Thursday, January 18, 2007

The EU Constitution is ‘Europe’s soul’

The German chancellor, Angela Merkel, has discovered the messianic mission of her EU presidency – a quest to find Europe's soul. She is determined to breathe life into the dead dormant document, declaring: ‘We must give Europe a soul. We have to find the soul of Europe.’

This was a favoured theme of Pope John Paul II, and for a politician to make the demand fuses the EU temporal with the EU spiritual. There already exists an official EU body called ‘A Soul for Europe’, composed of Roman Catholic ecumenical representatives who dispense millions of euros to religious organisations in quasi-spiritual pursuits whose objective is to persuade the ignorant laity that the EU is indeed divinely inspired. It is so important that it operates directly from the office of the President of the European Commission, and its job is to administer what our overlords call the ‘faith-sector of civil society’.

Chancellor Merkel is supported by Hans-Gert Pöttering, and Jose Manuel Barroso, who states: ‘We need the settlement to clear the clouds of doubt which hang over parts of Europe.’ Once again, the language is pseudo-religious: without a constitution, the people perish.

To fail to recognise the Chancellor’s calling would be ‘a historic failure’, she told the European parliament. Significantly, she rejects utterly any further public consultation ‘because it has already taken place’. She may conveniently have chosen to forget the outcome of those consultations, but effectively the assertion is that plebiscites needn’t happen because we’ve had them…

She may awake from her delusions, or she may not. If she fails to respond to British diplomacy, and insists on asserting her Germanic divine right, it will once again be for the United Kingdom to save Europe from itself.


Anonymous Voyager said...

It is Germany's only foreign policy and the Auswaertiges Amt cannot imagine any other without fear of being sidelined.

It is also bound into the Coalition Agreement with the SPD. The politician who tried to make Euroscepticism his own - edmund Stoiber of the CSU - has announced he is standing down - if Gunther Beckstein succeeds him it will be most interesting

18 January 2007 at 18:38  
Anonymous sparks said...

I've always thought of 'Europe" as the German Reich achieved by other means. We are in a sorry state if it comes to war again. What is the state of the German armed forces? I believe that I have read that they are already serving beyond their own borders and that the front axle of their main tank is high to deal with Winter on the steppes.

18 January 2007 at 19:04  
Anonymous Voyager said...

Sorry Sparks, I think you are way out of date. This Germany has no militarism which has disappointed both USA and Britain as they deal with Afghanistan.

The problem is that the governing elite has led the public upon a blind alley and mugged them to pay for the EU as German living standards fall.

Stop looking at the past - that is the problem with the EU - it is the future we need to shape not wallow in the past

18 January 2007 at 22:25  
Anonymous Colin said...

Voyager's last comment is absolutely correct.

Hopefully, His Grace is also correct with his statement that "it will once again be for the United Kingdom to save Europe from itself."

But how?

The only German politician who at least opposed somewhat the EU plans and Turkey's accession was Mr. Stoiber. Following an intrigue by his likely successor, Mr. Beckstein (probably in collaboration with Mrs. Merkel), Mr. Stoiber announced his involuntary resignation. The machinations of Mrs. Merkel have already ended the careers of the many successful German politicians such as Kohl, Schaeuble, Schroeder, Merz and now Stoiber. The strategy consists mostly of using the publicity caused by a scandal suddenly appearing from nowhere.

Interestingly, research has found that female aggression is different frome those of men. Girls employ "relational aggression" as weapon such as spreading hurtful rumors. Girls engage in higher levels of relational aggression than boys. "With boys, bullying incidents can be intense but they're usually short-lived and easily forgotten. "If a boy doesn't get invited to the movies by his friends," he might be angry initially, said team leader Katie Allison, "but the next day, they're all out skateboarding." Not so for girls, who tend to use a kind of slow torture that is manipulative, calculating and sometimes even brilliant."

The history of the EU is full of manipulations, calculations and scheming. The brilliance of Mrs. Merkel in this field is certainly not a reason for optimism. Her calculation is that the six month of her term isn't sufficient for accomplishing anything. Therefore, she has already organised a cooperation with her two next successors, i.e. Portugal and Slovenia, which undoubtedly will benefit by receiving tax money from Germany. She calls that system a "trio".

19 January 2007 at 00:21  
Anonymous Voyager said...

The trouble with the EU is that it gives disproportionate weight to small countries. A rationalist looking at the EU would eradicate the small countries by merging them into bigger entitities to show their "communautaire" spirit, but instead it lets small countries use the EU to bind big ones rather like Gulliver in Lilliput being tied down.

It makes countries like Ireland, Belgium, Cyprus, Malta, etc think they are equals so long as they have at least one big power alongside and it becomes like the UN with log-rolling to get General Assembly members to line up with a Security Council power in some trading alliance.

IF Britain wants to blow things apart it simply needs to push the Energy Question and demand that transmission networks be split from generators within the EU - this will put Merkel in great difficulty and France also - but by appealing over the heads of politicians to a public skimmed by utilities it would put France and Germany in great difficulties

19 January 2007 at 06:34  
Anonymous bob said...

Eamon de Valera, in a speech made at the end of World War II responding to a remarks Churchill had made in his victory speech, said the following:

"Mr. Churchill makes it clear that, in certain circumstances, he would have violated our neutrality and that he would justify his action by Britain's necessity. It seems strange to me that Mr. Churchill does not see that this, if accepted, would mean Britain's necessity would become a moral code and that when this necessity became sufficiently great, other people's rights were not to count."

It seems that Voyager and Churchill share something of the same spirit in that neither regard small countries as being worthy of being treated as equals.

