The Evolution of Europe

4 January 2012


Detail from an early modern map of Europe; Europe has always been both one and many, divided into kingdoms or nation-states, and yet pictured as one on a map.

The idea of Europe will not go away.

Even as European economic and political institutions are undergoing paroxysms due to a financial crisis (which is largely a debt crisis), the idea of Europe is as strong as ever, and still exhibits its ability to exercise profound influence merely through its spiritual presence in the world.

Thirteen former dissidents in Hungary have issued a manifesto — The Decline of Democracy – The Rise of Dictatorship — that explicitly calls on Europe and European institutions to intervene in Hungary:

“The advocates of democracy and the rule of law within and outside Hungary must not acquiesce in having the government of a member state of the European Union crush these universal values. Nor should the European Union just sit back and watch as it is being held hostage by an outdated, provincial tyrant. It is in the interest of both Hungary and the European Union to make a stand against the prime minister of Hungary. The leaders of the European Union are right in their decision to tighten integration, but this step should be taken not only to combat the financial crisis but also to challenge political crises and risks. The European Union may disintegrate not only for economic reasons but for reasons of pursuing disparate and antidemocratic policies as well.”

The manifesto ends with this paragraph:

“Europe is at a crossroads too. Hungary is a sad example of what may happen wherever there is a concentration of crisis tendencies, aggravated by attempts to resolve problems caused by an economic and social crisis with authoritarian means and a policy of nationalistic isolation. Instead of prosperity and stability, such a policy can only lead to suppression, conflict and turmoil. The desperate situation of present-day Hungary should be a warning for all of us: if Europe is prepared to help Hungary, it will also help itself.”

It would be difficult to find a more strongly worded brief on behalf of internationalism and the European idea as an ideal to which the dissidents appeal, and for the maintenance of which ideal they explicitly urge intervention on the part of other Europeans. The Hungarian dissidents regard themselves as Europeans, and they are urging other Europeans to intercede in Hungarian affairs in order for Hungary to exemplify common European ideals.

Thus the idea and the ideal of Europe continues to inspire political change and inform political action, even at a time when Europe is a beleaguered political entity. But the idea and the ideal also change, however gradually, so that to be European means different things at different times.

Another recent news item is that the “technocratic” government of Mario Monti in Italy has passed a law effective with the new year that allows service industries in Italy to be open for business twenty-four hours per day, seven days per week, Sundays and public holidays included. While there is already some push back on this law, and other proposed economic liberalization in Italy, from a free market stand point these laws are welcome and long overdue.

However, it could also be argued that these new trade liberalization laws represent a threat to European traditions and European culture, and if this argument has not be made already, I’m sure that it eventually will be made. “Blue laws” have a long history in Europe, and anyone who has traveled in certain European countries and tried to find an open store on Sunday can attest, they are effective in changing the character of commercial society and economic activity.

Such changes in the law are enacted under financial pressure. Europe is experiencing what yesterday’s Financial Times called “the worst economic crisis since 1945” — and it might be added the the years immediately prior to 1945 were no picnic either. Financial stimulus is needed, so measures that might not be considered under other conditions are enacted now in extremis. Once enacted, it is difficult to imagine that Europe would return to its traditional blue laws; once repealed, they are likely repealed forever.

This is one way in which the pressures of industrial-technological society and the finance capital typical of the Western nation-states implacably if gradually pushes culturally unique regions toward a common model of socioeconomic organization. None of this comes about as a result of a “grand plan” — it just happens because this is the most rational way to organize a large industrial economy, and inefficiencies will inevitably be targeted during financial crisis because making the change is less terrible than experiencing a financial collapse. To continue with the development of free market capitalism is less radical at this point than attempting to turn back the clock and reconstruct the institutions of a past civilization in which these financial pressures did not force the hand of political entities in cultural change.

It is precisely such developments that are often dismissed and criticized in Europe as “Americanization,” and dismissed and criticized in the rest of the world as “Westernization,” when it is in fact neither. Industrial-technological civilization reveals a natural teleology in its development toward particular institutions, especially financial and economic institutions. The pressures that force such changes are utterly blind to any plan to model themselves after America or the West, as I have argued many times. We can expected criticisms based on the resemblance of these institutions to American or Western institutions, but this appearance is based on deep structural forces that have already played out first in America since America had the fewest traditions with which to contend.

Europe plus free market capitalism will be something different from Europe simpliciter. Europe will still be Europe, but it will change. That is the way of the world, and more particularly it is the way of Western civilization that Europe itself defined.

