The misnomer of European Union

I have been wondering for many years what the driving force about the great experiment called EU was. All the effort to drag the laggards up to the standards of Germany and its neighbours, all that desire to unite… The markets bringing specialisation, economies of scale  are significant economic forces. ”Cold-shower” competitive pressures on the small domestic producers, aided by the price transparency of the single currency will please the Chicago-school devotees. Having an international currency eliminates risks and costs due to exchange of floating foreign currencies. Seigniorage (to the extent Euro becomes a reserve currency) is certainly attractive, why should the whole benefit go to the US.  But none of this has ever seemed enough for the great effort involved, certainly not to get this flawed, ill-fitting, monetary-but-not-fiscal-union in a non-optimal currency zone (where the Euro is cheap for Germany and expensive for Greece).

Well, the picture seems to have gelled in 2012.

First, the obvious: business loves more people in their markets, that’s an easy way to grow. Business also loves a reliable supply of labor asking for no conditions to speak of and low wages. EU now has an inexhaustible supply of labour ranging from 1 euro/hour for manual labour/tradies to about 2 euros for professionals. This need has always existed, especially whenever the economies were expanding, just think back to the voluntary travailleurs étrangers/gastarbeiterprogramm of the post WWII period, or the fremdarbeiter system under the Nazis that includes 15 million abductions few speak about.

Guest workers arriving to the Wirtschaftswunder, Germany’s economic miracle


The new markets are inhabited with weak competitors are easily bought up with cheap finances. Pesky problems of international management are disappearing: currency risk is eliminated and legal risks are evaporating due to the harmonisation of the many national legal frameworks into one.

But what of the externalities such a project entails (costs not borne by the business)? What of the common goods and public services (from road to power) that needs to be built, the non-quantifiable costs of social tensions between the rich and poor now living effectively in one country, the non-monetary pain of dealing with the imposed foreign, inflexible bureaucratic change, the unequal economic advantage of the single currency in a non-optimal currency zone? Well, not really your problem unless you are already in the post conventional stage of moral development. Internationally mobile private corporations are definitely pre-conventional, therefore immune to all those “complications”, and so those costs are invariably borne by the individuals and public funds (i.e. individuals again).

And that, in short, was the pattern that finally became apprent to me. Most of the benefit of becoming a single European market goes to those that can invest, those that control the means of production and the financing of the same. The costs? They are in general borne by the general population. Privatise the gains, socialise the externalities, to twist a familiar slogan. US wars have worked like this at least since WWII (taxpayer funded, but US corporations profiting from it). We started to see this dynamic in peacetime when Germany was being united, and we see it again on the bigger, but much more difficult European scale.

In addition to externalising costs to the non-business sector, The EU is patently unfair on discriminatory grounds too. In Australia we would not accept being paid different rates because of gender, race, religion, etc., but in EU this was always so, still desired by the ruling elite and tacitly accepted by the general population. In WWII the Western fremdarbeiter (foreign worker) got the same pay and benefits as Germans, but workers from the East got less than half. The only thing that has changed after 70 years is that now Easterners don’t come to Germany but stay in the East and get about a fifth of the German wage. The geographic separation of the quasi-colonised is easier for the western host societies that this way don’t have to deal with the awkward social problems travailleurs étrangers/gastarbeiters cause. It is also better for capital: dealing with the less developed eastern governments allows for better externalising environmental costs, asking for higher payments of subsidies to the MNEs (governments pay 4 years wage to the MNE to create 1 job), asking for more advantageous legal conditions in which the MNEs operate and the possibility of price discrimination by charging higher prices for western products in the eastern markets that at home (for example, in Hungary risks to banks are lower and banking fees/real interest rates on loans are about 2-3 times higher than in Austria), all factors in profitability that didn’t exist when the cheap labour went to the rich country to work. This discrimination is intractable because of the special interest driving it and the limited understanding by both the western and eastern populations. The average Romanian resident will just try to survive, not organise for some European-level political change. The average French/German person will also not willingly recognise that they are paid 2000 euros/month to assemble Renaults/Mercedeses, and the Romanian/Hungarian gets 400 euros to do the same work. All the French or German person will see is hordes of desperate, poor, incompatible people flocking to their country, engaging in unsavoury or criminal activities and exploiting their wonderful social security systems. Because of this shortsightedness, they vote for tough, right-wing politics, which is probably the instigator of the problem in the first place.

The designers of the European Union could have easily prevented this. It would be simple to legislate a union-wide minimum wage (in recognition that living costs are pretty uniform across the EU), and to say to the manufacturing corporations that in say, 5 years they could employ unskilled/semi skilled labor for any amount above the minimum wage in the company and its subsidiaries on one condition: they would have to pay the same wage anywhere in EU for all that do the same job. This would spray the western management teams and their plants out to all corners of the EU, and set the powerful economic forces into motion, lowering costs, lifting growth and aiding social cohesion at the same time. Over time, this rule could be increased to higher skills. But politically, EU would have never taken off under this condition; giving up the founding member’s advantage was never the plan. Instead, indebted countries will all have Brussels technocrats instead of democratically elected leaders and will be forced to privatise essential infrastructure (ports, roads, electricity, water, telecommunications), locking in the advantage of the “haves” over the “have nots” now on a bigger stage. The pure capitalism that is being rolled out will ensure the return of lords and serfs (income inequality has grown rapidly during the last two decades, even inside the core EU countries), with some safety mechanisms: the little symbolic PR spending (“Regional policies”, or “EU funds to preserve historic buildings/somesuch”) a pacifier for the masses, some transfer payments (“ECB gives EUR x billion to y country, who then gives it to its banks) that ensures the racket keeps going and we end with more public debt and private gain. We’re only avoiding revolutions because we manage the information, the expectations and frustrations of the masses, better than couple of centuries ago.

If the exploitation of Europe is called European union, then I would hate to see what European disunity looks like. Oh, wait…maybe we have already seen that…

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