19 January 2007 at 09:09  
Anonymous Voyager said...

Actually de Valera was a bit odd having himself signed the Book of Condolence at the German Embassy upon the death of Adolf Hitler.

I could not take someone with De Valera's tainted past as having anything of a moral character.

It is a principle of One Man One Vote that the voting rights of one "European Citizen" not be reduced to advantage another. It makes a mockery of the European Parliament that the vote of a European Citizen in Britain and Germany is reduced in worth compared to that of one from Luxembourg or Malta or the Republic of Ireland.........

I do not know why this essential principle of modern Democracy of One Man One Vote (OMOV) should not pertain in the European Union

19 January 2007 at 09:45  
Anonymous bob said...

I think you do de Valera a disservice. Although I do not agree with everything he believed in he was a man of principle. However he has become a much despised character in history and very much misrepresented by historians.

If I take your argument to it's logical conclusion am I to assume that China has more rights than any other nation in the world due to the size of it's population?

19 January 2007 at 10:37  
Anonymous t.w.hereward said...

May I second Voyager's suggestion on pushing the Energy Question. An issue with huge potential, and much riding on it. The sooner the better.

19 January 2007 at 10:57  
Anonymous Voyager said...

If I take your argument to it's logical conclusion am I to assume that China has more rights than any other nation in the world due to the size of it's population?
Were it to become a member of the EU I should expect that to be the case which, incidentally is one reason I am opposed to Turkey joining the EU

19 January 2007 at 12:45  
Anonymous bob said...

So then sovereinity is really determined by population, as to dismiss smaller countries as equals is to undermine their sovereignity as free and independent states. Might is right, and who souts loudest wins, apparently.

19 January 2007 at 12:54  
Anonymous Tejus said...

might may not always be right, but usually it does help in achieving targets.. look at the US, how they bulldoze their way through the UN

19 January 2007 at 13:04  
Anonymous Voyager said...

I fail to understand why 732 MEPs represent 27 Member States

Germany has 99 seats or 13.5% seats
UK has 78 seats or 10.7%
Poland has 54 seats or 7,4%

R of Ireland has 13 seats or 1.8%
Greece has 24 seats or 3.3%
Luxembourg has 6 seats or 0.8%

Portugal has 24 seats or 3.3%
Slovakia has 14 seats or 1.9%
Cyprus has 6 seats or 0.8%
Malta has 5 seats or 0.7%

In the next EU Elections Britain will have fewer seats because the total was fixed by The Treaty of Nice at 732 seats and Romania and Bulgaria will be involved next time

This means that Malta pop 404.000 has 1 MEP for every 80.000 people and Britain 1 MEP for every 788.000 people

OR Ireland has 1 MEP per 325 persons and Germany 1 MEP per 832,000 persons

OR Luxembourg 1 MEP per 77.500 and Poland 1 MEP per 714.000 persons

AT 732 seats for 486 million people it should be approx 664.000 persons per MEP meaning Ireland should have not 13 but 6 MEPs

and Britain should have 92 MEPs and not 78

and Germany should have 122 MEPS and Luxembourg should have 0 MEPs

19 January 2007 at 13:04  
Anonymous Voyager said...

Bob I am addressing the European Union, the subject of this thread - what you are addressing seems to be outside the scope of this thread

19 January 2007 at 13:05  
Anonymous bob said...

The population of Ireland is estimated at 4,062,235. With 13 MEP's that means there's one MEP for every 312,479.61 people, leaving your figure incorrect to the tune of 312,154.61

Your method of organising the EU would be to eliminate a soveriegn state if it did not meet a predetermined population quota, and presumably this regional district would then have to be ssubsumed within other nations to aid their population quotas.

19 January 2007 at 13:14  
Anonymous bob said...

My apologies then Voyager - but out of interest how does the Energy Question tie into the Soul of Europe?

19 January 2007 at 13:16  
Anonymous Voyager said...

You are correct Bob - I missed the '000 from the 325 - apologies it was a genuine error.

The principle of the European Parliament is to represent ALL European Citizens not each European State........the countries are represented in The Council of Ministers..........The "Citizens" are supposed to be represented in The Parliament

19 January 2007 at 13:18  
Anonymous Voyager said...

Energy Question tie into the Soul of Europe?

because the comment about a Seele came from Bundeskanzlerin Merkel with respect to the EU Constitution - my point was to block Merkel's attempt to revive the Constitution by pushing the other issue on Germany's EU Presidency Agenda - ie. Energy

19 January 2007 at 13:20  
Anonymous Anonymous said...

Apologies all round then

19 January 2007 at 13:22  
Anonymous Anonymous said...

A tremendously infomative thread. Thanks Voyager and Colin especially , your efforts are appreciated ..and filed.

I was reminded , by the original post , of Winston Smith, under Torture . He retreats first from his body into his mind ,and then when his mind cannot withstand the pain into his soul. Finally the state is in his soul and then he truly loves big brother.

Colin years ago I read a lot about diffential language use by women. Such things as use of passive contructions and tag questions are proveably contasting between genders.In other word instead of stating case , a woman will typically invite you to agree with her views. I thought it was something of parallell with what you say, being far more aggressive viewed properly.

Still women have their qualities!!

19 January 2007 at 17:11  
Anonymous Colin said...


Thank you for your interesting comments and would appreciate if you could provide a reference for the differential language phenomenon, so that I can do some more reading.

Let me be clear to avoid misunderstanding. Women have many qualities, indeed. And not all women are employing the female form of aggression, i.e. spreading hurtful rumors, manipulations and scheming, but some do. And if they do, they are probably much better at it than men.

