The European Union is not a well loved organisation, as its own Eurobarometer figures show. The two pillars upon which it was founded - revulsion from inter-necine European warfare and the success with which the founder member wartime continental economies recovered after the war - have faded from view. The relatively high standards of living in the core EU states and their democratic credentials have made the EU a magnet for new members. Whether it is the EU itself which is the attraction, however, as opposed to the characteristics of the states which are its constituent parts, is much more doubtful. Western Europe has an enviable position in the world with its high average incomes and tolerant traditions. The question is whether the EU reinforces these positive qualities or whether it lives off them. Does it reinforce them or does it undermine them?
There is scant evidence that the development of EU wide economic policies has improved its economic performance, particularly in the countries which are most affected, which are those which have joined the euro. Over the last ten years, the average growth rate per head of the population has been 2.0% inside the euro area, compared to 2.6% in the non-euro economies within the EU and 7.6% for the world as a whole. The reasons for the poor performance of the eurozone are the heavy deflationary bias of the European Central Bank (ECB)which is responsible for the monetary policy pursued by all the euro economies, buttressed by the Maastricht and Stability Pact limitations on national budgeting. The ECB's sole remit is to keep inflation low, irrespective of the impact this may have on employment levels or the growth rate. The result has been that the eurozone has for many years had a much higher rate of unemployment than prevails in other parts of the developed world, averaging 9.4% over the last decade. This percentage, however, measures only those who are registered as unemployed. It does not include those who have dropped out of the labour force because they do not think they will ever find a job with reasonable pay. If these people are added in, the true unemployment percentage in the eurozone is much higher - averaging something like 16.4%.
The poor economic record of the EU, and the correspondingly high levels of unemployment it has generated, have created many of the problems which make it much more difficult to get the EU's economic performance to improve. With rapid growth and full employment, it is much easier to have a flexible economy which then becomes much more efficient at taking advantage of new opportunities. When for many people, with new jobs hard to find, "flexibility" means the insecurity involved in job losses leading at best to the likelihood of a worse job at a lower income or to long term unemployment, it becomes a much harder concept to sell to sceptical electorates. It then becomes in everyone's interest to hold on to what they have than to take chances with an uncertain future. While this approach may make good sense for those with existing employment rights, it is very damaging to those currently without jobs and therefore to the long term prospects for the economy as a whole. Much of the malaise of the EU at the moment stems from the fact that all the parties of the political centre, who accept the EU as an established and unchallengeable fact of life, are left with no convincing way of resolving this dilemma. In these circumstances, it is hardly surprising that either extremist parties of the left but particularly the right become more attractive to voters, or that political apathy takes over.
One of the more baleful effects of the high levels of unemployment in the EU is the extent to which societies across the continent of Europe have become more polarised in terms not only of wealth and income but in many other respects too, including health expectations, longevity, educational attainment and proneness to crime. Roughly the top third measured by income enjoy, in general, very comfortable life styles, the next third tolerable if not ideal conditions, while for the bottom third, life is a constant struggle. While most continental economies have well developed welfare states and have policies strongly orientated to maintaining social cohesion, these are undermined by the large income differentials which high levels of unemployment inevitably generate.
A different problem with the EU, perhaps partly in response to the polarisation of its population, is its tendency to try to even out life's chances by imposing regulations on its citizens. These pour out of Brussels not in a stream but in a flood. There is no doubt that all regulations have some beneficiaries. The problem with them is that they are expensive and the cost tends to be diffused over the population at large. The issue then is whether the benefit for the few outweighs the cost to the many. Plenty of studies have been carried out both in the UK and elsewhere to determine where the balance lies and the overwhelming evidence is that the overall costs of regulations as a whole outweigh their benefits by a wide margin. A study in the Netherlands concluded that the net costs amounted to about 2% of the entire Dutch GDP. Government figures in the UK suggest that there is a similar burden in Britain, although some estimates have involved considerably larger percentages than 2%.
All political activity involves a fair amount of horse trading, unfairness and irrationality. There is considerable evidence, however, that the structure of the EU's political institutions make it particularly prone to political deals which are hard to defend. Almost no-one, at least in Britain, thinks that the Common Agricultural Policy has anything rational to be said for it. The Common Fisheries Policy has been a disaster from every point of view. The flow of funds between the Member States as a result of EU income and expenditure is completely indefensible. High income countries such as France and Ireland and especially Luxembourg benefit wholly disproportionately. It is hard to generate feelings of loyalty and idealism for the EU institutions against this kind of background.
Respect for the EU is not helped either by its lax accounting standards and proneness to fraud and corruption. It is now eleven years since the accounts of the EU were signed off by its auditors, an almost unbelievable commentary on the quality of its accounting standards. Every year, some 5% of EU expenditure cannot be accounted for at all while another 5% is misappropriated. It appears that only about 5% of all EU expenditure is ever audited to up to date international standards. Those who have protested from within the EU bureaucracy at this dismal performance have been viciously attacked and rubbished. Meanwhile, scandals such as those at Eurostat and over MEP expenses drain away support for the EU as a well run organisation.
Internationally, the EU has a very mixed reputation too. Some of its political class want to see the EU as a rival to the USA. The military weakness of the EU, however, and its demographic projections, showing a steep decline in both population and economic weight in the world over the coming decades, makes this look an unreal goal. A more appealing stance for many people would be for the EU to have a high reputation for putting forward realistic and effective policies for promoting peace and prosperity generally, especially in Third World countries. The EU attitude to the recent World Trade Organisation negotiations and, in particular, its intransigent defence of the Common Agricultural Policy has done little to enhance its reputation while in other areas of foreign policy, it has been difficult to establish any common approach at all.
The root problem with the EU is its undemocratic nature. Its constituent states may be democracies but the EU does not itself have a democratic structure and the trappings that exist are largely a sham. There is no electorate to which the major EU institutions are genuinely responseible. The EU is largely run by an unelected Commission, buttressed by unelected judges at the Luxembourg Court and unelected bankers at the European Central Bank. The European Parliament is a consultative assembly, not a parliament which can decide who the government should be and which can dismiss one which has lost its confidence. Elections at the EU level therefore have little influence on what happens while the power wielded by the EU machinery of governance steadily increases. It is the impotence of the EU citizen, faced with no effective way of controlling what the EU does, which has much to do with the failing support which the EU enjoys.
Can Britain do anything effective to change the nature of the EU? Experience strongly suggests not. As very heavy paymasters to the EU, it might be thought that we were in a strong position to influence what it does. The problem is that threatening to withdraw funding only becomes an effective weapon against the background of a serious threat to leave the organisation altogether. As long as all the major parties remain committed to Britain staying in the EU whatever happens, we have no effective leverage. The determination of the Commission and the other EU institutions to increase their power and influence, plus the acquiescence or encouragement of most of the EU's political elite to this happening, makes radical changes impossible to achieve. Especially against a backdrop of rising net contributions to the EU budget, floods of regulations generating more costs than benefits and the madness of both the Common Agricultural Policy and the Common Fisheries Policy, it remains to be seen how long the British electorate will be prepared to tolerate this situation.