Reform #3: Finance and economy (vol. 2) – Economy
As previously discussed, the reformation of the united Europe’s finance and economy must start with establishing a fiscal union within the political union of the member states (see Reform #3 vol. 1). After the financial and political preconditions are fulfilled, the leaders of the Republic of the United Europe (or RUE) are going to have to stimulate the economy, achieving growth, prosperity, and sustainability. In this volume, I am going to focus on the most essential components of economic success: full employment, trade, and resource utilisation.
Employment is one of the most crucial elements of every economy, as the employed contribute to the public budget in more than one way. Their taxes paid, their work completed, and their wages spent, the employed generate state revenues in the forms of direct tax payment, GDP growth, and consumption. The employed are the economic engine of the society; therefore, reaching full employment is absolutely critical in order to operate a powerful and stable economy. Since the Great Recession, however, horrifyingly high unemployment rates have become the new normal in the European Union (especially in the Southern member states), whereas the economic crisis unfolding due to the restrictions related to the COVID-19 pandemic seem to demolish the small, but hard-earned progress that has been achieved in the years before. Lagging behind the UK (5%), China (5.5%), Russia (5.7%), and the US (6%), the EU’s average unemployment rate is at 7.3%. The worst figures are to be found in Spain (16.1%) and Greece (15.8%), where the unemployment rate has decreased from the critical heights of 27-28% since 2013, but remained high nevertheless – even more troubling is the rate of youth unemployment (40% in Spain and 34% in Greece). The fact that Spain has the fourth largest population and economy in the EU makes its crisis more serious to the entire European economy – especially to the Euro Area. Still, high and permanent unemployment – especially amongst the youth – is a very common and worrying phenomenon in many EU member states.
Many individuals try to escape unemployment in their home countries by migrating to another member state with better prospects (the primary destinations are the Western and Northern member states). Due to the support of the flow of workforce in the European Union, the unemployed has the opportunity to work and live in another EU member state. It is not ideal to leave as being forced to leave, but it is still a good opportunity and a viable temporary solution for those, who speak a foreign language – especially English, French, or German. In addition to speaking the language, it is important to have a profession (or degree) and work experience. For instance, a German-speaking electrician is highly sought after in Austria or Germany in comparison to a philologist, who only speaks Greek. The former will definitely find a well-paid job, whilst the latter has no chance. Therefore, programmes that focus on attaining a profession and on learning European languages should be launched across Europe – fully sponsored by the European state.
Instead of supporting our own fellow European unemployed, however, Europe’s extreme liberal elite and their allies are desperate to import millions of illegal immigrants from Africa and the Middle East, and spend fortunes on so-called integration (mainly the Western and Northern member states), ignoring the European unemployed, who should be supported by launching programmes and proper trainings financed by the public. The extreme liberal elite preach about solidarity as the interpretation of helping the ones in need, but they intentionally ignore the real needs of their very own citizens at the same time. Real solidarity is to help our own citizens, neighbours, countrymen, unemployed, homeless, etc., not strangers. Once we eradicated unemployment, poverty, homelessness, injustice, and deviance within Europe; then, and only then, we can start thinking of helping others in the world, bringing aid to where the trouble is, rather than importing the trouble to Europe. The shameful betrayal of Europe committed by the extreme liberal leadership is neither right nor in the interest of the Europeans.
From economic perspective, unemployment puts a massive strain on government budgets. Decreasing tax contributions, shrinking GDP, and lesser consumption make state revenues plunge, which combined with increasing state expenditures (e.g. unemployed benefits) lead to massive government budget deficits that can only be financed by government debts, causing a potential economic crisis and dependency on foreign powers. Besides the obvious economic reasons and the fact that unemployment is a huge waste of resources for the economy, the social aspect of unemployment is as important as the economic aspect. It is one of the fundamental rights and basic duties of a person to get engaged in a productive occupation: to work. Labour is a useful and constructive occupation both for the person itself and for the society too. Labour provides an income, which covers the expenses related to existence (e.g. housing, nourishment, clothing) and pleasure. The individual with a decent job has self-esteem and dignity, whereas the unemployed feels worthless and without dignity, as they are unable to provide for themselves and their families, relying on the rest of the society to provide for them.
