Imagine NAFTA as a tiny amuse-bouche—the precursor to a larger, supranational feast. Imagine it came with structural funds to promote economic development in struggling areas—from Michigan to Monterrey to Manitoba—and a social chapter to shore up workers’ rights, and then the borders were thrown open so that labor could move freely along with capital. Imagine it then served up a North American Congress elected every five years from across the continent and added a North American Court of Human Rights. And then for the main course, it took the dollar (Canadian and US) and the peso off the menu and replaced them with a new currency (let’s call it the americano), which would be administered by the North American Central Bank.
This extensive buffet might not be to everyone’s liking. Indeed, some may gag from the get-go while others gorge themselves. Some utopians might champion it as the harbinger of a more social democratic world; others might argue it would further weaken unions and labor. But most would agree that such a bold project would demand democratic consent to be built and democratic control once it existed. The absence of those two basic factors would not only deprive the entire scheme of legitimacy but disable it from functioning properly.
Welcome to the eurozone and the European Union, struggling to maintain its credibility in the face of market speculation, popular protests and government ambivalence. The euro has lost about 14 percent of its value against the dollar this year alone. The weakest members of the eurozone—Greece, Portugal, Ireland and Spain—are threatened with ejection. Italy may soon find itself among them. Meanwhile, the strongest, France and Germany, are questioning the currency’s survival.
The curious thing about this crisis is that on paper Europe’s economies are not in terrible shape compared with the rest of the Western world. EU unemployment is marginally lower than in the United States (9.7 percent as opposed to 9.9 percent) as is the inflation rate (1.8 percent versus 2.2 percent). True, growth and productivity are lower too, so there’s little reason for anyone to dance a jig down the Champs-Élysées. But fiscally it is far from an unmitigated disaster. According to the OECD, the US deficit, as a percentage of GDP, is higher than that in Greece, Spain, Portugal and Italy—all in the cross hairs of the markets—and its public debt as a percentage of GDP is higher than that in Portugal, Ireland and Spain.
But Europe’s primary problem—the reason it has been lurching from crisis to crisis as the markets tank, the Greeks and Spaniards protest, and the Germans and French bicker—is not its fiscal deficit but its democratic deficit.
For the only thing more breathtaking than the scale and pace at which the EU has developed, from a small, tariff-free trading area to a twenty-seven-nation union with a common currency, court of human rights and central bank, is the lack of democracy that has gone with it. Go back to that imaginary North American superstate and imagine this—absolutely no direct democratic control over anything as an explicit feature of the system.
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The president of the European Central Bank is appointed by democratically elected governments but is not accountable to them. The ECB publishes neither the minutes of its meetings nor its voting record and sets its inflation targets and interest rates without any democratic consultation. The European Parliament, the only directly elected component of the EU, cannot even initiate legislation, which explains why voter turnout in European Parliament elections has slumped by more than 30 percent in the past thirty years, with turnout last year at 43 percent. Whenever people vote no to a phase of integration—as Ireland did two years ago—the EU simply orders them to vote again until they produce the right result. Once they vote yes, there is no turning back.
In the good times most countries—with the exception of Denmark and the United Kingdom—traded democracy for prosperity and joined the euro. But in a crisis, that consensus of convenience breaks down, and there is no means of resolving disputes and deciding on a course of action. Whatever Americans think of the bailout or the stimulus package, their elected representatives have had their say. Many citizens protested; Congress members who displeased them have had to explain themselves. Given the influence of lobbyists and markets, one would not want to exaggerate the control the people have over their economic destiny. But, at least in the public arena, there is an aspiration to democracy.
In the EU, however, democracy is not always even a goal. So the essential problem is not that the Germans seek the kind of fiscal austerity that could stall a fragile recovery, or that the French prefer more stimulus, which might lead to inflation; it’s that there is no democratic means of mediating that tension. Thus, instead of thrashing it out in an elected chamber the French and Germans bargain it out behind closed doors. Whatever deal they emerge with will not immediately affect the French and the Germans but the Spaniards, Greeks, Irish and Portuguese. Basically, it’s the wealthy deciding how much austerity the poor should put up with.
In the run-up to the Greek elections eight months ago, George Papandreou said, "People are feeling more and more powerless, so we as Socialists, I think, need to say democracy is again at the center of our policies, giving the citizen a voice." Papandreou won, promising to make the rich pay more taxes, award above-inflation pay raises for government workers and provide more support for the low-paid and pensioners. Today he is slashing pensions, raising the retirement age and cutting civil servants’ pay. The people feel more powerless; democracy has been cast out beyond the peripheries. And as for the voiceless citizens? For all the real decision-makers care, they can sing for their supper.
