This is the sixth in an NYRblog series about the fate of democracy in different parts of the world.
The European crisis, which we process from headline to headline as a matter of currencies and bailouts, is really a test of large-scale democratic capitalism. The disintegration of the Eurozone would be nearly as disastrous for the US as it would be for Europe; the result would almost certainly be a global financial meltdown that will make the events of 2008 look like, well, a tea party. But it is not only a matter of distant economic events that might have consequences for the US. The deeper issue is whether institutions of continent-wide democracy, European or American, can keep pace with the twin threats of global financial instability and national populism.
Some of the EU’s fundamental problems are very much like our own: the Greek crisis begins with rich people not paying taxes, hardly an unfamiliar situation. Just as Americans tend to see the federal government as an agent of distant interests, so too Europeans are coming to see Brussels as the trojan horse of a corrosive globalization. As with the US government’s approach to failing banks and a slumping economy, the attempts by European leaders to resolve the euro crisis raise some crucial political questions: Who gets to allocate wealth in times of economic difficulty? Who should be bailed out, and why? Is the austerity reflex sound economic reasoning or inertial politics? And how can such decisions, which affect hundreds of millions of people, be made democratically?
Two outstanding European thinkers are trying to get to grips with such questions. For much of the past twenty years, the Bulgarian political scientist Ivan Krastev has been engaged with the internal tensions within and between liberalism and democracy. In the opposite corner of Europe, the prolific British historian Brendan Simms came to politics as an observer of failure of the EU to intervene in the Balkans. Krastev is a piercing though always sympathetic critic, whereas Simms is conservative idealist. His starting point is not the post-Communist experience of democracy, as with Krastev, but rather the long British-American experience of union and constitution.
In an article that will soon be published in The American Interest, Krastev argues that the European financial crisis is but a symptom of a deeper malaise of European political culture. Europe is troubled, he says, by insecure majorities, the national populations of EU member-states who believe themselves to be threatened both by globalization in the streets (immigration) and globalization in the law (Brussels). As Krastev puts it, national governments have politics but no policy, since important decisions are made by the EU; the EU has policy but no politics, since decisions are not made by elected representatives. Sovereignty becomes a symbol: precisely because national politicians have yielded authority to the EU, they cling to the identity and comfort provided by traditional national states. This is true not just of small and weak states, but also of the major European powers, such as Germany.
European integration has always depended upon a certain kind of historical brinksmanship. Each major step forward has contained the seeds of a future problem, which can only be solved at some future point by another step. Krastev likens this gradualist approach to crossing a wild river by jumping from rock to rock, with the next rock only becoming visible after each jump. But what, he asks, if the rocks only go halfway across the river? The failure of the common currency was not only predictable but predicted. Everyone knew that something like the situation now faced by Greece would happen at some point. Everyone knew that a unified monetary policy (the interest rates set by the European Central Bank) without a unified fiscal policy (the ability of some recognized central authority to spend more money to revive the economy) could not endure. The hope was that a debt crisis, when it came, would by necessity produce a unified fiscal policy. But this seems to be the rock that does not exist. All that can be seen ahead of us now is the roaring river.
This is because fiscal policy is at the very core of a democratic system, and the EU is not yet democratic. People wish to know that they are paying taxes to a government they voted into office, with the institutions and powers that go with that task (a treasury, an elected executive, an accountable legislature); and that these revenues are then being spent on themselves and on people with whom they identify and share a political community. But, despite recent increases in the authority of the European Parliament, the EU does not have an elected executive that can make fiscal decisions, nor a treasury that might carry out such policy.
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At the moment the EU is veering between two possible responses to the crisis, each of which forces fiscal policy away from the populations of its member states. Either European leaders will find some stopgap to further centralize revenue and expenditure, without consulting their citizens. This might alleviate the crisis in the short term, but will eventually cause the populations of the wealthier members to rebel, as indeed the Germans and Finns already seem to be doing. Or, more likely, the EU will continue to edge towards a system in which a fiscally sound German-Polish-Baltic-Scandinavian core dictates to a more shaky periphery, which will likely bring popular rebellions there. At the moment Greek voters can change the parties who rule them, but cannot change fiscal policies. These are decided in Berlin. Thus we have the emergence of pantomime republics.
