Robert Nef: The Mount Pèlerin Society General Meeting, Prague, Contribution to Session 4, Sept. 5th, 2012
Ladies and Gentlemen,
We have heard many fine contributions about the likely future of EU, EUro, EUrope. As one of the few here who belongs only to the third category, I’d like to share with you some insights from the Swiss perspective. To show just how European I am, I’d like to open my remarks by quoting not a Swiss confederate, but an Austrian. It shall not be an Austrian economist, but an Austrian poet. Franz Grillparzer (1791 – 1872) had very good reasons in 1859 to be against Nationalism. He remarked that “human development leads from Humanity via Nationality to Bestiality” (Grillparzer, 1859). Unfortunately, we have observed this rapid progression over the course of the 20th century full of war and growing welfare state.
Allow me now a technical remark. My experience with giving lectures is that as a rule people only remember the good quotes, the good jokes and the good stories. So let me now turn to a little passage which contains all these three ingredients. It is the fable of “The fairly intelligent fly” by the American writer James Thurber (1894 – 1961). It expresses beautifully the stance of those who are sceptical about centralists in all parties and about those who, with no pun intended, “fly the national flag” whenever possible. The story goes like this:
“A large spider in an old house built a beautiful web in which to catch flies. Every time a fly landed on the web and was entangled in it the spider devoured him, so that when another fly came along he would think the web was a safe and quiet place in which to rest. One day a fairly intelligent fly buzzed around above the web so long without landing that the spider appeared and said, “Come on down.” But the fly was too clever for him and said, “I never land where I don’t see other flies and I don’t see any other flies in your house.” So he flew away until he came to a place where there were a great many other flies. He was about to settle down among them when a bee buzzed up and said, “Hold it, stupid, that’s flypaper. All those flies are trapped.” “Don’t be silly,” said the fly, “they’re dancing.” So he settled down and became stuck to the flypaper with all the other flies. Moral: There is no safety in numbers, or in anything else.” (Thurber, 1939)
Swiss entry into the EEA was rejected on December 6th, 1992, by a narrow majority of the people and a solid majority of the cantons. Current polls show a majority of over 70% against joining the EU. Our government and the national central bureaucracy are still in favour of joining and follow a step-by-step strategy of integration by fait accompli. Using a salami method, slice by slice it effects new understandings for allegedly good reasons, and then it merely formalizes them using the argument that they have been effective for some time anyway.
It is in fact impossible to stay completely outside of the whole integration process. The EU is in the middle of a crisis today and it would seem obvious for a speaker from a non-member country to give the EU a good bashing and paint a bleak picture of its future. However, matters are serious enough and this is not the time to make jokes or engage in Schadenfreude. The EU in general and the Euro in particular do have some serious structural flaws. But the main message I am bringing is this: No institution has ever been perfect.
The EU is not a fixed condition but an ambitious, maybe too ambitious project and a piece of unfinished business. Therein lie its risks and its chances. At present, it is partly in a bottleneck and partly in a dead-end street, this does not make the problem easier to solve, since both problems require drastically opposite solutions. A resolution of a bottleneck needs more force in the same direction; more of the same. The only answer in a dead-end street, on the other hand, is to turn around and start in a new, different direction. It would be disastrous to use the same strategy in a dead-end as one would in a bottleneck. In the EU, there are currently both bottlenecks and dead-end streets. Equally though, this is no reason for panic. Every human project is confronted with such challenges from time to time.
Some of my American and British friends predict that “the party is over” and some of my German friends offer visionary predictions “das knallt alles an die Wand“, that means it will all come down crashing. That a classical liberal Europe would then rise from the ashes like a phoenix – I rather doubt. As classical liberals we must do all we can to keep Europe diverse, ready to learn, open within the international context and capable of adaptation. I may be concerned about the future of the EU, but I know that it is not possible to simply turn back the clock in the history of institutions.
All friends of liberty, all classical liberals and libertarians, are called to first seek out the liberal core of the European idea and then to defend it tenaciously against all undesirable developments in the direction of more central bureaucracy and more personal and regional redistribution.
