The miller’s tale – a series of reminiscences

EPISODE 1 – Early intimations.

“Shades of the prison house begin to close upon the growing boy” – Ode on intimations of immortality from recollections of early childhood by William Wordsworth.

We moved into the countryside from the house next to the mill in 1950 and our old home became offices and a laboratory for our family business.. Going into the business made my later close acquaintance with the European project inevitable.

That was all in the far, unsuspected future when I went on a school visit to Germany in 1958. The German boy I stayed with asked me “Have you heard about our Wirtschaftsgemeinschaft? It will guarantee our living standard”. Neither his English nor my German was up to translating the word. So an answer had to wait until we got home. As soon as I asked our teacher, several other boys said

“My chap said exactly the same thing”. So it was obviously something they had been taught in school.

Our teacher, Mr Rhodes, explained that the word meant “Economic Community” and it had been started by a new treaty the previous year between France, Italy, Germany and the Benelux countries.

We discussed it for a while and thought it was a very good idea that these continental countries were co-operating with each other. “But remember,” said Mr. Rhodes, “This shows a difference in tradition between our countries. You would not be taught a political opinion like that as a fact in a British school.” How times have changed since!

This was the first time I remember people talking about what was called “The Common Market” and, whilst we wished the neighbouring countries well, I don’t recall many people being keen on the idea of our joining it ourselves. Matron was an exception but she was a Liberal – then a very small parliamentary party. One prominent member was a Lady Violet Bonham Carter who was so extremely enthusiastic that a radio comedian dubbed her “Lady Violent Common Barter” !

Interest moved up a notch around 1960. By then I was a pupil in a firm of corn merchants at Banbury, called Lamprey & Son Ltd. Their office was next to the town hall and had a high sloping desk with stools – no lounging in executive chairs! The accounts were still kept in hand-written ledgers upstairs. On my arrival, the manager, an austere man, passed me a weighbridge ticket – 5 tons 2 hundredweights three quarters and one stone. “There you are boy. Twenty five pounds twelve shillings and six pence per ton. What does it come to?” When I asked for a piece of paper to do the calculation “Lord love you, lad. What have they been teaching you all these years?”

Farmers came into the office on market days to order what they needed, to pay their bills and to be paid for grain which we had bought from them. It was a busy cheerful place and I clearly remember one nice old boy, a smallholder who had lost a leg in the First World War, asking the manager. “Well, Mr Humphries, be you goin’ to join this ‘ere common market?”. It didn’t rank very high in our concerns amongst the general bustle of a busy office. I did many jobs in that firm from bagging coal to really responsible tasks. Our boss, Roger Bradshaw, was only about ten years older than I. His father had died quite recently. So it was very different from working for my father. He would give a task, such as taking over the running of the retail shop without any detailed instructions and his favourite exhortation was “It won’t take you five minutes to get hold of it”.

Sometimes it took me much longer but I was allowed to make mistakes as long as I owned up. His son phoned me a few days ago to say he had been asking after me and this put me in mind to write these reminiscences.

After two happy years I went back home. Our most profitable product was a milk powder food for baby calves which my father had developed. He knew that technical advances were taking place in Holland and we eventually came to an arrangement with a large Dutch firm to use their formulations and made several visits to their mill to effect the technology transfer.

It was on one of these visits in 1962 or 1963 that I first came across the European Common Agricultural Policy. I was watching wheat come down a conveyor and suddenly saw purple grains. Now the only reason I knew for purple grains was ergot – a very nasty fungus which causes abortion in cattle amongst other things and there seemed to be an awful lot of it. The director who was looking after me said he would explain it all that evening. I learned that the grain had been dyed because it had been subsidised for use in animal feed. The dye ensured that the wheat could not be diverted back into human food. He explained the whole complicated system which also subsidised the use of milk powder in calf food.

I had never come across anything quite so odd in my life. We then had free trade in food and feed at home. How on earth could a common sense people like the Dutch have come to use such a complicated (and frankly barmy) system? “Little Holland is neighbour of big Germany,” my host said “and the Germans wanted it”. It was then that I remembered that he was very senior and I was very junior and a guest in his house. So I thought I had probably spoken out of turn.. His speech was quite matter-of-fact, as if describing the weather. I also knew that he had flown with the RAF during the war. So I shut up but remembered.

