January 10, 2013 12:15PM

America’s European Diplomacy: A Bull in a China Shop

The U.S. government appears to be pathologically unable not to interfere in matters foreign as well as domestic. According to the Sun, the Obama Administration has warned the British government not to hold a referendum on remaining a part of the European Union. The U.S. assistant secretary for Europe Philip Gordon said that, “We have a growing relationship with the EU, which has an increasing voice in the world, and we want to see a strong British voice in it. That is in America’s interests.” He added that, “Referendums have often turned countries inward.”


Predictably, the British are annoyed. Bernard Jenkin, a Conservative Party member of Parliament said:

“The Americans don’t understand Europe. They have a default position that sometimes the United States of Europe is going to be the same as the United States of America. They haven’t got a clue.”

Another parliamentarian, Peter Bone, said that Gordon should “butt out” and that the British membership of the EU had “nothing to do with the Americans.” “It’s quite ridiculous,” he added, “and it’s not what you’d expect from a member of the senior executive in the USA.”


Quite so! After all, how would Americans feel if the British government opined about U.S. membership in NAFTA? Would they not be a bit “miffed?” Not too long ago, the then‐​secretary of state Condoleezza Rice urged the Europeans to accept Turkey as an EU member state. Again, how would Americans feel if the Europeans urged the U.S. government to make Mexico America’s 51st state?


Moreover, is it really a good idea for the U.S. government to be dissuading foreign governments from consulting their people on matters of national interest? Not quite democratic, is it?


Finally, consider the astonishing brazenness of America’s government officials. Note that Gordon did not say that British membership of the EU was in the British interest. Instead, he simply stated that the British membership of the EU was in America’s interest. That, presumably, settles the matter for everyone. Gordon’s behavior is worthy of a Roman proconsul throwing his weight around some impoverished province on the edge of the world. It is not what people expect from a White House administration that supposedly wishes to correct the foreign policy mistakes of the previous one.

October 17, 2012 9:53AM

Is Secession a Good Idea?

I'm not talking about secession in the United States, where the issue is linked to the ugliness of slavery (though at least Walter Williams can write about the issue without the risk of being accused of closet racism).

But what about Europe? I have a hard time understanding why nations on the other side of the Atlantic should not be allowed to split up if there are fundamental differences between regions. Who can be against the concept of self-determination?

Heck, tiny Liechtenstein explicitly gives villages the right to secede if two-thirds of voters agree. Shouldn't people in other nations have the same freedom?

This is not just a hypothetical issue. Secession has become hot in several countries, with Catalonia threatening to leave Spain and Scotland threatening to leave the United Kingdom.

But because of recent election results, Belgium may be the country where an internal divorce is most likely. Here are some excerpts from a report in the UK-based Financial Times.

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October 12, 2012 10:35AM

Nobel Peace Prize to the EU Is a Farce

The Nobel Peace Prize Committee has awarded the 2012 Nobel Peace Prize to the European Union for “keeping peace in Europe.” The committee has now turned the award into a farce. But few people are laughing.


The Committee has ignored the important role that the North Atlantic Treaty Organization (NATO) and the United States have played in keeping Europe at peace throughout the Cold War. While it is true that the free trade agreements among the EU countries have led to more prosperity and cooperation, other EU initiatives have exacerbated Europe’s problems and ancient animosities.


Decision making in the EU lacks basic transparency and accountability. As shown by the Danish, French, Dutch, and Irish referenda, the EU has nothing but contempt for disagreement and opposition. The European common currency is in existential crisis. Periodic bailouts, which are needed to keep the eurozone together, have led to riots and loss of life. The EU today is deeply unpopular and distrusted. Corruption, scandals, and cynical abuses of power by EU officials are pervasive.


This is the troubling reality of the EU that should not be ignored. Unfortunately, the Nobel Peace Prize Committee has decided to look the other way.


Here is a related podcast.

September 20, 2012 4:54PM

Just as ‘Fair Trade’ Means Protectionism for the Benefit of Special Interests, ‘Fair Tax Competition’ Means Tax Harmonization for the Benefit of Politicians

Very few people are willing to admit that they favor protectionism. After all, who wants to embrace a policy associated with the Great Depression?

But people sometimes say "I want free trade so long as it's fair trade." In most cases, they're simply protectionists who are too clever to admit their true agenda.

[caption align=right]

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In the Belly of the Beast at the European Commission[/caption]

There's a similar bit of wordplay that happens in the world of international taxation, and a good example of this phenomenon took place on my recent swing through Brussels.

While in town, I met with Algirdas Šemeta, the European Union's Tax Commissioner, as part of a meeting arranged by some of his countrymen from the Lithuanian Free Market Institute.

Mr. Šemeta was a gracious host and very knowledgeable about all the issues we discussed, but when I was pontificating about the benefits of tax competition (are you surprised?), he assured me that he felt the same way, only he wanted to make sure it was "fair tax competition."

