The
European debt crisis is making the front page, again. Moody has
changed the outlook of Germany to negative and Spain is forced to
borrow at more and more unsustainable rates. The fate of the Euro is
more and more uncertain and while it is not certain, it is quite
possible that Greece, and perhaps other Mediterranean countries, will
abandon it at some point of the future. This, of course, would
trigger a trust crisis which would in turn further damage the
position of a currency which has no need for that. The value of the
euro would fall and the chance of some state going bankrupt would
greatly increase.
Of
course, and contrary to what many doomsayers would like to believe,
states can and do survive bankruptcies. Those familiar with the
history of Denmark will remember, for instance, that Christopher II
of Denmark pawned nearly his entire kingdom to German magnates
between 1320 and 1332. Yet Denmark still exists and is still a
kingdom. You see, states have an enormous advantage over corporations
: they generally command the loyalty of their subjects and can
therefore tax and draft them.
That is
what Christopher’s successor, Valdemar IV, did. He used his wife’s
dowry to get back some mortgaged lands he overtaxed to repay the rest
of his debts. When that didn’t suffice...well, a royal army in full
array could be very convincing.
Closer
to us, when the Bolsheviks seized power in Russia, they decided to
repudiate the Tsar’s debts, which caused a lot of complaining back
in France (and still does, to some extend), but hardly more. States
have defaulted on their debts or printed banknotes to inflate their
way out of them. This is not without consequences, some of them
drastic, but it certainly beats letting bad debts accumulate and
smother your economy.
Those
are, however, political decisions and that’s exactly the kind of
decision the European Union has been designed to avoid.
Western
European Civilization, of which the European Union is the last
incarnation (possibly as in Llywelyn the Last), formed during the
dissolution of the Western Roman Empire from the fusion of Germanic
and Roman culture under the Catholic Church. Unlike Chinese
civilization, in which the unity of “everything under heaven” is
an imperative and India, which hardly cared about political unity
until it was forced upon it by the British Empire, Western Europe has
always considered unification as a worthy goal, but consistently
failed to achieve it.
The
attempts at restoring the Western Roman Empire met with limited
success. Justinian reconquered northern Africa and Italy, but failed
in Spain. Charlemagne was crowned Roman Emperor and recognized as
such by Byzantium, but held neither Britain nor Spain. Charlemagne’s
empire fell to civil war in 843 and its successor states were
promptly besieged by Vikings, Hungarians and Bretons. Its existence,
short as it was, enabled, however, the imperial idea to survive in
both the Papacy, which came to consider itself as the supreme
authority in Western Europe, and the Holy Roman Empire, which claimed
the legacy of Charlemagne.
As often
happens, the Papacy and the Empire undermined each other’s
legitimacy during the Investiture Controversy, a long struggle
between Pope Gregory VII and Henry IV, Holy Roman Emperor (and their
respective tame intellectuals) over who would appoint bishops.
While
the Pope came out the victor with the Concordat of Worms in 1122, the
Investiture Controversy paved the way for the affirmation of the
kings (notably those of France and England) against both the Emperor
and the Pope. As soon as in the XIIIth century, the French king
declared himself “Emperor in his own kingdom”. At the very
beginning of the XIVth century, after the convenient but officially
natural death of Boniface VIII while he was negotiating with the king
of France’s special envoy Guillaume de Nogaret, the pope recognized
the authority of Philip IV over the Church of France in temporal
matters.
When the
Reformation fractured until then spiritually united Europe, the
sovereignty of the kingdoms was too well established to be contested.
This does not mean, however, that the idea of an European Empire had
been abandoned. The Hapsburg of Spain and Austria during the XVIth
century, Louis XIV of France during the Spanish Succession War and
finally Napoléon Bonaparte tried to recreate it, under one form or
another, and failed. The order the victors imposed at the Congress
of Vienna in 1815 explicitly repudiated the imperial idea and was
based upon a balance of power between the big European dynastic
states and a guarantee of independence for the smaller players.
As the
imperial idea seemed to recede in the background, a new conception of
European unification appeared, which would lay the groundwork for the
modern European (anti-)Union.
In 1795,
the German philosopher Immanuel Kant authored a small book titled
"Perpetual Peace: A Philosophical Sketch", in which he
argued that war could be made to disappear through a new
international order based upon the generalization of republican
governments and the institution of the rule of law at the
international level.
Obviously
Kant’s ideas were not immediately implemented, but they laid the
foundations for what one might call an "international
liberalism", based upon
the refusal of international war, as its “mainstream” counterpart
was based on the refusal of the ideological civil war. In both cases,
the idea is that the only way to keep people (and countries) from
killing each other is to appeal to their egoistical interest, by
using the twin tools of the free market and the abstract law. One
finds this idea, for instance, in Norman Angell’s (in)famous
pamphlet The Great Illusion,
which argued in 1909 that war was now futile due to the formation of
a global market.