It would be ten years before we entered this system. In the meantime, many people were quite well-disposed to the idea of joining the “Common Market”. Mainland Europe was doing much better than us economically. We always seemed to be strikebound in major industries and things were rather shabby here in comparison to their rapid progress. There were also people I respected greatly, who had done great things in the war. “This will be marvellous for you and your generation Edward. It means you will never have to suffer the sort of things we did.” You had to take notice of people like that. But nobody could explain to me why they had such a crazy agricultural policy.

Germany will never, ever pay more than now for NATO

This post originally appeared in the Raedwald blog. The author lives in Austria but originally hails from Norfolk.

Many of us will have grown up with the BAOR (British Army of the Rhine) – either as serving soldiers or like myself as army brats. There was a time when Gütersloh, Fallingbostel or Sennelager were more familiar to us than Slough, Reading or Peterborough. The BBC even had a forces radio programme, and knowing at least half a dozen BFPO numbers was par for the course. Well, BAOR disappeared without notice in 1994. The 25,000 remaining troops in Germany became BFG, now down to about 4,000 and scheduled to pull out completely by 2020, almost exactly in line with Brexit.

The change came with the fall of the wall in 1989. Before then, our lads were to play a vital role in forming a heroic but utterly pointless sacrifice in holding up the Soviet advance through Germany to France for about 72 hours. Then we all thought it an essential sacrifice. Now we wonder, why bother? Perhaps France and Germany would be better off under Russian rule. Why shed British blood in their defence?

When Trump abstained from the traditional annual G7 offering of American blood in Germany’s defence last week he too must have felt the same. Germany has been financially raping Europe for thirty years, sitting on a vast pile of gold as she threatens, bullies and manoeuvres others to pay for everything, like some nightmare dining partner endlessly disputing the division of the restaurant bill.

Turkey is now a Salafist terrorist nation and belongs nowhere near NATO. In bullying the Netherlands into ignoring the veto of the Dutch people and extending full EU privileges to Ukraine, the EU has just given Putin another poke with a sharp stick. The UK will find it hard to mobilise even 6,500 troops – we need a standing army of 100,000 to put an adequate force in the field. Germany’s armed forces are to all purposes entirely useless. Amidst the ruins of NATO (and oh yes it’s now finished in all but name*) there’s only France to defend the EU.

Merkel may gamble that she’ll get away with it, and perhaps she will. But without British and American wealth and blood to pay for it. We’re done.

*Also proving the rule that corporations are most likely to fail at the point at which they open a spanking glossy new multi-billion dollar HQ

Macron’s victory may create more problems than it solves

Emmanuel Macron campaigned for – and indeed, won – the French Presidential election on an unashamedly pro-EU platform. His victory was greeted with huge sighs of relief across the Continent. Rather ironically, however, his enthusiasm for the Single Currency and indeed the European project as a whole may have the opposite effect, as John Stepek pointed out in a recent edition of Moneyweek magazine.

At the heart of the problem is that when it comes to further integration within the EU and in particular, the single currency area, it is far easier to talk the talk than walk the walk.

A broad range of economists acknowledge that so many economically divergent nations pushing ahead with a single currency in the 1990s was far from ideal. If a monetary union is to work, fiscal and political union, while not prerequisites, certainly reduce the risk of a catastrophic failure. As it currently stands, the Eurozone is far from being an optimal currency area.

This is exactly the line Macron has been taking. In other words, as Stepek puts it, “He’s one of the rare pro-eurozone politicians who’s actually quite honest about the euro and the eurozone. He is calling openly for a much closer Europe. He reckons that Europe needs a common budget, a common banking system – effectively, a full-blown United States of Europe.”

Any French politician who has made such a proposal in the past has been fobbed off by Berlin with the curt instructions to put their own house in order first. Reforms to France’s generous pension arrangements, bloated public sector and short working week have been often proposed by a number of newly-elected Presidents only to be scuppered by tyre-burning, stone-throwing protesters backed by France’s powerful trade unions.

