The Bruges Group spearheaded the intellectual battle to win a vote to leave the European Union and, above all, against the emergence of a centralised EU state.

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Luke Johnson and Dr Irwin Stelzer

World affairs and British policy towards the EU

 

Introduction

We have two speakers this evening. The first speaker will be Dr Irwin Stelzer, who is the US economic and political columnist for the Sunday Times and the New York Post and an honorary fellow of the Centre for Social and Legal Studies at Wolfson College, Oxford. He has written and lectured widely on economic and policy developments in the United States and Britain, on the factors that affect and impede economic growth, and on the consequences of the European Union. Dr Stelzer’s book, The United States and the United Europe and the United Kingdom: Three Characters in Search of a Policy will be available in the blue room, where wine and refreshments will be served after this meeting.

Luke Johnson, our second speaker, owns and directs a number of companies which include the Signature restaurant chain, and he is the Chairman of Channel Four. He writes a regular column in the pages of the Sunday Telegraph. Mr Johnson wrote the foreword for the acclaimed TaxPayers’ Alliance publication, The Bumper Book of Government Waste.

 

Irwin Stelzer

I approach this subject with some trepidation, for two reasons. First, when I spoke here some years ago I seem to have aroused the ire of some of your members by suggesting that the next morning’s papers would not report the demise of the Euro, for which they had been fondly hoping, and I suggested politics would trump economics at least for a while, which it has. Second, I want to say a few kind words about the European Commission and persuade you that at least one of its agencies is adopting polices that real Conservatives should cast a favourable eye over. But first of all, let me declare an interest. I have commercial clients on all sides of these issues.

Jacques Chirac and the French hate it. The Germans can’t decide about it and the Spanish once liked it a lot but are now standoffish; the Italians have too many other things to think about. Gordon Brown is a longtime lover and the European Commissioner for Competition is a big fan. What I am referring to are the varied attitudes to the American model and towards the competitive core of the American model. As you all know, that model produced steady growth, low unemployment, stable prices: and that’s no small achievement in the world that we’re in, which is changing with such rapidity and in so many directions at the same time. One reason that we find ourselves in that fortunate position is that productivity has risen at a record pace and I would like to argue tonight that that is in part because the United States has a very favoured policy over cartelization and free trade over protectionism and competition over regulation. In other words, we in America embrace what Josef Schumpeter called ‘the perennial gale of creative destruction’, whereas in France, students and workers dream of secure and long-term employment. We say in America if you haven’t gone broke by the time you’re thirty-five, you haven’t taken enough chances. People also change their jobs with astonishing frequency.

The difference is no accident. It reflects the performance difference between a competitive and a cloistered economy. We do not make (with few exceptions) any effort to preserve businesses from extinction; whereas the continental European model relies heavily on preserving businesses from extinction, either by going out of business or by being taken over. You recall the furore when it was thought that a key strategic French industry, the yogurt makers, might be taken over by an American company. We don’t really have that. We strayed a little bit in the case of ports but we have now come back from the brink of protectionism, and the new law that’s being passed will be quite anodyne. We let businesses die. We have a long tradition of opposing what Teddy Roosevelt called ‘the malefactors of great wealth’, which is different from the generally well-behaving businesses that so offend the Leader of the Opposition. These are more cartels than anything else.

What I would commend to you to think about is that the European Commission has come down very hard on the side of preventing dominant firms from barring entry to newcomers. It has fined Microsoft a lot of money and has ordered it to open up its monopoly systems so that competitors can compete. On their side and pretty much alone is Gordon Brown, who has not endeared himself to many of you because of his fiscal polices, nevertheless in the micro sphere has fathered a very vigorous competition policy, and seen to the appointment of very talented people to run the enforcement agencies.

If you have competition, markets set prices, markets allocate resources: if you have monopoly, they have to be regulated. We can’t tolerate monopolies in a democratic society: at least not for long. So when you have monopoly power, when you have a dominant firm able to keep out newcomers, able to set prices and profit margins and so on, you get regulation; and regulation is a very poor substitute for competition. You have ministers sitting around trying to guess what markets would have produced. And that’s not a good thing. They are also trying to guess how they can expand their staff, which is also not a good thing. So I would ask you not to stifle your opposition to all things that come out of the European Commission, when you consider the competition polices that the Commission is adopting.

