The EU is regulating itself into irrelevance
From Twitter to greenhouse gas emissions, the answer is always more red tape
Otto von Bismarck supposedly once said that “with bad laws and good civil servants it’s still possible to govern. But with bad civil servants even the best laws can’t help.” Today, he would probably have to add that the worse the civil servants are, the more laws and regulations they seem to produce.
The European Union is increasingly becoming an example of this. It has been an open secret for a long time that working for EU institutions is either a form of early retirement for politicians, or a lucrative career for lifelong bureaucrats.
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The European Parliament is currently roiled by a corruption scandal which alleges that Qatar bribed one of the legislative body’s vice-presidents, Eva Kaili, to lobby on its behalf. Apparently she received €600,000 in cash, which is ironic since the Union is currently in discussions to limit cash payments for EU citizens to a maximum of €10,000. The vice-president title might sound impressive, but in fact there are 14 of them, presiding over 405 members of a “parliament” that does not even have the fundamental right of every other legislature in the free world: the right to propose laws. The parliament can only approve or reject proposals from the European Commission, making it a representative legislative body in name only.
One of these proposals was the implementation of a special tax on imports based on greenhouse gas emissions, allowing European governments to engage in a form of climate change protectionism. This will be a massive blow to developing nations trying to export more goods and services to the EU, since these countries very often have particularly high emissions due to an underdeveloped renewable energy sector.
This comes on top of new ESG reporting rules that will force companies to dedicate significant administrative resources to the task of “corporate sustainability reporting,” which will add even more red tape for companies that are already suffering under high taxes, excess regulation, and growing energy prices.
It remains to be seen whether all of these sweeping plans will comply with international trade laws, but one consequence will be unavoidable: the costs for producers and thereby the prices for consumers will rise with every new regulation, and there is no end in sight when it comes to Brussels’s appetite for interfering with businesses wherever it can.
For example, shortly after Elon Musk took over Twitter, Thierry Breton — the Commissioner of the Internal Market of the European Union — proclaimed on the social networking site that “in Europe, the bird will fly by EU rules.” These rules (among others) come in the form of the 2022 EU Digital Services Act, yet another regulatory framework which helps to explain why there is not a single European company among the top 10 most used social media platforms within the EU.
It is quite remarkable that, instead of creating structures to incentivise innovation and competitiveness, the EU prefers its organisations to ban competition and ensure that, in the long run, Europeans will pay more for lower quality.
There is an habit in Brussels (shared in many other European capitals) that you can simply regulate your way out of a crisis and the rest of the world will play along. As will become increasingly clear over the next few years, this will not work: the world will move on while Europe falls further behind. The ultimate price is paid by taxpayers who will continue to subsidise the cushioned careers of an ever-growing bureaucracy — but not in cash, of course, since that would be illegal. For some, at least.
It’s not just that there is over-regulation, but that the regulation itself slowly destroys small businesses by creating rules and forms that only big businesses can afford to comply with. Take GDPR – it adds a burden requiring audits, policies and processes that are beyond the skills and legal knowledge of many smaller businesses like hairdressers or language schools.
The revised EU VAT rules create a huge burden on selling cross-border for any business without an international tax accountant in their employ, so they force businesses to use multi-national trading platforms because they can’t afford the compliance costs themselves.
Similarly the EU thinks it’s fine for large businesses to demand legal policy statements from smaller suppliers who are simply too small to need complex policy frameworks, just adding meaningless paper and signatures and legal risk.
Each form or policy has three costs. The understanding cost – does it apply for me, the filling in cost – what data do I need to capture, and the cost of the risk of error. Multiple this by the number of forms to be completed (millions typically) and that’s the regulatory burden, which disproportionately falls on smaller traders who need to use external specialists to have a hope of getting it right.
And in many cases, the expertise of the external specialists comes from having been involved in the regulatory process. A form of legalised corruption.
GDPR was the most pointless piece amongst many pointless pieces of legislation for small businesses, and that is saying something, I spent hours, day and weeks on it and I don’t think any of the external consultants, or even enforcement officers and organisation had a clue about what it meant themselves. It was all a big waste of time.
And you are spot on about EU tendering rules favouring big companies…more than once we went in with a low price , got blown out because someone doubted we could execute on tender because we were a small business, and our tender was too low. They would give it to some media comms crew with a nice Thameside address and spoofy website for twice the price, and that lot, without video cameras, lights, editing etc, would contract it out…to us, for around what we tendered and just pocket the double bubble amount for virtually nothing.
The most surprising thing about this cash-in-a-suitcase scandal is that anyone is even surprised by it. It takes a special kind of naive devotion to the EU to think that Brussels isn’t already a quagmire of corruption.
