The European Union at the Crossroads

Completing Integration, or Hastening Disintegration

Stephan LeibfriedTranState Research Center, University of Bremen Bremen, Germany

Epitaph“I’m wishing for a transformation that will turn the [€] crisis headwind into a tailwind for the next qualitative leap in European policy, like what we saw [with German unification] in 1989 … . It remains to be seen what form of statehood this model might take—we’ll experience it, when we accomplish it.”

Adolf Muschg, Swiss novelist [*1934], 3 October 2012, in an official speech for German Unification Day in Bonn

Outline

1. The Nation State: The Indissoluble Wedding of Capitalism and Social Security

2. Europe: Can it Consummate the Marriage?

3. A Cautionary Tale: Marriage, American style

4. The Homegrown European Approach: “Social Europe”

5. Necessary but not Sufficient: What more is Required?

6. Viewing the Future through the Lens of the Past: What we can Learn from the US?

The Nation State: The Indissoluble Wedding of Capitalism and Social Security

• 1870s-August 1914 First era of globalization

• August 1914- 1960s Half a century of protectionism: Protecting jobs through closed economies and closed nation states

• mid-1950s ff. The ‘game changer’: Universalizing the welfare state in Western Europe and the USA

• 1970s-present Second era of Globalization: Welfare states allowed nation states to move beyond protectionism, making European (market) and global integration possible.

“On Course” An ironic comment on the 2001 Treaty of Nice, employing the classic metaphor of the ship of state.

Gerhard Glück (*1944), 2nd prize in the 2nd German Cartoon Competition, “Viva Europa”

Twelve men in a rowboat on a choppy sea. They look like a team, with matching yellow shirts and blue caps with yellow stars, but their rowing is not synchronized. One crew member is hanging over the railing, another is beating his mates with an oar. Someone in the stern holds a tattered EU flag aloft, and its stars are scattering slowly in the wind. But the crew is still in good spirits, the boat is still afloat, and there are a few bright rays of hope among the dark clouds..

Europe: Can it Consummate the Marriage?

• Like an ellipse, European integration requires, by definition, two carefully balanced foci: market and social integration. Without them, it flies apart.

• The first plan for a European monetary union, based on the experience of other unified currencies, required the union to take up 5-8% of the EC GNP so it would be a buffer from crises and in market swings: Marjolin Report 1975, MacDougall Report 1977.

• But, today’s EU acquires only 1% of Europe’s GNP. Compare this to member states, whose governments take up some 50% of their GNPs (about half for social expenditures). The EU is laid bare in the current crises.

(Source: Wikipedia Commons)

The European Banana: Feeding social insurance re-insurance of the EU

A Cautionary Tale for the EU: Marriage, American style

• Thinning out the middle & class polarization?

• Devolution of risk from central to state level

• Privatization of social security

• Rise of protectionism (the “great sucking sound”)

• Increased political polarization (two political nations and a house divided)

• Richard M. Nixon: “last of the New Dealers”. Ronald Reagan: out with the New Deal welfare state, in with the anti-discrimination litigation state.

• This will be Europe’s story too, unless it changes its ways

• Historically, the debate over a common EC welfare state dates back to the mid-fifties (France for, other 5 EC members against).

• Now, the universal welfare state model is well-anchored at member state level and can be moved up and adapted to the EU-level.

• The crisis crossroads: EU legitimation depends on saving people as well as banks. As Europe supra-nationalizes currency, bank, and fiscal policy, it must also find a way to re-insure its welfare states at its supranational level.

• Risk of backsliding: Without a “Social Europe”, member blocks in the north, east and south will resort to the protected national markets and to the closed political systems of the early 20th century.

The Homegrown European Approach: “Social Europe”

“The helmsmen are still arguing” (1981)Peter Leger (*1925-†1991)

At the Luxembourg Summit on July 1, 1981 François Mitterand (*1916-†1996) tried to extend his projet sociale to the EC-10. Many smaller countries supported him, but he was blocked by Margaret Thatcher (*1925-†2013) and Helmut Schmidt (*1918). In 1983 the “projet sociale” also faltered in France.

The Waves = Economic Crisis, Unemployment, East-West.

Necessary but not Sufficient: What More is Required for the EU to work?

• Replace national “machine politics” with a reliable civil service in problematic southern member states

• Cope pro-actively with southern backlash.

• A European New Deal can’t play with the old deck. New instruments.

• Expand the European budget from 1% to 5-8% of European GDP (Nation States have ~ 50%)

Viewing the Future throughthe Lens of the Past: What can we learn from the US?

• Socio-economically, the US experience today is a cautionary tale. But for market integration and state-building it may provide some positive historical instruction.

• Is US constitutional development a model for the EU? American Supreme Court judge Wiley Rutledge noted in 1947:

So by a stroke as bold as it proved successful, they founded a nation [in 1789], although they had set out only to find a way to reduce trade restrictions. So also they solved the particular problem causative of their historic action, by introducing the commerce clause in the new structure of power.

• Can we really force social integration only through market integration, expecting the Russian Dolls to produce a “Social Europe”? Or, do we need to impose some 21st century form of Polanyi‘s “moral economy” on the integration process?

… and then I need a lifeboat all for myself.

Michaela’s 1952 outcry. (Michael(a) is Germany’s John Doe)Wolfgang Hicks (1909-1983), Die Zeit, June 5.

Hans earns a lump of gold as big as his head, but when he tries to travel home with it, he finds it is a heavy burden. He tries to trade it for something useful, and is, finally, relieved to be free of it:

“How happy am I!” cried he; ’nobody was ever so lucky as I.’ Then up he got with a light heart, free from all his troubles, and walked on till he reached his mother’s house and told her how very easy the road to good luck was.

We need to trade the riches of our big banana for the happiness of a common European future in a common European house.

Hans in Luck in Grimm’s Fairy Tales (1812)Brothers Grimm