is a net gain for the people of Europe* is a complex empirical question. That question is not answered merely by parroting the EU’s line: we promote tariff-free free trade. No, that question is not so easily answered because although the EU promotes some free trade, it positively discriminates against non-members’ exports. 

Second, the EU tariff-free free trade zone among member states is not an EU tax free zone. The EU does not collect revenue via tariffs in relation to intra- and inter-member states’ trade, but it does collect revenue in regard to such trade by other means. EU law imposes a 15% value added tax (“VAT”) floor or minimum, which is collected by the member states’ revenue officials. Member states remit a share of those funds to the EU, and this revenue stream is a major source of funding for EU institutions. So the absence of EU-imposed tariffs against member states goods and services (although tariffs are imposed by the EU against U.S. and other non-EU goods and services) should not be confused with an absence of EU-imposed coercive taxation directed against member state economic activity. Whether the use of a VAT rather than a tariff in relation to intra- and inter-member state trade is a net gain for the people of Europe is a complex empirical question. I add that in two ways a VAT is worse (perhaps, far worse) than a tariff. First, tariffs apply only to trade crossing national frontiers, but the EU-mandated VAT applies to pure intra-state trade, even when not crossing national borders. Second, a tariff is one-time tax, but the VAT applies at every stage of production. The former type of tax is relatively easy for consumers to monitor; the latter is much more difficult. So the question about which regime is better for the people of Europe—a regime of competing national tariffs, or an EU-wide EU-imposed VAT—is not answered merely by parroting the EU’s line: we stop coercive taxation in relation to trade. No, that question is not so easily answered because the EU prohibits some forms of taxation (i.e., tariffs among member states), but it imposes others (e.g., VAT among member states). 

Third, another bad thing nations (and other levels of sub-national governments) do is the subsidizing of failing industries (sometimes in the form of outright nationalization). It is true: that is generally a bad thing. The EU has regulations prohibiting some of this conduct by EU member states. That’s a good thing. But again, that is only half the story. The EU imposes its own EU-wide industrial policies and subsidies. The most famous and wasteful is the Common Agricultural Policy. There are also EU mandates, policies, and subsidies in relation to global warming. And of course, sometimes the EU looks the other way (if not encouraging) member states to subsidize particular industries. Have you heard of Airbus? So the question about which regime is better for the people of Europe—one of competing state industrial policies, or EU-wide industrial policies—cannot be answered by merely parroting the EU’s line: we stop each member states wasteful industrial policy. That question is not so easily answered because although the EU prohibits some such policies at the national and subnational levels, it imposes many such policies of its own, and, of course, EU-wide policies embrace a far grander opportunity or scale for the misallocation of resources and for corruption. The Euro has impoverished Greece and much of southern Europe, and when Greece considered returning to a national currency, the EU threatened Greece with a forcible Grexit.

Part of the answer to these questions involves your beliefs about which set of institutions is more likely to get to the right answers—i.e., the administrative agencies of the member states or the EU’s administrative agencies. Another part of the answer will involve competition. Where member states choose policy, there is an opportunity for competition (or at least a geographic limitation in regard to the most immediate and pronounced effects of bad policy), but where the EU imposes EU-wide policy, and that policy is wrong, one and all are locked in. You cannot vote with your feet, unless your feet take you out of your country, and also entirely out of the EU.

Then there is immigration, along with common EU policies relating to asylum, border control, human trafficking, etc. The libertarian idea/ideal (according to some) is that nations are crimes and border-enforcement is tyrannical. But among those who look to more pragmatic defences for open (or more open) borders, the argument is that immigration makes the host nation (and its extant inhabitants) better off (or, at least, leaves them no worse off). Likewise, pro-open borders libertarians frequently claim that crime caused by migrants is not any worse than that caused by the extant inhabitants of most countries. This sort of pragmatic defence requires an assessment of complex longitudinal factual claims. Such assessments were possible, and perhaps remain so, as long as government agencies, NGOs, charities, academics, journalists, etc reported the world around them as they knew it. But if the government actively suppresses reports of crime by migrants and if speech involving such incidents is punished or suppressed by the government, the migrants, or otherwise, then whether we realistically remain able to make such pragmatic assessments is hardly clear. After Cologne, we have to ask ourselves what sort of world we now live in.