The
European Union, as it was created after the horrors of Nazism and the
colonial wars, is, to date, the most achieved implementation of this
principle. The predecessor of the European Union, the European Coal
and Steel Community, was formed in 1950 to prevent another round of
European wars (in itself a worth goal), through the creation of a
common market for coal and steel.
To quote
the then French Foreign Minister Robert Schuman :
The
solidarity in production thus established will make it plain that any
war between France and Germany becomes not merely unthinkable, but
materially impossible. The setting up of this powerful productive
unit, open to all countries willing to take part and bound ultimately
to provide all the member countries with the basic elements of
industrial production on the same terms, will lay a true foundation
for their economic unification.
[…]
In this way, there will be realized simply and speedily that fusion
of interest which is indispensable to the establishment of a common
economic system; it may be the leaven from which may grow a wider and
deeper community between countries long opposed to one another by
sanguinary divisions.
By
pooling basic production and by instituting a new High Authority,
whose decisions will bind France, Germany and other member countries,
this proposal will lead to the realization of the first concrete
foundation of a European federation indispensable to the preservation
of peace.
[…]
In contrast to international cartels, which tend to impose
restrictive practices on distribution and the exploitation of
national markets, and to maintain high profits, the organization will
ensure the fusion of markets and the expansion of production.
The
two initiatives which could have oriented the future European Union
in a more political direction (the European Defence Community and the
European Political Community) failed during the mid fifties and all
subsequent treaties, even though they entailed significant
sovereignty loss for the member states, followed the logic exposed by
Robert Schuman’s declaration, that is the construction of a common
market, managed by an administration according to an agreed upon body
of regulations.
Of
course, an administration is emphatically not a political body. It
does not set policies. It applies treaties as interpreted by the
court of justice. It is a headless body, but a very powerful headless
body which makes very difficult for member states to promote anything
but the creation of a common market where the possibility of a
meaningful political decision has been reduced to almost nothing.
The
poster child for this is, of course, the European Central Bank. It is
independent and receives no order from either member states or the
other European institutions. At the same time, however, being an
administrative body, it cannot change policy. By statute, it must
keep price stability, whatever the situation and at any cost.
Inflating the euro, and taking political responsibility for it, is
simply beyond its capacities.
Of
course, further “federalization” won’t solve the problem, as
this would mean, in the present context, giving the European
administration more power to curtail the political actions of member
states, without giving it the power, or the the legitimacy, to set
policies of its own.
Fans
of Isaac Asimov will remember the Second Foundation's undead empire,
created by calculation and ruled by calculation.
The
problem, aside from the fact that an unelected, unanswerable elite is
always bad news, is that such a system can work only in periods of
sustained growth. You see, if the cohesion of your society is only
based upon a promise of ever increasing prosperity... well, let’s
say you’d better deliver.
With
peak energy, economic growth is becoming more and more difficult to
achieve. There may be still some efficiency gains to be made, but on
the whole, the only way to create real wealth (not the administrative
spending included as wealth in GDP measuring) is by taking it from a
neighbor. That is what happens at the global level with the rise of
China and the use of the financial economy by the USA to extract
wealth from their periphery. That is what happen at the European
level with the Euro acting now as a wealth pump, funneling the
resources of the south toward France and Germany.
That
means that the European debts are essentially unpayable. Without real
growth they are bound to become even more so with every passing year,
concentrating resources ever more in the hands of an ever smaller
number of people. And of course, this will even worsen when oil
production ceases to stagnate and begins to decline.
At
some point somebody will have to emulate Valdemar IV, default on his
debt or leave the Euro to inflate his way out of it. Bankers and
traders won’t be amused but will quickly learn that money doesn’t
command loyalty. Those who won’t be able to run will then have an
interesting discussion with a court... or a lynch mob.
The
problem is that the European administration cannot take this
decision. It is not a political body, it cannot change its policies,
and those are liberal in nature. The first rule of a free market is
that debts must be paid, no mater the costs and the consequences, and
it is a rule it cannot break.
Nations
states will have to do it, therefore, either together in some grand
conference, or more probably alone, after the crisis has put some
radical into power. When this will happen, the European Union will
simply vanish as the USSR did after the August Coup and the Belavezha
Accords. Those who still nurture the dream of a political Europe,
whether it be the Europe of Regions of my own political family or the
Europe as civilization of the volkish far right will have to
accept, as I did, that Europe has become an hollow shell and that
time has run out. It is around nation states, not necessarily the
ones we know by the way, that Europe will have to face the long
descent, until they too dissolve.
As
for the dream of an unified Europe, it will have to wait for new
empires to come out of the forests of the coming Dark Age, but, of
course, by that time, it will no longer be the Europe we know.