Richard North, 04/12/2005  

My colleague has already blogged the gloomy comparison (gloomy from our point of view, that is) between European and American economic growth from today’s Business. While the new Sunday Telegraph seems to have slightly pollyannaish aspects, its Business section leads with another story that is likely to send shivers down the spine of anyone who thinks at all carefully about our future.

The title says it all: Top public sector pay soars five times inflation rate.

“Britain's best paid public sector workers last year received average pay rises of 13 per cent - more than five times the rate of inflation and nearly three times more than their peers in FTSE100 index companies.”

The biggest rises were in the Royal Mail, Channel 4 (which is owned by the state) and the regulatory bodies, such as Ofcom and the Financial Services Authority. Not only does the FSA make life difficult for businesses to carry on, it does so earning ever larger chunks of the tax paid out by those businesses. What could be more agreeable?/p>

“Meanwhile, Network Rail, the rail operator set up by the Government in 2002, paid its chief executive £919,000 last year - a 26 per cent increase.

New Bridge Street Consultants, the leading remuneration consultant, has found that the salaries of the best-paid FTSE100 directors are slowing and rose by an average of 5 per cent last year.”

This could be, the article suggests, something of an embarrassment to Gordon Brown as he prepares his Pre-Budget Report. I don’t see why. He has never been embarrassed by details like this before. After all, it has been known for some time that the soaring expense of the public sector has consisted largely of ever higher salaries and ever more people employed with diminishing productivity.

“Since 1998, the Government has hired an additional 680,000 people, taking the total to 5.8m. The spiralling cost of public sector workers has become an increasing source of concern for the Government. Brown recently urged trade union leaders not to campaign for annual pay rises in excess of 2 per cent. Meanwhile, Members of Parliament are seeking a 22 per cent pay rise.

In the year to January 2005 earnings in the public sector rose by 4.7 per cent - compared with 3.7 per cent in the wealth-creating private sector. According to the Office for National Statistics, the average private sector employee now earns less than the average public sector worker. The Government is also under intense pressure to drop its pledge to maintain the public sector
retirement age at 60.”

In a more pollyannaish mood, George Trefgarne, the new City Editor, has informed his readers of two interesting facts.

In his Pre-Budget Report Gordon Brown will tell us that globalization was made for Britain, who can benefit enormously from the historical ties with India and China (one wonders what he means about China – the Opium Wars?) and from their cheap exports.

It seems a little unlikely that a country, where 45 per cent of GDP is spent on the public sector, which is getting ever larger and fatter while the private sector is overburdened by taxes, will benefit from globalization. According to Mr Trefgarne, the business community is in two minds about the Chancellor’s blue-sky thinking:

“Although most businesses will welcome Brown's vision, many are angry at the standstill in the domestic economy and the rising tax burden. The Pre-Budget Report will include another downgrade of growth this year to under 2 per cent, which Brown will seek to blame on the slow growth of the European Union, the high oil price and the flatlining housing market.”

Mr Trefgarne’s other piece of information is about the meeting of G7 finance ministers,

“where a significant breakthrough in trade talks was achieved. Brazil indicated that it could improve access to its goods and services markets if the EU and America reduced their agricultural subsidies. That brings a deal at the World Trade Organisation meeting in two weeks a little closer.”

Indeed. However, it ought to be pointed out that what has been holding up a deal is the EU’s refusal to match America’s offer to reduce agricultural subsidies. Just how little is that little by which the deal is brought closer?

It became clear some time ago that Britain’s economy is heading the Continental way and the superior attitude adopted by the Chancellor of the Exchequer is somewhat misplaced.

Other aspects of our political structure are heading the same way, too. All this is rehearsed in another article in the Sunday Telegraph by Professor Niall Ferguson, who reminds us that Friday was the 200th anniversary of the Battle of Austerlitz, which ended the pre-revolutionary European order for ever.

“By routing the combined armies of both Austria and Russia, Austerlitz enabled Napoleon literally to redraw the map of Europe, conjuring up a new Confederation of the Rhine from the Baltic to the Alps. Moreover, by obliging the Austrian Emperor Francis to renounce the title of Holy Roman Emperor, Napoleon snuffed out an institution that had been at the heart of Europe for more than a millennium. Charlemagne had been crowned emperor by the Pope on
Christmas Day, 800. On August 6, 1806, that empire ceased to exist.”

While numerous historians have seen the Napoleonic order as being far more enlightened than the one he had “snuffed out”, Professor Ferguson does not share that view, pointing out that l’Empereur set up an oppressive system all of his own:

“Napoleon's idea of Europe was double-edged. On the one hand, he overthrew decadent dynasties like the Bourbons of Naples and established what was to become the model for Continental legal systems, the Code Napoléon. Later,in exile, he claimed that he had "wished to found a European system, a European Code of Laws, a European judiciary", so that "there would be one people in Europe".