This relates primarily to two fields that you should think about. Every time the Commission interferes in a merger, whether it’s an American company acquiring another American company that does business here and so on, there is a huge uproar in the press about interfering with businessmen. If they stop it for the reasons stated, namely to prevent monopoly power, that’s very much on your side – partly as consumers, and partly because you don’t want regulation. Similarly, when the Competition Commission there or here decides to say to a company ‘you won this game fair and square, you’ve 90% of this market and we don’t begrudge that to you if you won it being efficient and tough-minded and everything else that is virtuous in a capitalist society’, but you can’t then tie some product to it (think Netscape), so that others can’t compete – and that’s a very dangerous situation that we see in the software business, where people know that if Microsoft includes it in its suite of offerings then no competitor will have a fair chance of getting any business. So again when you see Bill Gates come screaming into town about interferences in his business plans remember this. There is something very confusing about Bill Gates: he looks harmless. He doesn’t look like J.P. Morgan looked with a huge belly, a big white vest and a gold chain when he appeared before congressional committees: but don’t let that fool you. The business practices of Microsoft have been found to be terribly anti-competitive. And we have the same problem with lots of other companies. Hate the European project all you want, but remember there is at least one good thing coming out of Europe and that’s the competition policy of the European Commission.

I will now comment on the efforts of the masters of the European project to override the voters’ decisions and revive the EU constitution. We did a wonderful pamphlet describing it at The Sun. Everybody knows that the document is an absolute disaster. I thought it was rather amusing that Giscard d' Estaing pointed out that France had not rejected the constitution as 45% of the people had voted for it.

It’s worth pointing out the dangers that I see if this project remains alive. Last week Peter Mandelson came back to Britain from a sort of quasi-exile in Brussels where he still is employable, apparently, and told the Labour Party that Britain’s problems can only be solved by increased reliance on international institutions. You have to have a special focus to conclude that that is the case. This from a man who has seen Britain surrender its own ability to create a free trade policy, surrendering it to the protectionists at the EU, which has undermined its sovereignty and its credibility around the world. The President appointed me to advise the US trade representative in America, and frankly we don’t really care what you think at the Doha round. We care what the EU thinks at the Doha Round. You may think that you can affect what they do there, but you shipped in the wrong man to stand up for the French: frankly you’re not a player anymore in that game and I think that is a very bad thing.

What worries me as an American is that the EU is proceeding to put in place an ambassadorial core and network that will have its own foreign policy. We ran pictures in Washington of some of the residences around the world that EU core ambassadors are taking for themselves. And they really are quite nice; it must be a very nice job. Power without responsibility, a lovely residence, you get to go to all the good cocktail parties and it’s terrific. But the fact of the matter is that this is a construct that is aimed at balancing / thwarting American power. And if you believe as I do that American power is more likely historically to be benign than say Germany, for example, I think you have to believe that this is not a good development. America does worry about the fact that your prime minister has signed up to a European Army: the annex to the Nice Treaty. This is the rapid deployment force. Since it can’t be used without agreement of all nations involved, it can’t be rapid; since it has no air force, it can’t be deployed; and it has such a tiny budget that it is not a force. Nevertheless you have it, and it is planning to divert to itself NATO assets. Well I have to tell you that the willingness of America to have its assets diverted to a force designed to be a counterforce to itself is not likely to happen short of a major victory of some lunatic democrat in the next century.

I know Mr. Rumsfeld is certainly not as popular as he once was. The fact of the matter is when they threatened to arrest him if he showed up in Belgium, he said; ‘Fine we’ll move NATO’. So they changed the law. America is just not going to have that diversion of its assets to this force. Please understand I'm not an American that believes that Britain owes us a debt for saving it in World War II. I rather think that we dithered while you say doeth. Frankly that’s been my opinion for a long time and we treated you rather badly after the war in financial terms when you were in some difficulty and the communists then running the state department wielded a very harsh bargain from Lord Keynes when he went over. Bob Skidelsky tells a much better story than I have.

I am not of the school that thinks you guys owe us something. The French owe us something. If Britain feels like trading in its special relationship with the US for further involvement with the European project then that’s Britain’s right to do so. I don’t think that’s in Britain’s interest but that’s not for me to decide. I know it’s not in America’s interest. I know that the special relationship has been one of the great cornerstones of maintaining democracy around the world. The good news is that I have reason to believe that Tony Blair did not read the Nice Treaty before he signed it. And the parts he read did not include the annex that was stuck on after he left Nice, so that in my mind would suggest that when there is mature consideration by the British people it may come out differently.