The saga of Europe is far from over.

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Grand Strategy Annex

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Just a few days ago in Axioms and Postulates of Strategy I wrote the following:

“Emphatically, facts do not speak for themselves. Perhaps it would be better for formulate it like this: facts cannot be counted upon to consistently and univocally speak for themselves. In some contexts and situations, facts sometimes speak for themselves, but this is a function of the conditions under which the facts are manifested. All other things being equal — i.e., when the conditions under which a fact is manifested cannot be controlled or limited — facts do no speak for themselves. This is what Nietzsche meant when he wrote that there are no facts, only interpretations. The modern quest to attain insight through accumulation of and immersion in a mass of detail is more likely to overwhelm than to enlighten.”

It follows from the fact that facts do not speak for themselves, and many (or at least several) different constructions can be erected on the same set of facts. This is the source of incommensurability. Two incommensurable bodies of knowledge — two incommensurable sciences, or even two incommensurable economies — can be raised on a single set of facts.

In the complex world of the social sciences, which involve not only the ambiguities of the world and its facts, but also the ambivalence of human agents whose motivations and purposes are present throughout every claim and counter-claim, the possibilities of incommensurability are raised to a higher order of magnitude. And so it is with economics, which is perhaps the most mathematized of the social sciences, or I could say that it is the most social of the “hard” sciences. Incommensurable economic doctrines flourish, and so the intellectual world is awash with economic claims and counter-claims, both of which seem to be supported by “hard data” (as the contemporary idiom has it), but which also seem to be mutually inconsistent, if not to describe entirely different worlds.

This incommunsurability, the ability to raise plausible but mutually incompatible constructions upon what would appear to be a single state of affairs, was on display in a page-long article by Jude Webber on Argentina’s debt default in the Financial Times for Tuesday 19 July 2011. The article was billed on the front page as “Wise or Lucky: Argentina’s model default,” while on the inside page it was called “Argentina: A high-risk recovery.”

The subject of default is uppermost in the minds of those in the financial community because of the looming default of Greece, a member of the Eurozone, and the shaky condition of Ireland and Portugal. The financial contagion is spreading through the Eurozone and now is affecting Italy and Spain also, whose borrowing costs have risen dramatically just in the past few days. Comparing Argentina in 2001 to Greece in 2011 is of course a lot like comparing apples and oranges. Nevertheless, comparisons are made, and this FT article made a number of comparisons of this order, both implicit and explicit.

I was surprised at the extent to which the author went easy on the Argentine default, and although the article hedged on any kind of outright declaration that Argentina was a “model” for other insolvent nation-state, given its current economic growth some ten years on after the default, this was clearly the picture that emerged. Part of this is to be put to the fact that a Greek default is now considered inevitable, and no one expects the debt to be paid off in full (investors are said to received a “haircut”), the Europeans are looking to a silver lining to the clouds, trying to convince themselves that default is not disaster and that there is a future after default within the Eurozone.

There was, in the article, no explicit recognition of the fact that, since Argentina’s default, that country has been cut off from international credit markets, and as a result of this has had to budget within its means for the past ten years. At least part of the present performance of Argentina’s economy is due to this forced budgetary discipline. This is not, of course, the only reason for Argentina’s superficially good economic statistics. The article chooses to focus on the ways in which international market conditions have, for the past ten years, converged to Argentina’s benefit, which the explicit proviso made that conditions could change at any time and, which them, the relative fortunes of the country. I do not disagree with this, but it is far short of an adequate picture.

I wrote above of Argentina’s “superficially good” economic statistics, and it is important to look beyond the surface in order to get the fuller picture. It is also important to consider the history of Argentina’s economy. History is always relevant to the interpretation of the present, but in the case of Argentina it is more than relevant, it is poignant, because Argentina was once a wealthy country. While Argentina has recently been admitted to the G20, and seems on the path to recovery, and perhaps even eventual wealth, it seems questionable whether the combination of sovereign debt default and a political balancing act within the Argentinian economy can produce lasting results, or whether the country will slip into a prolonged economic twilight of the sort that most pundits now predict for Greece.

Argentina is a large country, geographically extensive with a temperate climate that favors agricultural production. During the nineteenth century Argentina was among the wealthiest countries in the world due to its agricultural exports. That is to say, Argentina relatively early in its history moved to industrial-scale agricultural and an export-based economy. We all know, from recent financial reportage from east Asia, and especially from China, of the vulnerabilities of an export-driven economy, and the need to build an internal market in order to increase resiliency and decrease vulnerability.