I am convinced that Europe today needs more than short-term political crisis management. Neither will the flight forwards into a centralized economic, financial and social policy solve the current problems. What is required is a consideration of the conditions and facts that form the secret to the success of our little continent in world history. It is our diversity that enables competition in the broadest sense and mutual learning- that diversity which tenaciously resists the spirit of standardization and harmonization.
Let’s return to the regional integration as a trans-national alternative to the nation state. The terms “region” and “integration” are not easy to define, they are weasel words. The word “region” harkens back to the “rex”, the king. Integration, on the other hand, has the double interpretation of either eliminating or of cultivating differences.
Personally, I am in favour of cultivating diversity. That is, after all, one of the great secrets of the Swiss success. European diversity includes the individual responsibility of EU-member states for their own budges, which requires a consistent no-bail-out policy that expects each member to take on responsibility for its own financing and to bear the consequences of national bankruptcy. This combination of diversity and autonomy is what Eric Jones called “The European Miracle”: “The fundamental trump card of Europe is its diversity” (Jones, 1981).
This is not only the diversity of nations, but above all the internal diversity within a nation state. In the past this internal diversity used to be considered a disadvantage, but in a competitive world of a learning society it is effectively turning into an advantage. At least that is the experience we have made in Switzerland. Diversity makes us all more robust and less vulnerable. It enables mutual transfer of knowledge, one simply copies the successes and avoids the mistakes.
This is, in fact, a form of experimentation. History does not offer us ready-made complete models that we can simply replicate. But it does show us a lot of interesting experiments. I, for example, never call Switzerland a model. It cannot be copied. But it is an (at least partly) successful experiment.
The whole life is an experiment. Technology can be regarded as Nature experimenting with humans. In this light, politics is humans experimenting with humans. Experimental economists are becoming increasingly famous these days, but their experiments are always designed, from above. The experimentation l am talking about is different. There is no central designer, just small groups experimenting with what works and what does not.
Indeed, the smaller the group experimenting, the better, because the risks of a failure are contained within a small area or a small group of people. Diversity over an area is then a natural creator of small groups suitable for experimentation. Take Prague, for example. The history of this beautiful city is a history of competing overlapping minorities (in a similar fashion as they exist in Switzerland). If Prague were completely homogenously populated, it would be difficult to define a group or area that may try to alter slightly the way of working out answers to collective questions – to experiment with adaptation.
Historically, the most decisive cultural and political unit is the city (with its suburbs), not the centralized nation state. Political institutions of the future will simply be confederations of cities and local communities. I suggest that an actual path forward is not “let us forget about all regional integration and let us go back to the good old nation state!” Switzerland has never been a typical nation state and this is another of the many secrets of our successes.
Some time ago I tried to put together a list of these secrets. Of course they are not a closed system, there are many others, but not all secrets are equal, some secrets are more equal than others. In the spirit of classical liberal openness and competition of systems, I lift the veil of secrecy and offer them for your deliberation. With the proviso that I would be the first one to admit that some of them are, unfortunately, in decline and perhaps no longer apply as much as they used to.
Swiss Success Secrets:
- Diversity of Languages, Religions, Cultures. Not one is dominating the others.
- Overlapping minorities, who do not like each other very much, but at the same time they don’t hate each other.
Overlapping and asymmetric sympathies and antipathies. We don’t love each other as somebody of the same kind, but we trust each other internally a little more than we trust the non-Swiss peoples.
- No “natural borders”. Instead, historically dependent and irrational borders, both internally and externally, which make cross-border cooperation a good idea or even a necessity.
- Non-central administrative structures are old and functioning well. The central ones, were – at least in the beginning – small and less expensive than in other nation states.
- Discrimination from outside, no aid that would lead into dependency, but equally no military aggression.
- Competition of systems through peaceful diversity, neighbourly communication. No promise of homogenous relations.