Excellent essay. We’ve got it bad here in North America, but the EU looks like a basket case. Layer upon layer of govt must make it almost impossible for business. Bureaucrats do not build things. They knock them down.
Fear not, however, we’re not far behind you, In Canada, 90% of new jobs since the start of the pandemic are govt workers.
Bureaucrats are like cancer cells in the body politic.
Good governance within an organisation recognises when there is a requirement that is not being met, and institutes a procedure, or team of people, to meet that need. In much the same way as normal healthy cells only replicate themselves when the need arises and then stop.
Cancer cells continue to replicate themselves endlessly, with no natural function to stop them, taking over the body and stopping it from functioning – eventually killing it.
Bureaucracies depend on creating ever more regulations, so that ever more bureaucrats can attend ever more meetings – creating increasingly worthless regulations and reports, to give those ever-replicating bureaucrats something with which to fill their time. They are parasitic, eventually choking the host.
It’s long past time that apologists for the EU opened their eyes and diagnosed the malignancy that is killing “the project” they hold so dear.
Well said. Was this phenomenon not firat exposed on a WW2 airbase when flu zapped the huge number of admin officers – but planes kept flying. The EU is further crushing the vitals of the continents wealth creation by surrendering to the precautionary principle, as seen in covid and all areas of new tech (they still set their face against GM food, which is scientific barbarism). But we cannot gloat. All our laws are still EU laws. And the pro EU Blairite revolution means all of our failing terrible civil servants have been schooled in this dismal groupthink.
One of the few positive take-aways from the Covid crisis was for society to (momentarily) recognise just how much we need Supermarket Shelf-Stackers, Delivery Drivers and Utility Workers and just how easily the country managed to rub along without the input of Social Science Professors, Diversity and Inclusion Managers or the majority of Civil Servants.
Sadly we’re unlikely ever to see that reflected in their respective remuneration.
Well said, except that of course the UK has no shortage of the same problem, and in fact it has got even worse since Brexit, presumably due to a spiteful reaction by UK bureaucrats to not getting their own way. It is very obvious that no serious divergence from the EU will ever take place in the UK as long as the same establishment is in power.
Bureaucracy is a leprosy of the civitas — spreading dead cells, maiming the organism.
Complexity of regulation is a subsidy from small business to big business.
Saul D provides examples in his comment.
What we’ll never know is how many businesses and innovations never even start due to this suffocating blanket.
Ironically, the more rules and regulations they endlessly create, the more they drift away from being a genuine “Rule of Law” society since one of the defining marks of such is that the laws are able to be known by those subject to them. It is not possible even for a lawyer to know the full range of laws which apply.
I’m a big believer in automatic sunset clauses so every law that proves its worth will be renewed by the legislature, but the irrelevant, futule and foolish laws can be allowed to die without anyone needing to lobby a majority of MEPs to actively repeal.
But think of all the unemployed attorneys that would cause!?
Precisely the point! A nation of lawyers is by definition unhealthy
“It is quite remarkable that, instead of creating structures to incentivise innovation and competitiveness, the EU prefers its organisations to ban competition and ensure that, in the long run, Europeans will pay more for lower quality.”
There is nothing remarkable about it at this stage. It was a principle theme of the growing Eurosceptic sentiment in the UK that led to Brexit, and it took years for that awareness to develop into a political force. The point is that the EU had been over-regulating for decades even prior to 2016.
Nobody should be remotely surprised that the EU is institutionally incapable of even understanding what innovation and competition are, let alone creating the economically liberal conditions in which they flourish.
Working in the UK I saw the rules (pre-Brexit) applied on ergonomic workstations. A huge expense was laid out to change all the chairs, bring in floating monitor stands and keyboards. It was a bit nicer but hardly justified the expense. Easy for the big business I was working for but smaller ones. an unneeded expense. All because we were injuring ourselves?
Ditto for public organisations except it’s your taxes paying for it.
They call themselves lawmakers, that’s their job, our politicians too, and by golly that’s what they’re going to do – make laws, as many as possible but they hardly ever get rid of old laws so we are swamped with rules, regulations and laws. They seem to think that if only they can make enough laws they will achieve a perfect society.
Europe voluntarily created the malignant cancer that is slowly throttling the continent. Best bet: Pull the plug and go back to national sovereignty; let the bureaucrats go back to real work.
I simply do not get the point of this so-called Union. Who created it? Who voted for it? What purpose does it serve? Why does anyone pay attention to it? Why would, say, Romania want some weird people in Brussels determining its trade policies? Is there an army that protects members from outside aggression? If not, what on Earth are you people paying for?
