Tuesday, February 14, 2006

Zakaria on Europe's Dwindling Constitutive Power

The consistently interesting Fareed Zakaria rounds up the Trans-Atlantic situation in this Washington Post op/ed piece "The Decline and Fall of Europe". With a starting point in a recent OECD report he lists the symptoms of Eurosclerosis usually found in the Economist. In the very basic terms of growth, Europe and the US have drifted even further apart over the last 15 years:
If present trends continue, the chief economist at the OECD argues, in 20 years the average U.S. citizen will be twice as rich as the average Frenchman or German. (Britain is an exception on most of these measures, lying somewhere between Continental Europe and the United States.) People have argued that Europeans simply value leisure more and, as a result, are poorer but have a better quality of life. That's fine if you're taking a 10 percent pay cut and choosing to have longer lunches and vacations. But if you're only half as well off as the United States, that will translate into poorer health care and education, diminished access to all kinds of goods and services, and a lower quality of life. Two Swedish researchers, Fredrik Bergstrom and Robert Gidehag, note in a monograph published last year that "40 percent of Swedish households would rank as low-income households in the U.S." In many European countries, the percentage would be even greater.
Sweden being a rich country, the term should probably be "in most European countries". Zakaria moves on to the dismal progress on the Lisbon agenda, intended to catapult Europe into high-tech, R&D-driven growth, and notes that European reformers are stuck with a defensive agenda that is framed merely to fend off the challenges of globalization. To be fair, the same urges linger in America where the John Edwards (and to some extent Kerry) agenda of trade protectionism might well pop up again as 2008 approaches. But the effects are much more present in Europe: the structural problems in terms of labor market liberalization means that the sensation of being under siege is far more widespread on this side of the pond. Oddly, this is even the case in the Scandinavian flexicurity model-countries, where growth, flexible labor markets and widespread welfare do seem to add up positively.

Zakaria's conclusion is also a critique of the EU's common foreign and security policy (CFSP) project, because the soft power that the European countries seem to prefer to hard power is exactly a subset of the constitutive power that is produced by absolute wealth and relative economic growth:

What does all this add up to? Less European influence in the world. Europe's position in such institutions as the World Bank and the International Monetary Fund relates to its share of world GDP. Its dwindling defense spending weakens its ability to be a military partner of the United States, or to project military power abroad even for peacekeeping purposes. Its cramped, increasingly protectionist outlook will further sap its vitality. The decline of Europe means a world with a greater diffusion of power and a lessened ability to create international norms and rules of the road. It also means that America's superpower status will linger. Think of the dollar. For years people have argued that it is due for a massive drop as countries around the world diversify their savings. But as people looked at the alternatives, they decided that the chief rivals, the euro and the yen, represented economies that were structurally weak. So they have reluctantly stuck with the dollar. It's a similar dynamic in other arenas. You can't beat something with nothing.

Indeed. Europe's decline has been predicted many times before: the stagflation crisis of the 1970s produced a widespread Weimar-esque sensation of fragility. Raymond Aron's book essay In Defense of Decadent Europe (1977) argued that Europe's liberal (Americans: read "philosophically liberal" as in pro-democracy, pro-market) heritage and worth were stronger in terms of economic productivity than it would appear: only the Europeans had lost faith in them.

Interestingly, the very different intentions and outcomes of Mitterand's and Thatcher's subsequent reforms in the early 1980s are still today framing the European debate over "globalization": proactive market reforms or reactive state-based defense of the status quo?

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