In conclusion, my reason for this is my belief that politics is once again alive and well in Britain. After almost a decade in which you were essentially a one-party state, the Tories seem to be in a position to mount a serious challenge – although I am not sure that I should use the word ‘serious’ in connection with that.

Ordinarily I would be inclined to be very sceptical about a party committed to ‘policy lite’, to eliminating chocolate oranges, or in favour of gender quotas for parliamentary candidates, calling for increased regulation of business (thinly disguised as corporate responsibility) and proposing most of all to maximise happiness. And replacing GDP with GWB, which I understand is general wellbeing, which has one advantage – it can’t be measured. But more worrying is the pledge to hand over any increase in national income to the state, which can’t spend what it has now in an efficient manner. I queried one of the proponents of this little plan. And he said we don’t mean half in the sense of 50%.

Such a retreat from principle, combined with fiascos in the Labour government, at least has a virtue. They are making British politics competitive again by being sufficiently attractive to a sufficient number of people to get the Tory party a hearing, I think that’s a rather substantial achievement, especially when the alternative with which you’ll be faced is a Brown government, which would best be described by Ronald Reagan: The government’s view of the economy could best be summed up in a few short phrases: ‘if it moves tax it, if it keeps moving regulate it, and if it stops moving subsidise it.’

Opposition to the European project should remain high on your agenda, but be discriminating about which aspects of the European project that you oppose. I think that opposition should not blind us to the interesting development that we finally have a European Commissioner devoted to free markets and competition. I think the onward march of the European project has not stopped. They are pausing to refresh themselves and will move forward. I think that their march threatens the special relationship, and you have to decide whether that’s important to Britain. I know it has its weaknesses. I know Malcolm Rifkind argues that the special relationship is one way. From the American point of view, we value it. We value the special relationship and we value its support that we have received from Britain, in great pain on your part in Iraq. I think the good news is that the strains that we all predicated on the euro are now becoming visible. Italy desperately needs a devaluation and can’t get it. That one-size-fits-all interest rates are constraining some and causing inflation in other places is inevitable and the central bank seems determined to find some policy that will eliminate economic growth in Europe once and for all.

So I think that perhaps when passions have cooled, it might be all right to toast Gordon Brown for supporting a competitive policy and for saving sterling from extinction, but I’m not so sure that I would want to turn over the reins of government to him.

Chairman
I wonder if I could say a word in defence of Mr Giscard d’Estaing. ‘The British will not approve the constitutional treaty, we know it,’ he said. ‘I think that for Great Britain we need to find a special arrangement resembling that which applies to the Euro.’ He hoped the UK would remain in the EU even if it did not adopt the revised constitution. That seems to me to be a man who has some sensible thoughts.

 

Luke Johnson

I am not a professional politician or speech giver. I am a businessman. I’ve worked for myself for 15 years in a variety of industries and it’s really through my career in commerce that I have developed a healthy scepticism about the EU. I’ve also recently become Chairman of Channel Four. In that role I've decided to remain unaligned in party politics, but the one area that I have remained outspoken on is the EU, as I believe that it is a profound threat to our sovereignty, and even, perhaps, our way of life.

Firstly, a word on semantics. I always try to be careful to be specific and never let the EU lobby use such phrases as ‘Euro-sceptics’ when they mean ‘EU sceptics’: it’s one of the tricks that EU advocates use to promote their cause because they imply that all those who are opposed to the EU are opposed to the whole of Europe, and that they are, in effect, xenophobes. I am sure that the vast majority of the sceptical commentators on EU affairs, like their neighbours, enjoy visiting countries across Europe; they might even live in a foreign country. If anything, those opposed to the EU appreciate the diversity and cosmopolitan nature of Europe, the different countries, more than the bureaucrats in Brussels. It’s the EU more than any single body that tries to promote uniformity right across Europe and destroy all the cultural and linguistic differences that make it such a fantastic and interesting continent. I think that it is essential always to win the argument from the beginning: that essentially one can, and should, love Europe; but it’s legitimate to hate the EU. Because the EU is not Europe and it will never be.

