What Remains: On the European Union
The real costs of this model of international integration became visible with startling speed once the financial collapse of 2008–09 metamorphosed into the sovereign debt crisis of 2010. As the fairy tale ended, the viability of the euro suddenly became uncertain. Keynesians argued that expansionary policies could probably have headed off the worst of the crisis, because the overall sums required to deal with southern European debt were far smaller than had been at stake, say, at the time of the implementation of the Marshall Plan in 1947. But we will never know if they were right, because such policies were precluded by eurozone rules and German political resistance. Instead, the countries in the eye of the storm have been forced into austerity: national income has contracted rapidly, wages have been slashed, unemployment has soared (especially among the young), and the welfare achievements of previous decades have been rolled back.
There has been only one significant exception to the ongoing marginalization of national legislatures and their political leaders: the German Bundestag. As for the German chancellor, Angela Merkel, she has played a far more decisive role than any of the leading European officials except the head of the European Central Bank; in contrast, the European Commission president, José Barroso, and the president of the European Council, Herman van Rompuy, have been sidelined. But not even Germany has controlled the process. For in the preceding years, as the crisis demonstrated, enormous power had been handed over not only to European civil servants operating with little accountability or transparency, but to even less accountable groups outside the European bureaucracy altogether.
As politicians negotiated throughout 2010–11 to keep Greece inside the euro, the constraint they all faced was the need to avert a “credit event”—the determination of which depended not on them nor on any elected officials, but on the deliberations of a committee of the International Swaps and Derivatives Association composed mostly of bankers. These overseers are supposed to set aside conflicts of interest that might be generated by their own firms’ positions and speak for the industry as a whole, but the lack of transparency in the process makes it impossible to know. Immense power was also granted to a few American credit-rating agencies, latecomers to the business of global risk evaluation (and not notably successful at it). Neither grouping had automatically acquired this power; they had won it through lobbying and a series of political decisions in the preceding years that had allowed capital markets largely to regulate themselves.
Only in 2008 did Europe’s political class start to acknowledge, in the words of the German president, Horst Köhler, that the financial markets were “a monster that must be tamed.” Just how jerry-rigged the entire structure was has begun to emerge through the findings of a recent Financial Services Authority investigation that a number of major banks colluded over a period of years in fixing the calculation of the so-called London interbank offered rate (Libor), the basic interest rate upon which an impressive $350 trillion of financial instruments depend. The lack of interest initially taken in this extraordinary story outside the pages of the Financial Times is instructive. If the acronyms of modern financial life are impenetrable, the issues technically complex, the terminology euphemistic and the sums involved unimaginable, this is not accidental: such factors have functioned to enhance the mystique of the “market” in whose name these developments occurred, and to obscure its imperfections and asymmetrical opportunities.
Yet even as these elements became better understood, the crisis revealed the ability of financial markets to preserve private profits while socializing their liabilities. That socialization occurred on a breathtaking scale. Government bailouts to the financial sector in 2008–09 were so large that they left many countries’ debt/GDP ratios 20 to 25 percent higher, on average, than they would have otherwise been. The paradox was that while governments were thereby weakened, and in many cases slid into crisis, market participants took the assistance while moving rapidly and successfully to prevent any real regulatory challenge. The politicians denounced the irresponsibility of the bankers but fell short of an effective response. On the contrary, unfettered by a global financial transaction tax or any other significant new regulatory pressures, and helped by cheap money made available by the central banks (so-called quantitative easing, an extremely crude form of pump priming that represented the only form of stimulus left to an age that no longer believed in planning), the derivatives market at the root of the problem has continued to grow, while the financial sector has pushed ahead with many of the novel and uncollateralized instruments that contributed to the crisis. Alternately cajoling and threatening, its leaders have shown a much greater capacity for collective action, self-assertion and self-preservation than the leaders of Europe’s states.
