Criticism of the EUs Economic Performance

The most obvious criticism to make of the economic performance of the EU is that simply put
it hasnot been that impressive. From 1957 to 1973, at which time the UK joined the EC, the
averageannual growth rates of Germany, France, the Netherlands, and Italy were all in excess
of 4.5 percent and the average annual growth rate of the Inner Six (the previous four countries
in addition toBelgium and Luxembourg) was 4.9 per cent. In contrast, the UK grew at an
average rate of 2.8 per cent over the same time period. However, this high growth in the EC
was largely a result ofreversing the destruction of the Second World War rather by virtue of
EC membership (this can beseen in the high growth rates of other war-damaged nations who
were not in the EC such asSwitzerland, Sweden, and Norway). Between 1980 and 2012 on the
other hand, the UK grew at anannual rate of 2 per cent and the Inner Six grew at an average
rate of 1.6 per cent. During this period the EUs share of global GDP consistently declined
and now stands at approximately 25 percent.A number of reasons have been suggested for the
EUs relatively anaemic economic record, the firstof which concerns its trade policy. As
previously mentioned, extra-EU trade is governed by the EU,not individual member states,
who impose a common external tariff on non-EU imports (in 2012the average rate was 5.5 per
cent but with enormous variety). It has been suggested that it is thisexternal tariff, and
subsequent reduction in extra-EU trade, that has caused growth opportunities to be missed by
economies in the EU. It has acted to restrict its members ability to trade with the restof the
world, whose impressive growth, stimulated initially by the GATT agreements andsubsequent
trade liberalisation and later by globalisation, has outpaced that of the EUs
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.The centralisation and bureaucracy of the EU have also been said to dampen economic
growth. Asthe process of political and economic integration in the EU has accelerated, there
has been a paralleltrend regarding centralised decision-making that decisions are being
made increasingly far fromthe people they affect and that the EUs principle of subsidiarity,
the principle that wherever possible decision should be taken as close to affected citizens
as possible, is being paid lip serviceonly. While the creation of a customs union removes trade
barriers that can prevent thespecialisation of nation states, which Adam Smith identified as the
source of prosperity, this benefitis only applicable if open trade would not otherwise exist,
otherwise the benefits of greater size areless apparent. The optimal size of a nation can be
thought of as a trade-off between the harnessingeconomies of scale in the provision of public

goods and the increasing difficulty of governing anincreasingly heterogeneous community

that is not suited to a one-size-fits-all approach to policy
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.Of the 10 wealthiest countries in the world, on a GDP (PPP) per capita basis, the single one
with asignificantly large population is the United States of America
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, which benefits from a level ofdecentralisation not commonly found across the globe
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. A further criticism levelled at some of theregulations and directives imposed on member
states by the EU is that they are wasteful orineffectual. One of the most debated EU
regulations, on the issue of whether or not it contributes tothe EUs relatively inflexible labour
markets, is the Working Time Directive (WTD), which coststhe UK 4.2 billion annually
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, despite UK workers having the choice to opt-out of the 48-hourweek.Despite being one of
the most lauded achievements of the EU by pro-integrationists, theintroduction of the euro has
certainly not been an unqualified success. Critics of the currency unionargue that the
structurally divergent economies of the EU are not suited to the demands of a singlemonetary
union, especially in the absence of a corresponding fiscal union. Productivity
differences between the core and periphery economies of the Eurozone, exacerbated by higher
prices ineconomies such as Spain and Greece caused by the spending boom that access to the
lower ECBinterest rates stimulated, were reflected in a competitiveness gap between the two
which, in lieu of an exchange rate adjustment, resulted in large and growing current account
deficit in the economies of the latter. Additionally, peripheral economies found their access to
cheap financing greatly expanded after their ascension to the euro and so governments, banks,
and households all took on high levels of debt with disastrous consequences during the
sovereign debt crisis