Monday, September 26, 2016
The European Union used to solve collective problems, now they are killing it
by Thomas R. Wells
Collective action problems pit individual selfishness against the collective interest in areas as diverse as pollution, trade, peace, and public roads. The invisible hand of the market can't reach them. Instead we need politics. The European Union used to be good at this. But not any more.
An example. Public goods like roads and schools and police are worth far more than they cost. We would all be better off as individuals if we each donated some portion of our gains from them into a collective fund for providing them. Unfortunately, we would each be even better off if we were able to escape paying our fair share while everyone else paid theirs. Then we would have our cake and be able to eat it too, to drive on the roads that other people paid for. But then only suckers would contribute, and so the roads wouldn't get built and we would all travel very slowly and inconveniently.
Collective action problems are mitigated rather than solved. The main approach is the one recommended by Hobbes in his classic statement of the problem: we call our donations ‘taxes' and appoint someone with a big stick to come along and make sure everyone pays. Introducing an external power ('the government') with the power to punish anti-social behaviour changes the pay-offs attached to our choice of whether to contribute to the public good. Now individual rationality lines up with rational collective choice and the roads get built.
There are however two alternative approaches to the Big Stick. We can institutionalise cooperation, for example by making it easier to make binding promises to each other. Or we can moralise it, by taking up a 'team' perspective and acting on the maxim, 'Act as I would wish others to do'.
Hobbes was especially exercised about the collective action problem of peace. Outside a political order (enforced with a Big Stick) rational individuals motivated merely by concern for their own self-preservation would come to fear preemptive attack by others and therefore attempt their own premptive attacks. Man is wolf to man, as he put it. Within a state, the peace and other public goods can be secured the Hobbesian way. However, between states things are trickier, because states don't acknowledge a higher authority and even the most powerful states are merely one among equals. (Just consider China's sneering response to the recent Permanent Court of Arbitration ruling on its annexation of Philippines territory in violation of the Law of the Sea.)
To the extent that national sovereignty means that a government cannot be held accountable to outsiders for its actions, sovereignty is dangerous and expensive. It raises the risk of preemptive war and destroys the scope for the disproportionate gains of cooperation, whether over free trade, preserving world fisheries, or mitigating climate change. The EU project is many things, but one of its most important functions – and its greatest success - has been to mitigate collective action problems without giving up national sovereignty to a unified political order (as in the United States).
The EU achieved this by taking up the two alternative approaches of institutionalising and moralising cooperation.
Institutionally, this takes a variety of (seemingly deliberately) complicated and dull forms. For example, choices about principle, such as the single market, may be taken by national governments, but many contentious details are left to international civil servants. It is easy to see whether or not partner countries are doing what they promised. Multiple projects are tied together, raising the stakes of refusing to cooperate far beyond those of the case in hand. And so on.
EU institutions have been useful in one particular way that has now come back to haunt them. They enabled national politicians to resist the greatest threat to peace and prosperity: vested short-termist domestic interests such as trade-unions and national supremacists. Rather than having to perform the hard and thankless labour of arguing over and over for the reality and significance of the benefits of reciprocal cooperation for the national interest, these politicians discovered that they could simply point to the EU institutions and say ‘My heart is with you but I'm afraid we have no choice'.
Morally, there was a kind of solidarity. As members of the same club, EU countries felt that they were on the same side. They didn't have to worry too much about where the relative gains from particular cooperative projects fell - who came out ahead in power terms - because they didn't have to worry about that power being used against them. (This point may seem obvious, but the old way to analyse cooperative projects from trade deals to anti-pollution treaties, especially well illustrated by Putin's Russia, is to ask not 'How much better off will this deal make us?', but 'How might this affect our relative geopolitical power?) That moral solidarity wasn't by any means complete. But it was substantial enough that even where there were gaps in the institutions, individual countries did not seek undue advantage.
Obviously that is not how the EU functions any more. The Eurozone crisis displayed the collapse of moral solidarity, with every country defending its own interests at vast collective expense. In the most dramatic case, of Greece, Germany and France ran to protect their banks and pension funds stuck holding Greek debt. Without goodwill, the incomplete institutions of the EU couldn't get purchase on the problem. A Big Stick was hastily fashioned and haphazardly applied, and a fiscal problem of a few percent of Greek GDP was allowed to snowball into an excruciatingly awful political and economic crisis.
The collapse of moral solidarity between states reappeared even more starkly in the refugee crisis in which a surge of nativism across the EU quickly swept away any hope of a collective solution. Germany's attempted moral leadership fell flat and borders began to go back up between supposed friends like Sweden and Denmark.
Finally, the demand for nationalist exceptionalism continues to grow. National politicians in Britain had spent 30 years castigating the EU for everything that people didn't like. Well apparently the people were listening and came to the not unreasonable conclusion that this was something Britain needed saving from. When it came to the referendum and those national politicians suddenly tried to defend the EU's cooperative achievements it was too late for them to be believed. 'Give us back control!' the peoples of Europe demand, no one having explained to them that 'having control' over whether to pay your taxes might not be as wonderful as it sounds.
With every crisis the EU fails, its ability to address collective problems unravels a bit further. It no longer seems like a club of countries committed to doing better together than they can do apart, an ingenious and inspiring escape from the brutal cutthroat logic of realpolitik. It is decaying back into neighbourly distrust and rivalry, the old way of doing Europe.
Can it be saved? I hope so. But from here I do not see how.
Posted by Thomas Wells at 12:25 AM | Permalink