Without The UK, Europe Has a Better Chance

Social Europe, by Steven Hill

There are many lessons to be learned from the Brexit vote. Among the most important is the importance of leadership and political vision. Members of the public need to feel they have some idea of where their country is going and why, and their place in it.

Instead, what we have seen is a lack of political leadership and forward-looking vision in the UK, by both Conservative and Labour Party top leaders. What I have come to call “Cameron’s Folly” allowed those with a “negative vision” driven by fear and suspicion of outsiders to drive the discussion and overwhelm all other considerations (such as the negative impacts of Brexit on the UK economy).

Looking forward, I greatly fear that we see the same dynamic ready to play out in the US presidential election. I do not think this election is a slam dunk for Hillary Clinton at all. All other considerations, such as the erratic behavior of Donald Trump, may be overwhelmed by broad public fear of (fill in the blank).

But the short-term chaos may turn into opportunity in the medium and longer terms. While I was not in favor of a UK exit, I think it actually could be good for the EU, and for the euro zone. The primary obstacle is that both of those entities are in need of greater definition, and the UK was always the whiny problem child throwing obstacles into that process, and providing fuel for other member state opportunists to do the same. As long as we don’t see a rush to referendums, particularly in France and the Netherlands, I think there may be a silver lining here.

For the UK, however, I think this is going to be really a big challenge. It appears likely to lose Scotland, and possibly Northern Ireland now too. The best case scenario for the UK at this point is becoming a British version of Switzerland. Which might not be that bad a thing, eventually, except the UK likely will not be as wealthy as Switzerland.

From crisis can come some real opportunity for change, as we know. But change can go the wrong way, if there is no political leadership. That’s the real danger here. Because that just gives a greater opening to the Europe-phobic doomsayers who have been saying the same thing for two decades.

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Is the European Union really dying?

In fact, if you type the words “European Union” and “crisis” into the Google search engine, you instantly receive 115 million hits. When I did that back in 2009, before the eurozone crisis, “only” 58 million hits popped up. Is the EU really in that much worse shape today? Apparently yes, according to the daily headlines. Brexit, Grexit, Russia-Ukraine, refugees, terrorism, eurozone instability. Recall that even before the Brexit vote, French Prime Minister Manuel Valls declared that Europe could “fall apart within months.”

But this is not the first time that political leaders and media outlets have declared the end of Europe. Prior to the economic crisis of 2008, the European economy was written off by most analysts as suffering from “Eurosclerosis” and condemned to decline. Here’s a small sample of brassy headlines from leading media outlets over the last decade, trumpeting imminent collapse:

“The End of Europe”; “Europe Isn’t Working”; “Will Europe Ever Work?”; “What’s Wrong with Europe”; “Is Europe Dying?”; “The Decline and Fall of Europe;” “Why America Outpaces Europe”, and many more.

In the 1990s, The Economist dubbed Germany the new “sick man of Europe,” and other media doomsayers warned of a future of rising unemployment, crime, and taxes to “a level not seen since the Weimar Republic.” Yet now a prospering Germany has become a global player.kipper

The superpower rationale

Yes, the EU is juggling a number of daunting situations, but that’s what superpowers do. They deal with one crisis after another, year after year, some of them domestic and others international. A superpower by definition occupies a big corner of the world, in which messes happen and things have a tendency to fall apart. It’s all entropy and tooth decay out there, and not for the faint-hearted.

As Josef Joffe pointed out in his book, The Myth of America’s Decline, the pundits have wrongly predicted the fall of a superpower before. So then what does it mean to be a superpower? It means having both the capacity and size to make a difference on the world’s stage, and ideally to help solve global problems. Does the EU really qualify for that lofty status?

Emphatically yes. First, the EU is powered by one of the world’s great economic engines.

Even with the eurozone crisis, what I call the EU-Plus (EU28 + Norway and Switzerland) still has the largest economy in the world (post-Brexit, the UK would still be part of the EU-Plus, owing to the deep integration of the UK and EU economies). These nations produce a quarter of the world’s GDP. Indeed, according to World Bank figures, the EU-Plus economy is larger than that of the United States and India combined.

It has more Fortune 500 companies than the U.S., India and Russia combined, and some of the most competitive national economies, according to the World Economic Forum (European countries hold 13 of its top 25 rankings). This vitality extends to small and medium-sized businesses (SMEs), which provide two-thirds of Europe’s private sector jobs and 85% of net job growth (in the United States, SMEs only provide half the jobs).

I hear many leaders complaining, “Europe isn’t innovative enough. Where are the European Facebooks, Googles and Apples?” Before we fall too much for that Silicon Valley-hyped rhetoric, let us just remember that those companies actually don’t create that many jobs. They are using software and algorithms to replace human workers.

You want innovation? Take a look at Germany’s Mittelstand (i.e., small and medium sized) companies which are world-class exporters as well as job creators, making products that are crucial to industrial growth all over the world. So much for excessive red tape supposedly strangling the European economy.

In another display of bold innovation, Europe has led a small revolution for greater economic democracy and a broadly shared prosperity. It is based on practices like co-determination, works councils, effective labor unions and the “visible hand” of an active government that guides the “social capitalist” economy.

These are things largely unheard of and/or unimaginable in the United States. The way in which Bernie Sanders’ campaign resonates with large swaths of young people and others underscores that there is a strong appetite in the U.S. for a similarly fairness-based approach to the economy.