Professor Somin writes: “Free market advocates on both sides of the Atlantic would do well to work to improve the EU rather than try to get rid of it.” But Somin gives us no indication in regard to what he would consider a meaningful “improvement,” or even whether improvement is to be sought in regard to reforms to EU governance institutions or in terms of reforming the substantive policy goals pursued by EU institutions and policymakers. Somin also writes that: “At the very least, it would be unwise to junk the EU at a time when the alternative is likely to be statist nationalism, often with authoritarian tendencies of the sort evident in many anti-EU parties, such as France’s National Front.” Id. I happen to believe that these two issues are closely linked: it is precisely EU institutions’ democratic deficit which has engendered the rise of authoritarian parties in the member states. Thus, it may be that the most efficient way to end the success of such parties (in a manner consistent with democratic norms and the rule of law) is to stop further European territorial expansion, to stop further integration among member states, to stop the deepening and expansion of EU powers, and, maybe, to stop the EU project in its tracks through legal and peaceful exit. E.g., Brexit. I don’t deny that that is a difficult pragmatic question. Why Somin et al think it clear that the right path is to continue zombie-like in the expectation of long-sought-after-but-never-to-finally-emerge EU reform seems undertheorized. Is there a history of successful EU reform in the past? They do not say. Is there a reasonably clear set of beneficial reforms of EU institutions that are likely to garner sufficient political support to be enacted? Again, they do not say. So why do they offer this particular or, even, any advice? I know this might sound horribly old fashioned and naive, but is not a democratic choice put to the people a peculiarly appropriate way to resolve such an issue—an issue fraught with highly complex imponderables along with multiple contentious normative claims about what is desirable? Why would Somin et al offer advice to foreigners: who have lived under these institutions and have directly experienced their effects, and who are likely to have far more knowledge on such issues if only because their most essential interests are at stake. Political ignorance?

There was a time when libertarians understood that the virtue of Western institutions, per Karl Popper, was that rulers who chose bad policies could be peacefully replaced through democratic means. That was not the whole of the rule of law and the open society, but it was an essential precondition for both. 

Simply put, EU institutions do not meet that standard. The European Union is not a meaningfully democratic body. The President of the EU Commission and individual EU commissioners—who collectively compose the EU’s powerful executive arm—are not elected by EU (i.e., member state) citizens and they are not appointed by simple majority action in the European Parliament; likewise, the President of the EU Commission and individual EU commissioners are not removable by simple majority action in the European Parliament.** Had the UK’s Remain Camp and the EU’s leadership put forward a real programme to make the President and the Commission subject to normal, parliamentary democratic controls, then a majority of the U.K. electorate might very well have voted to continue with and in the wider European project. But the EU has proven time and again to be incapable of substantial reform along democratic lines. It is the lack of meaningful democratic controls over EU institutions which has engineered the rise of authoritarian politics in Europe.

Leaving the EU was and is a risk, but so is sticking in the unreformed (and, perhaps, unreformable) EU. There were good reasons to support and object to Brexit. But I think one thing is sure: a libertarian promoting continuing participation in EU institutions cannot claim the mantle of Popper and the open society.


* Some people might write: “Peoples of Europe.”

**Compare Professor Laurent Pech & Professor Steve Peers, Referendum Briefing 3: Does the EU have a ‘democratic deficit’?, EU Law Analysis: Expert insight into EU law developments (June 15, 2016, 01:40 AM) (“Furthermore, it’s possible for the Commission [as a whole] to be dismissed by the European Parliament—just like the UK’s House of Commons can pass a vote of non-confidence in a government.”), with id. (failing to mention that dismissal of the Commission as a whole, which has never happened, requires an absolute majority of all members of the European Parliament AND two-thirds of those voting, preconditions which are hardly in line with common parliamentary practice).

Twitter: (@SethBTillman)

Seth Barrett Tillman, The Libertarian/Popperian Case for Brexit: A Response to Professors Somin, Levy, Norberg et al., New Reform Club (July 19, 2016, 11:16 AM), <>. 

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