19 January 2007 at 18:22  
Anonymous Voyager said...

Women have many qualities, indeed. And not all women are employing the female form of aggression, i.e. spreading hurtful rumors,

there are indeed similarities to the Thatcher era and the Westland Affair.......and indeed to the manner of the Blair operation. I am interested in reading this book - The Manipulated Man by Esther Vilar

19 January 2007 at 18:59  
Anonymous Colin said...

I am sorry, Voyager, for again opposing one of your views which seem to be a constant, i.e. favoring the application of force if it suits your (or your group's) interest and rejecting it if others want to do the same.

Bob's view is absolutely correct. Why?

First, let us agree on a criterion for measuring the advantages and disadvantages of your and Bob's views. I assume that most readers will agree that the well-being of the European populations and not of its politicians should be the essential criterion.

Now, let us turn to the question what is better for the European populations, a large or a small state?

In a large state, politicians have more power to control and exploit the population. If the rulers of small states such as Luxembourg, Andorra, Singapore etc. become oppressive, people simply move to another state. Therefore, small states are forced by necessity to be less oppressive than large states. Your proposal that every individual within the EU should have the same vote is nothing else than the complete annihilation of independent small states which should lead to more centralisation of power. This would be disadvantageous for all the people living within the EU. It is illogical to favor larger states and at the same time to be against the even larger EU state, isn't it?

Second, I am obviously too dumb to understand your argument to "demand that transmission networks be split from generators within the EU - this will put Merkel in great difficulty and France also - but by appealing over the heads of politicians to a public skimmed by utilities it would put France and Germany in great difficulties"

A major source of energy are oil and gas pipelines from Russia crossing German and French territory. How could you possibly separate the pipelines from these territories and how could you guarantee that the rulers of these territories don't have some sort of control over the pipelines? For intellectually challenged individuals such as myself, could you please be somewhat more specific on how you reached your conclusion.

Third, your last comment "similarities to the Thatcher era and the Westland Affair.......and indeed to the manner of the Blair operation" is most interesting. Unfortunately, I don't quite get it. May I ask you once again the favor to enlighten me on the relationship?

19 January 2007 at 19:05  
Anonymous Voyager said...

"demand that transmission networks be split from generators within the EU - this will put Merkel in great difficulty and France also - but by appealing over the heads of politicians to a public skimmed by utilities it would put France and Germany in great difficulties"

Russia owns NO pipelines in Western Europe but would like to - in fact Russia owns no pipelines outside Russia.

In Germany companies like E-ON and RWE are very powerful and cash rich. They run power stations, including nuclear ones. They have huge cash balances reserved for de-commissioning nuclear stations. They own power transmission grids just as the CEGB did in Britain. When they can generate power and wheel power across Europe their costs are not transparent.

That is why the EU wanted to split transmission of energy from production of energy but so far the only country to have done so is the United Kingdom.

The same is true for gas pipelines. In most of the UK gas is produced by British Gas now called Centrica. The gas transmission business is now called Transco which is part of National Grid Plc except in the North of England where it is called Northern Gas Networks,

The EU Plan was to split pipelines from gas producers and electric grids from power generators to create cost transparency for regulators. German utilities don't like it - nor does Suez in France - Friedrich Merz in Germany was in trouble as a politician because he was secretly still on the payroll of E-ON while the CDU spokesman on taxation.

The Utilities are very powerful and some of the best capitalised businesses in Europe with fantastic cashflow and nice deals with Gazprom.

When Thatcher was Prime Minister she wanted Westland sold to Sikorsky and Heseltine wanted it sold to Agusta. Heseltine left the Cabinet and Thatcher was destabilised - she had Leon Brittan briefing against Heseltine and the rumours being fed to the media were savage, Brittan had to go from the DTI and she bunged him to Brussels as his reward before the Party destroyed him - Wm Hague got his seat in Richmond, Yorks.

Blair - "Emily" - is very feminine in the way briefings and smears take place through the press to defame any opponent. It is the tips to The Times or The Sun to undermine anyone who criticises The Project - Clare Short complained about it, as did Martin Sixsmith - lots of people - ordinary people were smeared.

As for Europe........The Council of Ministers represents Governments as does The Commission - the Parliament was supposed to recognise European Citizens and provide the democratic component. It does not. It cannot. The principle is One Man One Vote but not in EuroParl which has weighted voting. If we did this in Britain we could solve the West othian Question by giving Scotland 1 MP in Westminster and 1 Secretary of State in The Cabinet. That would be the equivalent to the way the EU Parliament functions

19 January 2007 at 20:33  
Anonymous Voyager said...

Your proposal that every individual within the EU should have the same vote is nothing else than the complete annihilation of independent small states which should lead to more centralisation of power.

Illogical. If every person in the EU is by The Amsterdam Treaty a "European Citizen" entitled to a European Union Passport it is ridiculous that each does not have one vote to elect MEPs. These same MEPs are grouped into EU-wide Parliamentary Blocs linked across a minimum of 5 EU states.

Someone votes Conservative in Britain for an MEP and finds the Manifesto is actually that of the European People's Party which does not stand as such in any EU country. The EPP then has constituent groupings each elected on a different basis yet acting as an EU-wide political bloc legislating matters which are then imposed on each national parliament.

19 January 2007 at 20:40  
Anonymous Colin said...


Thanks for the explanation. Now, I understand what you are talking about.

(1) With your demand that "transmission networks be split from generators within the EU" you were talking about the recent demands of the EU bureaucrats to expropriate private energy companies of their transmission networks. These companies built and payed for their transmission networks. Now, the EU bureaucrats want to control (i.e. to own) these networks claiming that the high costs of energy are the result of immoral profits.