EU as world leader

But it would be a mistake to measure superpower status purely in economic or geopolitical terms. The 21st century world is facing two immense challenges:

  1. With China, India and Brazil rightly demanding their seats at the table, how do we enact a desirable quality of life for a burgeoning global population of nearly 7.5 billion people?
  1. And how do we accomplish that in a way that does not burn up the planet in a carbon-choked Venus atmosphere of our own creation?

Creating economic as well as ecological sustainability – preserving our “EconoEcoSphere” — is one of the defining challenges of our time.

The EU has been the world’s leader in this crucial endeavor. Led by Germany and its ambitious  program, Europe has moved forward vigorously.

The program includes renewable energy technologies like solar and wind, as well as efficient mass transit and “green design” in everything from public buildings, homes and automobiles to low wattage light bulbs, motion sensor lights and low flush toilets. In the process, member states have created hundreds of thousands of new green jobs. That job performance and innovation stacks up very well to that achieved by the much more hyped Silicon Valley companies. And this innovative green sector responds more directly than does Silicon Valley to the pressing global need to rein in deadly carbon emissions.

Significant Challenges, going forward

Unquestionably, Europe’s potency and reach have limits. German-led austerity for the eurozone has had limited success in recovering from the global economic collapse of 2008. Greece in particular has paid a steep price. Russian adventurism in Ukraine, a flood of refugees from the near-abroad, and now the looming secession of the UK – or perhaps just that of England? – from the EU have exposed existing tensions and fault lines, north-south and east-west. These crises often appear unsolvable in the short term, with little patience for the middle and longer-terms.

Also, the classic idea of a superpower includes military might. President Obama has lately accused the EU of being a free rider when it comes to “hard power” — meaning that it more or less relies on the US to step in militarily. But Europe isn’t the military weakling that some people believe it to be. Even not counting the UK, the EU states collectively have one of the largest military budgets in the world. They also have well over a million soldiers in uniform, substantial military hardware and nuclear weapons.

Remember as well that military hard power is sometimes counter-productive. Would a military response to Russia’s invasion of Ukraine really have yielded better results than the EU’s diplomatic efforts? And what have the bombardments in Syria achieved, apart from creating millions of refugees that are washing up on Europe’s shores?

EU: Still in evolution

Part of the ongoing struggle is a natural consequence of the EU’s institutional incoherence.

The EU is governed by an odd form of quad-cameralism (= four chamber system) between four indistinguishable chambers: the European Commission, the European Council, Council of Ministers and the European Parliament. Each of these even has its own “president” – and who can keep track of four different presidents? Why not call one a premier, another a prime minister or regent? Even a superpower only gets one president!

This overly complex system of governance leaves even the most ardent europhiles confused. Partly for this reason, German chancellor Angela Merkel, as the head of the largest member state, has been thrust by recent events into the role as the de facto prime minister of Europe.

Yet, how does a chancellor of Germany rise above domestic passions and politics to do what is best for Europe, in the absence of clear-cut institutional coherence at the EU level?

In her makeshift role, Merkel has done an admirable job in certain respects. But she also has made mistakes, in part because her role as the EU’s prime minister conflicts with her domestic priorities as chancellor.

Pandering to national passions, she unwisely joined French President Nicolas Sarkozy in telling Turkey that its bid for EU membership was blocked out of hand. Now, Merkel is regretting that lapse of judgment, and Europe is paying a higher price.

Similarly with the excruciating Greece impasse: Germany’s reluctance to write blank checks for Greek profligacy is understandable, to a point. But Mrs. Merkel allowed Germany’s historical fixation over debt in general, and Greece’s transgression in particular – which was relatively small, compared to the overall size of the EU economy – to trump the more important geopolitical need to secure the EU’s borders in a troubled member state. Again, Europe – and Germany — are paying a higher cost.

But the other two superpowers, the United States and China, also have had to endure their own ongoing lapses and institutional shortcomings. The U.S. has many admirable qualities, but it also suffers from its own immigration woes, rising inequality and an eroding safety net.

Internationally, President Obama still carries a big stick. Yet, it’s smaller than the one used by previous US presidents. Moreover, its use sometimes seems to make matters worse. NSA spying and surveillance abuses, as well as Bush era torture of prisoners at Abu Ghraib and Guantánamo, have undermined long-cherished values and diminished America’s global appeal.

U.S. politics is plagued by a degree of paralysis that seems almost European-like, even though the United States has a well-established federal union. All of these tensions have boiled over and resulted in the phenomenon of Donald Trump.

Meanwhile, China’s “communist capitalism” hybrid remains an authoritarian puzzle of immense contradictions. A growing middle class is still proportionally small compared to the vast numbers of poor, even as inequality, corruption and cronyism thrive. Impressive levels of industrial production have resulted in astounding levels of ecological ruin. Rampant development has resulted in widespread corruption and land grabs by local officials that make a mockery of governance. It is telling that so many people are trying to get out of China and go to the US or Europe for education and work; few of the world’s huddled masses are banging down the doors to get into China.

Strong executive leadership, it turns out, is only great when it leads in the right direction. Being a superpower isn’t always super, nor is it for the faint-hearted. In comparison, the EU doesn’t always look so bad.

Despite all the positives – a half-full glass, at least — Europeans are stuck in a hyper-self-critical mentality. They still seem to view Europe as the junior Cold War partner, sitting in the backseat, while America sits up front driving the vehicle. Sitting in the backseat has its benefits; you don’t have to take much responsibility for the direction of the vehicle, and you can always defer the hard questions to the driver.

However, with the United States possibly on the edge of driving over the cliff via the Trump option, it is time for Europe to put forward more boldly its own brand of leadership and vision.

This will remain a challenge without a greater degree of institutional coherence and competence, which evolve slowly over decades.

 

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