David Cameron (left) will back down in fight with EU, say officials ... David Cameron will break his promise not to transfer powers to Brussels by yielding to plans for an EU "economic government" and City regulation, senior European officials have predicted. Britain has opposed German and French calls for European Commission scrutiny of national budgets and is against the creation of Europe-wide financial supervisors that can overrule British regulators in the City of London. Both issues are top of the agenda for Belgium as it takes over the EU's six-month rotating presidency on July 1, giving the small, federalist country a leading role in negotiations. – UK Telegraph

Dominant Social Theme: The EU is hard to fight. Britain is changing, but maybe not enough.

Free-Market Analysis: Yesterday we covered Cameron's calls for austerity in Britain, believing it was perhaps part of a larger dominant social theme sweeping Europe and eventually America. The fear-based promotion in this case is that governments are over-extended and that ruin awaits sovereign nations that cannot pay their bills. The solution, of course, unfortunately, is to cut spending, sell off national resources and raise taxes.

The larger point we wish reemphasize is that regime-changes in Western democracies do not necessarily "change" much at all – even if you wish to believe in such change. Those investors and others who tend to believe that a political evolution can create significant traction in 21st century regulatory democracies need only to look to the American experience to see that is not necessarily the case. We believe the Tory takeover in Britain will only reinforce this point.

No, despite the rhetoric, we don't have much faith in David Cameron's brand of "change." In fact, we think the two-party system in Britain is just as controlled as the one in the United States. It mimics the real thing (real shifts in policy), but is in actuality one party with different emphases. We have noted, for instance, that Cameron ran on a "big society" plank that involved devolution of power (subsidiarity in a sense) in order to ensure that local communities had more control over government programs.

On election, however, Cameron used his big society platform to emphasize that local control over government initiatives should include aggressive local support for British military troops and the war in Afghanistan. Thus we can see that a solution that was supposed to de-emphasize the federal behemoth ends up being manipulated in such a way that it supports the state's military industrial complex and its activities abroad.

We also would be very surprised if Cameron makes a sharp break with the EU. The British elite spent nearly a half-century deceiving British citizens about the true aims of the EU. In fact, it was never conceived of as a free-trade zone. This was simply a pretext. The ultimate aim of those behind the EU was indeed to create a United States of Europe with a flag, national anthem and a pan-European military and police force.

As we have pointed out before, the EU is a kind of regulatory dictatorship. Its Euro-crats are intent on homogenizing rules and regulations throughout Europe – and also intent on controlling the budgetary processes of Europe's nation states. From our perspective this is all part of an aggressive move by the power elite toward global governance. The more standardized the systems within and between countries, the easier it is to implement one-size-fits-all policies. And the EU is standardizing with a vehemence that is hard to believe, as we can see in the following report:

EU to ban selling eggs by dozen ... Shoppers will be banned from buying bread rolls or eggs by the dozen under new regulations proposed by the European parliament. Eggs are among many foods commonly sold by number, not weight. Under the draft legislation, to come into force as early as next year, the sale of groceries using the simple measurement of numbers will be replaced by an EU-wide system based on weight. It would mean an end to packaging descriptions such as eggs by the dozen, four-packs of apples, six bread rolls or boxes of 12 fish fingers. The legislation could even see special unit-based promotional packs offering 'eight chocolate bars for the price of six' banned, according to a report in trade magazine, The Grocer. (- BackYardChickens Forum)

Britain is an increasingly authoritarian society despite Tory vows to roll back some of the salient elements of such a community. It is also an increasing part of the EU, and we will be very surprised if Cameron makes a difference here. Thus, the changing of the guard in Britain may not, in fact, be so spectacular after all. This conforms to our perspective that politics are also an elite dominant social theme designed to give citizens an illusion of control over a system that is not being run on their behalf. It is only when people better understand their own victimization that real change (as opposed to faux political change) will begin to occur. We will continue to argue that such change is underway, in large part thanks to the Internet, and that it likely cannot be halted at this point – though the elite manifestly will do everything in its power to derail it.

