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Whither Europe?

June 12, 2010

(Note – this entry, already 2500 words long – is `in progress’. I’ll be working on it over the next week. Where I’m heading is the shift of ties between the United States and Europe in which the US has made concessions to the Europeans on economic matters, trade in particular but has tried to retain (and largely succeeded) its control over Europe’s global security policies, mostly through the greater integration and coordination with NATO)

Twenty years ago, in the beginning of March I traveled from Finland,

Prague - 1983

where I was living with my family, on a journey that took me to Sweden, Norway, Denmark and ultimately Germany. It was 1990 – a time of dramatic change on the continent

– Although the Soviet Union would continue to exist for another 21 months, virtually all of the Eastern European communist countries had collapsed.

– a few weeks into my trip, on March 18, 1990, voters in what was then East Germany had opted for reunification with the West. East Germans had good understanding of what it was they were rejecting but, time suggests, only the foggiest idea of what they were uncritically embracing – Western European capitalism. Still, all the signs pointed in one direction: in a short time East Germany would cease to exist

– While this breath-taking flurry of events unfolded in Eastern Europe, Western Europe was experiencing a period of economic and social integration that would culminate two years later, in 1992, in the reduction of many regional trade barriers. The Maastricht Treaty of that year (1992) would set the groundwork for the establishment of one currency some eight years later.

–  As the European Union gained momentum, a second European trading network – the European Free Trade Association (EFTA) – found itself running out of gas as its members bolted for the more successful EU trading network.

  • While welcomed – if not hailed – politically, the collapse of Eastern European communism complicated Western European economic integration.
  • What would happen to the USSR? –
  • There were questions of how former communist economies and political systems could be integrated into European capitalism. It was understood that the process would take an inordinate amount of  political will, financing that would detract from the momentum Western European integration had enjoyed in the 1980s.
  • Financial and political attention shifted away from integrating Europe’s south – Spain, Portugal, Greece along with more northernly Ireland – into the European Union; instead a great deal of energy looked East.
  • Already the danger of implosion, in Yugoslavia and the Soviet Union could be felt on the horizon (as well as with Czechoslovakia that did implode but more peacefully than it happened elsewhere).
  • I wondered then, how those Western European social democracies would fair now that Communism had collapsed. On some levels, I worried that they would be slowly undermined
  • As the Warsaw Pact Treaty imploded (it would collapse a year later, on July 1, 1991), NATO”s future was also on the agenda. An alliance against Eastern European and Soviet Communism seemed redundant as communism collapsed like a house of cards.

It was with such thoughts in mind that I ventured across Scandinavia and down into Germany, stopping in Hamburg before going on to Berlin.  In Hamburg, I met a number of leftists and community activists mostly trying to get a sense of how they viewed the changes their country was caught up.  One conversation focused on the future of NATO. Several of those involved suggested that like the Warsaw Pact, NATO too would be dissolved and that Germany would be free of the foreign military bases – US and Soviet – that had plagued the country since the end of World War II.  But one friend was not so sure – not only was he not sure that NATO would disintegrate, but nor was he sure that it was a good idea that it should. He spoke of the need for a military alliance – specifically with the United States – in the post Communist period, one that could manage the security issues he feared would emerge with the collapse of communism. I had recently seen a number of security projections from both the

East Berlin - April 1990 - East Germans celebrating the collapse of Communism with a street fair

Finnish and Swedish governments which had argued along similar lines. Although my heart was with those seeking NATO’s dissolution, my mind already was telling me that my Hamburg friend and those Nordic reports were closer to the mark and that NATO would be somehow reshaped, refashioned to play a post Cold War role.

Twenty Years Later…

Twenty years later – it took almost that long for the dust to clear – a Europe very different in some ways – continues to emerge.