Agriculture has continued to be a mainstay of the Argentine economy throughout the twentieth century up to the present, and it is still synonymous with the production of beef. But the agricultural economy is not the whole story. Set in the midst of Argentina’s vast spaces are many surprisingly large cities. I have previously wrote about how Sarmiento urged the urbanization of Argentina because he considered cities to be a civilizing force. This is one of Sarmiento’s intellectual legacies, and comes across clearly in his Facundo.

In a recent BBC piece, Rise of the Asian megacity, the focus of the article is Asian cities, but I was interested to note that for the statistics in 1990, when only ten megacities were named, while half were in Asia, the other interesting fact, not expressed in the BBC story, was that the other half of the ten cities were all in the western hemisphere, and Buenos Aires was one of these ten largest cities in the world. According to current statistics, Buenos Aires is now larger than Los Angeles, and the only larger cities in the western hemisphere are Sao Paulo, Mexico City, and New York.

When I visited Argentina last year I didn’t travel to Buenos Aires, but I did fly in and out of Cordoba, which is Argentina’s second city, with just over a million in population. I was quite surprised by the size of the cities in the Argentina. On every map a city just looks like a small dot, and the unfamiliar traveler often doesn’t know what to expect. Thus when I arrived in Santiago del Estero, San Miguel de Tucuman, and San Salvador de Jujuy, I was taken aback by the shear size of these cities of which I had no previous knowledge. All were big, bustling urban centers.

To get to these cities, however, one had to pass through mile after mile of open country, and as one passes through the small towns along the highway one sees the legacy of Argentina’s agriculturally-based economy: almost every small town had a John Deere dealership, and the greater part of the heavy truck traffic on the highway consisted of agricultural shipping.

Like many places in the world, Argentina has a divided soul: it is both rural and urban, and both rural and urban traditions have contributed substantially to its cultural heritage. I suggest that Argentina is as profoundly affected by The Rural-Urban Divide as is the US, if not more so. Apart from Sarmiento, the literature of the southern cone is rich in stories of inter-generational alienation between the gaucho tradition and the emergent urbanism the transformed the gaucho from a vital part of the landscape to a romantic literary motif. (This is especially the theme of Uruguayan playwright Florencio Sánchez.)

Argentina’s divided soul (no less than that of the US) has led to divided policies, but whereas the divided souls and policies of the US has resulted in less that optimal economic polices, the increasing marginalization of agricultural as an economic force has limited the impact of these policies. In Argentina, where agriculture is still a major force in the economy, policies that have sought to placate urban populations through the politics of subsidy have been devastating for agriculture, and therefore devastating to the economy on the whole.

The Kirchner-Fernández administration has been actively interventionist in the economy, and has been interventionist in the Peronist populist tradition. But this has been an urban populism that treated the agricultural sector as a producer of wealth that can be expropriated and redistributed. The result has been a series of policy interventions that have penalized the traditional agricultural export model, and has even forced agricultural producers to sell at a loss to the domestic market.

Not surprisingly, some major Argentinian agri-businesses have been moving assets to neighboring Uruguay, and indeed the Financial Times article mentions in passing the problem of capital flight. There can be perhaps no more dramatic illustration of this than the fact that Uruguay has now bypassed Argentina as an exporter of beef. I urge the reader to look at a map and compare the relative geographic sizes of Argentina and Uruguay. Even the reader who is unfamiliar with Argentina’s tradition of producing beef for export will immediately see that something is a little strange when diminutive Uruguay can export more beef than Argentina. (Take a look at Uruguay forecasts beef exports will total 1.4 billion USD in 2011.)

In other sectors of agriculture, Uruguay’s exports of fruit have increased sharply. For example, blueberry exports have doubled (mostly going to the European Union), while overall fruit exports have exceeded US$100 million for the first time in its history. Uruguay’s fruit exports are still dwarfed by those of Argentina, but we see a broadly based increase in Uruguay’s agricultural production and export. Thus while Argentina’s economy has been growing at 6 percent per year since the initial contraction following the default, its agricultural industry has been lagging while neighbors pick up the slack. The traditional engine of industrial development and national wealth in Argentina has been marginalized by political intervention, and this puts the sustainability of Argentina’s present financial model in question.