Spinelli’s vision of an economy run in the service of human needs has been turned on its head. If the human needs being served by the euro—the currency with which the very project of ever closer union has come to be identified—are not primarily those of its citizens, this is not surprising, because they have had less say in the outcome than the bankers. In the war years on Ventotene, finance capital was seen as a force to be controlled and checked, and the speculators were regarded as at least partially responsible for the slump of the 1930s. By contrast, integration through financial liberalization and monetary union has produced wealth that European democracies cannot afford and problems they cannot answer, limiting their power and undermining the credibility of their institutions. No longer the fount either of political liberty (as nineteenth-century liberals once hoped) or of social welfare, European internationalism has moved a long way from its origins.
The Mystique of Global Governance
Europe has rarely been just about Europe. As Spinelli’s manifesto testified, it has also often stood—sometimes formally, sometimes implicitly—for a much broader normative ideal, most recently when George W. Bush’s abrasive approach to politics made it peculiarly tempting to look across the Atlantic to the EU, with its fledgling common currency and its “European model of society,” as an alternative. In 2004 the economist Jeremy Rifkin declared that “Europe’s vision of the future is quietly eclipsing the American dream.” The following year, the historian Tony Judt concluded his new book Postwar by describing a continental nirvana in which people opted to pay higher taxes in return for “free or nearly free medical services, early retirement and a prodigious range of social and public services.” Writing in 2009, on the very eve of the sovereign debt crisis, the political commentator Steven Hill went even further, describing the continent as “the new City on the Hill.”
It was in these years that some American commentators hailed a sophisticated new form of internationalism emerging globally that was largely based on the European experience. They wrote enthusiastically about a “New World Order” that looked suspiciously like the European Union writ large, a world in which formal supranational institutions played a relatively minor role and loose, businesslike networks of middle-level government officials from different countries—often mingling with regulators and industry experts—got things done. In this world, there seemed to be no evident conflict and rather little formality. Most of what went on happened behind closed doors, humdrum and technical but ultimately of real consequence. It was a quiet world of international standard-setting, Internet governance and spreading human rights. States remained important, but through the actions of bureaucrats instead of legislators or politicians. The era of large international institutions, formal treaties and perhaps of diplomats too seemed to be passing.
As a description of what was occurring not merely within Europe but globally, the picture was compelling: old-fashioned political scientists had mostly missed the fact that international affairs were becoming less focused on large, formalized institutions and more dependent upon informal clusters and horizontal interagency relationships that blurred the boundaries between officialdom, corporations and NGOs. This perspective implied—as a leading theorist of this process argued more explicitly later—a relatively minor role for behemoths such as the United Nations:
There is an entire infrastructure of global governance that is not at the UN, or at the World Bank, or at the International Monetary Fund or at the World Trade Organization. It is the networks of antitrust officials, of police officials, prosecutors, financial regulators, intelligence operatives, militaries, judges, and even, although lagging behind, legislators.
This kind of description, however, sounds rather like the one regulators and networkers would presumably like to give of themselves: earnest and professional, guided by considerations of something dull but respectable called “best practice.” Efficiency and expertise rule. One would scarcely guess that anything so uncouth as political power could influence the discussions over the conference table. There is no fighting here, no blood, not even any really sharp clashes of opinion. In short, this is a rosy picture of a world governed, in legal scholar Martti Koskenniemi’s words, by the “Supreme Tribunal of a managerial world.”
It is an old idea, this thought that all would be well if only the politicians could be kept at arm’s length and the people who actually know something allowed to get on with things. Before World War I, scientists, engineers, doctors and bibliographers all embraced internationalism for this reason: it gave them a grand mission and appealed to their sense of the nobility of their calling. Yet experts are not always capable of standing above the fray of politics, and they are as prone to see themselves as representing their own governments as anyone else. Whether or not expertise in the abstract is political is not the question here; it is what kind of political order this claim of technical neutrality is being advanced to support. Some hope this order will be a democratic one, led by the United States and the West and spread globally through the inspiring example provided by professionals working collegially. But for most people, American leadership and values alone are not really a sufficient cure for the deficit of democratic accountability at the heart of modern international governance.
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