So what is the EU? In my opinion, it seems to be a huge engine to stifle democracy. Over the decades, the political classes across Europe have promoted an organisation which takes power and freedom away from citizens and concentrates it among civil servants, politicians, judges and others almost no-one knows, who operate in cities even hundreds or thousands of miles away in an almost entirely unaccountable way. Who among the public actually votes for their MEP? Who knows their MEP’s constituencies, name and party, voting record or anything about them? These politicians ferry back and forth to Strasbourg and Luxembourg on their lavish expense accounts and produce legislation that affects our lives and yet most ordinary voters on the street have no idea who they are or what they do. They are supremely distant figures, obscure and yet dangerously powerful. Public figures supposedly serving in public office, yet unknown to the vast majority of the public, and they cost us 2.4 million pounds each. The best democracy in my opinion is always the most local; by contrast the EU style of central government is the opposite: a mad ideal which I think is helping to destroy our generation’s faith in politics. Apathy and despair at having any influence over the system or the law is driving millions away from the polling booth.

The EU, I think, is a direct cause of this malaise: it concentrates power amongst an out-of-touch elite who find the grubby business of actually getting elected in honest elections all too tedious. So as a consequence they have managed to organise things within an almost Alice in Wonderland type of world where the institutions in which they are involved bear no relevance to real people’s lives – except in an entirely pernicious way. They expropriate hundreds of millions of pounds a year to fund their chauffer-driven lifestyles, overseeing new committees and regulations while failing to file their own accounts or have them signed off for the last eleven years. Any less influential body or business would have been shut down by now for such negligence and incompetence. Despite the many whistleblowers reporting on the endemic abuse within the EU, senior administrators are desperate to preserve the system at all costs. Almost by design, the EU shuns transparency and openness, making itself and the parasites who live off it profoundly anti-democratic.

It always seems to me that people do tend to take better care of their own possessions than other people’s. Just look at how carelessly employees drive their company cars, compared to ones that they have had to pay for with their own money. The state uses tax, or as some sceptics call it, legalised theft, to fund its activities. The EU is one grand step further removed from national tax. So the connection becomes very distant indeed. The 25,000 staff of the EU occupy what I think is a parallel universe to the entrepreneur; they drain value from the economies of Europe and act as a terrible burden on the wealth-generators who actually create jobs and increase our standard of living. Yet in the EU they claim that one of their prime objectives is to reduce unemployment and improve opportunities. It would be laughable if it wasn’t such a serious matter.

Easily the single best way to promote jobs across the EU would be to scrap the vast majority of unnecessary and oppressive rules which inhibit enterprise which the EU promotes. EU-inspired red tape is helping to suffocate business and drive jobs offshore to low cost countries like China and India. Pointless EU directives and regulations concerning everything from chemicals to water to forestry, to medicines, to fishing to farming to employment to health and safety act as a cost and a disincentive to investment. A Dutch study showed these restrictions and the accompanying paperwork have cost them fully 2% of their national GDP. Extrapolating that figure to our own economy would suggest a burden of over 20 billion Euros a year and this particularly affects small businesses which generate most new jobs and innovation. Large companies can always better afford the red tape; but just ask any entrepreneur their view of the mountains of mindless legislation generated by the EU and I suspect their reply will be short and to the point.

I first received my real lesson in the decay and wickedness of the Common Agricultural Policy (CAP) when I was chairman of Pizza Express some years ago. I went on a buying trip to Italy to purchase tomatoes, wine and olive oil and the like from producers. We visited a major supplier who lived in very grand style with very many servants in a splendid palazzo growing tomatoes. His family were obviously spectacularly wealthy. During a magnificent lunch he explained in great delight in how his entire business prospered through subsidies that he had ‘fiddled’ from the ‘fools at CAP’, as he called them. He had a major business, built up on distorting incentives paid for by the hard-pressed European taxpayer, who still ends up paying far more for food than the world price. Suddenly I saw, in a very clear practical and personal light, where much of the EU’s 70 billion a year budget was going: fraud and waste. Moreover, the CAP is a terrible engine for unfair trade and environmental destruction. Its 30 billion annual pounds and subsidies lead to over- production and dumping, depriving third world farmers of a fair opportunity to develop.

