Europe must grow up

By Martin Wolf

Financial Times

Published: November 10 2004

These US elections were an earthquake. The American people have done far more than re-elect an administration that is as reckless as it is radical. They have also given the same party secure control over Congress. Republicans will now try to secure a Supreme Court of much the same complexion. Should they succeed, rightwing populism will animate all three branches of American government.

Contemporary Republicans are not conservatives. On the contrary, theirs is a revolutionary movement aimed at overthrowing much of the post-second-world-war order at home and abroad.

For two groups, in particular, this seismic shift in US politics poses a huge challenge. The Democrats must reverse their slide from predominance to irrelevance. Europeans face much the same task. Let us leave the former to their pain and turn to the latter instead.

With the end of the cold war, Europe is important to the US neither as an arena nor as an actor. In Europe many Americans see a collection of states that are neither willing to follow obediently nor able to help effectively. They view the European economy as decrepit and the European future as dismal. In earlier times, Europeans visited two cataclysmic world wars upon the planet. More recently, they failed to deal with the minor challenge of the break-up of the former Yugoslavia. Instead, they wrung their hands like so many Pontius Pilates.

While powerful Americans view Europeans with contempt, the latter respond with a growing dismay. This is only partly because the contemporary European attachment to secularism and the welfare state is as powerful as that of Republicans to their opposites.

Far more important is the divergence over foreign policy. As two distinguished American scholars, Robert Tucker and David Hendrickson, note in a brilliant article in Foreign Affairs, this administration has proudly overthrown all four of the pillars that supported US legitimacy in the postwar world: "its commitment to international law; its acceptance of consensual decision-making; its reputation for moderation; and its identification with the preservation of peace".* For most Europeans, the Americans have put the world back on the road to international disorder of the worst kind. If might made right, the European Union itself would founder. The big powers would again dictate to the rest.

In the late 1960s, Jean-Jacques Servain-Schreiber, a French commentator, wrote his celebrated book The American Challenge. A Republican US is a new American challenge for Europe. The dream of a deep and durable alliance between the two sides of the Atlantic is defunct. A good working relationship is possible. But Europe must first reinvigorate itself economically and politically.

Europe's demographic decline makes economic resurgence even more essential. As the report on the "Lisbon strategy", under the chairmanship of Wim Kok, former prime minister of the Netherlands, notes: "the pure impact of ageing populations will be to reduce the potential growth rate of the EU from the present rate of 2-2.25 per cent to around 1.25 per cent by 2040 . . . Already from 2015, potential economic growth will fall to around 1.5 per cent if the present use of the labour potential remains unchanged."**

Yet, far from making the best use of available resources, the EU economy shows signs of growing difficulties. After a glorious period of catch-up with US incomes per head, the EU has experienced a marked relative decline since 1990. Behind this lies a worrying deterioration in both absolute and relative productivity performance; and the proportion of people of working age actually at work is only 64 per cent in the EU of 15 members, against 71 per cent in the US, with particularly poor performance in Belgium, France, Greece, Italy and Spain (see charts).

In March 2000, European leaders committed the EU to become, by 2010, "the most dynamic and competitive knowledge-based economy in the world". If nothing else, this demonstrated a sense of humour. Needless to say, the EU will fail to achieve this objective, as the Kok report demonstrates. It cannot even be said that they are any closer to that objective than they were more than four years ago.

If Europe is to sustain its vaunted social model, provide steady increases in living standards to its population or sustain its position in the world, this performance has to improve. I doubt whether there is a credible co-operative answer to this challenge. The solution should come instead from intense competition among companies and among the regulatory regimes offered by governments, within the context of a free internal market. That spirit of competition must also be extended to institutions of higher education.

A revitalised economy is the beginning. On it must be built two crucial changes.

First, Europe must have military forces able, at the very least, to bring security to Europe and its immediate neighbourhood and, ideally, to act effectively abroad. Only then are the Americans likely to take Europe's voice seriously.

Second, Europe must avoid both the current British policy of slavish obedience and the equally depressing French policy of instinctive opposition. Europeans need to have foreign policies of their own. Frequently, they will be allies of the US; sometimes they will wish to stand aside; and - only occasionally, one hopes - they will find themselves in carefully calibrated opposition.

Mr Bush's re-election brings one salutary benefit for Europe: it is clearly time to grow up. The era of a benign tutelage is over. The era of partnership may yet begin. Europe must both revitalise its economy and maintain its own security. It must not seek to confront the US for the sake of it: that would be childish. But it must also refuse to trot by the American side, regardless: that would be infantile.

It is time for the old continent to become an adult, with a mature voice in the world's councils. That voice is desperately needed. Can Europe rise to the challenge of supplying it? I doubt it. Who, given the record, would not? But I also hope.

* Iraq and US Legitimacy, Foreign Affairs, November/December 2004 ** Facing the Challenge: the Lisbon Strategy for Growth and Employment, http://europa.eu.int