  • The former Eastern European communist countries have been transformed into a kind of semi-periphery to a Western European (mostly German) core. Some – the Czech Republic, the Baltic states – have done better than others (Bulgaria, Rumania, the remains of Yugoslavia). After essentially destroying – and looting and absorbing  – what was probably the most developed area in Eastern Europe – the German Democratic Republic, known more familiarly as simply East Germany, twenty years on, Germany has spent an inordinate amount of money trying to integrate this region into a re-unified Germany.
  • As for the USSR, it would of course, collapse soon thereafter. Its largest component, Russia, would undergo such a painful – and politically stupid process of Clinton Administration directed shock therapy, based largely on IMF-World Bank structural adjustment like programs that it would nearly implode. Led by an incompetent and drunken slob, Boris Yelstin, who never heard of a shock theraphy program he didn’t embrace, the country – with its nuclear arsenal – went through one of the most radical de-industrialization and impoverishment movements in modern history – before a break was finally applied to the decline at the end of the decade. Still much weaker, economically, politically and socially than it had been before the collapse of the USSR, Russia has made something of a turn around, albeit, not particularly democratically.
  • Of course the greatest implosion was in the former Yugoslavia. Its economy had been in trouble since the early 1980s as a result of the increase in oil prices combined with a slowing in World Bank – IMF aid in the middle of that decade. While the collapse and break up of Yugoslavia is a result mostly of internal economic and political rot, the process was expedited by the speed with which some European countries – Germany in particular – encouraged the break up.  While all wars are ugly, the Balkan Wars of the 1990s – greatly resembling the first and second Balkan Wars of the early 20th century have to rank among the more savage examples of ethnic blindness  and racism in the modern era. And while the guns have been silent for a number of years – the fundamental tensions remain in place. It is highly unlikely

    1964 - Athens Technical University

    we’ve seen the last of the fighting there. Having encouraged the break up of Yugoslavia, Germany looked on helplessly as the murderous fighting spread. It was forced to call in the United States military to put a halt to the bloodshed.

  • Greece, Spain, Portugal and Ireland – all of whom had enjoyed significant investment from richer EU countries during the 1970s and 1980s experienced a loss of financing during the 1990s and the first decade of the new milleneum as investment dollars poured into Eastern Europe and Russia instead. As Eastern Europe increasingly replaced Europe’s `southern cone’ as a source of low and medium end manufactures at lower wage rates, these four poorer members of the European Union increasingly found themselves in deeper and deeper water.  Forced to take increasingly restrictive measures in order that their finances and government spending stay in line with criteria necessary to keep the euro afloat, they found themselves in an  unstable structural crisis that would emerge full blown a few months ago with the near collapse of the Greek economy. More on this below.

Shifts in the Balance of Power Between The USA and Europe

As Eastern European communism was collapsing in the late 1980s and early 1990s, Western Europe was increasingly integrating economically and socially. Over the course of the period 1945-1990 European economic and social integration intensified, in part as a result of `natural processes’, in part stimulated, especially since the early 1970s by a more complex global financial situation. The underlying issue for Western  Europe was quite simple – how could Europe begin to rebuild itself to play a global role in the aftermath of the two world wars. 1945 found the continent exhausted and politically divided. The Europeans understood that regional economic rebuilding would take place under a US security umbrella and that after several centuries of dominating global economics and politics that the continent had been reduced to the role of `junior partner.’  It was also quite evident that rebuilding Europe was a long term – 50 to 100 year process. If in the period before World War II the `great fear’ stemmed from fascist movements in Germany and Italy, in the aftermath of the war, the winds were blowing from the left. The US strategy for defusing the left postwar challenge entailed massive reconstruction aid (the Marshall Plan), encouraging the creation of Western European social democracy (high taxes, extensive social benefits) and behind the scenes aggressive CIA operations to fund rightwing and moderate political parties. While it took 15 years, by 1960, the Western European `economic miracle’ was well underway and the political threat of left political take overs already largely a thing of the past, although the left would play a role in Western European politics of no little significance, certainly much greater than it played in the United States.

From an economic point of view – the challenge to Europe has been rather consistent from the 1945 outset: how to compete with more sophisticatedly managed, technically more advanced, financially more endowed – overall larger and much more aggressive American corporations who could easily out-compete their European counterparts.  How could Western Europe create economies of scale to compete with American corporate power? How could Europe be financially independent in a region that had 20 or more different currencies competing against what was, in the early postwar period, the power of the dollar? How could at the largest medium sized countries like France, the Federal Republic

Rouen France, Place Jeanne D'Arc - 2005 Lowell Fey Photo

of Germany and Italy, compete with a country like the United States with its huge internal market, extensive natural resources, etc. etc. This would require what Gorbachev would later refer to as `new thinking’ – new arrangements between Western European countries, some of which had been bitter enemies for century, fighting and jockeying with each other incessantly? For all those problems/challenges, European integration began its slow and steady progress not long after the end of the war with what many considered a surprising level of cooperation between erstwhile adversaries – France and West Germany. There were a series of steps starting with the rationalizing iron and coal production along the French- German border known as the Schumann Plan. The integration took a step forward in 1958 with the creation of what was then called `The Common Market’ solidified in what is referred to as the Treaty of Rome. It brought together six countries in what was essentially a low tariff trade network – France, Germany, Italy, Belgium, Netherlands and Luxembourg.  Lowering tariffs stimulated intra-Western European trade to a considerable degree. There was a period of some fifteen years of dynamic regional growth under a broader umbrella of US led global growth.

