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Abstract:
At Lisbon in 2000, the European Union (EU) set itself a new strategic goal, namely to become the world’s leading economy and to enhance social cohesion across the union, all within a decade. It is argued in this article that one fundamental barrier to the fulfilment of this dream is the fact that power is centralised in the Commission rather than the Parliament. The basic idea upon which our theoretical model is predicated is that a political system that centralises power lowers the cost of rent-seeking and therefore leads to a more economically harmful redistribution, as reflected in the annual EU budget. Here, the two main redistribution policies, (1) Common Agricultural Policy (CAP) and (2) the Structural Funds, consume more than four fifths of the total annual EU budget. Thus, if the EU is to achieve its strategic goal, a strong cure is needed to reduce redistribution and encourage more free trade. The simple cure for this ‘EU disease’ would be to strengthen the decision-making power of the Parliament at the expense of the Commission. In this way, power would be spread out between the democratically elected members of the Parliament rather than being concentrated with a few bureaucrats. Such constitutional change and decentralisation of power would increase the costs of lobbyism in particular and thereby reduce distortions of policy outcomes, clearing the road for free-trade policies and economic growth in the new millennium.
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