But just suppose Macron succeeds where his predecessors have come to grief. Even a streamlined French economy will take years to converge with Germany’s and then, what about Italy or Greece? Following Macron’s victory, the headline in the Bild newspaper, which Stepek describes as the rough German equivalent of the Sun, was “How expensive will Macron be for us?”

This is not just the heart of the Eurozone’s problem – it highlights a major stumbling block with the whole European project. Germany has been happy to be a net contributor to the EU’s funds via the EU budget. In some ways, it would be very churlish of the Germans to moan about this. Labour market reforms in the first decade of the 21st Century made German businesses more competitive and the single currency also made German goods relatively cheap in other Eurozone countries. Italy and Spain, habitual devaluers before adopting the Euro, have lost this option. Unable to weaken their currency and thus boost their export markets, businesses in these countries have failed to compete with the Germans.

The unemployment figures bear this out. Only 3.9% of working age Germans are out of work and youth unemployment was a mere 6.7% in March. The corresponding figures for Italy are 11.7% and 34.1%. Spain and Greece are even worse, with overall unemployment at 18.8% and 23.2% respectively and more than two out of every five young people out of work in both countries.

Closer fiscal union means that not only would German taxpayers be paying into the EU budget to rebuild the infrastructure of the former Soviet bloc countries, but they would be liable for the social security and pension benefits of unemployed and retired Greeks, Italians and Spaniards. At the same time, a banking union would increase German liabilities if an Italian bank went bust. In short, it would be all pain for the average German (who is doing very nicely out of the Euro) with very little gain.

But surely the gain would be the big step towards full political integration which has always been the goal of the EU project? We are now getting to the heart of a fundamental flaw in the whole federalist vision. The idea of an United States of Europe may have been appealing in the late 1940s when everyone was keen to find a format which would prevent another world war. The problem is that while certain intellectuals, particularly on the political left, have long had an internationalist outlook, ordinary men and women are far more attached to the concept of nationhood and ethnicity, even though they may not even be aware of how deep that attachment runs.

But the subject of fiscal transfers, along with the related issues of benefits and welfare, can be guaranteed to bring such sentiments out into the open. Even in the United States of America, there is considerable resistance in some states to a European-style welfare state – and significantly, the states in question are the most ethnically diverse. It seems to be hard-wired into our nature that we are more willing to make sacrifices for people who are “one of us” than for people we perceive to be different.

A German, whose public sector employees have to work well into their 60s, is therefore unlikely to take kindly to subsidising the pensions of Greek public sector workers, many of whom used to retire in their 50s. But Greek austerity is biting impossibly hard. At our Annual CIB rally, Ambassador Chrysanthopoulos told us that his own pension had been cut from 3,400 euros per month to 1,200. If the recently announced cut of a further eighteen per cent applies to him, he will be down to under 1,000 euros a month – and he reckons himself lucky! So real hatred for Germany is building up in Greece, as is impatience with Greece in Germany. The German people may yet find the price of European empire too high while poorer Greek households on the most basic social security are currently receiving around 8 euros per household (not per person) per day. So starvation stalks the land – all in the name of building a European superstate.

An extreme example? Perhaps, but it illustrates graphically the challenges which Macron’s election has brought to the surface. How deeply does the average German, Greek, Frenchman, Swede, Pole, etc  – as opposed to an intellectual or a politician – really love the EU? If the depth of love of the rank and file isn’t strong enough to transcend ethnic and cultural divisions or to be willing to endure financial deprivation and extreme hunger, the only question which Macron, Merkel or their successors will need to consider is how the whole EU project can be put peacefully to sleep without a total political and economic catastrophe.

Photo by Lorie Shaull

Customs Union: from Zollverein to irrelevance

By Ian Milne

Preamble

Orwell’s Nineteen Eight Four came out in 1948, less than a decade before the official birth of the European Community.  In Orwell’s vision, three totalitarian super-states, Oceania, Eurasia and Eastasia, were perpetually at war.

The European Community was – is – merely the latest version of the chimera of a single European state that had been pursued in the nineteenth century by writers such as Victor Hugo, by Continental tyrants such as Napoleon, and, in the twentieth century, by German governments led in 1914 by Bethmann-Hollweg  and from 1933 to 1945 by Hitler.