- Openness for immigrants. Selective immigration for those who are needed. Good networking with Swiss émigrés.
- Good industry with human capital willing to work, factories in the rural areas. Cities do not give rise to an urban proletariat.
- Relatively free labour markets.
- No natural resources, offset by population willing to learn. Urban centres are small and flexible. High group ethos, flexible and educated elites who pursue relatively simple lifestyles.
- Political structures which are not polarizing. They encourage people’s own initiatives, self-regulation, self-organisation. Extremism is impossible.
- Originally no welfare state redistribution, between persons or regions.
- Originally no professional politicians. No traditional civil service. Low level of specialization. A militia principle working in many regions.
- A usable and deep state myth that is easy to identify with: William Tell.
Most nation states that exist today are the result of very cruel experiments of unification and of discrimination (even extinction) of minorities. They have been steeped in blood and iron, “Blut und Eisen” (Bismarck). The pre-Socratic philosopher Heraclitus of Ephesus (535 – 475 BC) may have been right, after all, claiming that “war is the father of all things”.
But we should add that the mother of all things is the peaceful exchange and mutual learning and adaptation. So let us all together forget the authoritarian over-regulating father, at least in the political sphere! And let us go back to the tolerant mother who shows us how to exchange in peace and how to be creative. Perhaps even how to be a creative dissident, one of my favourite issues. After all, who else should “return to the mother” than we, followers of the fine tradition of freedom stemming from the oldest known inscription of the word freedom as Ama-gi, meaning “return to the mother” in ancient Sumerian cuneiform.
The traditional nation-state wanted to safeguard and imperialistically promote the ideas of State, Nation, Language, Economy and Culture within one “sensibly” and “naturally” constrained territory. But who is to say what the correct political borders are? This collective error led to the First World War, “the great seminal catastrophe of the 20thcentury – the event which lay at the heart of the failure and decline of this Western civilization” (Kennan, 1981). An event in whose shadows we are still suffering; of course, the Second World War was just a continuation of the First, and the Cold War just a continuation of the Second. The disastrous issue was the vain hope to find “just” borders. But there are no “just” borders. Borders are just borders!
Today, economies and cultures are essentially and increasingly spanning across political or linguistic borders. The EU is not the positive alternative to the collective error of centralised nation states. Instead, the EU is a bureaucratic, corporatist empire, a political cartel in which the economically influential parties keep the smaller or economically weaker parties happy through transfer payments. In return they demand financial and political tributes whilst at the same time cutting off competition among systems as much as possible. The more ambiguous and indistinctive the foundations are, the better for the self-assigned, self-empowering bureaucrats. Eurocrats in Brussels can live quite well in this state of hazily defined responsibilities since bureaucrats are masters at muddling through. You can always present unnecessary restraints as inevitable practical constraints “without alternative”. It is well-known that necessity knows no law.
The EU, in terms of its origins and structures, is an attempt to overcome crises of the nationally structured, social democratic industrial age at a supra-national or continental level. In reality, however, it creates a mechanism which takes problems no longer solvable in a generally binding, democratically legitimate national legislation and pushes them up to the European level. Examples include monetary policy or the ticking time bomb of collective pension schemes. The EU is trying to artificially keep alive for a while the welfare-state “ancien régime” of the industrial era whose national-economy foundations have become untenable in this age of globalization. It is an outdated project that is still stuck in the conservative mentality of mercantilism, of a market economy tamed or perhaps shackled by corporatism, of the Cold War and of the welfare- and nanny-state that deprives people of the right to decide. Unsuited for the challenges of the 21st century, it obsesses about internal market instead of global free trade.
The EU is trying to prolong this collective error on a continental level by muscling in a form of European pseudo-solidarity and nationality. It wants to be something of a mercantilist Super-nation. If it lacks some loyalty, it wants to buy people off by centrally organized redistribution. But in reality it is perhaps destroying the loyalty more than creating it. Coercion destroys voluntary action and genuine loyalty. Loyalty can be based on free consensus over enlightened self-interest, never on bureaucratic machinery of redistribution.
