Europe at 50: Happy Birthday

  MSNBC.com

Europe at 50: Happy Birthday
Asthe EU celebrates its 50th birthday, critics say it has one foot in thegrave. But many countries now look there, not to America, as a model.
By Andrew Moravcsik
Newsweek International
March 26, 2007 issue - American Alone. While Europe Slept. Menace in Europe.As the European Union celebrates the 50th anniversary of its foundingTreaty of Rome, the pundits agree: Europe is in terminal decline. It isa continental-size museum dropping into the dustbin of history.
Thatpicture is especially popular in America. As U.S. skeptics tell it, theOld World (save for Britain, naturally) is finished. Economies arestagnant. Technological and entrepreneurial energy have passed toSilicon Valley and Bangalore. Politicians are powerless in the face ofsclerotic social-welfare systems, coddled work forces and entrenchedspecial interests.
Demographic decline isupon them. Immigration only exacerbates social problems. Europeanforeign policy is anemic. "Europeans are from Venus, Americans fromMars," said Robert Kagan, referring to Europe‘s lack of military might.Europe, he went on to say, can muster neither the unity nor resolve tostand alongside America on the world‘s stage. The latest sign: spatsover new U.S. missile defenses in Poland and the Czech Republic.
Europecannot save itself, critics argue, because it has lost any idea what itstands for. The EU recently spent a half decade trying to draft a newconstitution, only to see it rejected by discontented Dutch and Frenchvoters seemingly fed up with too much "Europe." An anti-Muslim,neonationalist backlash is almost inevitable as Europe fails tointegrate its rapidly growing minority populations, warn Americanconservatives like columnist Mark Steyn, who predicts Europeans willsoon wake up "to the call to prayer from a muezzin." The bottom line:Europe is lost.
To most who live inEurope—or have visited lately—all this seems wrong, even absurd. As theEuropean Union turns 50 this week, let us consider all that has beenachieved. Europe arose from the ashes of the Great Depression and WorldWar II to become whole and free. Half a century ago, only a utopianwould have predicted that, today, one can traverse Europe from Swedento Sicily without encountering a border control and—most of theway—using a single European currency. Or that a tariff-free singlemarket would exist, cemented by a common framework of economicregulation.
Europe is now a globalsuperpower of world-historical importance, second to none in economicclout. It has constructed one of the most successful systems ofgovernment—the modern social-welfare state, which for all its flaws hasbrought unprecedented prosperity and security to Europe‘s people. It isthe single most successful advance in voluntary internationalcooperation in modern history. The original European Economic Communityof 1957 has grown from its founding six members to 27, knittingtogether just under 500 million people from the western Aran Islands ofIreland through the heart of Central Europe to the Black Sea. Itsvalues are spreading across the globe—far more attractive, in manyrespects, than those of America. If anything, Europe‘s trajectory isup, not down. Here‘s what the critics get wrong.
ECONOMIC REALPOLITIK
Beginwith the biggest—that Europe is bogged down in a cycle of slow growthand mounting, ultimately unsustainable, social costs.
It‘strue that the past half decade has been difficult for some of Europe‘slargest economies. The trillion-dollar cost of unification has keptGermany from playing locomotive to the rest of Europe. France and Italyhave lagged as well. And yet, Britain is booming, as are the Nordicnations. Among the new EU members of Eastern Europe, average growth of5 percent exceeds that of the United States. Slovakia, Estonia andLatvia are all growing at 10 percent or more annually.
Criticsroutinely claim that high European wages and social-welfare benefitsstall job creation, and that Europeans "resist reform." In fact,there‘s no evidence for this. If it were so, how then could Europe haveenjoyed higher economic growth than America for the bulk of the postwarera? Despite nearly 50 percent tax rates and cradle-to-grave welfarebenefits, Northern European social democracies like Denmark, Sweden andFinland grab half of the top slots in the World Economic Forum‘sranking of the world‘s most competitive economies. "Nordic socialdemocracy remains robust," says Anthony Giddens, former head of theLondon School of Economics—"not because it has resisted reform, butbecause it embraced it."