We discussed Cameron's call for British austerity within this context yesterday but we likely did not fully explain why austerity is yet another kind of creeping authoritarianism. It doesn't sound that way of course, for it is wrapped in a perception that "deflation" is undermining the solvency of sovereign states and that as a result the state shall have to shrink. But when we examine the reality of what is occurring we find that the state is not so much shrinking as becoming more demanding of its citizens and more punitive as well.

The IMF recipe that is being applied to the Western world (or so it seems) does not have a very good track record even when focused on countries that can devalue. This is in part because the IMF treats government as a business and attempts to apply businesses practices to often-corrupt political entities. The sacrifices are usually borne by the middle class and the result usually lowers the standards of living for the entire country. Here's a description of IMF results, as reported by the Independent Institute:

Any list of countries "helped" by IMF programs reads like a casualty list. The start of the IMF's painful involvement in Yugoslavia was candidly described in the 1989 issue of the World Bank's publication, Trends in Developing Countries: "The dinar was devalued in real terms by 19.3 per cent and strict limits were imposed on the growth of nominal wages....The program was supported by the IMF.... Output declined about 2 per cent, and inflation accelerated to 251 per cent by the end of the year. The unemployment rate has been rising, and the real income of the population declined by at least 2 percent."

The same sort of destabilization program was pawned off on several Latin American countries. To obtain a two-year IMF loan in 1982-83, for example, Chile deeply devalued the peso, raised tariffs from 10 percent to 35 percent, and raised income-tax rates. The economy collapsed, and inflation soared. Chile completely reversed those policies in 1984-85, and later ended an onerous payroll tax by privatizing Social Security. Since escaping the clutches of the IMF, Chile has become a model for development.

The IMF's track record in East Asia is no better. South Korea adopted an IMF program in 1980, including a 17 percent devaluation and a huge increase in the highest income-tax rates. The economy shrank by 5 per cent, and inflation hit 35 per cent. As soon as the term of the IMF loan ended in February 1981, the Korean government began to slash tariffs and tax rates. This was followed by nearly two decades of astonishing economic growth, an achievement tarnished but not undone by Korea's latest disastrous experiment with currency devaluation.

Think of the IMF as a bill collector for Western financial entities. Also, as regards European countries, the IMF recipe is not applicable in one important area – the countries embarking on austerity cannot devalue. This means the entire brunt of the austerity involves tax increases, government budget cuts and pension cuts.

The most misleading part of the "austerity" debate has to do with taxes, however. Not only are taxes going up in the countries involved in Western austerity programs, but those who previously evaded taxes in nations that had lax tax-collection policies are now being hunted down zealously. Greece has received the most publicity, but other countries in Southern Europe will doubtless engage in the same practices.

The coverage of such changes as regards attitudes towards taxes has been covered by the mainstream Western press with nearly unadulterated approbation. The argument has been made over and over that countries have been profligate and are now to assume their appropriate responsibilities. But we have fundamental questions about taxes. Surely they should be paid (given the penalties for not paying them). But within the larger framework of fiat-money/central banking societies, taxes are a kind of anachronism as governments can print all the money they want – and "sterilize" it too, if government propaganda is to be believed.

More than that, every intrusion by the public sector only renders the private sector more inefficient and there is almost nothing that government does that cannot be done better privately – from building roads, to mail collection, and almost any other kind of public activity. From our perspective then, the idea that one of the outcomes of austerity is to make governments more zealous about collecting taxes and individuals more amenable to paying them is not necessarily a net positive. We like our nation states inefficient and disorganized. The specter of mercilessly organized and efficiently extractive nation-state is not our idea, necessarily, of progress.

Conclusion: Governments are not businesses and in the era of the Internet it is increasingly difficult to pretend they are. Austerity currently is being justified by the bogeyman of "deflation" but in fact the entire process in our view is another – subtle – fear-based promotion. This is an important observation to internalize in our opinion as one examines the totality of the euro-evolution and its spillover effects onto America. The Tories are pretending that their ascent to power marks a shrinkage of the state. But we would tend to believe that adoption of the austerity meme – among other themes – only presages a further evolution of federal control.

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