Rethinking Europe

Post-Brexit: EU Still a Superpower

Yes, the EU is juggling a number of daunting situations. But that’s what superpowers do.

(Credit: ABC Photo - Shutterstock.com)

Takeaways


  • The EU has more Fortune 500 companies than the U.S., India and Russia combined.
  • Europe has led a small revolution for greater economic democracy and a broadly shared prosperity.
  • EU has been the world’s leader in creating economic as well as ecological sustainability.
  • EU's overly complex system of governance leaves even the most ardent europhiles confused.
  • U.S. politics is plagued by a degree of paralysis that seems almost European-like.
  • The US took decades to solidify as a nation. During that time, the economy suffered at least seven financial crises.

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. 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.

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.

That rationale, always applied to the United States of America, also has its place when analyzing the EU.

But 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, due 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 codetermination, 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 to date. The way in which Bernie Sanders’ campaign resonates with large swaths of young people and others underscores that there is a stron appetite in the U.S. for a similarly fairness-based approach to the economy.

EU as world leader while US stands still

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?

2. 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 Energiewende 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 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.

Not all is well

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.

But even on this touchy front, indications are that lately there is a remarkable meeting of the minds has occured between Mr. Tspipras, the Greek prime minister, and the German finance minister Wolfgang Schäuble.

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.

A military weakling?

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 Europe’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.

Compare Brussels’ woes to Washington’s

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 U.S. presidents got to use. 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 Guantanamo, 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.

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.

Too self-critical

Yet, 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.

U.S. integration took a lot of time too

To understand Europe’s present and future, I find it helpful to revisit the past — of the young United States of America.

In 1789, this nation was torn by regional tensions and sovereign-minded member states that pushed back against central government and ever closer union.

Initially, young America had no single currency — each state, even individual banks, used their own. Americans were so suspicious of central government that President George Washington, who was a military hero, dared not propose allocating funds for a standing army.

People were so against federalism that the first national tax, which was levied on whiskey – chosen because it seemed uncontroversial – led to open rebellion in Pennsylvania, prompting President Washington to march troops there.

Finally, a full 70 years after its first government, Americans fought a bloody civil war over “states’ rights.”

The issue was whether a central government could supersede the member states’ “rights” to allow ownership of enslaved people.

In short, it took many decades for the United States to solidify as a nation. During that time, the economy suffered at least seven bank and financial crises. Those crises make today’s euro difficulties look mild.

One could still see these centrifugal tensions reflected in the 1960s during the U.S. civil rights era. One can even see it today in Donald Trump’s candidacy and the anti-government Tea Party movement.

In short, centrifugal tensions are not just visible in Europe today. They are very much present in the United States as well.

A planet in formation

While this comparison is instructive, it is also imperfect. The European Union has divisions that are rooted in centuries of conflict. It is a miracle that it has come this far.

But when you hear the next “Europe is dying” headline, remember that “old Europe” actually is quite young.

The EU can survive David Cameron’s folly and Viktor Orbán’s audacity, and a few million refugees, and radical Islamic terrorism and too much austerity – as long as the European appetite for union remains steadfast and the heart of the enterprise remains beating.

Watching the EU is like observing a planet in formation – a work in progress, on a decades-long trajectory.

At this point, as it sorts out what to do about the UK, it can be said to have reached “the end of the beginning,” to borrow Winston Churchill’s useful phrasing.

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About Steven Hill

Steven Hill is a journalist and author of the recently published book Die Startup Illusion: Wie die Internet-Ökonomie unseren Sozialstaat ruiniert (www.Startup-Illusion.com). Find him at www.Steven-Hill.com and @StevenHIll1776

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