Insofar as percapita European growth lags the United States, it is not becauseEuropeans are uncompetitive. Take Germany, with a larger trade surplusthan China‘s and a growing share of world trade. Output per hour workedis higher in France than in the United States. Daily U.S.productivity is higher than in Europe only because employed Europeanschoose to work fewer hours than Americans, in exchange for less pay.Remember those six to eight weeks of vacation every European isassured? Most Americans say they would make the same trade-off—if onlytheir employers would permit it.
Europeansindeed pay dearly for their social-welfare systems, but they believeit‘s worth it. Even in poorer, pro-American Hungary and Poland, pollsshow that only a small minority (less than 25 percent) wants to importthe American economic model. A big reason is its increasingly apparentdeficiencies.
Consider health care, thebenchmark of any nation‘s overall well-being. "Americans have the bestmedical care in the world," President George W. Bush declared in hissecond Inaugural Address. Yet the facts show otherwise. The UnitedStates is the only developed democracy without a universal guarantee ofhealth care, leaving about 45 million Americans uninsured (and as manyagain undertreated). Worse, whether measured by questioningpublic-health experts, polling citizen satisfaction or measuringsurvival rates, the health care offered by other countries increasinglyranks above America‘s. U.S. infant-mortality rates are among thehighest for developed democracies. The average Frenchman, like mostEuropeans, lives nearly four years longer than the average American.Small wonder that the World Health Organization rates the U.S.health-care system only 37th best in the world, behind Colombia (22nd)and Saudi Arabia (26th).
If anything, theeconomic future looks rosier for Europe than for America. Last week theOECD projected 2.5 percent euro-zone growth, compared with 2 percentfor the United States. Investment and business confidence areskyrocketing. In the next few years, the market capitalization ofEuropean firms in the global top 500 is set to exceed that of U.S.firms.
Sure, China and India get theheadlines. And yes, U.S. trade with the Asia/Pacific region haseclipsed trade with Europe. But the deeper truth is that investmentlong ago displaced trade as the leading driver of growth, and in thisrespect Europe stands even with the United States as the world‘seconomic superpower. The relationship between Europe and the UnitedStates, says Daniel Hamilton, director of Johns Hopkins‘s Center forTransatlantic Studies, "is by a wide margin the deepest and broadestbetween any two continents in history."
Nearly60 percent of U.S. foreign investment goes to Europe. U.S. businessinvests considerably more every year even in small European nationslike Belgium, Ireland or Switzerland than in the whole of China orIndia. U.S. corporate profits in tiny Switzerland alone last yeartotaled four times earnings in China and 23 times earnings in India.And the reciprocal holds as well. European investment in the UnitedStates accounts for two thirds of all foreign direct investment. Everyyear, inward European investment in a few U.S. states—recently Georgia,Indiana and Texas—is greater than all U.S. investment in China andJapan. Bottom line: few Americans realize how much their own prosperitydepends on Europe, and how inseparably the two economies are linked.
DEMOGRAPHIC SCARE
Socialdemocracy is unsustainable without the workers to pay for it. Thereinlies a deeper source of Euro-pessimism. Declining birthrates mean thatthe ratio of the workers to retirees (those over 60) will worsen from5:1 today to less than 2:1 by 2050. "The nightmare scenario," says MarkLeonard of the Open Society Initiative for Europe, "is of a Europeaneconomy increasingly hollowed out as a bloated population of pensionersliving off the backs of an ever smaller pool of workers."
YetLeonard himself does not believe this will happen. Neither does theEuropean Commission, which estimates that even modest reforms—say anincrease in retirement age of five years—would be enough to restoreEurope‘s pension and welfare systems to firm financial footing. Morerobust economic growth would help, too. Europe is also likely to turnto immigration to help replenish its shrinking work force. Says JoschkaFischer, a former German foreign minister: "Europe will have no choicebut to open the doors."