This awful financial and mental state leads to depression, rage, or revolt, meaning that unemployment is a threat to national security as well, because the long-termed unemployed react impulsively to radical ideas (especially the youth), as they look at themselves as losers, who might have nothing left to lose. As proved by history (e.g. French Revolution, Bolshevist coup), high and long-term unemployment is a ticking bomb, which can be heard ticking in today’s Europe too (e.g. France, Greece, Italy, Spain). In order to avoid social upheaval and possess a powerful economy, the Republic of the United Europe must achieve full employment, to which previous reforms provide useful and powerful tools (e.g. benefiting from the fiscal union and common tax system, through tax reduction for businesses for new hires, via spending on public works).
The European Single Market guarantees the free movement of goods, capital, services, and people, enhancing internal trade between the member states of the European Union (and Iceland, Liechtenstein, Norway, and Switzerland) by benefiting from the removal of tariffs and border control (and from the common currency in the Euro Area). Besides enjoying thriving internal trade, the EU is the largest exporter in the world. The bloc’s most important trading partners are China, the US, and the UK, but Switzerland, Russia, Turkey, Japan, Norway, and South Korea are also amongst the largest contributors in terms of trade volume – in this order of significance. The EU has concluded many trade agreements on various levels across the globe, of which the two most important are the Canada-EU Trade Agreement (2017), and the Japan-EU Economic Partnership Agreement (2019).
The Republic of the United Europe is going to inherit these relations and agreements, but the new principles of external trade are going to be set by the European Government (or EG), excluding the member states from negotiating agreements with an external partner. The RUE should focus on four major directions: the US, the UK, China, and Russia – in this order of importance.
Europe’s most important trading partner is the US (555 billion euros of total trade in 2020), as the North American global power is the largest market for European exports (353 billion euros in 2020). There is a strong ambition on both sides of the Atlantic to intensify and deepen economic co-operation under the aegis of the proposed Transatlantic Trade and Investment Partnership (or TTIP). The partnership intends to merge the European market into the American – including the member states and citizens –, meaning an absolute domination of American capital on the European market, thus the de facto conquest of European economic and financial sovereignty. The TTIP is an attempt of the American capital to seize the prestigious European market in the race for maintaining global supremacy over China. As such, the TTIP goes against European interests, thus harmful and wrong.
The relationship between the European Union and the United Kingdom is yet to be defined, but whatever the outcome may be, London is going to remain an important trading partner of the united Europe. Therefore, a smooth and clear trade agreement is more than desirable. However, it is important not to let London picking cherries, making it explicit that any access to the European Single Market is not possible, as the precedent it would set to other member states could politically destabilise Europe.
The EU’s top trading partner is China (586 billion euros of total trade in 2020), which has already the largest market in the world, growing continuously. The facts that China is the future and Europe has an enormous trade deficit with Beijing (181 billion euros in 2020), make it all the more important for Europe to increase their volume of export. Serving this interest, the EU-China Comprehensive Agreement on Investment (or CAI) deal aims to open up China’s internal market to European companies and to protect EU direct foreign investment in China (e.g. in manufacturing sector). It is imperative that neither the CAI nor China’s Belt and Road Initiative project is hindered by ideological differences, ensuring the return to pragmatism in the relations with Beijing.
Looking at the trade volume and at the difference between the sheer size of economies, Russia’s importance is far less than the above mentioned countries’; however, the symbiosis between Europe and the Eurasian giant is relatively tight, hiding enormous potentials for both parties. Besides the fact that both regions represent a huge market with hundreds of millions of people living in vast areas (from Lisbon to Vladivostok), Europe needs energy from Russia (especially the eastern member states are exposed to the desperate need of Russian natural gas). Significant projects similar to the Nord Stream would be beneficial both for Europe and Russia, but as long as the relationship between Moscow and Brussels is strained by political disagreements, hostility is going to dominate over co-operation, leaving the great potentials not only unexploited, but also further eroded.
The Republic of the United Europe is going to possess enormous capacities to increase their export, forging trade agreements on European terms and meeting European interests. It is crucial that every trade agreement includes a closure to enforce environment protection, which must present not only principles, but exact figures and deterrence in case of violation.