Consciously or not, the European Union was built on similar assumptions: that the post-war world would consist of huge “blocs”, competing for resources & markets, and that European states were destined to amalgamate into a single state. In the Eurocrats’ weltanschauung – world-view – North America constituted one bloc, Europe another, while to the East, (the Soviet Union, its first candidate, having failed) China would exercise hegemony over the Asian land-mass.

The EU Customs Union

Since its accession to the “Common Market”,  “British Trade Policy is not to have a British Trade Policy”. The UK hasn’t been in control of its own trade policy since 1973. What the UK has had since 1973 is being trapped – for the first time in its history – inside a customs union – the EU Customs Union.

The EU Customs Union, the only one in the developed world,  is a relic from the “Fifties” –  the 1850s. This is how it came about.

In  German & French “received wisdom”, customs unions are (still !) a peculiar obsession. The 19th century German customs union – “Zollverein” –  was the mechanism associated in the German collective consciousness with the Bismarckian creation of Prussia & then the German Empire.

On 4th September 1914, a few weeks after the  outbreak of the First World War,  Chancellor Bethmann-Hollweg issued his letter setting out German war aims. War aim number four1 was to “create a central European economic association through common customs treaties…….”. (A Figaro journalist, Eric Zemmour, describes this as a plan for the “vassalisation économique” of France through the mechanism of a customs union2.)

Two years later, in 1916, when the war wasn’t going too well for Germany, Berlin offered a separate peace to the Belgian Government (then in exile in Le Havre3), involving the evacuation of German occupying forces from Belgium & the signing of a bi-lateral Belgian-German customs union4.   This was turned down by the Allies.

In early 1917, when a compromise peace with Britain, France and Russia might just have been possible, German aims were for a “German peace” with a customs union led by Germany and with the involvement of Austro-Hungary and Romania, thereby solidifying Germany’s hold over its supposed allies and converting them to a de facto part of the peacetime German economy, no different from Alsace-Lorraine and a large slice of Belgium which Germany also proposed to retain.

In the next war, in 1942, when Germany still believed it would win, the Reichsbank organised a conference5 in Berlin to plan how Germany would run the European economy afterwards.  This involved a European Customs Union – Zollverein – very similar to the one we have today.  (It also involved a single currency with – believe it or not – an opt-out for the UK).

 Almost two centuries on, in 2016, with average customs duties worldwide (including in the UK) down to a little over one per cent6, customs unions have lost whatever economic raison d’etre they ever had.

The EU is likely to experience a significant decline as an important trading partner in the future due to demographic issues. These two Global Britain briefing notes (here and here) list the projections for population growth and decline within and outside the EU. It is particularly interesting to see the very different projections for France and Germany.

Ian Milne

1          The full text (translated) is: “We must create a central European economic association through common customs treaties, to include France, Belgium, Holland, Denmark, Austria-Hungary, Poland “sic”, and perhaps Italy, Sweden, and Norway.”
2          Eric Zemmour, Figaro, 29.9.16 
3          The building which housed the Belgian government in exile between 1914 & 1918 survived the 1944 bombing & still stands in Saint-Adresse, a suburb of Le Havre.
4          Georges-Henri Soutou, La Grande Illusion, 1914-1920, pp 75.
5         The title of the 1942 conference was “Europäische Wirtshaftsgemeinschaft”
6          In 2013, 82 % by value of all UK imports of goods from outside the EU bore zero customs duties. The remaining 18% of such imports bore an average rate of EU-mandated customs duties of 8%. That 8% average is likely to be lower now.

 

Photo by Polybert49

Britain needs fighting ‘Plan B’ for trade as EU turns screws on Brexit

By Ambrose Evans-Pritchard. The original first appeared in the Daily Telegraph.

The European Union is hardening its terms on Brexit. There is a new hint of hostility in the language. The tone is peremptory.

Those of us who hoped that Germany would push quietly for an amicable settlement can no longer be so confident. We now learn from Handelsblatt that the German finance ministry insisted on some of the most unfriendly changes to the EU’s latest working documents.