It is a typical socialist scenario: First, government makes everything more expensive by taxation, especially energy. Next, they blaim the capitalists and demand more state control and/or expropriation. That would be the first time in human history that things became better by involvement of state bureaucracy. Can't you see that Brussels not only wants to control agriculture but as many economic fields as possible. The control of energy by the EU would be a nightmare for the UK and for everybody else, even more so than the Common Agricultural Policy. If the British are disobedient, Brussels will threaten the UK in a similar way as Russia has done with the Ukraine. Which organisation would be a bigger threat to British independence the EU or a few companies?

(2) "If every person in the EU is by The Amsterdam Treaty a "European Citizen" entitled to a European Union Passport it is ridiculous that each does not have one vote to elect MEPs."

Two objections:

First, you are against the EU and The Amsterdam Treaty, why are you now in favor of its basic premise, i.e. that every citizen within the EU has the same rights. If you accept this premise, you shouldn't complain about Polnish or Bulgarian plumbers in the UK or mass immigration from Turkey in the future.

Second, democracy is not only about the power of the majority but also about the protection of minorities. If every citizen has the same vote within the EU, it is likely that the majority will decide that the higher income of the British population is an unfair advantage and that Britons have to be taxed with a "social justice" tax so that their "unfair" income can be tranfered to the poorer states within the EU. People living in a small state are a minority within the EU. The British people are a minority within the EU and a method - although an insufficient one - to protect them from robbery by the poorer majority is to not accept the principle of one man one vote.

Democracy in Iraq is a good example: The Sunni minority is subdued by the rule of the Shiite majority. The result of the principle one man one vote is the despotism of the majority. Another example: Jewish Germans were a minority, Christian Germans a majority; that doesn't make the holocaust acceptable! Finally, what would happen to the Israelis in a common Israeli-Palestinian state with a Palestinian majority? In your view, "it is ridiculous that each does not have one vote to elect" a MP.

20 January 2007 at 00:14  
Anonymous t.w.hereward said...

Fellas, you are both wrong on several aspects of EU energy liberalisation, V in detail and C in a rather big way, conceptually.

Before setting off on a major diversionary tack I invite our good host to rule, whether this would be in order?

20 January 2007 at 11:57  
Anonymous Colin said...


It is always good to know that someone has the final answer. I am eager to correct my mistakes. His Grace, our revered host, has always been welcoming and courteous as long as the arguments showed signs of erudition and intelligence. So do us the pleasure and go ahead with your criticism. Certainly, you wouldn't be so cruel to keep me ignorant, would you?

20 January 2007 at 12:17  
Blogger Cranmer said...

Mr Hereward,

His Grace is welcoming of all expressions of intelligence and erudition which may bring enlightenment.

20 January 2007 at 12:18  
Anonymous t.w.hereward said...

OK, but this is a big topic...

This post addresses only Colin's issues. If have the stamina I will turn to Voyager next (but that will treat only upon matters of detail).

* * * * *

The companies that initially built the major transmission networks (gas, power) were monopolies, either state owned, municipally owned or indeed private. Some were national monopolies, some were regional or local. The key point is, it was the state that granted (or failed to take away) these monopolies

They were monumentally wasteful, as monopolies always are, and spent far more on building infrastructure than was necessary. But since the ‘utility value’ of gas and electricity is very high indeed, and since they were monopolies, then (a) everyone just got on and paid what they were told to, and (b) very few people even noticed the waste (not least because they were told that there wasn’t any waste; and of course it was difficult to point to a more efficient way of doing things).

Then comes the new competitive market paradigm which, when fully implemented, reduces this waste to a remarkable extent. (In parallel, some state-owned companies get privatized.)

Some people cannot understand how there can in fact be competition in the utility sphere, but in the UK we have (I hope) enough experience of this that I don’t need to explain. However, it is arguable that some aspects of the utility business, in particular the means of distribution (pipes and wires) are a ‘natural monopoly’, i.e. you don’t expect competition to result in two sets of pipes in the same street. Any type of monopoly needs careful regulation, for fear of the traditional abuses. So the business model of the ‘natural monopoly’ part of an 'integrated' energy company that has both infrastructure assets (not subject to competition) as well as what is termed a ‘supply business’ and perhaps also a production / generation business, (both now subject to competition) will be quite different.

Here’s the problem. Monopolies (private or otherwise) strongly resist the development of competition / the erosion of their monopoly privileges, and fight it by all manner of devious means. If they still retain ‘natural monopoly’ assets, they are able to use a number of underhand means to fight their competitors, principally (a) cross-subsidy and (b) making it difficult for competitors to gain access economically to use these assets on a ‘third-party’ basis, to transport their gas / electricity to customers.

It has often been hoped that these problems can be overcome by requiring the former monopolies to retain, but separate their ‘natural monopoly’ assets and run them as stand-alone businesses (‘administrative separation’). In theory this might work. In practice, it has been shown time and time again, that it does not.

So – the proven solution is to force them into ‘legal separation’. This is NOT expropriation. If (e.g. BG pre- 1997) it is a private company, it can demerge into two or more private companies. BG voluntarily split into 3, in fact. The case of BG is a good one because as 3 separate entities, the successor-companies to BG made a great deal more money for its shareholders than when it was a single entity. AND the UK gas market became truly competitive thereafter in all the relevant sectors (i.e. everything except the pipeline sector).

This, dear Colin, is the very opposite of socialism!

So, what about property rights in all this? Well, someone owning 1% of BG before demerger owned 1% of each of the demerged assets afterwards – no problem there, I would suggest. Second, and most important, the grant of a ‘non-natural’ monopoly is not a property right that anyone should defend.

