November 2nd 2002

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Articles from this issue:

COVER STORY: Bali: after the dust settles ...

CANBERRA OBSERVED: Vultures circle Crean after Cunningham debacle

NEW ZEALAND: US links free trade to repeal of NZ nuclear ships ban

NEW ZEALAND: Kiwibank on target for 100,000 customers

STRAWS IN THE WIND: Global systems / The splitting of the West / After the earthquake

WESTERN AUSTRALIA: 'Unlawful' electoral changes: McGinty tries again

AGRICULTURE: Farmers' overwhelming support for alternate sugar package

LETTERS: Bush doctrine (letter)

LETTERS: Accepting responsibility (letter)

LETTERS: Drinking age (letter)

ECONOMICS: Getting to work on the world economy

COMMENT: Holding on to the centre

COMMENT: Monash shootings and the irresponsibility culture

COMMENT: Affirmative action illuminated

EUROPE: New members, new problems for European Union

ASIA: Behind Pakistan's Islamist revival

BOOKS: Marriage: Just a piece of paper?

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New members, new problems for European Union

by Max Teichmann

News Weekly, November 2, 2002
The European Community is embarking upon a project which will bring in the weaker - or failing - states of Europe, and a strange mixture of good and bad consequences are likely to follow.

Firstly, the hundred million new citizens of the ten extra members of the EU will go up in the world, improve their collective and individual conditions, and shed some of the ingrained follies, poisoned historical feuds and memories, and tenacious local elites, which have combined to limit their progress, ration justice for the majority, and institutionalise resentment and non-cooperation.


However, as the pace of economic and socio/cultural change quickens, the new members are going to generate social problems more serious than those in Western Europe are experiencing. Things should never go as badly as they have in newly-capitalist Russia, but there will be many social and economic casualties on the way to a blissful union.

Western Europe is likely to experience the same fate as did West Germany when she brought in her eastern provinces. It is even plausible to date West Germany's decline from being one of the growth engines of the West to being a sluggish, slowly-growing country with four million unemployed, a budget deficit (concealed until after the recent election), and a string of big business failures - from that fateful reunification day.

Like Italy's Mezzogiorno, East Germany is a voracious sponge for aid of every kind. Yet its unemployment rate is still nearly double that of West Germany's and its demands upon the Treasury in Berlin never end.

The European Union faces the same experience with its ten incoming states. They will add considerably to the population but only marginally to the GDP.

So they will eat up West European taxes, agricultural subsidies, special grants to ailing regions, infrastructure expenditures of every kind: all so as to be brought up to the same standard of living and quality of life already enjoyed by others in the community.

This hasn't really happened in parts of the existing EU, but there will be continuous political pressures from the new members, spurred on by their electorates. In passing, the great size of the new European Union, its numerous member countries, is going to make collective agreements far more difficult to achieve, and the process much longer to go through.

This will strengthen the power of the EU bureaucracy even more. The same consequences will flow from a greatly expanded NATO, as they have already occurred - well and truly - in the United Nations.

All the moves to set up and then expand, and then further expand the European Union, have come from big business and the burgeoning Brussels bureaucracy. European business has been functioning poorly for quite some time now, and it wants an out. High labour costs and powerful, inflexible unions; high taxes and charges to fund a very expensive welfare state; massive subsidies to Europe's farmers, have made states like Germany semi-uncompetitive.

In the past, businesses escaped to the developing world where they could relocate their factories - as the US and Japan have done. Cheap labour, minimal health and safety laws, low (or no) taxes, confer enormous advantages. But as competition in overseas markets sharpens - the Chinese pay workers 22 cents an hour, etc - and political and currency conditions kept turning treacherous, many European firms started looking wistfully towards home.

Ten extra European Union states means the addition of a new tied market of 100 million, the provision of cheap labour at your doorstep.

A German factory in Romania pays its workers one-tenth of the German worker's wage, with higher productivity; local materials, services, etc, cost only a fraction of those in Western Europe. There is a Third World of Europeans ready and waiting.

But the effects on Western employment and trade unions and many local companies can be imagined. And Western farmers will face new competitors demanding the same subsidies that they now enjoy. All this could be a recipe for widespread disruption in many European economies and prodigious fiscal headaches, but big profits for the giant players.

We have seen the economic cannibalism (or is it vampirism?), whereby larger firms are taking over smaller competitors so as to increase market share, reduce competition, and cut costs - you sack some of your own and more of theirs - and how this is not solving anything in the long run. The same robbing Peter to pay Paul strategies are operating at the national level, but instead of companies, it is national economies.

Suffice to say, Europe is going to have her hands full for some time, and it may throw light on what is happening at the UN.

  • Max Teichmann

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