Particular vested farming interests have successfully pushed a selfish and backward agenda for the EU for many years and have cost the UK consumer billions in higher taxes and the cost of food. The EU is riven with such corrupt lobbying. EU enthusiasts will argue that millions of jobs depend on our membership. This I think is a straight lie, like so much of the EU propaganda. We were told that Britain’s economy would collapse if we didn’t join the Euro, but we’ve actually outperformed the Euro zone economies since it was created. Overall only around 10% of Britain’s total GDP and jobs support our trade with EU states. A number of studies have shown that leaving the EU would be neutral overall for jobs and trade. EU nations enjoy massive trade surplus with Britain. So actually EU members need us in many ways more than we need them. However many other countries like Switzerland and Mexico have free trade agreements with the EU and certain countries that have stayed out of the EU like Norway and Switzerland actually enjoy a higher standard of living than EU nations.

Ultimately, in my opinion, I think the EU is unreformable and that those who think we can improve it are, I’m afraid, dreamers. I think we should move to withdraw rather than integrate further, which is the inevitable trend of the EU. Just like a latter-day Soviet Union, I think the EU is capable of destroying our individual culture and prosperity, capable of trampling on our industry and undermining our future if we allow it to. There are many in this country who tend to have a fatalistic view towards the inevitability of the EU as a federal super state. They see the steady loss of Britain’s independence and sovereignty and are ready to give up. I strongly believe we can avoid such a gruesome fate. We can exit the EU but remain as either members of the European economic area or the European Free Association and enjoy the benefits of the single market without the crushing costs and regulations of EU membership. Only very radical reform of the EU can possibly make the club worth being a member of. There is a desperate need for such a looser structure with true transparency and accountability and institutions that are geared toward economic liberalism. Sadly I do not believe that there is the will to carry through the necessary changes within the EU. I think if we were to hold a referendum now on whether to withdraw from the EU then I think as a nation we would vote to withdraw and that would be an example of true democracy in action. Here's hoping that some amongst our politicians have the courage to ask our people some day soon.

 

Questions and Answers

Question
Could you possibly sketch out a roadmap to withdrawal from the EU?

Luke Johnson
As a businessman I would say: just do it. I can’t believe that it is impossible if the will of the British people is unsupportive. We should just pass the necessary laws to do so and dismantle the legal and political infrastructure that we have taken on over the decades and revert to a true level of independence such as that enjoyed by Norway and Switzerland and so forth.

Irwin Stelzer
We know a lot about the economic consequences, and they are someway between trivial and positive. What we have got wrong about withdrawal: I don’t think that the thing that is going to trigger any real support for that is anything that an economist can write about. It is too obscure to say, ‘we have this tariff on computers and that would go away’ and so on. I think that something that would trigger this sentiment is something like the Human Rights Act; that will get people’s attention as to the nature of the sovereignty that has been suspended. Economists should put these things together – that’s what they do – but like Luke Johnson says, politicians should just do it. My feeling is that the trigger will be something like a move of authority over football to Brussels, defining crimes, immigration or one of the social issues. These are far more likely than anything we can tell you about cost and benefit. Once that happens I think people will know how to write the required legislation. As an outside observer like me, I think it is absolutely astonishing as to what the British people have been able to tolerate so far.

Question
Do the two speakers agree that the taxation system in this country is a mess? It is, first of all, too high and is destroying business enterprise initiative. The costs of administration and fraud are causing a ludicrous drain on the economy. How could anybody possibly reconcile fixing the taxation issue with staying in the European Union, which is heading off in precisely the opposite direction?

Luke Johnson
I’m no expert on tax. However, all I’ve ever read suggests that the flat-tax is working well in places like Estonia and Latvia and other new entrants to the EU. The US also has this problem. I think that the cost of administration and of getting it wrong is immoral and it is a wicked waste of societies’ time and resources to expend so much energy in trying to behave in a legal way. The more you tax, the more you disincentivise people to work. There must be a better system. The EU has some very profound problems with tax as some of the EU lobbyist nations like Ireland have adopted a very low tax policy to encourage investment and I’m sure they are going to resist violently the harmonization of tax that some of the great EU cheerleaders are promoting. I say bring on the great EU conflict and fragment the damn thing. I think tax is one of the big issues that they have to reconcile the more forward-thinking nations with Old Europe.

Irwin Stelzer
Separate too high from complex. My view is that the UK government is taking 43% of GDP and you just can’t remain competitive economically with that. I think it would be virtually impossible to have an absolutely neutral, social-engineering free tax code and to get that done. Can it be made less complex? Yes. Completely like Estonia? I don’t think so. I think the real saving grace will be international tax competition. In the end, the thing that will force down tax rates will be loss of business and investment to low tax regimes. It won’t come internally unless there is an external pressure to do it. In the US we had Mr Forbes, who has been dissipating his family fortune to talk about flat-taxes; consequently they had to sell their collection of Fabergé eggs. I wouldn’t hope for that. If it were me, I would tie a limit on the portion of GDP that a government is allowed to collect. I have more hope for lower taxes than less complex taxes.