Please note, it is socialists that defend the continuation of integrated energy companies, and free-market adherents that militate for the separation of ‘natural monopoly’ assets from those parts of the businesses that are subject to competition.

Personally I consider this an issue of the first importance.

20 January 2007 at 15:06  
Anonymous t.w.hereward said...

Voyager, just a few factual points:

- Gazprom part-owns quite a lot of pipelines outside Russia, including W.Europe (and is set to own a whole lot more, with deals already done). Of particular note are (a) the extensive WINGAS system in Germany, co-owned with BASF; and (b) a part-share in the very important Interconnector running between the UK and Belgium

- UK is not the only country to have split ownership of transmission and production (Netherlands, Italy, Spain have all split to a greater or lesser extent). In fact, the more important split is between transmission (including distribution) and supply, which all these countries have also done / are doing, to varying degrees.

- "most of the UK gas is produced by British Gas now called Centrica": wrong. Centrica has the largest market share in gas ( qua supplier), at around 50%, but produces only around 10% of UK gas.

- I won't bore you with details of the ownership of gas transmission in the UK, but it's more complex than you say: in particular, last year Transco/National Grid sold off a sizeable part of its distribution network to other co's.

- "Plan was to split pipelines from gas producers...": as stated above the important separation is between infrastructure and supply, not production. This is what the EU is attempting to do also.

20 January 2007 at 17:11  
Anonymous Colin said...

Dear T.W.,

Thanks for your detailed explanations.

We seem to agree in general terms about monopolies. However, I strongly disagree with your view of a “natural monopoly” which has to be prevented by the biggest monopolist of all, i.e. the state. In my view, that’s another deceptive strategy of the EU bureaucracy. Let me explain …

You are correct in stating that energy companies were or are monopolies and that monopolies are bad because they tend to abuse their power for exploitation. This problem arose because the state, i.e. the monopoly of coercion, granted trade monopolies to certain energy companies. Now, the greatest monopolist of all, i.e. the state, claims that it wants to fix the problem it has created. Let’s guess how the bureaucrats want to fix the problem. They want to apply Adam Smith’s proven method, i.e. to let the invisible hands of the market do the work. That would disempower bureaucrats and politicians. Heaven forbid! What do the bureaucrats need to keep their hands in the dough? A reason, a slogan. What about “natural monopoly”?

”The theory of natural monopoly is an economic fiction.” wrote the American economist Thomas J. DiLorenzo, professor of economy at Loyola College in Maryland, in The Review of Austrian Economics Vol. 9, pp. 43-58: The Myth of Natural Monopoly ”No such thing as a "natural" monopoly has ever existed. The history of the so-called public utility concept is that the late-nineteenth- and early-twentieth-century "utilities" competed vigorously and, like all other industries, they did not like competition. They first secured government-sanctioned monopolies, and then, with the help of a few influential economists, constructed an ex post rationalization for their monopoly power.” All the points T.W. mentioned and many more are debunked in this article. So much about economic and political theory. Now, let’s return to the energy market of the EU.

T.W., you said the EU has to regulate the energy market because two companies should not be allowed to put " two sets of pipes in the same street". I don't know where you are living but in my area, different companies are digging up the streets at least once a year for putting in cables for electricity and for telephone, fibre optic cables for cable TV, pipes for water, sewage and gas, for checking, repairing and renewing. Thus, it is not impossible to add two sets of pipes. It can be done. And it has been done in the past before the granting of monopolies by the state because of “natural monopolies”. For example,

”Six electric light companies were organized in the one year of 1887 in New York City. Forty-five electric light enterprises had the legal right to operate in Chicago in 1907. Prior to 1895, Duluth, Minnesota, was served by five electric lighting companies, and Scranton, Pennsylvania, had four in 1906. During the latter part of the nineteenth century, competition was the usual situation in the gas industry in this country. Before 1884, six competing companies were operating in New York City . . . competition was common and especially persistent in the telephone industry . . . Baltimore, Chicago, Cleveland, Columbus, Detroit, Kansas City, Minneapolis, Philadelphia, Pittsburgh, and St. Louis, among the larger cities, had at least two telephone services in 1905.”

Let’s return to the fact that the EU wants to regulate the energy market in order “to increase competition”. Is there really a need for an intervention of the EU?

Absolutely not. Why not let the British energy companies dig up the streets in Germany and deliver cheaper and better service to German customers? The result would be competition and lower prices for German customers. Hence, who is interested in EU interventionism in the energy market?

Right, you guessed it. The companies with the highest prices will ask their national politicians to protect them by implementing at the EU level some regulatory barriers to entry for competitors from other countries. The question is how to prevent competition from entering their own market and at the same time conquering the market of competitors? A mechanism is needed to deny competitors access to the transmission networks.

Two steps are required to achieve this end: First, the transmission networks are handed over to the EU. (After all they can’t be handed over directly to the most powerful companies. And who is willing to oppose the noble aim of the EU to protect customers from greedy capitalists.) Next, EU criteria have to be established (aka EU regulations) for denying access to the transmission networks. Environmental criteria are most useful for this purpose because who could oppose the moral imperative to save the planet. More specifically, German industry has a high environmental standard because of excessive governmental regulations. To reduce CO2 and save the planet from "global warming", British energy companies might be denied access to their own transmission networks and German energy companies would be able to deliver energy to British customers at higher prices. Or maybe the British energy companies are part the oligopoly plotting to take over the Polnish, Romanian, Bulgarian etc. market.

In summary, giving the EU the power to control transmission networks will not result in more competition but in less, namely those who have the strongest influence in Brussels, i.e. France and Germany, will decide about the access to the energy market. And who is likely to lose? Naturally, smaller companies and countries. Ain’t it right, T.W., old fellow?

