Can Europe actually make it?

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Europe is in dire straits at the present moment but it is not a “no-future” basket case. Nor is close cooperation between European countries becoming a thing of the past. Close cooperation is needed now, it was needed yesterday and it will be needed tomorrow. The question is now whether the leading European countries can sufficiently understand their responsibilities and disregard short-term interests and small victories in favour of long-term gain.

There have been some misunderstandings about the current economic crisis. The crisis is more than a conjectural swing, a blip on the screen that will go away soon. Nor is it a crisis of capitalism as such. But it is a crisis for the neoliberal model of capitalism which has dominated the old capitalist centers in recent decades, Europe, North America, and Japan. The model is too heavily tilted towards securitization and financial speculation, it is too deregulated, and it is too unequal because it does not have enough to offer for the large middle classes and the less skilled groups in our societies in terms of income and employment.

A reform of that model is surely necessary. A reformed model needs to emphasize the production of real goods and services, gainful employment, and sound finance; in short, a more robust and less speculative capitalism. But note that the crisis is not first and foremost an EU crisis. It is a crisis for the old capitalist heartlands in general. It is the United States, not Europe that has taken the current model to extremes. In the United States, the richest one percent of the population took home about seven per cent of total income in the mid-seventies; today they own more than 20 percent. Meanwhile, huge sections of the middle and working classes have stood still, with no substantial progress over some three decades. With a shrinking job basis because of neoliberal globalization, this is not a sustainable model in the long or even in the medium run. So when US observers look at the present situation in Europe and shake their heads, they should rather be looking inside, at their own situation. They are sitting on a huge problem, not a solution.

But let me focus on the present crisis in the EU. Unfortunately, the EU has not seized the opportunity, and therefore it might let a good crisis go to waste. Focus is on short-term stabilization of debt-ridden countries via austerity measures. More middle- and working-class despair in these countries is the unavoidable result. How can you blame the people in the streets of Madrid and Lisbon and Athens and Rome for thinking that the EU appears very keen on bailing out banks but not very interested at all when it comes to bailing out ordinary people?

What went wrong and how could it all get so bad? As always, there are several elements involved, some of which we perhaps should have noticed earlier when we were too fixated on European successes. First, we did not sufficiently see that the EU contains member states that are fragile, ineffective, have serious corruption problems, weak capacities for adopting and implementing rules and regulations, and are excessively dominated by vested interests that have been successful in taking care of themselves on behalf of the state. Eurozone membership handed such states an almost unlimited access to cheap credit. The results, when ample funds flowed into fragile states, ought to have been predictably disastrous.

Second, the vast differences between member countries of the eurozone were played down, and perhaps expected to disappear very soon - they didn’t. In retrospect, the euro was not an economically sound project; it made more sense in terms of political prestige, i.e. “driving integration forward”. Third, to the extent that rules were in place, no member of the euro-zone was particularly interested in respecting them and enforcing them when things looked better.

The economic crisis will risk exacerbating a legitimacy crisis for the EU. Anonymous bureaucrats take far-reaching decisions behind closed doors and people suffer. It is no help that national politicians are talking European cooperation down rather than up. They blame the EU for every problem and take personal credit for every success – but the sad part is that sometimes people believe them. 

This all happens at a time where we have a globalized world where the need for cooperation between countries is higher than ever. And since global governance will continue to be relatively weak and underdeveloped, our best bet continues to be regional cooperation. But it will not be enough to re-arrange the deck-chairs on the Titanic. A reformed economic model is needed, and so is a reformed political-institutional model. Liberal democratic theory has never really answered the question about how to construct healthy democracy outside of the nation-state framework. How to proceed in a situation where old-fashioned international cooperation is not enough and a full federation is not in the cards? We need better answers to that question.

As for the short-term, the immediate agenda is clear: The only way forward is to formulate practical solutions to common economic, social, and political problems, preferably so that ordinary people can see that the EU is also for them, it is also their project. The major concern of ordinary people at the present time is unemployment; this is where something must urgently be done.

At the same time we have had a lesson about the continued importance of the national level. National government continues to be of crucial importance and it needs to be effective, legitimate, responsive, and uncorrupt. In this, there is also some good news: the EU has, in recent history, played a large role in leading national government in that direction, both in Southern Europe and in Eastern Europe. It needs to move further in that direction, but it must not antagonize people in these countries while doing so.

I think many of us have been liberal idealists for quite some time after the Cold War ended: we believed that with the universal victory of liberal democracy and liberal market economy all would be good. But we have learned that the liberal economic and political model is full of problems and tensions and that it always needs to be adapted and modified to meet current challenges and present-day problems. At the present time, we are on the search for a liberal model that works in the sense that it offers a decent future to the large majority of people. Not only the EU, but national governments and thinking individuals have a responsibility in this regard.

So can Europe make it? Yes we can. Europe continues to have the potential to become a major world player. In terms of hard power, this will require closer cooperation and coordination. It is by no means necessary to rival the United States in terms of military hardware; what Europe needs is better coordinated smart power, which is really focused hard power. What Europe most needs is to beef up its soft power; we have a record of cooperation and achievement that should not be underestimated. We can build on that to reform our model and reclaim our soft power. The UK model of every country for itself is a road to the irrelevance of Europe.

At the same time, leading countries including Germany have not sufficiently realized that they to take more responsibility for a sustainable, long-term European project. Germany, and other “euro-winners” such as the Netherlands and Finland have to chip in, in order to create a more symmetrical system with better prospects for economic growth, not least in the European periphery. The system must have something to offer ordinary people in the fragile member-states, or suffer a further dramatic loss of legitimacy. Mark Leonard, the Director of the European Council on Foreign Relations, a pan-European think-tank, recently called for European governments to “set out a radical vision for rethinking Europe which deals with the efficiency and the legitimacy crises at the same time”. He is right and now it’s up to European leaders to move in the right direction and it’s up to the rest of us to help pushing, and to clarify what the real problems are and what can be done about them.