While it is easy to say that policies can be changed and the agricultural industry can resume its role, there will be an inevitable loss of market share and perhaps lost decades of national wealth. Unlike, for example, the mineral wealth of the DPRK or the petroleum reserves of the US held in ANWR, which are essentially resources banked in the ground, and which can be extracted more efficiently and more profitably in the future with improved industrial technologies, the loss from missed agricultural opportunities is a loss that cannot be made up at a later date. If you don’t sell fruit or beef this year, someone else will sell it, and the purchaser will likely consume it this year. You may sell to them next year, but you missed your chance to profit from this year.

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Grand Strategy Annex

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A few weeks ago in The Dubious Benefits of the Eurozone I discussed the dilemma of Greece, and, perhaps more importantly, the dilemma of the other Eurozone economies that are now mere bystanders to a Greek tragedy.

Problems continue to mount, and no solution is in sight. Day after day, the headlines fall like dominoes — last Friday: All for one… The eurozone countries are politically responsible for Greece’s problems, by Tommaso Padao-Schioppa, former ECB board member; Monday: Euro’s critical test: The eurozone needs to have powers to tax member states in a crisis, by George Soros (who needs to introduction), and today, Tuesday: What now for Europe? There is more than money at stake in the Greek crisis, by Gideon Rachman.

The truth of the matter is that the Eurozone has already failed, and it has failed because it has been starkly revealed, with all the blunt disambiguation of a messenger speech, that there is no mechanism in place that will either coerce other members of the currency union to come to the aid of Greece in a robust fashion, or that will coerce Greece to take the painful steps it must take to reform its economy in order to bring it in line with the best Eurozone economies. Either way, action is painful and expensive, but inaction is to condemn the population of a country in crisis to a long slide, at the bottom of which is poverty and economic irrelevance. Unfortunately, since the slide takes time and the consequences are not immediately apparent, it is almost certain that lack of political will means Greece will become a de facto second-class citizen of the Eurozone.

It is a hard saying, but some peoples condemn themselves to long term lower standards of living by unwillingness to work regularly, pay taxes dependably, regulate honestly, and govern transparently. Greece, of course, has a history of crippling strikes and Communist activism that have militated against productivity. In such a context, not paying one’s taxes can be spun as a heroic act of defiance in the face of corrupt governmental interference. And they are right. The government is corrupt. All governments are corrupt to some degree, but we pay our taxes anyway if we want to possess a national infrastructure that will make it possible to live reasonably comfortable lives in the context of contemporary industrialized society.

This impasse should not surprise us in the least. The general principle at stake is that a collective crisis demands cohesive collective action, the sooner the better, the more decisive the better. In most particular instances of the general principle, it does not surprise us when a collective entity that has become too large for its mandate fails to deliver cohesive collective action. When the Europeans announced that they would create a joint military force, no one took it seriously. A joint European military command would be at least as difficult as a joint European foreign policy, and probably more difficult. While divergent national interests appear much more rapidly when it comes to fighting and dying, they eventually appear in economics as well. Taxing and spending is not quite as immediate as fighting and dying, and it is perhaps the next thing on the list that will get people’s attention.

After the Second World War, and again, on a wider scale, after the Cold War, Europe proclaimed itself to be unified. Moreover, it Europe has acted on occasion as though it were in fact unified. An outside observer who knew nothing of European history except what could be documented from public news sources since 1945 might come to conclusions that, despite having better than fifty years of evidence to support them, are still nearly baseless. Such is potentially the fate of all inductive reasoning that does not rest on a foundation that comprehends a period of time sufficient to measure the patterns in the history of the observed entities. Since the patterns of political entities are played out over centuries, fifty years is an insufficient sample for an accurate result.

The need for collective action in the face of crisis, and the lack of a collective will to take action, is the tragic flaw, the Achilles heel, of all trans-national entities. That being said, I am not simply contrasting the supra-national entity of the Eurozone to the successful and robust nation-state, since this implies that the nation-state possesses some special quality in virtue which cohesive collective action is possible (which latter occult quality perhaps resides in the Volk). In fact, extant nation-states do possess this quality — essentially, the quality of being able to act upon raisons d’état — but not intrinsically. The nation-state can be defined ex post facto as that political entity for which raisons d’état are possible; the territorially defined nation-state is the effective limit of cohesive collective action. In other words, nation-states are nation-states because they have achieved national cohesion. To understand the causality to run in the other direction — that nation-states achieve cohesion because they are nation-states — is to get things seriously backward.

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