What the EU states should be doing instead, as Simms maintains in a recent essay for Chatham House, is exploiting the crisis to take the bold step of creating a European democracy that would function as a great power. Historically, Simms argues, successful political unions among states are established not in good times but in bad, by people conscious of earlier failed attempts to build them and determined to do better next time. He cites the old Holy Roman Empire and Polish-Lithuanian Commonwealth as examples of dysfunctional entities with weak central institutions and odd voting laws from which the American Founding Fathers learned when they designed their Constitution. Europe is now experiencing—if only Europeans would realize it!—the same sort of salutary shock that the Founders confronted in the late eighteenth century: an unregulated relationship between the parts and the whole, while the enemies are drawing near (Simms has in mind a resurgent Russia, a global China, and a nuclear Iran).
Thus Simms concludes that the solution must be a new Constitutional Convention, whose members are invested with the authority to begin again from the foundations and produce a lapidary statement of basic institutions and rights—rather than the ponderous EU treaties Europeans tend to vote down when given the chance in national referendums. Simms is likely right that gradualism has played itself out; a new beginning may be the only way forward. But it is unclear how to get from a group of democracies to one democracy, especially when the citizens of those democracies do not know what is in it for them. Simms imagines a new “Party of Democratic Union” that will win future elections, control the European Parliament, and thus force action from the ground up. But for all the reasons Krastev gives, the chances of this are slim.
A more plausible alternative is to encourage the European elites to propose a new constitution themselves. If not likely, such an approach is at least possible. The creativity will have to begin in Berlin, since at this point only Germany is important enough within the EU for its own national elites to double as European elites. This is not a part German leaders have embraced. In the current crisis Prime Minister Angela Merkel has played a brilliant tactical game, allowing the problems of others to fester to the point where only Germany can determine the solution. This narrow approach indulges German voters in the dangerous fantasy that European imitation of German austerity would solve the problem.
Germans are now behaving a bit in European politics as red staters do in American politics: they profit from the larger union they think they want to undermine. The German boom of the last decade depends precisely on the euro and the market it provides for German exports in countries such as Greece, and on the fact that the euro in international markets is likely cheaper than any German currency would be. Merkel’s approach, consistently pursued, will emphasize the symbolic character of non-German sovereignty by producing more pantomime republics. Eventually, domestic politics in Germany and on the European periphery would undo the European system that has given Germany such political and economic power.
As the Polish foreign minister Radek Sikorski noted in an impressive speech in November, Europe cannot do without German leadership. And this means nothing more dramatic than realizing that, without a major political reform of the EU, Germany will find itself with far less world power and far less reach into European and global export markets. What might such a constitution look like? Symbolic sovereignty and pantomime republics would be replaced by a dual democracy, with executive and parliamentary authority and revenue collection located at two distinct points, the European capital and the national capitals. A convention of European elites would have to decide, and set down in a brief constitution, which sorts of authority, and how much taxation power, would be located in each. The new arrangement would have to endorse a clear “giveaway-takeaway” mechanism, so that voters would know that they cannot be taxed for the same policy at both levels of government.
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Just where those lines would be drawn would have to be decided by Europeans (although I agree with Simms that European solidarity without a European army will be difficult). The arrangement would have to be endorsed, country by country, in a referendum. Since it would be a new beginning rather than just another treaty, however, it would have to start with Berlin. The German lead would have to be followed by other countries that are fiscally sound and growing, which at this moment means a new core around the Baltic Sea. Countries that vote it down would simply be left out, with the option of revoting later, rather than being allowed to torpedo the entire project (as happened with the earlier attempt at a European constitutional treaty in 2004-2005). Governments would have to inform voters that they would not be giving away sovereignty, but endorsing sovereignty at two levels, confirming national power at home while gaining democracy at a higher level.
Europe cannot simply turn around, as Americans sometimes imagine, and hop backward rock by rock to the other shore of the river, becoming again a collection of nation-states That was where this journey began, let’s remember, with the Great Depression, World War II and the Holocaust. The whole purpose of European integration was to make such events impossible, a goal in recent decades emphasized by the growing demilitarization of Europe itself and the Europe-wide commemoration of the tragedy of Europe’s Jews. There is no way back, only a way forward: either with or without a constitution.
But a viable constitution is unlikely to emerge from either a democratic process or from the blueprints of analysts, however brilliant, from European peripheries such as Bulgaria and Britain. There will have to be a German who will pick through their ideas and those of many others, and rally German elites toward a European solution. For Americans this is no mere spectator sport: the consequences of a European failure will reach us soon enough. If the Europeans cannot get the balance between global finance and domestic politics right, that is bad news for democratic capitalism around the world.
