The European Union’s summit last week has produced a rough agreement on a firmer “fiscal union,” capable of imposing credible budget controls on Greece, Italy, and other debtor-countries. The details have yet to be worked out, and the markets are unlikely to repose any great confidence in the deal. The deeper problem, however, is that no version of a fiscal union can save Europe or the euro. The principal authority for this proposition is Alexander Hamilton.
Hamilton’s name is much in vogue these days in European capitals. Behold the bold visionary who talked a dysfunctional Confederacy into a closer union, assumed the states’ debts, and founded a powerful central bank: Europe needs his example and prescriptions. Alas, Hamilton’s admirers misunderstand him. He argued for a closer union of a particular kind — and against the kind of union they are contemplating.
You may want a league or alliance among independent states, Alexander Hamilton explained to his fellow citizens in Federalist 15. That would not be good for you, but at least “there is nothing absurd or impracticable in the idea.” Or you may want, as I do, a constitution and, under it, a government that governs you directly, as individuals, citizens, and taxpayers. What the sentient among you cannot want is the “political monster” of a “government over governments” rather than individuals; an “imperium in imperio.” Why is that so bad? Two reasons: democracy and the rule of law.
If you care about republican government and democratic accountability, you cannot have twelve states make rules for the citizens of a thirteenth. Unanimity is the only possible rule. That is the rule of the Articles of Confederation. However, it has rendered the central authority ineffectual and “imbecilic.”
If you care about the rule of law, a government over governments presents a nasty enforcement problem. “It is essential to the idea of a law that it be attended with a sanction,” and there are only two ways of inflicting it: “the magistracy,” meaning courts and their marshals, or the armed forces. The magistracy works splendidly vis-à-vis individuals. That is why individuals are “the only proper objects of government.” Governments aren’t. You cannot jail them, and the option of fining them also looks unpromising. (The States didn’t even pay the requisitions to which they agreed.) That leaves armed force — which a government over governments will probably lack, and which you wouldn’t want in any event.
By its very design, the EU presumes that all this is wrong. The EU is quintessentially a government over governments, and it relies, in a once-proud, now-suspect postmodern spirit, on mechanisms that fall outside Hamilton’s stark courts-or-guns analysis. Moral suasion, for example, informed by the urgency of a preventing a relapse into ancient, bloody rivalries. Intergovernmental processes, sustained by elite consensus. Cross-subsidies from German taxpayers to countries and constituencies that might otherwise fail to see the good sense of the system.
The system is cumbersome and opaque. Even so, it has worked tolerably well in ordinary times. However, institutions that are good on issues that benefit from plodding, consensual policymaking by entrenched elites may yet be bad at responding to Hamiltonian moments when demands for prompt action, democratic legitimation, and lawful government run high.
Intergovernmental imbecility wasn’t much of a problem until the Libya crisis required the exercise of a few more IQ points, which the EU could not muster. Similarly, the debt crisis exemplifies the futility to trying to escape Hamilton’s grim wisdom on the rule of law and its enforcement.
Along with the euro and the monetary union, the EU Treaties introduced deficit and debt limitations for eurozone states; enhanced “surveillance” (in the somewhat creepy language of the Treaties) of suspect countries; and penalties in the event of non-compliance. The problem, as European leaders understand it, is that the European Council (composed of member-states) routinely blinked when it came to penalizing violators, including Germany and France. Last week’s deal supposedly makes the sanctions “automatic” by shifting enforcement authority to, of all places, the European Court of Justice.
The notion that justices in Luxembourg would levy and enforce financial sanctions on an already-bankrupt member-state is obviously absurd. The actual enforcement mechanism remains what it is — the Germans’ willingness to pay. Put bluntly, credible enforcement means German puppet regimes in Rome, Athens, Madrid, and perhaps Paris.
While there aren’t going to be German tanks in Athens or anywhere else, the Brussels deal does illustrate the deeper, constitutional problem with heaping yet more authority on a government-over-governments. A now-we-mean-it confederacy with teeth was not Hamilton’s project. It was then, as it is now in Europe, the project of brain-dead state elites. Far from embracing it, Hamilton fought it with all his resolve and skill. What he fought for instead was a constitution beyond Europe’s reach and imagination — an actual fiscal union, with a federal government that directly taxes and regulates citizens but leaves state governments to their own fate. That is what we inherited.
American federalism has its problems, but the prospect of installing trusted federal bureaucrats or governments of unity in Sacramento or Springfield is not among them.
Europe’s fortune might improve if its leaders could dispense with “closer union” blather and instead contemplate Hamilton’s teaching on the “great and radical vice” of their union: a government over governments is “subversive of the order and ends of civil polity.”
— Michael S. Greve is the John G. Searle Scholar at the American Enterprise Institute and co-editor, with Richard A. Epstein, of Federal Preemption(AEI, 2007). His book on The Upside Down Constitution (Harvard University Press) will be available in February, 2012.