The Problem is the Solution

According to The Globe and CBC, Stephen Harper thinks that the problem with the EU is a lack of integration. The CBC news story on this that I heard the other day went even further, more or less agreeing with Harper's perspective (well, more likely the reporter simply accepted what he was told by Harper or a Conservative staffer and didn't bother to look it up himself). In effect, the CBC reporter said that the EU was had an integrated economy but lacked an integrated polity. Its goal was to maintain national autonomy on the political level but promote economic integration.

Well, this might be true if we were talking about NAFTA, but even here it would be a statement that is open to debate (as Stephen Clarkson's work on this subject notes). But ... with regard to the EU? The EU has moved much further down the road of political integration then has NAFTA and has a host of common policies on matters like currency, mobility, environmental protection measures, resource redistribution, agriculture, etc. To state that the EU functions, in effect, mystifies how the EU actually functions.

Why would this be important? This is important because if you don't understand how the EU works, you can't understand the character and nature of the solutions and this is precisely what Harper is doing. How much more integration does he feel is necessary? Sure, the EU maintains political autonomy on all sorts of matters (tax regimes, say). But is this  the root of the problem? Is he -- or anyone -- trying to suggest that the problems in the EU would disappear if there were common continental wide policies on just about everything? In Canada, thanks to federalism, we can't get common national policies on a whole bunch of things (education comes to mind as a key example). What right do we have to tell anyone that they should abandon their autonomy when Alberta and Quebec and New Brunswick guard theirs within Canada. My point is not that Canadians are hypocrites; the opposite. Let's assume that the differences within Canada with regard to matters of provincial jurisdiction exist for a good reason and let's assume that that reason relates to the difficulty of tailoring policies on a national level for geographically diverse populations (Newfoundland, for instance, simply needs a different policy with regard to daycare or education then BC).

If this is true, if Canada's decentralized approach actually has some merits, why would we suggest that others abandon the very things that have allowed Canadians to tailor social, education, health, and economic policy (with admittedly more or less success) to the needs of its population. If "one size fits all" does not work in Canada, why would we think it would work in Europe?

But, let's go further ... what has caused the problems in Europe? It is caused by national economies or is it a product of spill-over from national economies caused by increased international integration? In other words, if Europe truly had isolated national economies, I would argue that they would not have the problems they have now because those problems could be isolated in one or two nations. Increased economic integration -- particularly, but not exclusively in capital markets -- are what has created the disastrous spill-over effect (there are other causes, too, to be sure, such as rampant real-estate speculation and serious macro-economic mismanagement).

The argument for increased integration might be that a bigger polity (say, a continent, has the resources to withstand the shocks set out by, say, Greece or Spain). Perhaps, but is that not what is happening now? Are not Europeans responding more or less on a continental level (let's leave aside the question of whether or not we agree with their response)?  If this is the case, what is there to be gained by increased political integration? Could a more united EU have responded faster? Perhaps but that would depend on the system of government they have (doubt me, as yourself how fast the US responded to its health care crisis). Anyone who says big governments are more responsive then small governments has simply failed to study politics. Anyone who has will tell you that the speed of responsiveness is not a factor of size but of organization. Big governments, I'd guess, tend to be a bit slower just because of their size but this point is not universally true. A dictatorship, for example, can be big and can respond very fast. Our concerns with the dictatorship are not in inefficiency but its ethics.

So, increased political integration does not bring more resources to the table (all resources are scare is  rule #1 of Econ 101) and cannot necessarily increase the speed of response. Moreover, it is possible that increased integration in capital markets is at least part of the problem. So, what is the advantage to increased integration?

I raise these questions to point both to this issue and another one: if the argument for increased integration is so unclear ... why would anyone make it? What do they have to believe and at what evidence have they looked to make such a statement.

A requiem for European Union in need of intervention - The Globe and Mail

See, I was right! OK, that is not quite modest is it. But, for those of you who still might think that isolation is inherently a bad thing ... the Euro Zone is on its 15th crisis summit in the last two years, at least according to this Globe story:

A requiem for European Union in need of intervention - The Globe and Mail

To be clear, I am not arguing that one should always avoid integration. I'm arguing that integration (or, regional trading and currency blocs) are not inherently, in and of themselves, good things. To me, perpetual crisis is not a positive.

What can Canada Learn? Europe moves ahead with fiscal union, U.K. isolated - The Globe and Mail

This story (EU Debt) is ... well ... OK, it is not interesting at all in the panic filled atmosphere of European debt crisis, but it is important and it is important for more then one reason:

1. Note the way those who have qualms about a tighter trans-national centralized fiscal regime are portrayed. I am not fan of the British PM and, yeah, he looks rather clumsy on TV, but come on? Clumsy? Is that what what reporting on a major international debt crisis has been reduced to?

2. Note that those who have concerns are portrayed as isolated and without any discussion of the potential merits of isolation. My bet is that right now, a fair number of Brits are happy they are isolated from the Euro. In other words, isolation is neither good nor bad. Its the context. Simply describing someone as isolated sounds bad but Britain has benefitted from its isolation (Spain, France, Italy, Greece, Ireland, by contrast ... those non-isolated countries) have been hurt. What is more, we heard a lot about British isolation when it failed to sign onto the Euro. Yet, it turned out that that was the right decision. A little historical perspective, then, is not only missing but seems to have been edited out in an effort to portray caution and prudence as bad.

3. Note: "fog": not only is isolation bad but somehow it is addle-minded (foggy). This is just silly and one would have expected something better from "Canada's national newspaper" You get the point: the merits of the issue -- fiscal integration -- are avoided and replaced by name calling.

4. Canadians should pay attention to this because we have heard all this before. At the beginning of the 21st century, we heard that our banks were isolated. Red tape needed to be removed, mergers allowed, etc., etc., and now ... those people who supported that idea will at least concede that they were wrong. The isolated Canadian banking system helped protect Canada from the international economic crisis (or, its worst effects) and we should bear this in mind before we jump too quickly on international integration or fault the Brits for their failure to lovingly embrace a EU that is, frankly, a fiscal disaster.

But, we heard even more about this in the first decade of the 21st century. We heard Canada could not be isolated militarily from the US and so had to participate in the war in Iraq. We heard Canada could not be isolated from the US and so had to sign onto a revamped stars-warsesque missile shield (excuse my cattiness: how did those things go by the way?)  What about that much urged (in some quarters) plan for a common Amero in response to the Euro?

The lesson Canadians need to learn is that major policy decisions should be made with due care. Caution -- even if it creates isolation -- is not a bad thing and on a number of issues (for Canada) has actually served the country well, maintaining its sovereignty while avoiding a war now widely acknowledged as useless. It helped Canada maintain a more buoyant economy then the EU while avoiding the country being weighed down by a defence technology that the US government now concedes does not work.

So ... let's not call people names. Let's assess issues. Idealistic?