Berlin stipulated that Britain must honour “all obligations” (Verpflichtungen) for divorce payments, a tougher wording than the earlier, gentler talk of legal and budgetary “duties” (Pflichten).

It demanded that Britain desist from tax dumping and financial deregulation that would “jeopardize the stability of the union”. This demand is almost insulting. British regulators have led efforts to recapitalize banks. It is the eurozone and Germany that have dragged their feet on tougher capital rules.

There is no longer any attempt at diplomatic tact. The document states that the European Commission will “determine” when the UK has made “sufficient progress” as it jumps through the hoops, the way it handles accession talks for supplicants hoping to join. It reads like an imperial curia discussing a colony.

The French too have stepped up their demands, insisting that financial services be excluded from the trade deal. The City of London must respect the “regulatory and supervisory standards regime” of the EU in any future arrangement, suggesting that Britain will have to accept the sway of the European Court.

Some argue that France will soften its line under a President Emmanuel Macron. His economic strategist is the anglophile Jean Pisani-Ferry, co-author of a Breugel paper proposing a ‘continental partnership’ between Britain and the EU that preserves very close ties.

Sadly, Mr Pisani-Ferry has made no headway with this idea. I have met Mr Macron enough times – or have seen him at EU venues behind closed doors – to detect a messianic fervour for the European project. He is a crusader by political religion, the EU’s latterday Bernard de Clairvaux.

But it is the hardening mood in Germany that is most ominous. The reason for the sudden change is unquestionably Theresa May’s snap election. While we think that the Prime Minister’s motive is – in part – to build a buffer against Brexit ultras in her own party, that is not the view in Berlin. Germans see her gambit as anti-EU sabre-rattling and a breach of good faith.

“The EU wants to counter Theresa May’s rhetoric and kill the idea that a bigger conservative majority will make any difference to their negotiating position,” said John Springfield from the Centre for European Reform.

The German press has likened Mrs May’s démarche to the defiant posturing of Alexis Tsipras in Greece. They almost take it as a given that her Brexit plan will fail and that she too will be forced to capitulate, grovelling for mercy. One wonders where the briefings are coming from in Berlin.

The parallel with Greece is on one level absurd. Syriza caved after the European Central Bank cut off liquidity and shut down the banking system. Britain is not in the euro or vulnerable to such coercion, and the strategic contours are entirely different.

Yet the Greek saga is instructive. The lesson is that you do not bluff with the EU power structure. If Theresa May still thinks that “no deal is better than a bad deal”, she had better have a credible Plan B, and she must be willing to activate it.

Falling back to the minimalist option of the World Trade Organisation and hoping to craft global trade deals smacks of defeat. It would leave Britain in limbo, pleading with the US, Japan, China, India, and other countries to embark on talks when they have larger matters at hand.

So it is time to think in revolutionary terms.  Parliament’s Exiting the EU Committee called earlier this month for a detailed study of what it would mean if the UK left the EU without a deal. Downing Street should answer this legitimate request, and the menu should include the nuclear option of unilateral free trade.

This is a heady Cobdenite manifesto, a turbo-charged version of the Repeal of the Corn Laws in 1846. No developed country has ever attempted such a thing, though New Zealand comes closest, leaving aside the special cases of Hong Kong and Singapore.

All tariffs would be cut to zero. There would be no restrictions on imports besides obvious safeguards, such as policing child labour or environmental abuses, or for national security reasons.

It needs no reciprocation, working from the premise of Adam Smith that if any other country wishes to impose or maintain barriers that is their own folly. They suffer the welfare loss. The currency would adjust to the new equilibrium, keeping the current account close to balance over time.

Adam Smith’s Wealth of Nations laid out the argument that protectionists hurt themselves most

Adam Posen, head of the Peterson Institute in Washington, said Britain would face a rough time with no EU trade deal but at least such a plan has creative allure. “It is far more credible than other options,” he said.

The current dismal narrative on Brexit would be transformed overnight.  Britain would suddenly be seen by the rest of the world as pioneering nation at the forefront of globalism, reasserting Thatcherite audacity, rather than a crabby islanders in decline. “People’s jaws would drop,” says Professor Patrick Minford from Cardiff University.

