14 October 2014

Europe still shackled to the legacies of its past


In London, a week ago,  the clouds of denial briefly parted and some rays of reality broke through. The French Prime Minister, Manuel Valls, said: ” I’m worried how the Eurozone has detached itself from from the rest of the world economy.” But there is no evidence that his anxieties will lead to anything: not a single new job, not even a grandmother’s footstep towards deregulation, not a fraction of a percent of economic growth.

Alas, poor Europe.  Our continent has been a nursery of culture and civilisation. European ideas have played an indispensable role in the advancement of mankind and are needed more than ever. The rule of law, democracy, free markets: without them, men cannot reach their full potential. Yet when the history of Europe’s last hundred years comes to be written – if there is anyone alive to write it – it should be entitled: “Europe: tragedy and decline.”

The problem started with the Enlightenment and its economic adjutant, the industrial revolution. These great movements had three aspects. The first was a trinity of liberation: intellectual, political and economic. This enabled man to make a decisive break with the scarcity and oppression of previous epochs. Its other two legacies led mankind into peril.

The first of them was the creation of the modern nation state. That was the political equivalent of splitting the atom. It created immense amounts of energy and from the French revolution onwards, this enabled wars to be fought on an unprecedented scale. The wars of peoples were far more destructive than the wars of kings. By 1945, they had left Europe on the edge of the abyss, only to be saved – at least for the time being – by one of the consequences of the literal splitting of the atom: a military stalemate depending on mutually-assured destruction. What a humiliation for a continent which had been used to bestriding the earth.

Finally, there was the great Enlightenment illusion: that a benign modern state could refashion human nature. At its best – David Hume, Adam Smith, the American founding fathers – the Enlightenment offered “freedom from”. At its worst, under its bastard offspring Jacobinism and Marxism, the Enlightenment propounded “freedom to”, under which coercion waded in blood wearing the mask of freedom.

The desire to reshape men is a highly dangerous temptation, for it attracts idealists as well as monsters. Many noble minds were overthrown by Marxism. Since 1945, new generations of benevolent reformers have been seduced by the latest Enlightenment snare and delusion: building a united Europe.

It is easy to understand why that seemed so attractive in 1945. The wars of nations had almost destroyed Europe. The exigencies of survival seemed to demand the supersession of the nation state. But those who thought like that ignored one factor: men and nations can change. “Never again” said the future Europhiles in 1945. At a far less sophisticated level, “never again” was echoed across much of Western Europe. There was a widespread desire for a new order, so that France and Germany would never again go to war over Alsace-Lorraine.

The movement towards European unity appeared to have early successes. The war-shattered nations rebuilt their polities and their economies more rapidly than many expected; their political self-confidence was another matter. In the case of France and Germany, neither nation found it easy to be happy in its own skin. But Europe recovered. There seemed no reason why this should not continue indefinitely, on the basis of free trade and political cooperation between sovereign states. Then another baleful enlightenment project intervened.

Although Chancellor Kohl of West Germany might seem an unlikely spokesman for the Enlightenment – too full of wurst – he was an ardent believer in European political union and concluded that it was losing momentum. So, almost certainly without realising what he was doing, he set out to refute Marx. Instead of economics determining politics, he would use politics to reshape economics. From the outset, the single European currency was a political project.

It was also a highly unstable one. Most modern states have richer and poorer regions. Inevitably, it is a strain for the poorer areas to use the same currency as the better-off ones: they find it hard to earn enough of the stuff. Equally, the interest-rate disciplines which may be necessary to control inflation in the affluent zones may be too severe for the less well-off. But these difficulties can be circumvented, by fiscal transfers. Redistribution by Uncle Sam enables Mississippi to survive with the same currency as Manhattan: in the UK, read Mayfair and Motherwell.

Even in a single country, with a common language, a common patriotism and considerable freedom of movement, a single currency is a complex business. It also throws up moral hazards. Fiscal subsidies can create welfare dependency. But it has been proved that currency unions are manageable in nation states. Over a whole continent, with minimal fiscal transfers, they are impossible. How could Messina and Athens be expected to use the same currency as Munich and Amsterdam?

Herr Kohl thought that there was a solution: let Europe become one country, so that fiscal policy would reinforce monetary policy. But there was an obvious difficulty; obvious, that is, to anyone except a German. As with previous German attempts to unite Europe, hardly anyone else was in favour. There was no prospect that the common currency would rest on the sure foundations of a common patriotism.

Instead, it is resting on a far less stable support: youth unemployment. In the Eurozone, the average rate is now over twenty percent. That has one surprising aspect: the absence of social unrest, thus far. But the single currency is thwarting the hopes and throttling the life chances of a generation. Especially in counties with no deep roots in stability and where there is little respect for the political elite, it is hard to believe that this can long endure.

Helmut Kohl’s unwitting attempts to refute Marx will end up by strengthening extreme left movements. But there is an even more urgent need for refutation. Lamenting the slaughters of the First World War, Ezra Pound said that they had died “For an old bitch gone in the teeth/ For a botched civilisation.” A century later, the botching continues; the young still suffer.

Bruce Anderson is a political commentator.