20 January 2007 at 23:39  
Anonymous t.w.hereward said...

Colin, I lack the saintly patience of our host, and my tolerance for having words put in my mouth is limited. Ignorance I can excuse but not misrepresentation for polemical purposes in a forum such as this. Your ideological instincts are sound (e.g. suspicion of monopoly) but your willingness to ignore the necessarily complex empirical data does you no credit; and your readiness to take up cudgels with such vehemence and cheerful ignorance leads me to fear for you.

I might have thought our earlier encounter on the matter of the oil market would have suggested to you that there is a lot you don’t know about the energy markets. Detail is everything and the world is often less tidy than theory would have you believe. Facts, however, are sacred and if a theory cannot accommodate them it must be modified or dropped.

'Natural Monopoly'

T.W., you said the EU has to regulate the energy market because two companies should not be allowed to put " two sets of pipes in the same street".

I most certainly did not.

Far from endorsing any doctrine of 'natural monopoly', I scrupulously placed the phrase in inverted commas every time I used it, to indicate my own reservations, and introduced it saying only that "it is arguable...". I too am always on the alert whenever I hear the phrase, because it has often been used by scoundrels to justify all manner of cozy arrangements that are well able to be left to competitive forces. And, for the avoidance of doubt, I agree that companies should indeed be permitted to lay gas pipelines wherever they like, subject to safety etc etc.

BUT you had better accept that (for practical reasons) you will not have two sets of competing GAS pipes coming down the same street. You certainly don't today (not anywhere Colin, including your street); and the fact that there may be two sets of competing telephone wires in your street is a matter of rejoicing to me, but not a counter-example as regards GAS. So, as a purely practical matter, not a doctrinal matter regrettably we must accept that (for practical reasons) some types of infrastructure will, de facto, not be duplicated. This may legitimately be described (as a matter of shorthand) as a ‘natural monopoly’.

There is a huge benefit in so identifying it. This is because, if we kid ourselves that competing gas pipelines can in practice be laid down the same street, we will be tempted to say “we can leave this to competitive forces”. We will then be sadly disappointed when the inevitable happens, i.e. that practical factors ensure no competing infrastructure is built, = no competition! Rather, if we identify it as a (de facto) monopoly, we are then driven by our well-founded mistrust of monopolies to regulate it in a beneficial way – i.e. (a) to enforce a regime of 'third party access' on transparent, identical terms for all those wishing to use it – INCLUDING the company that owns the pipe, and (b) to ensure that no expropriatory ‘monopoly rent’ is charged for so doing. This is what the EC wants to do.

Ownership and operation of infrastructure

Here, Colin, you move into the realms of complete fantasy, stating some cunning plan on the part of monopolist / socialist forces that you have entirely fabricated.

You say: First, the transmission networks are handed over to the EU... Next, EU criteria have to be established (aka EU regulations) for denying access to the transmission networks.

The separation of infrastructure assets from supply & production portfolios is, as I have stated, proposed by free-marketeers and opposed by the integrated energy co’s / former monopolists themselves / statists of several different political hues. No-one proposes ‘handing them over to the EU’. The UK model suggests they can have a very good existence as separate, free-standing, privately-owned companies, operating in an appropriate regulatory regime (a) to allow for third party access and (b) to incentivise them to be efficient. Note that as free-standing companies they no longer have any motivation (or indeed ability) to cross-subsidise: and they have every incentive to allow third-party access because that is exactly how they make their money!

So where on earth do you come up with “criteria have to be established … for denying access” ?? Everyone concerned is signed up for third-party access: free-marketeers as a matter of urgent conviction, the rest paying lip-service (but dragging their feet).


You say: “Is there really a need for an intervention of the EU? Absolutely not”.

Here’s why you are wrong. The EC has passed several well-intended ‘Directives’ for the introduction of full competition in the gas & electricity markets of the EU. These include mandating ‘administrative separation’ of infrastructure assets from other assets in integrated companies and, of course, mandatory third-party access to infrastructure. After several years this approach has patently failed, particularly in France and the gas market of Germany (interestingly, not so much in the German electricity market). The reason for failure is not because the competitive model doesn't work, but because entrenched vested interests are dragging their feet.

Thus, more radical steps seem necessary (which you may describe as 'EU intervention') including ‘legal separation’. Third-party access, far from being blocked, is going to get a major boost. The EU will take control of nothing (although it will harmonise regulation, along the lines of the competitive UK model)

Finally, I would note that a battle is raging within the EC / EU between on the one hand the free-market faction (which, encouragingly, prevails in the EC at present) that is proposing these important changes; and on the other hand the old ‘social chapter’ faction which is defending the anti-competitive status quo, i.e. urging that the integrated companies should retain ownership of infrastructure assets. The 'powers to control the networks' that are proposed, are for the specific purpose of facilitating access!!

The fostering of competition does not require an absence of regulation - a common error - but rather the implementation of adroit, appropriate regulation. Otherwise, entrenched forces will block competition.
Colin, you are in grave danger of enlisting on the wrong side by accident!

21 January 2007 at 15:23  
Anonymous Colin said...


Thanks again for your long explanation. Unfortunately, your essay is not convincing.

Honestly, I find most troubling your attitude that nobody may doubt your views because you have studied economics and we have not. The problem with such a condescending attitude is that even Nobel prize winners of economics often differ. This is never the case in the fields of natural science. If there is so much controversy as in economics, we can only conclude that the received wisdom in economics is of an uncertain nature just like in the other social sciences.