Pure free trade cuts through the Gordian Knot, eliminating the need for an army of technocrat negotiators and for yet more of those supra-national tribunals that so proliferate, eviscerating democracies and sapping consent for globalism.

Prof Minford says the hide-bound political class has yet to give such clear blue sky proposals a serious airing. “It is so unfamiliar. It takes a mental somersault to break free of mercantilist thinking,” he said.

Economists for Brexit – now Economists for Free Trade – certainly got off on the wrong foot last year by suggesting that the UK would be positively richer under such a model. This invited a blizzard of criticism.

My own view has always been that there will be a negative shock from Brexit and withdrawal from the single market, with effects on GDP at best neutral by 2030 with the right policies.

Professor John Van Reenen, a trade expert at MIT and a vocal critic of the Minford plan, says retreat to the WTO would cost roughly 2.5pc of GDP compared to remaining in the EU, with losses rising over time to 8.5pc due to productivity effects.

Witness to History

LORD WALSINGHAM (now aged 92) was a Third Secretary in the German Department of the British Foreign Office in 1950, when the foundations were being laid for the first stage of what is now the EU. It was then called the European Coal & Steel Community. He was Secretary of the tripartite study group (The UK, USA and France) which  cancelled all denazification to rebuild Germany against communist Russia for the Cold War.

This link is to a youtube video where he recounts his experience (approx 35 minutes)

Whilst the project was ostensibly about securing peace in Europe, British intelligence was well aware that there were secret additional  agreements in the Coal & Steel Treaty between Germany and France to weaken British heavy industry, eventually to undermine Britain’s defence capability so that the European project  would dominate Europe unchallenged in the long term.

Britain did not join the Coal & Steel Community but neither did it make public the ulterior, anti-British intentions of the “Fathers of Europe”. At the time Britain was  heavily indebted to the USA which was backing the EU project and funding the European Movement through the CIA.

The European Coal & Steel Community was intended to lead to a united Franco/German European army but the French National Assembly voted that down. Jean Monnet, Schuman and colleagues decided that they needed to proceed more gradually as the nations of Europe were not then ready to assent to their  dissolution in a single European polity. The European Economic Community was founded on this principle of small, repeated inexorable steps towards “ever closer union”. The process was called “Engrenage” – like a ratchet, it was irreversible. The Treaty of Rome set this up in 1957.

The name “European Economic Community” is highly significant. As a businessman, Monnet well knew the importance of brand loyalty. Every politically aware German of the Nazi era would recognise the  “Europaeische Wirtschaftsgemeinschaft”,  set up to build integration between the countries of Europe after the Nazi victory of 1940 and widely publicised in a collection of papers of the same name, published in Berlin in 1942. Translations of the introduction and main paper are available here. Apart from some descriptions of contemporary events, there is nothing in them which has not come out of the EEC and the EU in the last sixty years. The mindset and geopolitical world outlook are virtually identical.

The post war EU’s biggest project by far, the Common Agricultural Policy, was decided in 1962 but it was based on the clear guidelines, laid down twenty years before in Nazi Berlin (link here).  Now, of course, the Nazi EEC turned out to be mostly propaganda because the pressures of war overtook and destroyed it – but many of its intentions, including dominance over central Europe have been carried into effect under the EU flag , since the fall of the Berlin wall.

The Nazis were adapters rather than inventors of the project, which had been on official German minds for generations. On 9 September 1914, the Imperial Chancellor Bethmann Hollweg wrote:- “Russia must be pushed back as far as possible from Germany’s Eastern frontier and her domination over non-Russian vassal people broken… We must create a Central European Economic Association through common customs treaties to include France, Belgium, Holland, Denmark, Austria-Hungary and perhaps Italy, Sweden and Norway. This association will not have any common constitutional supreme authority and all members will be formally equal but in practice under German leadership and must stabilise Germany’s dominance over central Europe”.

Monnet, Schuman and colleagues added the “common constitutional supreme authority” in the form of the European Commission but the project is still highly congruent with the remarkably stable, long term objectives of Germany’s political class since the 19th century.

In late 2016 the German government allocated 4 million Euros to an investigation into the influence  of Nazi personalities and policies in the post war era.