Yet at the same time, Napoleonic Europe was without question an authoritarian empire. He had no qualms about censoring his critics and imprisoning political rivals. The raison d'être of his rule outside France was simply to pay for his wars. Napoleon liked to portray himself as Europe's liberator as well as its unifier. In truth, he was merely the most ruthless of the "enlightened despots".”

However, the end of Napoleon’s empire did not mean the end of Bonapartism in the legal and political sense, and that, according to Professor Fergusson is what makes it so difficult for the British and the Continentals to understand each other, at least, in theory:

“Napoleon fell; Bonapartism lived on, with the civil code and economic dirigisme as perhaps its most enduring legacies. And how they have endured! Ask yourself what are the biggest differences between Europe and England. The answer is that they have Napoleonic law and economics and we, whom he did not conquer, have the common law and the free market.

Which is why Tony Blair must often feel that Boney's ghost has come back to haunt him. As Prime Minister of the country that currently holds the Presidency of the European Union, Mr Blair not unreasonably expects to play a leading role in European affairs. Yet his efforts to reform the EU's budget have brought him into collision with almost everyone who has an opinion on this
famously baffling subject.”

As most historical generalizations, it ain’t necessarily so. Economic dirigisme was not invented by Napoleon, though he may have codified it. Mercantilism had a long existence in these islands as well but the ideas of free trade caught on here a good dal faster than on the Continent, despite several outstanding French and German theoreticians.

The idea of Tony Blair actually understanding, let alone upholding free trade or common law is laughable. And, of course, as Professor Ferguson points out, things have changed in Britain as well:

“Yet perhaps, on reflection, it is not quite right to ascribe Mr Blair's difficulties to the persistence of the Bonapartist tradition on the Continent. For one thing, I am no longer sure how committed we British really are to our own legal or economic traditions. The sovereignty of Parliament and
the traditions of common law have already been substantially eroded as a result of European integration, which has made the European Court of Justice supreme over our judges. As for the spirit of Adam Smith, as Andrew Neil argued in his excellent Hayek Lecture at the Institute of Economic Affairs last week, that you are more likely to encounter it in Beijing than Britain.”

The other side of his argument is that it is not so much Napoleon’s empire that has been reborn but the Holy Roman Empire, famously described by Voltaire as being neither holy, nor Roman, nor an empire (but an unholy mess, added a much more recent historian in my hearing).

Professor Ferguson plays on those words by pointing out that it is not clear how long the EU will go on being European and it certainly is not united. Perhaps a Eurabian Disunion, he muses.

At this point Professor Ferguson begins to display the usual ignorance of the very clever. Having drawn this witty parallel, he has to prove it and that is not so easy. After all, the Holy Roman Empire had ceased to be a state that legislated for all its members or insisted on centralized control centuries before it was finally abolished by Napoleon.

Parallels with the European Union that is gathering more and more power at the centre do not work, no matter how hard Professor Ferguson tries and how many links he can show:

“In his 1667 treatise De statu imperii Germanici,Samuel Pufendorf described the Holy Roman Empire as "a body that conforms to no rule and resembles a monster". I have often thought that this description could equally well be applied to the EU. Like the Holy Roman Empire, it has a relatively weak legislature - the Reichstag was the Holy Roman Empire's equivalent of the Strasbourg parliament.

Like the Holy Roman Empire, its court is a more important institution - though the Reichskammergericht had a rival in the Reichshofrat, just as the European Court has an alter ego in the European Court of Human Rights. And like the Holy Roman Empire it is always in the process of reforming itself, without ever quite getting there.”

I am rather sorry I am unlikely to hear any of Professor Ferguson’s lectures. They must be highly entertaining and seriously infuriating. What kind of an analysis is that? Does the man really think that the Strasbourg parliament is the EU’s real legislature? What happened to the Commission, that European equivalent of the Napoleonic civil service, that does far more than just obeys its political masters? In fact, they are the political masters. If this is the best our leading historians can do, we are in a sorry state.

The truth, I suppose, is that the EU is a rather frightening amalgam of the two: it is the Holy Roman Empire reborn with a Napoleonic political and legal system. Not having a bumptions little caporal at the head of it, it does not indulge in military conquests. The Holy Roman Empire was not the only state Napoleon destroyed – he finished off France as a serious military power.

Instead, the two ideologies have united and spread well beyond the boundaries of both empires without a shot being fired. Eat your heart out, Boney!


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