Since the beginning of the Industrial Revolution, hydrocarbon resources are needed to fuel our economy. As hydrocarbon resources are effective only when they burn – destroying our environment in a fast pace –, reforming the use of them is impossible. Since the 1970s, nuclear power generation proved to be very effective and emission-free, but the rare examples of Chernobyl and Fukushima presented that it can be very unstable and dangerous, should something go wrong. In the last decades, renewable energy resources have become popular due to their abundance, cleanliness, and safety. Therefore, it is without doubt that we have to transform our fossil-fuel based economy into a clean one, in which the renewable energy resources become dominant, and ultimately monopolistic. However, on mid-term, it is inescapable to use nuclear energy to recover the potential loss in energy efficiency, due to the replacement of fossil fuels with renewable resources (Sun, wind, water, geothermal, etc.). Even though it is expensive to start with, thorium-based nuclear power and small modular nuclear reactors are clean and safe enough to provide a bridge in the transition from fossil fuels to renewables until the technology of solar panels, water and wind turbines, and harnessing geothermal energy is advanced enough to fully supply the economy.
Scientifically, the immediate replacement of fossil fuels with renewable resources would be the most desirable scenario. However, such a radical change in a short period of time would most likely lead to an imminent economic crisis, which would most certainly result in a social collapse. Therefore, the transition must be paved out cautiously, but without hesitation. Most countries have already begun to switch to renewable energy, but in a much slower pace than it would be required to solve the climate crisis. The leading examples are Costa Rica, Iceland, Finland, Nicaragua, Norway, and Sweden.
The Republic of the United Europe must act as a leader of a movement that aims to involve all countries to sign a pact of environment protection. The Paris Agreement on battling climate crisis and von der Leyen’s European Green Deal are good steps forward, but both are too little and too late to seriously address the raging climate crisis. In order to boost transition, immediate actions, such as provision of funds (related projects and IT), global agreement on environment protection, the reduction of taxes on renewable energy, and the introduction of carbon tax and plastic tax must be taken. The introduction of plastic and carbon tax in every member state of the RUE could be a significant and viable step. Plastic tax must be as high as possible to force industry to find another solution for packing and other purposes, abandoning the use of plastic overall on very short-term (glass, linen, wood, and other materials could be used instead). Carbon tax should be set relatively low at the beginning – giving time to industry to shift –, but increased gradually as fast as possible, considering its impact on the economy and everyday life. Simultaneously, tax reduction on renewable energy is imperative, whilst involving more solutions based on renewables at the same time (e.g. solar photovoltaic and wind-powered plants, advanced energy storage, green hydrogen, using electric vehicles in transportation, massive tax discounts and governmental support for clean solutions) is going to force fossil fuels out of market on mid-term. Although, the introduction of carbon tax and plastic tax could result in costliness on short-term, economic production is going to be cheaper, more sustainable, and safer on mid- and long-term. Both taxes should be introduced globally, for which the RUE must fight.
The transition does not only protect the environment, and brings us closer to a higher form of civilisation, but also completely ceases our dependency on resources from other countries. In the future, the RUE will not have to import natural gas from Russia or oil from the OPEC (Organization of the Petroleum Exporting Countries) countries, which are interested in manipulating the prices, thus causing instability in our economies – purposefully. The permanent and ever-growing scarcity of fossil fuels leads to increasing prices, economic and humanitarian crises, and war. In order to prevent such catastrophes, countries that are not oil exporter – thus not interested in oil production – could form a global organisation, which refuses to import hydrocarbon resources, pledging to fully promote the use of renewable energy resources. Starting as a European initiative, the Union to Support Renewable Energy (USRE) could aim to develop an efficient energy strategy based exclusively on renewable resources, accessing a great abundance of energy, and achieving massive and sustainable economic growth and permanently low prices for all.
The political and fiscal union of the Republic of the United Europe is certainly going to provide the tools and expertise to the leaders of Europe to steer the European economy out of its current agony towards prosperity. The suicidal dogmas of neoliberal economic policies (e.g austerity) and the harmful effects of cyclical consumerism are going to be abolished by focusing on creating and protecting jobs, and on strategic production, setting longevity, accessibility, and compatibility as key priorities.
As the enlightened reformation of the political system is an essential precondition to a stable and thriving economy, a strong and sustainable economy is required to achieve general well-being and prosperity. In order to ensure that prosperity is distributed appropriately amongst the members of the society (i.e. the citizens of Europe), the reformation of the social system is inevitable and necessary.