Less Berlin, more Brussels, and more like the United States – A conversation with Glyn Morgan

27/12/2015

Maurizio Ferrera (MF): The EU is in a mess. The debt crisis (Greece) is not over yet and may hit again with a vengeance in the months ahead. Most member states are reluctant to do their part in the refugee crisis. Despite lip service, “Europe” has not rallied behind Hollande in his “war on terror”. The UK wants out (or sell dearly its permanence within the Union). The sequence of crises has obviously to do with “events”. But do you think there is some “master cause” which explains why the EU seems so inept now (more than in the past, really) in producing joint actions? The feeling is that European elites are unable to decipher the epochal transformations occurring around them and react accordingly.

Glyn Morgan (GM): To reach common decisions has become difficult because the challenges confronting Europe are huge and unparalleled. Let us consider the economy. We live in an era of truly global capitalism. In the 1990s we saw China, India, and a number of countries from the former Soviet bloc all enter the global economy. In a process the Harvard economist Richard Freeman calls “the Great Doubling”, the global labor pool very quickly increased from 1.46 billion workers to 2.93 billion workers. This process hit Western European countries—especially Western European workers—very hard, because a lot of firms and even whole industries were suddenly no longer viable. Europe must find a way of competing in this new world. And she must find it while societies are growing old—the percentage of the active working population is in decline, which makes it increasingly difficult to fund pensions and other welfare programs. Furthermore, as populations grow old, there is less tolerance for radical experimentation, less willingness to explore new ways of organizing our economic and social affairs. Consider here, for example, new disruptive businesses like Google, Facebook, Airbnb, and Uber—all set up by young Americans in their twenties or thirties.

Political challenges are just as big. Northern Africa and the Middle East are imploding. We are witnessing not merely the fall of leaders and regimes, but a redrawing of boundaries. In the wake of this redrawing, some very unappetizing political forces will come to power. Inevitably, a large number of people will flee the chaos and violence of this region and seek entry into Europe. Short of militarizing their borders and returning people to face certain death, European authorities will have no choice but to admit these people, raising the problem of how to integrate them. If immigration is inevitable, the task is to turn immigrants into loyal and productive citizens.All these challenges would raise enormous problems to any system of governance. It is simple-minded to think that each state pursuing its own particular national interest—the goal of many Eurosceptics—is the answer to any of these problems.

MF: Populism is on the rise in most member states, especially on the right (e.g. France). The euro or just generally European integration is often indicated as the culprit. Is there a link between the surge of populism and the lack of a credible system of representation at the EU level? Some commentators talk about the rise of an “econocracy”, of a novel regime of “liberal authoritarianism” at the heart of the EU (e.g. unresponsive/unaccountable central bank and the various Troikas…). Do you agree?

GM: The European system of governance is best described as a form of liberal political incorporation. As seen in the process of central and eastern European enlargement, the EU offers countries a deal: we will give you a lot of money and grant you membership, in return for which you must accept all our laws and institutions. In large measure, this system of governance has worked. No central or eastern European country has succumbed to fascism or communism. Liberalism has, more or less, triumphed. Whatever constraints this system of governance imposes on national democracies is, in my judgment, a relatively small price to pay. You have to remember that the EU leaves most policies that matter most to the ordinary voter—education, crime, pensions, welfare, income taxes etc.—in the hands of national governments. It is absurd to portray the European Union as some anti-democratic institution.

MF: In principle, yes. But the constraints on national budgets have become very stringent. The Commission and the European Central Bank intervened in a very intrusive way in the choice of economic and social policies during the crisis. Think, for instance, about the letters Trichet sent to Spain or Italy, which contained a detailed list of reforms to be launched as a condition for financial support. And let us think about the events in Greece.

Viewed from a more all-encompassing European perspective, there was nothing undemocratic in the way that the Greek Crisis was resolved.