You claimed that "The EC has passed several well-intended ‘Directives’for the introduction of full competition in the gas & electricity markets of the EU.". lol

Certainly as well-intended as all the other 'Directives' of the EU, e.g. the common agricultural policy and hundred thousands of EU 'Directives'. The old Romans already knew that the most important question to ask in the political arena is "Cui bono?". So who benefits from all these 'Directives'? And why should they be necessary? How could civilization develop to such high levels without the EU 'Directives'? You never answer directly to any of my questions. Your main strategy is to tell us that things are more complicated than we are able to understand, that we should take all the details into consideration and then you move on to talk about details, e.g you said that I "ignore the necessarily complex empirical data" etc. Deflection from the main question by talking about details is a very old trick taught in numerous textbooks about the art of debate and abandontly used by politicians, often together with your other trick, i.e. reference to expert knowledge.

You said "Thus, more radical steps seem necessary (which you may describe as 'EU intervention') including ‘legal separation’. Third-party access, far from being blocked, is going to get a major boost. The EU will take control of nothing (although it will harmonise regulation, along the lines of the competitive UK model)"

These words could come right out of the mouth of an EU bureaucrat and I am starting to suspect that you are directly or indirectly working for the EU. Welcome on this blog ! His Grace will be happy to know that the promoters of EU are interested in his blog, a sign for its relevance.


As a matter of fact, neither the EU nor its 'Directives' are necessary. There is a large amount of analyses and publications available on the harmful effects of state interventionism mainly written by economists including some Nobel Prize winners. Either you are not informed about the literature in your field of expertise or you are willfully ignoring it.

However, you are absolutely correct in pointing out that the last part of my comment was the claim of "some cunning plan on the part of monopolist / socialist forces that you have entirely fabricated." And that this is a "move into the realms of complete fantasy". Certainly, I cannot prove it and therefore it is possible that I am wrong in regard to that part of my comment. Nevertheless, there is sufficient evidence for cunning plans of politicians in other fields. For example, the founding of the Federal Reserve Bank in the USA, the printing of fiat money by governments, the claim that British membership in the EU would only be about free markets and not about integration, that the war in Iraq is not about oil but about weapons of mass destruction and democracy, the claim that the Trade with CO2 - Certificates has the purpose of saving the planet from global warming although only 1.2 % of global CO2 is man-made and periodic changes between global warming and ice-ages did occur long before the advent of homo sapiens. Most interestingly, a recent report explains how a high-ranking German bureaucrat, Dr. Gunter Hartkopf, managed to make environmental policy a priority in order to enlarge the power of the bureaucracy as he told an audience of bureaucrats during his speech at a conference of civil "servants". Summing up, lying, deceiving and cunning for power and exploitation is so frequent in the world of politics that anybody who denies such a possibility is either naive or trying to deceive others.

You postulated "The fostering of competition does not require an absence of regulation - a common error"

Again, I beg to differ and not only me but also many excellent economists. Dear T.W., you err and the fact that you studied economics doesn't make it better. Maybe you should read the related œuvres of some renowned economists such as Mises, Hayek or Rothbard who have debunked the statist dogma taught by the state employees, i.e. university lecturers of economics, and have demonstrated how regulation hampers competition.

You claimed "implementation of adroit, appropriate regulation. Otherwise, entrenched forces will block competition."

You must be kidding. How would Marks & Spencer block the competition by Wal-Mart, by sending troops over there? How would Ford be able to block the competition by General Motors, by beating up the managers of GM? The only way a company can block the competition is by using the coercion of the state, i.e. tariffs, safety, environmental and other regulations for increasing the barrier to entry.

In conclusion, I beg you pardon, T.W., for having to tell you that you are once again wrong.

I hoped that I might be able to learn something new from you. However, I only wasted my time trying to disprove old myths. We all would be living freer and better without "well-intented" EU apparatschiks, their "Directives" and without pro-EU economists denying or unaware of the economic literature on the power of self-organizing systems.

21 January 2007 at 19:53  
Anonymous t.w.hereward said...

Colin, suppose you found a situation in any market that was unsatisfactory - by your own standards - and that you identified the problem as being one of market distortions sustained by vested interests. Would you not advocate Directives, or whatever else was available to you under legislation, to correct the market distortion? I assume you would.

I along with many others have worked for a number of years (and with some success) helping to bring about practical competitive energy-market conditions, in the UK and wider. I am only interested in results, and 'economic literature', often emanating from the ivory tower, is only of relevance if application of its brings results. It is a long, painstaking task (started in 1982)and requires stamina.

I am disengaging from this discussion, but only for reason of courtesy: nothing you have asserted sways me in the slightest degree. This is not the place to bore with line-by-line refutation (which I assure you is possible).

Can I recommend you approach some living, breathing, practising, free-market proponents in the flesh,(rather than googled texts), qualified in this subject as a matter of detailed knowledge (not abstract principle) and ask them what the score is on EC energy market liberalisation? (Failing that, just read the Economist or the FT.)

You will be amazed at the answers they give you. In brief, you will learn that the free-marketeers are all on my side of the issue. We are working hard to bring about genuinely competitive conditions, against the most formidable entrenched interests: and we are slowly prevailing.

Your Grace, je m'excuse

21 January 2007 at 21:44  
Anonymous Colin said...


You kindly gave an example, i.e. "suppose you found a situation in any market that was unsatisfactory - by your own standards - and that you identified the problem as being one of market distortions sustained by vested interests. Would you not advocate Directives, or whatever else was available to you under legislation,"

Here my reply:

A market situation can only be unsatisfactory, if I don't have a choice between different companies. Such a situation can only arise if legislation or Directives prevent competitors to enter the market for making profits. Hence, the best way "to correct the market distortion" is to get the state entirely out of the energy market.