It was not created by the people. On the contrary the people were shanghaied into joining without ever being able to vote to join. It was a creation of governing classes for the governing classes until at the UK referendum the governing classes were utterly shocked to discover that the bluudy proles were not thinking along EU-approved lines. Add to that the regulatory processes were quickly captured by big business to line their pockets.
I looked it up to learn more, and you’re absolutely right, so I guess the question is, why is it being put up with? Then again, it’s not like we Americans have any say in what our so-called leaders do anymore, so, short of an all-out revolution, there’s nothing we can do about it. Incidentally, my mother’s maiden name was Burnell. The Burnell’s were connected to the Acton-Burnell castle in Shropshire. Perhaps we’re family?
Surely you know the answer. It was created to
Facilitate trade between European countries, setting up standards, common rules, and limits on government market distortion.
Replace unlimited competition – which could lead to war – with diplomacy and cooperation. Hereunder give Germany a way to grow without being a threat to its neighbours again.
Allow big countries to have more power by being part of a big gang, instead of walking the streets of the world alone. You can get better deals by agreeing on an EU position and bargaining as a group than by facing up to the US or China one by one
Give smaller countries a rule-based environment, access to the big market, and at least some kind of voice in the decisions. If you just are a small neighbour to a big country, the big neighbour gets it all its own way without having to even pretend to listen to you. This is why so many countries joined.
Personally I should very much have preferred an EU that limited itself to trade and had no cultural policies, no elected parliament, and no Brussels power centre that keeps trying to grow. But this is the EU we have, and the ‘ever closer union’ stuff is there because most countries voted for it. Unless you think your country is so Great that it can outcompete an entire continent all on its own, it is obvious that you are richer and more influential inside than outside
Rasmus, you always make interesting points. They’re utterly mental, but I enjoy reading them!
“Replace unlimited competition – which could lead to war – with diplomacy and cooperation. Hereunder give Germany a way to grow without being a threat to its neighbours again.”
How well do you think this is going so far? The EU has certainly suppressed competition between member nations, but at the cost of destroying growth itself. Baby and bathwater there, I think. And yet, the goal of constraining Germany inside a trade bloc has not even satisfied the requirement you specified in any case: it has produced asymmetric growth in which Germany has sucked demand from most of the rest of the EU into its own economy, and its economic dominance has then in any case led to colossal geopolitical stress and strategic danger because it was able to do energy deals with Russia in open defiance of its NATO membership obligations.
“Personally I should very much have preferred an EU that limited itself to trade and had no cultural policies, no elected parliament, and no Brussels power centre that keeps trying to grow. But this is the EU we have…”
I am not sure if you are implying that “the EU we have” is a better option than no EU at all, but either way I would maintain that the third choice, namely the trade bloc-only EU that we were all led to believe would exist, is the standard against which the EU should be judged. My view is that if we can’t have that version of the EU, then it deserves to collapse and indeed I hope that it does. I would never have voted out of an EU that really was just a trade bloc, and I doubt most other UK voters would have done so either.
The EU is careering towards a brick wall, and the biggest good thing that came from Brexit is we are not in that car.
If it went back to being a trade organisation and kind of public space for Europe, I would vote to rejoin, but it won’t, it will plough on as it has towards the wall until it collides with it.
I think it’s a quagmire at best, but even Sir Winston argued for a European Union after WWII in order to prevent war among the members. I believe that is the primary reason it exists.
He argued for a European union to try and combat the Soviet empire and prevent it just rolling across from Magdeburg to St Malo and Lisbon. But he did say a union of free states, not a federal union of subsumed states.
Within 20 years the EU may well be the potential cause of conflict between members rather than safeguarding a peace that NATO has had a lot bigger part in preserving than the EU.
“that you can simply regulate your way out of a crisis and the rest of the world will play along” — well said indeed. This is essentially a delusion and a dangerous one, bringing loss after loss, as not just rest of the world would ignore it, but even business community inside EU. Look what happened with massive sanction regulation just recently. Business en mass has found its way around it and keep doing business with sanctioned entities.
When Shaw’s Little Black Girl inquired of the holy man carrying a huge cathedral on his back, how he could do it, he replied, as best I recall, “Oh, no matter. It’s all made of paper.”
The bureaucracy problems are real. But the most obvious alternative is for the EU to do nothing. Let the oil companies protect the climate, let Google and Cambridge Analytica protect privacy, let companies and retailers balance their own profits against consumer protection, etc.. If the author actually cared about any of those goals and had an alternative idea on how to advance them it would be nice to hear.
