The travails of ‘Europe’ – I

First Published: 2015-07-10

With the possible exit of Greece from the euro zone, the disintegration of a ‘virtual empire’ is likely

Europe" – the idea of a United States of Europe, which has animated continental politics for most of the postwar decades – is in trouble. But with "Grexit" and "Brexit" as distinct possibilities threatening the idea of "Europe", three questions arise: How have things come to such a pass? Was "Europe" always an illusion? And what will be the geopolitical consequences of the disintegration of the "virtual empire" that was the promise of "Europe"? These are the questions I will try and answer in this and my next column.

George Friedman ("A Net Assessment of Europe", Geopolitical Weekly, May 26, 2015) provides a useful geographical division of the European continent between Peninsular Europe lying to the west of a line from St Petersburg to Rostov-on-Don, which is linked to the oceans and intimately engaged in global trade. To the east is a landlocked and a much poorer Russia dependent on more difficult and expensive land transportation than maritime trade.

After the fall of the Roman Empire, at the hands of the German tribes, their homeland in the middle zone of the peninsula became the disunited Holy Roman Empire of the German principalities. After the fall of Constantinople to the Ottomans, it was "at the heart of the European balance of power and the global system it spawned. It was here that the strategic concerns of the great powers intersected. In friendly hands, the area could serve as a decisive force multiplier, in hostile hands it would be a mortal threat" (Brendan Simms, Europe: The Struggle for Supremacy, from 1453 to the Present, page 4). The ensuing "German" problem has been at the heart of European politics ever since.

A J P Taylor (in his masterly The Course of German History) argued this had two aspects. The first is geographical. As peoples of the north European plain, Germany has no natural frontiers. Secondly, ethnographically Germans are "people of the middle" who always had two neighbours to whom they have shown two faces. To the west, they have shown their benign, cultured face of the most "civilized of barbarians, eager to learn, anxious to imitate". To the east, they have shown a less benign face to the Slavs. "Ostensibly the defenders of civilization, they have defended it as barbarians, employing the technical means of civilization, but not its spirit." Taylor, therefore, welcomed the post-war partition of Germany.

Two essential geopolitical questions faced the allies after the Second World War: first, how to thwart Stalin’s ambition of absorbing Western Germany into his Soviet Empire, and second, how to prevent German revanchism? The North Atlantic Treaty Organization (Nato) and the European Union (EU) were the answers. The Americans wanted a politically and militarily united Europe to stop Stalin and remove the burdens on the Americans. Beginning with the European Coal and Steel Community gradually the economic union took shape; whilst Nato, in the words of its first secretary-general "Pugh" Ismay, was designed "to keep the Americans in, the Russians out and the Germans down" (Simms, page 402).

The post-war economic boom of "catch-up growth", and the social and economic reforms that had been postponed for a generation, along with the US largesse in the Cold War, facilitated the construction of "Europe", argues Tony Judt (A Grand Illusion? An Essay on Europe), allowing the incorporation of the relatively wealthier countries of Western Europe into the union. The collapse of the Soviet Empire led to a further eastward expansion of the EU, after the new applicants had satisfied the EU’s political and economic conditions for accession. Also, membership or prospective membership of the Nato alliance had a powerful stabilising effect on fragile new democracies in Eastern Europe. Peninsular Europe through this enlargement of the EU and Nato had created a "virtual empire" with Germany at its core.

By the end of 2010, two flaws in the structure of this "virtual empire" were threatening its survival and once again raising the "German question". The first was the monetary union and the creation of the euro zone. I, along with many others, argued (see my Lost Causes) this was a misguided project, as the euro zone was not a natural "optimum currency area" and that without a fiscal-cum-political union it was unsustainable. So it is turning out, with an impending Grexit.

The second flaw was opened up with the dissolution of the Soviet Empire and the eastward expansion of "Europe". Judt argues this once again brought the old geographic and religious differences to the fore, reviving the differing cultural and national identities and the ensuing divisions of the 19th century. It also raised the old cultural distinction between "the countries west of the Elbe and Leitha rivers [which] have for a long time been Europe, whereas the lands to their east are always somehow in the implied process of becoming" (page 60).

With the slowing down of economic growth in the union in the 1970s and the 1980s, the fiscal burden of the entitlements created by their post-war welfare states had been rising. With its expansion to the poorer East, who would be entitled to the transfers paid for by the richer West? It became clear "that it would cost the Union a lot of money – more than it can presently afford – to bring in such future members on the same terms as present ones" (page 92). Thus, immigration from the poorer parts of Europe and access to the welfare stares of the richer countries have become divisive political issue in many Western European countries. There has also been the rise of a defensive nationalism. Taken together, these trends have led many to support political parties that accuse the EU of being an oversized transnational unit suffering from a perennial "democratic deficit".

The 2008 Great Crash and the long Great Recession aggravated these woes of "Europe". The debt-ridden Club Med countries were hit particularly hard. The internal devaluation and the fiscal adjustment required for internal and external balance has led to massive unemployment and reductions in their gross domestic product (GDP). As Germany is seen at the heart of these woes and, along with the European Central Bank and the International Monetary Fund, is purportedly imposing "austerity" on these countries, old fears of German domination are being openly expressed – as in Greece, where there are posters of the German Chancellor Angel Merkel in a Nazi uniform. With Grexit and Brexit now on the political agenda, the myth of "Europe" is about to explode, with the possible future fragmentation of the union back into its constituent nation states.

Read Part II here…

First published at the Business Standard and posted here with the kind permission of the author.

Deepak Lal is the James S. Coleman Professor Emeritus of International Development Studies at the University of California at Los Angeles, professor emeritus of political economy at University College London, and a senior fellow at the Cato Institute. He was a member of the Indian Foreign Service (1963-66) and has served as a consultant to the Indian Planning Commission, the World Bank, the Organization for Economic Cooperation and Development, various UN agencies, South Korea, and Sri Lanka. From 1984 to 1987 he was research administrator at the World Bank. Lal is the author of a number of books, including The Poverty of Development Economics; The Hindu Equilibrium; Against Dirigisme; The Political Economy of Poverty, Equity and Growth; Unintended Consequences: The Impact of Factor Endowments, Culture, and Politics on Long-Run Economic Performance; and Reviving the Invisible Hand: The Case for Classical Liberalism in the 21st Century.

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