The second best solution is to improve the legislation by new Directives. Obviously, that's the method you are favoring.

However, in the long-run your approach has serious side-effects. First, a new bureaucracy has to be established and more bureaucrats have to be hired for supervising the access to and the control of the transmission net. Second, the main law of bureaucracy is its unlimited growth because bureaucrats always find new needs for regulation in order to increase their salary by increasing the number of civil servants working under their direction. Who has to pay for all these unnecessary bureaucrats? Naturally, the population either directly by taxes or indirectly by higher prices if the companies are charged with the costs of the Directives. In the short-run, your approach to control the transmission net by bureaucracy will produce lower energy costs for customers because some competition is introduced. In the long-run, these benefits are, however, again absorbed by the growing costs of a growing bureaucracy. And most importantly, a new bureaucracy has been established which has usurped new powers. Governments come and go, nations rise and fall, but bureaucracies - once established - survive them all. The vested interests of bureaucrats is the problem.

Finally, thank you for professing: "I along with many others have worked for a number of years (and with some success) helping to bring about practical competitive energy-market conditions, in the UK and wider." The first part of your sentence suggest that you are working for the government and the last part that you are part of the EU bureaucracy. This explains your views. It would require a Saint to argue against one's own interests.

You said "'economic literature', often emanating from the ivory tower, is only of relevance if application of its brings results."

Free markets bring results and the realisation of free markets did not emanate from the ivory tower of economic literature but from a successful young Manchester textile manufacturer named Richard Cobden.

"Can I recommend you approach some living, breathing, practising, free-market proponents in the flesh..." Here you go again with your old trick to claim expert knowledge if you cannot prove your point. Hic Rhodos! Hic salta! BTW, we don't have to be a chicken to judge the quality of an egg.

I agree that we should end the debate because it is leading nowhere trying to convince a fervent advocate of the EU bureaucracy that the people don't want and don't need them. All they need is the freedom to mind their own business and some protection from the state against aggression and fraud. However, one thing is sure, we won't get the bureaucrats, the true rulers on which every government depends, of our back.

22 January 2007 at 00:32  
Anonymous Colin said...

Dear T.W.,

In regard to the proliferation of bureaucracy, recent additions are bureaucrats 'needed' for environmental protection, for women and ethnic quotas, against discrimination and global warming, for the EU and now (heureka!) for energy transmission nets.

As the historian William Henry Chamberlin (1897-1969) observed:

The proliferation of bureaucrats and its invariable accompaniment, much heavier tax levies on the productive part of the population, are the recognizable signs, not of a great, but of a decaying society. Historians know that both phenomena were especially marked in the declining eras of the Roman Empire in the West and of its successor state, the Eastern or Byzantine Empire.”

We all know the fate of the Roman and the Byzantine Empire. The population demoralized by the restraining bureaucracy lost the will to fight and die for the defense of such a system when the barbarians were the gates.

"Those who cannot learn from history are doomed to repeat it." (George Santayana)

22 January 2007 at 23:25  
Anonymous Voyager said...

Gazprom part-owns quite a lot of pipelines outside Russia,

I am aware of that but I consider ownership only where it indicates control. I am aware of this fragmented state of gas transmission in the UK being both a victim of Northern Gas Networks and its three Chinese owners; and of MidAmerican Energy and its propensity to inflict regular blackouts on our electricity supply.

I know BASF and Wintershall and am aware of the large stocks built up in Germany prior to temper tantrums with Belarus. I am also aware of the retarded policy of turning gas into electricity nstead of into heat and so compounding Britain's energy dependency at a time of having Europe's fastest growing population.

I also know how much lignite RWE is scraping out of the fields around Eschweiler and that they have obtained 30 Million Euros from the EU in agricultural subsidies for when they have to reinstate the land. Poor old ARD was baffled that one of Europe's richest utilities could qualify for EU subsidies as it traced a 750 Million Euro transfer from the Bundesbank to the ECB and the waty the spoils were allocated to the well-heeled in Germany

24 January 2007 at 18:17  
Anonymous Colin said...

The profitable world of bureaucrats:

Gazprom launches carbon trading venture. The environmental bureaucrats have created a $19.4bn carbon trading market. The Russian Gazpprom and the Dresdner bank in Germany want to profit by investing in projects generating "carbon credits" under the Kyoto protocol, mainly in Russia and Eastern Europe, and by selling these credits to the industrialized countries of the West.

Will the carbon trade prevent global warming? Of course not, because the human-induced climatic changes are negligible. Carbon trading is the modern version of the selling of indulgences by the Roman Catholic Church.

Naturally, the environmental bureaucrats, who have created this entirely fictive industry based on unfounded anxieties of man-made global warming, will benefit by controlling it and by a never ending stream of new regulations.

Strange that the famous Roman orator Marcus Tullius Cicero (106-43 B.C.) already observed 2,000 years ago:

“A bureaucrat is the most despicable of men, though he is needed as vultures are needed, but one hardly admires vultures whom bureaucrats so strangely resemble. I have yet to meet a bureaucrat who was not petty, dull, almost witless, crafty or stupid, an oppressor or a thief, a holder of little authority in which he delights, as a boy delights in possessing a vicious dog. Who can trust such creatures?”

The transmission net bureaucracy is next to come.

24 January 2007 at 19:53  
Anonymous Voyager said...

Germany is actually making a fortune trading emission credits with British companies.

The German Govt was very generous in dishing out permits to the utilities and chemicals sector and Britain very sparse - hence Germany generates £500 million a year selling emissions credits to British companies

27 January 2007 at 14:43  

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