16/04/2009

European elections: a high stake event!

The financial crisis represents the greatest challenge that the European Union has faced since its inception. That is why the elections on June 7th are of such significant importance. The period of less than two months remaining to the polling date should be devoted to mobilise public opinion, conduct a thorough and transparent debate on the issues and confront the elector with the consequences that are implicit in the vote he will cast.

 

The central question concerns the manner in which Europe should respond to the rapidly emerging trend by which public authorities are reassuming the necessary powers at economic, social and regulatory level to deal with the damage created by excess deregulation and blind faith in the self correcting efficiencies of the “free market” that are the root cause of the current crisis.

 

Superficially one can divide the last century in several periods: opening with a first “globalisation”, already well underway at the end of the XIXth century, it led to the exacerbation of “national interests” aiming at controlling international trade which, in turn, provoked World War I. After a failed attempt to restore the “status quo ante”, the financial crisis of 1929, followed by the depression of the 1930’s threw the world on the path of overwhelming State power (already achieved in 1917 in the Soviet Union) which underpinned totalitarian regimes in fascist and communist countries, while it took somewhat milder forms in democracies such as the New Deal in the United States or the Popular Front in France? This period ended in stages starting with the defeat of the axis powers, followed by the slow re-emergence of a market economy, to culminate by the end of the 1980’s with the collapse of soviet communism putting a final nail in the coffin of “planned economies”.

 

Follows a new era in which capitalism takes progressively hold at global level: over time, as it rids itself of much of the regulatory framework inherited from the previous regimes, “financial capitalism” gains progressively the upper hand. Technological progress, mainly in communications, lead to the creation of industrial and financial conglomerates whose planetary reach domesticated government power to serve their purposes through financial, fiscal, social or regulatory arbitrage (term used here politely rather than outright “blackmail”).

 

The undeniable wealth creation and the real shared prosperity that accompanied the early decades of the process of dismantling State power created the illusion that ever greater market freedom constituted an infallible recipe for controlled and perpetual economic growth. The absence of any serious argument against the superiority of the free market economy masked the distortions that were infiltrating the system as well as the growing inequalities in the sharing of the fruits of economic development.

 

It is the exacerbation of these factors that created the current crisis. It has taken such vast proportions, over such a short period, that it has forced renewed government intervention picking up the strands of power that they had abandoned so gladly to the private sector over the previous years. Let us pay a just tribute to the authorities for the speed with which they have reacted: first the monetary authorities whose decisive action avoided the worst effects of a mounting liquidity crisis in financial markets; there after, Governments who devised stimulus packages of unprecedented size in the hope of stalling a deep recession that, for the first time in history, affected all the major economic actors on the planet simultaneously, underscoring their interdependence  resulting from the irreversible mechanics of globalisation.

 

In parallel “world leaders” initiated a process of reform aiming at preventing the occurrence of similar failures in the future. The most emblematic events in this vein were the G20 meetings in London and Washington.

 

So far so good: there can be scant criticism of the process now underway. It does however harbour elements that could make the pendulum swing too far in the other direction with consequences as dramatic as those it seeks to prevent and, in this context, the position of the “unfinished” European Union appears particularly vulnerable.

 

Pragmatically, the “reinforced cooperation” promoted by world leaders seems the only realistic approach, be it on the regulatory front, the coordination of economic policies and social norms or in any field where national sovereignty is exercised. That being said, the influence that a given participant in the dialogue will exert and its capacity to influence outcomes while defending the interests of its constituents, will be directly proportional to its economic and demographic weight.

 

The 27 Member States of the EU are facing a decisive choice concerning the manner in which they wish to be represented in the forthcoming debate: either they opt for individual representation, reinforcing the “intergovernmental” trend in the European construction that the crisis seems to be fuelling, or they choose to be collectively represented by the Union at the negotiating table.

 

The first alternative can only lead to a less than optimal defence of the interests of each country concerned as they confront their views with powers such as the United States, China, India, Russia or Brazil. Furthermore this fragmentation will favour ad hoc alliances according to Member States’ particular interests which could severely undermine European solidarity if not the legal underpinning of the “acquis”.

 

The second, which implies political vision and courage, should allow the EU to defend the interests of the world’s largest and richest economic single market and oppose vigorously protectionist tendencies that a fragmented approach would encourage and whose disastrous consequences are inescapable.

 

It is also as issuer of the world’s second reserve currency that can aspire to be a counterweight to the all powerful US Dollar that the EU can impose itself as a major actor in shaping the reform of the financial system that is on the cards. Such an approach is far more appealing than discussions aiming at the creation of a new synthetic monetary unit (SDR’s etc.) because the latter would only have limited usages and would therefore not diminish in practice the overwhelming supremacy of the American currency.

                                                                                    

That is why, on the eve of the European elections, it is necessary to put the question unambiguously: does one wish a strong Europe with an open “internal market” capable of defending its interests on the global scene where coordination will become a must for all, or, conversely, does one embark on the path of outmoded nationalism which, as XXth century history has demonstrated, leads inexorably to conflict?

 

In the rebalancing of State power in world governance, it is crucial not to repeat past errors and to preserve the undeniable advantages, in terms of wealth creation, which are characteristic of an “open and regulated capitalistic system”.

 

The policies pursued by some of the “larger” European countries, aiming at reinforcing the “intergovernmental” (Pillar II and III) powers of Member States to the detriment of “supranational” (Pillar I) authority can only lead to a permanent weakening of the Union which will be condemned to endure its future rather than shaping it.

 

Candidates presenting themselves for the European Parliamentary elections as well as the political parties that support them should state clearly their position on these crucial matters so as to inform the electorate on the central and constructive role that the EU can perform in connection with the management of the crisis that has become the citizen’s main preoccupation.

14:52 Écrit par Paul N. Goldschmidt 13 Ave. Victoria 1000 Bruxelles dans Général | Lien permanent | Commentaires (0) |  Facebook |

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