GM: True, the Greeks like to portray “the Troika” as undemocratic. In July 2015, the Troika reached a decision on Greek debts that appeared to subvert the popular national will as expressed in the Greek referendum. But this dimension of the Greek Crisis is really best thought of as a clash of national democracies. The Greek people wanted one thing; the German (and Dutch, Finnish, and Slovakian etc) people wanted something else. Viewed from a more all-encompassing European perspective, there was nothing undemocratic in the way that the Greek Crisis was resolved. No well-ordered democratic system can allow one segment of the voters to get their way at the expense of others.

MF: It depends on how you decide who gains and who loses. Even mainstream economists now recognize that the EU has favored creditors to the detriment of debtors. After all, German banks had lent money to Greece by choice while earning higher interest than alternative investments made in Germany. A currency union among diverse economies cannot function without a central bank to act as a “lender of last resort” and without a certain amount of “risk pooling” among member countries. To move in this direction, however, we need a justification not only in terms of “economic necessity”, but also of solidarity: do you agree?

GM: Rather than appeal to solidarity—an overused term that has no clear meaning—I would prefer to invoke Alexis de Tocqueville’s concept of “self-interest rightly understood”. The Germans have followed their own narrowly-construed self-interest from the start of this crisis. The 2010 bailout of Greece was, as you point out, a bailout of German (and Dutch and French) banks, some of whom would probably have had to declare bankruptcy if Greece had defaulted. The self-righteous rhetoric of the Germans has poisoned the debate and led to an unedifying round of mutual recriminations between creditors and debtors. The Germans need to be persuaded that that they have benefited disproportionately under the current European system of governance. They need to realize that many Europeans perceive this system of governance as unjust. It is in the long-term self-interest of all Europeans—Germans and Greeks, Dutch and Italians—to identify a system of governance that allows all peoples a good chance to prosper. I suspect that such a system of governance will require a lot more centralization, a lot more Brussels and a lot less Berlin, than we have at the moment.

We need only agree upon a minimal conception of justice that includes a basic social minimum. Above this social minimum, different regions should be free to set their own levels of taxation and welfare.

MF: Should the EU become some sort of “state”? If yes, what are currently the missing ingredients? And how would you respond to the classical “unfeasibility” objections?

GM: If the European Union is to acquire a greater level of state capacity to address the challenges mentioned above, it will also need a shared agreement, a basic consensus, on justice that goes beyond the basic rights found in the European treaties. I don’t think it is desirable or feasible to expect much in the way of a consensus on the details of taxation and welfare levels. We need only agree upon a minimal conception of justice that includes a basic social minimum. Above this social minimum, different regions should be free to set their own levels of taxation and welfare—much in the same way that in the United States a state like New Hampshire has no income or sales tax, but New York has high levels of both. Over time, as Europeans become more geographically mobile, they can move to a region that best fits their preferences.

MF: But the United States has a federal welfare (social security, tax credits, programs of medical and social assistance, etc.: more than 15 per cent of GDP) as well as a system of transfers from Washington to the states. These two elements provide a degree of solidarity and redistribution, both inter-territorial and inter-personal. There is more geographical mobility, it is true. But the federal budget plays an important role in terms of economic and social stabilization. The EU budget is less than 1 per cent of its GDP. Forget considerations of political feasibility. But don’t you think that in Europe there should be at least a public conversation on the issues of distributive justice? You mentioned a guaranteed minimum income. What do you have in mind?

GM: You are quite right to identify these differences between the United States and Europe. In fact, I do not think that the EU—which you rightly point out is in a mess—can survive unless it becomes a lot more similar to the United States. It needs a much bigger central budget and much more distribution between member states. I recognize the current political difficulties, but I think Europeans need to have a serious conversation about a European-wide unemployment system. Although this is not on the political agenda, a number of scholars have started to work on this topic. You mentioned earlier the issue of feasibility. A European-wide unemployment system is not currently feasible. But unless we discuss it and think through its possibilities, we will have nothing to offer if the current crisis gets worse and our economic problems multiply. Let’s face it, no one seriously thinks that the Greek Crisis is over. Within the next couple of years, we are going to go through another round of debates about the future of Europe. We need bold plans grounded in principles of justice.