The golden decades of the 1950s and 1960s that included dramatic Western European growth rates came to a screeching halt in the 1970s. A series of events merged which triggered regional wide recession – spikes in the price of oil in the aftermath of the October, 1973 Middle East War, the end of Bretton Woods and the floating of the dollar which resulted in global currency speculation adversely influencing European regional trade, and the general slowing of global growth as a result of the worldwide  saturation of global demand. As a result Western Europe entered a period of structural crisis. Western European economic growth was particularly affected by the global financial instability resulting from floating the dollar. This development seriously undermined not just world trade, but intra-European trade. Trade was dampened as exporters and importers tried to guess which way currencies would move. In Europe what is known as a `scissor’ phenomenon developed as money flowed into the more prosperous European economies, like Germany and the Netherlands, greatly strengthening the value of their currencies. At the same time investment dollars flowed out of the weaker European currencies

June 1987 - Finnish Mid Summer March And Celebration

(Greece, Spain, Portugal, Ireland and at some points even France and Italy). The deutschmark appreciated while the drachma went tumbling making German exports – the heart and soul of the FRG economy – more expensive.  Some of those barriers to trade which had been peeled away in the decade after the founding of the Common Market in 1958 began to surface once again in new forms. If tariffs remained low, `product standards’ started to differ, favoritism was shown by governments to domestic producers, a movement away from regional integration and back towards the protectionist policies which had helped trigger two world wars began to take shape once again.  The problem was exacerbated by the difficulties European companies had in their competition with larger U. S. and by now Japanese corporations. The vision of how to deal with all this took shape by the mid 1970s, the practical solutions took a little bit longer. The essence of the program entailed the following:

  1. Stabilize the Western European currencies so that both depreciation and appreciation would be limited within a narrow range, the goal being to re-jump start intra-regional trade and build confidence
  2. Seriously reduce or, if possible eliminate the barriers to trade within Western Europe to create a larger `single regional market’
  3. As the barriers to trade fell away, this in and of itself, it was argued, would create the conditions for a period of mostly intra-European merges and acquisitions, ie – larger manufacturing, insurance and financial institutions would be needed to take advantage of the larger regional market.
  4. Over time prices and wages would become more standardized throughout the region, trade barriers would continue to fade away, and `Europe’ would emerge as a single economic entity – bigger and stronger – and more capable of competing globally with North America and East Asia. (The role of the `BRIC’ (Brazil, Russia, India, China) was still a long ways off.
  5. If the process picked up momentum, it would create the conditions for the creation of a single European currency
  6. The economic integration of Europe would facilitate its eventual political and security integration even such a political resurrection was far down the road.

It is remarkable how much of this program, envisioned already in the 1950s (perhaps even before) by European `visionaries’ like Jean Monnet, Charles De Gaulle, Konrad Adenauer among others, actually came to fruition. Often the progress was pushed by crises – as it was when the European Monetary System essentially collapsed as a result of currency speculation raid in 1992 or I would argue, the Greek events of today.  Other times the integration took more organized, planned forms. In any case, the overall direction has been unambiguous – greater economic integration, growth of economies of scale. As the different crises hit the system – the currency crisis of 1979, the collapse of communism in 1989,

1987 - Lisbon - Tile Sidewalk

the speculation frenzy of 1992 – `Europe’ has responded strategically in the same manner – it moved again and again towards greater integration, greater concentration of wealth and power,  towards a more coordinated regional policy, towards less national autonomy of different European economies etc.  I would argue that this trend continues, despite current crises. For example, although the euro is in trouble – a reversion to the former national currency situation is, to my mind, virtually unthinkable.

