Fundamentally, a union of states is in trouble when any
federal action is predicated on consent from the governor of the largest state.
The U.S. Senate was proposed precisely to give the smaller states a means to
thwart the domination of a few large ones in legislating at the federal level.
The European Council’s qualified majority vote mechanism and the unanimity
requirement on “big ticket items” such as taxation permit a supermajority of
states to reject the proposal of a few large ones. The U.S. House of
Representatives and the European Parliament offer no such avenue for small
states because those chambers are based solely on population. California and
New York, and France and Germany, can through their peoples’ representatives
have great clout in those bodies. Therefore, bicameral (i.e., two chambers)
legislatures are distinctly advantageous at the federal level of a union of
states.
I suspect that the lesson has been lost on many Americans,
who have not bothered to study their own history. As for Europeans, whom I as
an American so much admire, I suspect that the problem is a mix of denial as to
the E.U. being a federal system rather than a mere alliance or common market.
Europeans thus leave themselves vulnerable to informal political dynamics, such
as informal pressure from a large state on smaller ones, exacerbating the
stress points in federalism. After all, no political design is perfect. Lest
federalism be presumed to be tantamount to a central government dominating
those of the states, the divisions of competencies can be made, on parchment at
least, such that the state governments retain most (but not all!) of the
governmental sovereignty in the federal system.
However, as the case of the U.S. in the twentieth century demonstrates, de facto political consolidation is a
danger even if the parchment is said to guard against it. Even so, this danger
does not justify the denial that leaves Europe so vulnerable as it steers its
Union ahead almost purblind among icebergs.
Denial is not limited
to political systems. Particularly in the U.S., awareness of a warming planet
has had to contend with the salience of corporate America in shaping the public
discourse. Indeed, the naïve assumption that what is good for General Motors is
good for America leaves the public good susceptible as citizens unwittingly
defend the interests of large corporations even against the interests of the
individuals themselves and the common long-term good of America and even the
planet.
In Europe, global warming has had more currency. Even so,
corporations have compromised the European approach. Additionally, Angela
Merkel’s effective veto in reforming the strategy enervates the path ahead as
well as sets a bad precedent for the European Union itself as a union of
states.
The E.U.’s carbon market was at least by 2013 the world’s
largest. Yet the price of a carbon allowance had fallen perilously low due a
weak economy and a related glut of allowances. Even though part of the fault
lies in not having tied the total number of allowances in the market to the GDP
of the E.U. in a given year, companies were sitting on so many extra allowances
because most of them were given for free. This points to a conflict of interest
in the regulated having too much influence on the regulators and thus the
regulatory system itself. One might thus predict that the E.U. would have great
difficulty deciding to remove allowances from the market in order to raise the
market price. Such a reform would not be in the interests of the regulated.
The rejection by the European Parliament’s industry
committee of a stopgap plan to prop up the market by temporarily removing 900
million allowances in early 2013 was thus hardly a surprise. Less transparent
was the impact of the division within the German government as an impediment to
even a stopgap measure. Peter Altmaier, the environment minister, supported an
E.U.-led intervention, but Philipp Rösler, the state’s economics minister, “flatly
ruled it out,” according to the Financial Times. With Angela Merkel standing on
the sidelines, there was insufficient political impetus in the European
Parliament to push through the measure.
The Financial Times observed at the time that “Germany’s
seeming paralysis over even a short-term remedy has raised doubts about the EU’s
ability to agree on the more fundamental changes that many believe are
necessary to correct an oversupply of allowances.” That is, the de facto requirement of the leader of
the largest state renders the E.U. too weak to take on even fundamental reforms
that are necessary to the continued viability of the Union. “Angela Merkel
needs to step in,” says Bas Eickhout, a representative in the European
Parliament from the Netherlands. “She holds the key.” It is no wonder that
David Cameron had just announced a future referendum in Britain on whether that
state should secede from the Union.
According to the Financial Times, moreover, through the
three years of a debt crisis that threatened the very existence of the euro,
one thing became evident: “no meaningful action—be it a multibillion-euro
bailout or new fiscal rules—can go forward without the consent of Angela
Merkel, Germany’s chancellor.” This ought to be a wake-up call even to those
who deny the basic federal infrastructure of the Union. A union of states
needing the consent of its largest state is not viable. Indeed, the de facto consent violates a basic sense
of fairness. The continuance of this violation therefore subtly undermines the
very legitimacy of the Union—hence making it vulnerable to external shocks such
as a financial crisis.
It could not have been missed by the business lobby that
Angela Merkel’s consent was necessary for the market-based system of
carbon-allowances to be fixed. The easiest strategy of the business sector would
be to make a deal with her, rather than having to lobby in other state capitals
or in Brussels. At the time, Merkel was up for re-election so there was fodder
for a deal friendly to the regulated. Lest it be concluded that the problem was
merely excessive influence of the regulated, a basic flaw in the E.U. itself
can also be blamed.
The de jure checks
against the domination of a large state were insufficient to thwart de facto vetoes from Germany. It could
be that informal power relations, such as a club mentality, play too great a
role in Europe. Even though Slovakia could veto increasing the bailout funds,
for instance, it did not take much for the real
players in Western Europe to put the eastern state in its place. Yet if
Germany or France wants to veto a proposal, the obstruction stands. Such a
double-standard renders the E.U. vulnerable in the long-term. At the very
least, peripheral state governments
could become indifferent to the club,
for nobody relishes being a second-class citizen.
Source:
Joshua Chaffin and Pilita Clark, “EU’s
Carbon Trading Hopes Rest on Germany,” The
Financial Times, January 28, 2013.
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