MF: And what principles should guide joint action in the case of refugees or the terrorist threat?

GM: In the short term, migrants and refugees are going to pose a huge financial burden on European member-states. The European Union needs to take over, if not the actual policing, the funding of the policing of the Mediterranean migrant routes. The financial burden now placed on Greece and Italy, which is extremely unfair to those countries, must be shared among all European states. In the longer-term, migrants are likely to prove an economic and cultural benefit to the countries where they settle. Europe is suffering a dramatic demographic decline. Large-scale immigration offers the best immediate solution to that problem.

MF: I agree. But the admission of migrants (not only those who come from Africa or from the Middle East, but even those who move from Poland, Romania or Bulgaria to Germany, France or the United Kingdom) arouses hostility and resentment among the natives, and especially from those who may lose their jobs or access to social housing. For large segments of the population (and the electorate) solidarity stops at national borders, even regional. There is a political problem, but also an ethical question: must the hospitality of “foreigners” be considered a moral imperative?

GM: Absolutely, it is a moral imperative. Europeans must face up to the fact that through nothing but sheer luck, they were born into stable and relatively affluent societies. They could have been born in Chad, Niger, or some other destitute country. Closed, impermeable borders basically imprison people in poverty. The situation of these people is only going to get worse as the climate changes. Europeans think that a few hundred thousand immigrants a year represents a tidal wave that will destroy their culture and way of life, and that integration is beyond their capacity. They need to remember that between 1880 and 1919 the United States admitted more than 23 million immigrants—many of them Italian. If the United States could do it, I can see no reason why Europe can’t manage it. Unfortunately, the immigration debate in Europe is dominated by nationalists. People who believe in the natural equality of mankind and a basic right to freedom of movement—the values of the European Enlightenment—need to speak up.

MF: What does the EU look like viewed from the US: a failing federation? A coward opportunist in the area of security? An economic and monetary troublemaker?

GM: Viewed from a US perspective, the EU today resembles the Articles of Confederation, the decentralized system of government that existed for only twelve years before the US Constitution came into force in 1789. That system of government proved too decentralized to address the economic and security challenges that America faced at the time. The history of the United States is a history of the federal state acquiring more capacity at the expense of local and state authorities. There is always a danger with a strong centralized state. The US state has done some terrible things, both at home and abroad. That said, I still think the European Union needs to be more centralized than is currently the case. As you suggested, Europe needs a proper central bank that acts like central banks elsewhere in the world, which is to say a bank that acts as a lender of last resort and has multiple macroeconomic objectives (including employment levels) rather than merely price stability.

MF: Would the United States welcome such a strengthening of the EU (probably without the participation of the United Kingdom)? In the past there has been much ambiguity on the part of America towards European integration. Perhaps today the US is interested above all in greater military involvement in Europe …

GM: As a matter of fact, notwithstanding the NATO alliance, the United States is steadily losing interest in Europe and is turning towards Asia. Europe will inevitably have to shoulder more of the burden of its own defense and diplomacy.

MF: A Europe of nation states or a more centralized EU?

GM: Each national state with its own defense budget leads to a waste of resources. The European Union has long had pretensions to acquire an effective security and defense policy. Unfortunately, it has never been able to progress very far in this endeavor. Part of the reason is that Europe still depends very heavily on the US. Europeans are in for a rude shock if one of the Tea Party Republicans (including Ted Cruz or even Donald Trump) were ever to become elected president. They would pursue a much more nationalistic and isolationist policy than any previous postwar president. While I do not think that a Tea Party Republican will win the next election, Europeans need to prepare themselves for a future when they must stand on their own feet without US military support. Again, this requires the European Union to set aside its petty squabbles and acquire a more substantial form of state-capacity. Basically, the EU needs to become a United States of Europe.