Question
Based on what is happening now in Italy, is the EU's current course unsustainable and likely to result in a crash?

Irwin Stelzer
Unfortunately for Italy, its economy is skewed towards goods that are the most tradable with Asia: shoes, apparel, etc. It is the most subject to international competition from low wage countries. It can do one of two things: it can devalue, but the EU won’t allow that – or it can adjust by letting all those non-competitive businesses to go out of business and have a transition to things that the UK does. That is, either non-tradable goods or non-competitive. It probably doesn’t have the political will to take the second option. Economists are very good at telling countries where to go but not on how to get there. They would have a long, difficult haul. Berlusconi came in willing to do that compared with the socialist that has now been elected, but he could get anywhere. It is a pipe dream to think that the political elites in Europe will allow the EU to implode. They are willing to have high degrees of suffering in order to maintain this dream because it has nothing to do with economics. You talk to Tony Blair; he will tell you it is a political project. So the notion that there will be economic pain that will cause the Euro to come unstuck is far fetched. Taking France, for example, it has persistent rate of 10% unemployment. When you talk to Giscard d’Estaing about it, he says we would rather have our system with large transfer payments to the unemployed than have your system where the law of the jungle applies. I think that the ability of the elite to watch pain inflicted on other people by this project is really a lot larger than we think, which is why I think Britain’s solution is not to wait until it implodes. And Blair did you a great turn by expanding to other members, because it makes it workable and dilutes the power of France and Germany quite considerably. Waiting for it to implode reduces the incentive to exit. And I don’t think the implosion is likely. Maybe Italy will have this huge upheaval, but not with this government – maybe with the next government.

Question
Back in the Sixties a book was published: Can the Soviet Union Survive Until 1984? Given that this European Union resembles a privatised Soviet Union, can the EU survive until 2014?

Irwin Stelzer
The Soviet Union was pervasive: that is not an apt analogy. The EU has enough green shoots of private enterprise in it. There are some very successful French and German international companies; the eastern Europeans are proving to be pretty successful in running businesses; even the Chinese have a bigger private sector than the Soviet Union did. Is the EU so inefficient that it will collapse like the Soviet Union did? I think not.

Luke Johnson
I agree, in that the political elite of the French, in its heart of hearts, is buying into slow decline, rather than vigour and dynamism. I’ve seen unemployed people in France and had businesses in France. It’s a complete nightmare to have employees. That’s why French firms don’t like taking on staff. French workers are loyal, hard workers but it’s just the system. The add-on when you hire someone in France is almost sixty percent of what you pay them. So net, they tend to enjoy a lower standard of living and it’s under pressure that is only going to get worse – but it will be slow and painful rather than sudden and violent. The reason why I think Italy might be more of a flashpoint is that they are under much more extreme pressure than any of the other major economies. It’s got a history of instability. The tipping point will come dramatically earlier from there rather than from Greece, Germany or France.

Question
Nobody has yet talked about using the law. We know about the corruption at the EU. Why is nobody talking to lawyers to find a trigger, because I think that if it became open public knowledge just how corrupt the EU is and what a waste of resources it is, it may be the adequate trigger to get the referendum?

Irwin Stelzer
I’m not sure about that. It’s not about finding lawyers, it’s about finding judges that will listen to those lawyers – and that’s not an easy thing to do. Again it’s the passivity that I find so astonishing. Everyone reads the paper and watches the television – the reports on the corruption are there all the time. This sense of hopelessness has to be dispelled first. We must question how do we get out, specifically, and then use economic studies on how getting out might increase GDP per capita. But getting out is not a policy: it’s an objective. Getting out of the EU sounds so extreme, but if you say we’ve got to do these six things and then the consequence will be X: then you are starting to get practical. Tax reform is great, but people don’t know how to reform the system or get there.