This,critics claim, raises the most harrowing scenario of all forEurope—cultural extinction. European societies face seeminglyinsuperable difficulties integrating Arab Muslim immigrants. TodayMuslims comprise only 5 percent of Europe‘s population; within 20years, however, their numbers may double, in part as a result ofgenerous family-reunification policies. This incites all sorts of luridwarnings about a future "Eurabia" and the erosion of a purely Europeancivilization. High-profile race riots, terrorist acts and controversiesover everything from head- scarves to ethnic profiling have not helped.Absent adequate socioeconomic opportunities, neither traditionalIslamic authorities acting within relatively permissive multiculturalenclaves, as in the Netherlands and Britain, or a combination ofassimilation and stiff law enforcement, as in France, appears to beable to stop the spread of extremist ideology and violence.
Yetit is easy to exaggerate these trends. For all the problems, statisticsshow that levels of immigrant and religious violence in Europe are notsubstantially higher than in America. In the years to come, jobsvacated by retiring baby boomers will open to the young immigrantunemployed, easing fears among natives that the newcomers will stealjobs and erode social-welfare benefits. Across Europe, immigration lawshave lately become more selective—with greater encouragement ofimmigration from non-Arab countries. Nowadays, one half of immigrantsin Spain (30 percent of Europe‘s current flow) come from Latin America.Anywhere between 300,000 and 600,000 Poles are currently reported to beworking in Britain, and a half million more in Germany. In the end, thespecter of restive immigrant populations unsettling Europe, let aloneundermining its culture, is overblown to the point of unreality.
THE QUIET SUPERPOWER
Americanrealpolitists like to talk about a "unipolar" world, bestrode by a solesuperpower. The success of the European Union proves just the opposite:the world is bipolar, and the other pole is Europe.
Consider how the EU began, 50 years ago, as a parochial Franco-German entente. Today, it‘s themodel for a continent. The EU expansion, subsuming a dozen formercommunist states, has been the surest exercise in democracy promotionsince the end of the cold war. "Once sucked into Europe‘s sphere ofinfluence," says Leonard, "countries are changed forever." The mereprospect of inclusion in the union has been enough to prompt wholecountries to rebuild themselves from the inside out. Examples: Romania,which joined the EU just this year, and Turkey, which has Europeanizeditself to an extraordinary degree, with the aim of joining Europe. Thesame effect can be seen in other hopefuls, from nations of the formerYugoslavia to Ukraine.
To be sure, theUnited States remains unrivaled in "hard" military power. Yet one needlook no further than the quagmire in Iraq to see its limits. When itcomes to the instruments needed to engineer peace, the softer tools ofcivilian power, Europe far exceeds America. It is the "quietsuperpower."
Europe‘s tools go well beyondEU enlargement. The EU is the largest trading and investment partner ofevery nation in the Middle East. It has mounted diplomatic efforts, inconjunction with the United States or independently, to resolvedisputes throughout the region. The EU provides 70 percent of theforeign aid and humanitarian assistance in the world today. Almost allthe world‘s peacekeeping and policing forces, outside of Iraq, arestaffed or funded primarily by Europeans—Lebanon, Sierra Leone, theIvory Coast, Afghanistan. It will soon take over NATO missions inBosnia and Kosovo.
Far from being a productof the past, the EU has emerged as Europe‘s most innovative andsignificant contribution to modernity. With its multilateral scope, theEU is the source of around 20 percent of all laws passed in Europe. Ithas extended the reach of democracy and free markets within and beyondits borders—in a way that American neocons can only dream about—and isbecoming a model to the developing world. Futurologist Jeremy Rifkinadvances a compelling case for the ascendancy of European ideals."While the American Spirit is tiring and languishing in the past," hewrites, "a new European Dream is being born"—one that emphasizescommunity relationships over individual autonomy, cultural diversityover assimilation, quality of life over the accumulation of wealth,sustainable development over unlimited material growth, deep play overunrelenting toil, and universal human rights." The global financierGeorge Soros is putting money behind a similar idea, seeking to createa new European Council on Foreign Relations premised on the notion thatU.S. foreign policy "has left the world leaderless and in disarray."Europe and a revitalized EU, he believes, offers a better "model andmotive force" for addressing the global challenges of the modern era.
Trueor not, it‘s significant that 50 years after the EU‘s march to unitybegan, it is now Europe, not the United States, that‘s held up as a newlamp unto nations.
Moravcsik is director of the European Union Program at Princeton University.
© 2007 Newsweek, Inc.
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