But his idea of "fair tax competition" is that people should not be allowed to benefit from better policy in low-tax jurisdictions.

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September 11, 2012 12:23PM

Learning Nothing, Forgetting Nothing: The Useless Laments About Allies’ Contributions to Defense

Today in the Los Angeles Times, Gary Schmitt argues that America’s Western allies are not spending enough on their militaries. This is not news. But Schmitt offers no solution to the problem.


Smaller countries free ride on larger countries’ security guarantees because it is the rational thing to do. Almost two years ago, Schmitt authored a very similar piece in the Wall Street Journal. If he was concerned then, or is concerned now, with the inadequate spending of our allies, the best way to change that is to revoke our commitment to defend them. As I wrote in response to Schmitt’s Wall Street Journal article:

In their 1966 article “Economic Theory of Alliances,” Mancur Olson Jr. and Richard Zeckhauser solved this puzzle. Olson and Zeckhauser explained the disproportionate contributions of NATO members with a model that showed that in the provision of collective goods (like security) in organizations (like the NATO alliance), the larger nations will tend to bear a “disproportionately large share of the common burden.” Due in part to these dynamics, Kenneth Waltz concluded by 1979 that “in fact if not in form, NATO consists of guarantees given by the United States to its European allies and to Canada.” As Waltz pointed out, France’s withdrawal in 1966 from NATO’s integrated military command failed to “noticeably change the bipolar balance” between NATO and the Soviet‐​sponsored WTO.


The implication of the Olson‐​Zeckhauser model, which has held up remarkably well over time, is that the only way to force Europe to spend more would be to make clear that the United States views European security as a private, not a collective, good, and that consequently its provision was rightly Europe’s responsibility. Given U.S. policymakers’ extreme reticence to adopt this conclusion, likely because a more independent Europe would be more independent, we should expect European defense spending to stay low and U.S. defense intellectuals to keep complaining about European free‐​riding, all to no avail. (I have previously written about this subject here and here.)

If we maintain a commitment to defend our European wards, they’ll keep free riding and Uncle Sucker will keep paying. Think tankers writing earnest op‐​eds and policymakers giving stern speeches isn’t going to change this dynamic.

July 19, 2012 3:48PM

Europe’s Crisis Is Because of Too Much Government, Not the Euro Currency

The mess in Europe has been rather frustrating, largely because almost everybody is on the wrong side.

Some folks say they want "austerity," but that's largely a code word for higher taxes. They're fighting against the people who say they want "growth," but that's generally a code word for more Keynesian spending.

So you can understand how this debate between higher taxes and higher spending is like nails on a chalkboard for someone who wants smaller government.

And then, to get me even more irritated, lots of people support bailouts because they supposedly are needed to save the euro currency.

When I ask these people why a default in, say, Greece threatens the euro, they look at me as if it's the year 1491 and I've declared the earth isn't flat.

So I'm delighted that the Wall Street Journal has published some wise observations by a leading French economist (an intellectual heir to Bastiat!), who shares my disdain for the current discussion. Here are some excerpts from Prof. Salin's column, starting with his common-sense hypothesis.

...there is no "euro crisis." The single currency doesn't have to be "saved" or else explode. The present crisis is not a European monetary problem at all, but rather a debt problem in some countries—Greece, Spain and some others—that happen to be members of the euro zone. Specifically, these are public-debt problems, stemming from bad budget management by their governments. But there is no logical link between these countries' fiscal situations and the functioning of the euro system.

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July 5, 2012 1:36PM

The Simple and Predictable Story of Fiscal Bankruptcy in Cyprus

With all the fiscal troubles in Greece, Spain, Ireland, Portugal, and Italy, there's not much attention being paid to Cyprus.

But the Mediterranean island nation is a good case study illustrating the economic dangers of big government.

For all intents and purposes, Cyprus is now bankrupt, and the only question that remains to be answered is whether it will get handouts from the IMF-ECB-EC troika, handouts from Russia, or both. Here's some of what has been reported by AP.

Cyprus' president on Thursday defended his government's decision to seek financial aid from the island nation's eurozone partners while at the same time asking for a loan from Russia, insisting that the two are perfectly compatible. ...Cyprus, with a population of 862,000 people, last week became the fifth country that uses the euro currency to seek a European bailout... The country is currently in talks with the so-called 'troika' — the body made up of officials from the European Commission, the European Central Bank and the International Monetary Fund — on how much bailout money it will need and the conditions that will come attached. Locked out of international markets because of its junk credit rating status, Cyprus is paying its bills thanks to a €2.5 billion ($3.14 billion) Russian loan that it clinched last year. But that money is expected to run out by the end of the year.

So what caused this mess? Is Cyprus merely the helpless and innocent victim of economic turmoil in nearby Greece?

That's certainly the spin from Cypriot politicians, but the budget data shows that Cyprus is in trouble because of excessive spending. This chart, based on data from the International Monetary Fund, shows that the burden of government spending has jumped by an average of 8.3 percent annually since the mid-1990s.

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