Luke Johnson
I’m no lawyer, so I have no idea how one would attack the corruption in the EU. The thing I find astonishing is that an awful lot of the sort of people who are high-minded or publicly minded become corroded by the trinkets. Be they legislators or civil servants. They all start to be excited by the rewards, be it power, or be it lifestyle. I think the EU has been a fantastic engine for many of the political elite that comes within its orbit. It draws them in and the Mandelsons, Blairs and others all succumb to its charm and they see a way of life of influence and so forth and suddenly reason and a sense of independence go out of the window. Because isn’t it much grander to be in charge of so many more hundreds of millions of people rather than just influencing a mere old sixty million people – so they become corrupted.

Question
Compared to the experience of the USA, how can we in Britain get a fair hearing or debate in Europe when everyone in the media, in particular television, has a socialist bias toward the EU?

Irwin Stelzer
In America, we have competing biases. Here we have your major broadcaster thinking it isn’t. Once you think that you’re not biased you get self-righteous. In America talk radio was the Conservatives’ answer to the liberal control of the media and broadcast networks like the New York Times and the Washington Post. Here you don’t have much of that. You guys all think that the regulator should make everybody fair. Well, to hell with fair. What you want is diverse. I don’t know how you get around the BBC problem. I’ve seen them in political action; I’ve seen them up close. They are formidable when it comes to preserving everything except their audience.

Luke Johnson
Believe me that there are voices within Channel 4, that there are bounds not within individual programmes but within the schedule. I would violently disagree with you that Channel 4 is leftwing. We have a very small audience relatively, compared to the vast BBC empire; so we don’t cater to the same audience share that they do. There is a diversity of voices in 4 and that’s the whole point of it.

Question
Would the speakers agree that in Europe the multinationals have more chance of disciplining the EU by removing their industries to the low tax economies in the near future?

Irwin Stelzer
Certainly the German multinationals are investing in the East, but taxation is not the only determinant in investing in location. There is the stability of the regime, there is the rule of law, there is regulation and all sorts of things and because of the decline in transportation costs and because of the declining importance of national boundaries, people are proving quite mobile. In the UK you have 350,000 Polish plumbers here. I think businesses will move but they are not all going to go to Estonia. Markets matter and proximity to markets matter. There will be pressures in those directions and capital is in a sense more mobile than labour, but not much more, as you would think these days. One of your problems in this country is that how mobile labour has been except within Britain. Within Britain there is an enormous amount of immobility of the workforce, especially between North and South, but that is because the housing market is so screwed up.

Luke Johnson
Having spent some time in China and India in recent years I have to say that, in my opinion, the biggest challenge facing the West is certainly not the great clash of civilisations vis-à-vis Islam and the West. It’s dealing with the entry of two billion plus people, consumers and producers, into the capitalist markets, and I think this is the issue that is hitting Italy so very dramatically. It’s something that through the decade of its existence, the major countries in the EU, such as France and Germany, have never had to deal with before and this is a very dramatic challenge that the traditional voices, polices and administrations of the EU are utterly ungeared to cope with. Business can and will move across the globe – but it’s not as if people in Europe will relocate to India. If the EU does not reform and fall apart and dissipate and therefore allow the sorts of liberal polices that exist in America, then the peoples of the EU can look forward to a steady decline in their standard of living. Generally, over the centuries, people have not tolerated that for that long but I, like you, am astounded at the passivity of the peoples as regards the European project. I think we’re almost worse in this country than others, because at least in France, for example, they have their fanatically powerful farming lobby. I fail to understand who it really is in this country that really supports the EU. I have never seen them as a force.

Irwin Stelzer
It was the inability, I think, to counter the notion that if you oppose the EU then you are a little Englander. It’s really interesting; the pressure you describe is enormous and when you look at the inability of the EU to respond in any meaningful way and then you think about Britain: Gordon Brown gives endless speeches about the competition that we have gear up to in the 21st century; all the Chinese are going to be engineers and so on. What is his solution to that? It’s a typical EU solution, ‘well they’re forging ahead in design, so we’ll set up a governmental design centre’: just picture the creativity that will emerge from that centre. One of the problems is that everybody thinks in terms of some governmental response to an issue. That’s why I really think that what’s really needed is a huge cultural change. You have parents unwilling to take on debt to send their children to university. That’s an investment, not an expense. If you buy a house it interrupts your cash flow; if you go to university it should also interrupt your cash flow: it’s as important. The government has to have some sort of programme for that. It’s that basic first reaction: ‘let’s see what the government will do’, that is really the killer. I think it’s going to take a while. When the NHS collapses – and it’s heading towards it – and people have to look to themselves, on more than a lot of issues, then you will see this passivity go away because you’ll have no choice.