Monday, May 28, 2012

Europe - Back to the Future

As we began the current century, Europe was destined for great things. Some even claimed that this was Europe’s century. Indeed so far it is, but not for the reasons that many were hoping for.

The dream of a United States of Europe is fading and in its place there is no Plan B. Instead, we watch the daily disintegration of a dream and the nightmare of a gradual economic meltdown which will impact every citizen, most directly those who use the Euro for their daily transactions. This economic meltdown is having substantial personal consequences for Europeans – high unemployment, significant personal insecurity, new taxation and challenges to a sense of identity – as well as communal impact, with large regions of Europe unable to manage their socio-economic future. For example, Catalonia, once the most prosperous region of Spain, is close to bankruptcy and is calling on the Spanish government for help. In turn, the Government of Spain has indicated that one more major bank failure or the failure of a regional government, such as Catalonia, will bankrupt the country. Spain will be the new Greece.

At the heart of the challenge for Europe is the idea of “the in between time” – the time between an old way of functioning as an entity and a new way.  The model of European union and fiscal union on which the Eurozone is built is dying and the new version of Europe has yet to emerge. All of the actions of the EU, the IMF and the European Central Bank are aimed at restoring the old in the face of the new. They are doomed to failure. (I describe this in between time more fully in my recent book Rethinking the Future – Six Patterns Shaping the New Renaissance – available from and on

Take, for example, the use of the “shock doctrine” in response to the situation in Greece. The doctrine, so well described by Naomi Klein, prescribes a simple solution to the economic challenge of Greece: let the market function and get out of the way. The idea here is that Government should be a small part of the nation, not the focus for its economy. Shrink government and eliminate all government debt, privatize anything that people want to own and reduce taxation and regulation (especially labour laws and workplace regulation) so that a free market can operate as near free as possible. This is basically the German response to the problem of Greece’s profligate government and the rationale for the IMF view that the people Greece needs to “grow up and pay their taxes, reduce their expectations of what government can provide and let the market function”.

There are three reasons this is going to fail. First, no one has “sold” the shock doctrine in terms of bringing the future to the present. Its all pain, no gain. The absence of visionary leadership both within Greece (as is clear from the fact that it has not been possible to form a Government either of a majority or of national unity) and from the EU means that the people of Greece have to place blind bets on the future with no one really having an adult, visionary conversation. The second reason is that there is not a country in which the pure form of the “shock doctrine” has worked over a medium to long period of time – Naomi Klein’s key point. The final nail in the coffin is that democracy prevails. What the people of Greece want is to get on with their lives with a sense of surety about their future. The shock doctrine applied to Greece will deny this to them for several decades – it will reduce the standard of living for the majority of Greeks by between one third and one half. In a democratic society, this is a recipe for instability and unrest, not to mention violence.

When Spain, Italy, Portugal and Ireland become Greece, as they surely will, what will the EU then be like?

It cannot be a monetary union without total political union. This requires the ending of sovereignty for nation states and the subservience of national governments to a central government. France and Germany have long held the view that this is the desired end-state for the EU, as long as France and Germany run it. Britain and several other countries, notably former Eastern bloc countries - the newish members of the EU - have experienced such a deal with their former subservience to Russian state centralism in the USSR. They wont buy it and, frankly, neither will anyone else. The French simply do what they always do – take what they like and ignore the rest. The Germans seek dominance so that they can preserve their Germanic culture and economic power. If these “innate rights” of nations are eroded, then the French will explode onto the streets and the Germans will quietly move their money and their businesses elsewhere.

This is why there is a growing push for a straight “in or out” vote on the EU in Britain and some other countries. What is the EU and where is it going? Do we want to stay on the express train with no driver going in a direction we don’t understand?

So what is the alternative? It is back to basics. Back to the idea of a group of nations agreeing to permit free trade and the free movement of people. Back to national currencies with national control. Back to central banks making banking decisions. Back to agreements on education transferability of credits and credentials and to standards for the food supply and health care. But less Brussels, less eurocracy and less imposition of EU directives on national governments. In short – its back to the future.

If Canada, the US and Mexico can enter an effective free trade deal and gradually expand its boundaries to cover services, education and health why cant Europe. Canada retains its national identity, currency, control of its economy, but does a massive amount if trade with the US efficiently and effectively. There is a relatively free movement of people across borders and the currencies, while separate, are easily tradable. It works. It is simple.

Any other strategy for Europe appears doomed. Britain should lead the way in this conversation, since it reflects the strong views of the British people. They want easy movement across borders, an effective basis for trade. They don’t want the European Courts deciding British law – for example, that prisoners have a right to vote when the British parliament has twice decided that they do not. They don’t want new regulations affecting UK businesses to appear roughly every twenty minutes of the working week from the EU and they don’t want massive centralization of decision making in Brussels or Strasbourg.

So the future is: back to the future and less of Europe is more of Europe. It may take some getting used to.

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