The In/Out Question and European Spring

18 June 2014/No Comments
By Nick Dunbar
cover of The In Out Question by Hugo Dixon
The In Out Question
cover of European Spring by Philippe Legain
European Spring

The In/Out Question: Why Britain should stay in the EU and fight to make it better by Hugo Dixon (Kindle Single, 130pp)
European Spring: Why our Economies and Politics are in a Mess and How to Put Them Right by Philippe Legrain (Amazon print-on-demand, 448pp)

 

As the May elections to its parliament showed, the European Union is at a crossroads. Lacklustre economic performance has eroded trust in the EU, compounded by increasing fears of immigration leading to a rise in support for anti-EU and extremist parties. Threatened by the UK Independence Party, British Prime Minister David Cameron has promised voters a referendum on EU membership.

Against this context of rising anti-EU feeling come two books aiming to shape the debate over EU reform. Journalist Hugo Dixon takes a very narrow focus: the UK in/out debate.

In a crisp, readable text only 130 pages long, Dixon tries to inject some hard factual analysis into a debate dominated by emotion and populist rhetoric. He demolishes false arguments such as ‘welfare tourism’ (which actually benefits British ex-pats while immigrants to the UK pay proportionately more tax than natives).

He argues that the UK would be worse off outside the EU because it would lose the leverage it now has with other trading partners such as the US and China. Half-measures such as a Norwegian, Turkish or Swiss-type affiliation would also be worse for Britain, he says. Instead, the UK should work on reforming the EU from within.

Dixon has pitched his book carefully. He knows that likely ‘no’ voters will consider the UK’s economic model superior to continental countries and they certainly won’t be sentimental about EU social programmes. So Dixon presents the EU as a favourable economic transaction for Britons that is better than its alternatives. Euroscepticism across the EU offers what he calls a ‘golden opportunity’ for reform which can only benefit Britain, such as fully opening up the market for services and supplanting the EU’s ailing banks with capital markets based in the City of London.

Philippe Legrain may reach similar reformist conclusions to Dixon but his scope and intended audience is much broader. More of a policy wonk than journalist, Legrain has something of an insider’s perspective by virtue of his stint as special adviser to European Commission president José Manuel Barroso between 2011 and 2014.

His book attempts to do several things. He gives a blow-by-blow account of the euro crisis and what he sees as the mistakes of policymakers in responding to it. He shows how austerity measures and talk of Eurozone break-up worsened the crisis and only eased after Mario Draghi’s dramatic ‘whatever it takes’ speech in July 2012.

Lest his British audience starts feeling smug reading about the plight of Eurozone spendthrifts, Legrain diagnoses a deeper economic malaise within the EU, including the UK, resulting from low productivity and vested interests. British politicians are lambasted for the ‘unforced error’ of leaping on the austerity bandwagon in 2010 and British companies for squandering the flexibility provided by sterling. Germany also gets a pasting from Legrain. Its power as the Eurozone paymaster masks deep economic weaknesses in its workforce and industrial base.

After 280-odd pages of naming and shaming, Legrain comes up with a recipe for reform, arguing for a complete reshaping of fiscal policy as well as political institutions. To make the EU more adaptable, dynamic and decent, Legrain comes up with an ambitious wish list.

For example, he wants to replace income tax with a levy on net expenditure (thus taxing unearned income net of savings), abolish tax deductibility of interest payments and start taxing land values ““ a move which he says would help cool the UK’s febrile property market. To reduce inequality he proposes that governments hand out education vouchers and provide young people with a capital sum to start their own businesses.

Legrain has argued neoliberal views for over a decade, and his previous books promoted the benefits of globalisation and immigration. Continuing that theme in European Spring, he wants to see disruptive innovators like Uber or AirBnB break down closed EU markets. He thinks Europeans should embrace fracking, eat GM food and build on green belts. Although he doesn’t quite express it like that, Legrain wants Europeans to become more American.

Juggling data and armfuls of dense footnotes, Legrain sometimes loses track of his argument and his broad ambitions for the book can at times clash with each other. While the decision to publish directly via Amazon may have worked for Dixon, one feels that Legrain could have done with the services of an editor employed by a traditional publisher.

Where Dixon and Legrain converge is on their agenda for fixing the EU’s democratic deficit. For Legrain, his raw first-hand experience of the euro crisis make the lack of accountability at the European Central Bank, Commission and Council particularly galling. Both he and Dixon want national parliaments to get more involved in policing decisions in Brussels. Legrain wants to liven up the EU parliament and Dixon wants more national government checks on EU initiatives.

The question readers might ask is how likely is this to happen? Will the rise of anti-immigration parties bounce Brussels into reform, or will integrationists use their blocking majority and carve out a two-speed Europe? In the same way that actions by policymakers during the crisis made Eurozone sovereign bonds more volatile than anyone expected, referenda such as the UK’s inject a wildcard element into the EU’s future that are hard to factor into a risk model. The lesson of both these books is that this volatility may be suppressed but it certainly hasn’t gone away.

 

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