Most nation states are probably too large rather than too small. Their current size came out of an optimal defence technology in case of war. Large states did not rise through markets but through wars. However, this emphasis on size for military purposes becomes a moot point in our nuclear age.
There are political communities which are collecting money for the common good on the basis of self-administered taxes in the sense of club membership fees. Alternatively, whenever possible, they directly charge for use. Our goal is not the removal of borders and the integration in centralising structures, but a political organization which offers the best possible combination of “voting”, “voting by feet” (exit) and “loyalty”.The dictum “No taxation without representation ” is notoriously well known, but sometimes the equally important opposite is forgotten: “no representation without taxation”. The “natural” political organisation is a group of people who agree to be taxed by consent. This group may be very small, perhaps even smaller than Switzerland! But small is beautiful, and there is no reason to fight against your neighbours. Provided, of course, that they don’t try to change your (tax) system!
So, you may ask, what is the grand Nef vision for the world, the Terra N(u)efa at the end of the rainbow? Well, it would be a new form of the European Free Trade Association, but somewhat different from the actual EFTA which has not been exactly very successful and is a slave to the association agreements signed under the pressure of the then European Economic Community and to this day still labours under the somewhat outdated ideas of 1989.
Instead, there would be a New European Free-trade Association, a true Terra NEFA! It would be governed by peace among independent states with differing political structures. It would be open to the world and free trade. There would be competition of fiscal and social policies among geographically small areas who would also assert their migration policy based on their interests which would also pay attention to the interests of migrants and immigrants. And that’s it! These conditions cannot possibly create a federal European super-state.
I started my remarks with a fable, and I would like to end them with another. It is from Arthur Schopenhauer (1788 – 1860), and it brings together nicely everything I have tried to explain on these pages:
“A company of hedgehogs snuggled up together on a cold winter’s day in order to stop themselves freezing by using their mutual warmth. But they soon found themselves suffering from their own spines and were driven apart. When their need for warmth finally brought them nearer together again, the spines drove them apart again – so that they were pushed hither and thither between the two evils until they found an adequate distance from each other in which they could tolerate both of them. Exactly in this way the need for company, which springs from the emptiness and monotony of mankind’s inner life, brings people together – but then their objectionable habits and their unpardonable errors soon drive them apart again. The mean distance from each other at which they finally settle down and where mutual coexistence turns out to be possible is marked by courtesy and good manners. The English have a good expression for those who do not observe this. They say to such people: ‘Keep your distance.’ In this way the need for mutual warmth is only partially filled, but there is also little injury do ne by the spines of the hedgehog. But those who have sufficient inner warmth of their own will do well to keep away from society altogether, for in this way they will give no offence and they will also feel none.” Well, so much for Schopenhauer, the famous pessimist…
I hope that both Switzerland and all the members of the European Union have a lot of “inner warmth” of their own. I also hope it will come from the most sustainable energy source – I hope for more “inner warmth” as a result of permanent peaceful frictions.
GRILLPARZER, Franz (1859) Sämtliche Werke. Ausgewählte Briefe, Gespräche, Berichte. Hrsg. von Peter Frank / Karl Pörnbacher. 2 Bde. München 1960, Bd. I, S. 500.
JONES, Eric (1981). The European Miracle: Environments, Economies and Geopolitics in the History of Europe and Asia. Cambridge University Press
KENNAN, George F. (1981), The Decline of Bismarck’s European Order: Franco-Russian Relations 1875-1890
SCHOPENHAUER, Arthur (1851), Parerga und Paralipomena, English Translation by E. F. J. Payne, Clarendon Press, Oxford, 1974, 2 Volumes Thurber, James (1939/1983), The fairly intelligent fly, Fables for our Time
The text draws also on ideas and statements contained in:
NEF, Robert (2004), In praise of Non-Centralism, Berlin
NEF, Robert (2011), Liberty, Diversity and subsidiarity, contending with triplets, Telders lecture, Den Haag