For the most part, over the course of the last half century until quite recently, different US administrations since World War II actively encouraged European integration and did not consider it a threat to US interests in Europe. A stronger Western Europe economically meant a stronger defense against Communism during the Cold War. Just as vital, a stronger Western Europe economically meant greater possibilities of US-Western European trade. And a more integrated Western European internal regional market would actually facilitate US corporate penetration, especially in the early post war decades when US corporate and financial might was generally more efficient than its European counterparts.

Although today American political commentators somewhat overstate the case, it is also true that European economic integration was enhanced by the protection of what was referred to as the US security umbrella, the fact that the United States provided Western Europe with the military support it needed to progress economically in peace. Although many Western European countries did join and participate in NATO – indeed it is they that pressured the US in the first place to move to create that military alliance – it was never at the same financial or troop level as the United States.

With the United States bearing the greatest military and financial burden for Western European security, Western European countries could and did limit the amounts of military spending allocated in their national budgets. If the United States was spending more on security, Western European countries concentrated on manufacturing research and development as well as their well known and impressive social programs. Low levels of military spending in Europe became an issue of contention already in the 1980s before the collapse of communism – with members of Congress pressing European allies to `contribute their fair share’ to maintaining the US military network abroad. The Europeans resisted these pressures at the time.

Still even here a certain pattern of US-European relations was taking shape that would continue into the post Cold War era we are now in. Its main themes are:

  • The United States would continue to `give ground’ to Europe on economic issues. It has made concessions to the Europeans on trade issues; the European Commission in its trade negotiations with the United States has been able lobby more effectively for European economic interests than in the past. Economically speaking European integration – especially since the creation of the euro – has been able to challenge a more economically weakened USA. Relatively speaking Europe is stronger and the United States somewhat weaker in their bilateral relations than 20 years ago when Communism collapsed
  • If the United States has `given ground’ to the Europeans on some trade issues, it has compensated for that by drawing Europe ever closer to US global strategic plans through Europe’s integration into NATO. If the United States hardly succeeded in dragging much of Europe into its military ventures in Iraq, it has been far

    Barcelona - November 2007

    more successful in involving them in its re-energized war in Afghanistan. Likewise, European countries have enthusiastically followed the US lead on tightening sanctions against Iran, and on supporting the Israeli-Egyptian blockade of Gaza.

  • In the 1970s and 1980s before the collapse of Communism many European countries had a position independent of the United States on the Israel-Palestine conflict. But for the past 20 years, they have sheepishly followed US strategic priorities rather closely.
  • The United States has been able to maintain certain divisions in Europe that it sees as strategically advantageous to itself. It has embraced the former Eastern European communist countries, shepherding many of them into NATO, playing on their fears of Russia.
  • The United States has pushed very deep into Central Asia – where it hopes to compete with and dominate everyone – but especially the Russians and the Chinese – in control of natural gas, oil and the establishment of strategic bases – its cutting edge has been getting the smaller nations to get into NATO.

A key element to US policy towards Europe today concerns US Afghanistan policy. Although Barack Obama has eliminated terms like `the war on terrorism’ from US State Department lexicon, his administration is very much still fighting it worldwide, call it what you will.  For Europe and NATO Afghanistan is something of a test case that could have even more global implications. If the United States `wins’ militarily (or claims victory even if it doesn’t, as it has done in Iraq), it can argue that NATO should be used elsewhere to deal with `instability’. `Elsewhere’ is shaping up to be Africa where there is a global race for oil and other natural resources. The US military is in a number of ways beefing up its Africa focus, at this moment, mostly through Africom – the African wing of the US Central Command. But the United States would prefer, very much, that its security interests in Africa have multi-national support following the Afghan and Iraqi model – where there is international military cooperation – but firmly under US command. The Europeans are not particularly enthusiastic about the Afghan war. Their leaders were dragged into it although popular sentiment is strongly against. If Afghanistan does not go well for NATO, it is less likely that European (and others – Japan, Korea, Australia) will follow the US into its military adventures in Africa. So the US has a double edged strategy towards its military role in Africa that can be summed up as ` with NATO is desireable; without NATO it will rely on Africom’.

in progress – to be continued


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3 Comments leave one →
  1. June 12, 2010 8:22 am

    You know, I have to tell you, I really enjoy this blog and the insight from everyone who participates. I find it to be refreshing and very informative. I wish there were more blogs like it. Anyway, I felt it was about time I posted, Ive spent most of my time here just lurking and reading, but today for some reason I just felt compelled to say this.


  1. Whither Europe? « Rob Prince's Blog capital university

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