Well, yes? People have an irrational belief in the power of the law. In the end, the law is only as good as those who abide by it
The answer is small government. There are rules, but they are more manageable, allow for small business and small government remains much closer to the people who vote for them. Small government is easier to hold to account.
The problem is that increasingly we have laws of compulsion – ‘you must do something’ like fill in a form – instead of laws of prohibition – ‘you must not’. The most famous prohibition being ‘do no harm’. Slowly the levels of compulsion gum up the system, and if they aren’t prosecuted, become meaningless and pointless.
For example, I was in the bank the other day to get an answer to a query. Before I started, they told me I had to sign a personal data consent form to be able to continue with my enquiry – 5 pages long, written in legalese, no lawyer with me, not clear what it’s about and I can either sign it and continue with my query (which should take 5 minutes) or be faced with legal costs and time to check the form out. So like every other bod in the system, I sign the form. It’s a compelled signature which I believe invalidates the agreement. But the bank doesn’t need the form except for some bit of petty regulation, and I don’t need it, because when I sign it transfers risk on the transaction from the bank to me. It protects them, it doesn’t protect me. (‘We told you. You signed. So it’s your problem’).
Laws of prohibition work much better than laws of compulsion. Give the bank a duty of care, and let them decide on how to provide that care and attention to their customers. Give customers the right to redress if the bank fails in its duties. There is no need for external compelled forms in this situation.
The problem is that much of the elaborate regulations engineered by the bureaucracy is totally useless at achieving the supposed ends. Banks are subject to elaborate Know Your Customer regulations that are a burden both on the banks and the customer filling in endless forms. But does it stop scammers obtaining bank accounts and transferring their ill gotten gains out of the country? Clearly not judging by the sheer volume of fraud in operation. Any attempt to follow up and trace the funds is met by another wall of bureaucratic GDPR regulations that stymies proper enquiry. In theory KYC regulations should stop criminals opening accounts and transferring their loot but GDPR prevents private attempts to follow the trail and the Fraud squad is incapable of getting on top of the issue.
Bureaucratic attempts to keep company directors hones often simply result in companies being fined as a result of fraudulent activities of their directors to the detriment of shareholders who thus suffer a second hit.
KYC is a classic of bureaucracy solution of endless cost and minimal effect. Banks literally have to collect and vet data on millions of their customers, at the customer’s time and expense – so billions in cost across all the forms to be completed – in order to prevent what? A few thousand money launderers at best.
What’s worse is that it overturns a bank’s duty of care to their customers, substituting instead the statist role of policing those customers (which is even more sinister when you consider that governments may later use the information to block bank accounts or banking services to dissenters).
And how do the the actual professional money launderers get round this? According to the warning letters the bank sends out, they pay people to open and run bank accounts for them. They become experts at beating KYC as Sam Bankman-Fried showed, and they stuff the pockets of politicians and administrators so they turn a blind eye – as the various money laundromat scandals showed.
So we get costs and costs and costs for forms for honest people, while the effects are dodged and perverted by those with a professional interest in breaking the law.
Funny how all that KYC stuff went out the window when Rishi panicked and allowed anyone with a pulse (or even many without) to get a government (read taxpayer) backed Bounce Back Loan during the pandemic.
The extent of the losses is staggering, not to mention the additional cost of recruiting teams of HMRC sleuths to try and recover some of the stolen loot.
“But the most obvious alternative is for the EU to do nothing”.
What nonsense. The obvious alternative is intelligent regulation which recognises that in most cases, industry can come up with better standards than government bureaucrats. And in certain cases, where there are tangible externalities such as environmental impacts, centralised standards are necessary. The point of the article is that we have over-regulation and need less of it, not that we have regulation and need an absence of it.
Your argument is childish straw-man claptrap that is obviously falsified by even a cursory reading of the article.
Your comment is very sensible (if slightly rude). But then, unlike the author, you clearly accept there is a role for (well-drafted) rules. It is not clear that the author accepts any need for rules on CO2 emissions or data privacy at all.
Straw men arguments seem common place to defend the scope of regulations. Often the regulations are written by corporations to ensure their hold on whatever area they see competition.
In the EU, it is very obvious that regulation is mostly just a corporatist racket primarily used by big players to suppress competition. What surprises me is that so many activists seem not to be bothered by this.
Let’s flip your argument around for a moment. How effective has GDPR been in achieving the objectives you mention? And E-privacy? And now in turn the Digital Services regulation. How’s that going?
The answer is, not only have they been grossly ineffective, they have in many cases overridden national regulations which had functioned far better. You talk as if they filled a legislative gap that needed filling, but that’s not true. The “alternative ideas” you mention were already in place (eg ICO in the Uk)
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