The countries which make up the EU ought to be some of the most favoured in the world. Having industrialised early, they have much higher than average living standards. They are blessed with generally benign climatic conditions, fertile soil and an attractive environment. After sometimes tempestuous political pasts, all are now well established and tolerant democracies. They have been at peace with each other for as long as most of their citizens can remember. They share a massively favourable cultural and intellectual background. In an uncertain world, European countries ought, therefore, to be able to provide an attractive model to many less advantaged parts of the world. To a lesser and lesser extent, however, is this happening. The reason is that, for all the inherent advantages of its constituent Member States, the governance of Europe as a whole, through the mechanism of the EU, has been plagued with errors of judgement and commission. As a result, at least relative to what reasonably ought to have been achieved, Europe's economic record and prospects are very poor. Its demographic prospects are dire. Its political importance in the world is slipping fast. Respect for the way in which it is governed is waning. Much that could and should have gone right has gone wrong. Why has this happened?
A good deal of the malaise from which Europe suffers stems from the economic policies which the EU has embraced and which its political class has, in turn, foisted onto its constituent economies. The key feature has been a determination to use economic policies to drive the EU towards becoming a single economic unit. The principal way in which this has been done has been to make successive attempts to lock the currencies of EU Member States together. All these efforts have been unsuccessful for entirely predictable - and extensively predicted - reasons. Currency unions only work on a long term basis if the areas covered are sovereign states with sufficient internal social, historical, cultural and linguistic coherence for large internal taxation and spending transfers to be accepted. Although this is what the EU political class wanted to see happening in Europe, they failed to see that imposing monetary union before the conditions needed for it to be viable was a recipe for disaster - which it was during the Snake period from 1969 to 1975, during the Exchange Rate Mechanism between 1979 and 1993 and which it is now with the euro. As long as some countries - particularly Germany and Holland - have far lower levels of inflation and correspondingly high export competitiveness compared to other less disciplined economies, but without huge resource transfers, monetary union was always doomed to fail. Efforts to stop currency movements occurring, however, inevitably involved deflation in the weaker economies, followed by declining performance in the more competitive ones as their major export markets in the weaker economies fell away. As is the case now, the result of trying to lock currencies together in the EU has always been relatively slow growth, high unemployment, pressure on public expenditure and widening income, wealth and life chance differentials.
Although it is not fair to blame all deep-seated social changes on governments at any level, it is equally unreasonable for governments to wash their hands of all responsibility for major shifts in behaviour, much of which is conditioned by taxation and social policies. In this category falls the enormous decreases in birth rates across much of the EU. While the population in the UK is set to increase between now and 2060 by 15%, in most EU countries it is set to fall, in some cases dramatically. In Germany, the decline is projected to be 14% - from 82m to 71m, and in may Central European countries by around 20%. By 2060 one in eight of the entire EU population is expected to be aged more than 80 - a far higher figure than in most of the rest of the world. These demographic changes have huge impacts on the labour forces of the countries with declining populations, leaving far fewer people of working age in proportion to those who are either older or younger than the working population. These trends are going to have major implications as to what pensions can be paid to older people, what levels of public services will be maintainable, how to manage excess assets such as surplus housing, and how long people will have to go on working before they can retire.
The poor economic prospects and dire demographic projections for most EU Member States underline the relatively poor strategic prospects for European countries over the coming decades. The much higher growth rates being achieved in other parts of the world, particularly in major countries such as China and India, imply a very large shift in economic power and influence away from Europe to other countries, many of which were comparatively insignificant economically until quite recently. Militarily, Europe is also in a poor state. While defence budgets were understandably cut as the cold war came to an end, other trends have made the military forces of most EU countries even less effective than they might have been. Procurement has been very poorly managed, leading to very high costs for the limited amount of hardware that has been purchased. Many European forces are unable or unwilling to put themselves in danger, thus rendering them almost useless in fighting conditions. Despite valiant efforts to achieve a common front on international issues, deep divisions of opinion among European nation states have made efforts to present a unified policy to the rest of the world on many issues impossible. From a strategic perspective, therefore, the EU's role in trying to project Europe's interests in the world more effectively by pooling resources rather than leaving each Member State to fend for itself, has not been a success.
The EU might have a better standing in the world if some of its flagship policies were not so damaging for poor people throughout the world. Worst of all is the Common Agricultural Policy (CAP), which precludes Third World countries from selling many agricultural products to the EU even though they could be supplied at far lower prices than prevail inside EU tariff and quota barriers. The Common Fisheries Policy (CFP), though on a smaller scale than the CAP, is even more pernicious. Not content with pillaging the once rich waters surrounding Europe, EU fishing vessels now regularly over-fish large stretches of sea surrounding Africa, thus putting local fishermen out of business. The total cost to Third World countries of the CAP and CFP is now much higher than the aggregate EU aid budget, leaving the EU effectively sucking resources out of poor countries instead of helping them to develop. This really is a scandalous state of affairs.
The inability of the EU's political class and the institutions through which it works to run the EU's affairs reasonably successfully, and to provide what most EU citizens want, is reflected in the comparatively low and falling levels of support which the EU has across the board among Member States. Perhaps EU's biggest and most fundamental failure of all has been the undemocratic way in which its institutions have developed, with remarkably little effective popular control over what is done. It is no accident that this has happened. Since its inception the EU institutions were deliberately established to reflect the view of people who deeply distrusted democracy and who thought that unelected officials could do a better job than politicians who had to face the ballot box. As a result most of the power within the major EU institutions is held by members of the Commission, the European Central Bank and the Luxembourg Court, none of whom ever have to stand for election. The European Parliament is a consultative assembly rather than a sovereign body capable of forming and dismissing governments. The overall result is that the EU lacks the fundamental loyalty and support which any organisation needs to be really effective.
As a new government comes to power in Britain, all the familiar problems about Britain's relationship with the other EU Members come yet again to the fore. As has always been the case ever since Britain joined the EU in 1972, there is still the same dichotomy as there always has been between the aspirations and intentions of most political leaders on the continent and those in the UK. Despite all the problems the EU faces, the vast majority of the EU political class - although not their electorates - still want to press ahead with creating a United States of Europe more or less on the same basis as the USA. This is not a view shared by the vast majority of the British people and not by a majority of the UK's active politicians. As the EU's failings become more apparent, so reluctance in the UK for further moves towards a federal EU state become stronger, but at the same time more difficult to resist as qualified majority voting becomes more prevalent. In the past, despite serious misgivings on many occasions, British governments, with varying degrees of reluctance, have gone along with the way the EU has developed and avoided precipitating a crisis by refusing to accept what was happening. Perhaps the same thing will happen again over the next few years despite all the familiar promises we have been given about the British government standing firm against further integration. It may be, however, that we are getting close to a tipping point, perhaps triggered by the very major problems which the EU is facing as monetary union shows increasingly ominous signs of moving towards disintegration. Especially if radical new measures are to be introduced to attempt to stop the euro fracturing, involving efforts to achieve much closer economic integration and further centralisation of power in Brussels, there may come a point where moves towards a much more flexible and less prescriptive position for Britain in relation to other European countries becomes practical politics. If Britain is genuinely determined not to become part of a much more closely integrated but decreasingly trusted and respected EU, the direction of travel could begin radically to alter. This is surely what most people in Britain would like to see happening.