Prologue: Realpolitik and the European Union

Realpolitik reigns anew in Europe. This was not the intent of those who set out to create a new European order after 1945. But it is the way that things have turned out. France, which created the institutions of the EU, and was the driving force behind the creation of the Euro, is now entrapped in its own creation, unable to make the necessary domestic reforms to allow it to prosper as a co-equal of Germany in the EU. The UK has opted to leave, depriving the rEU of the excuse that the UK was the stumbling bloc to the creation of a United States of Europe (USE). The UK never was the stumbling bloc: that was propaganda by frustrated supporters of the project, both in the UK and in other member states. The reality was that the UK was officially more supra-national than the Pope. Like other countries, Whitehall played the federal/supra-national game in Brussels, and the national game at home. Like other countries, the gap between the reality of Brussels and the rhetoric at home widened too far for credibility.

Supra-nationalism is an extreme doctrine. It states that nationalisms are the source of war, and that they have to be subsumed into a larger entity. Definitely nationalism and war are related. But war has many causes, as any perusal of the 22,000 or so books published on the outbreak of the first world war would attest to. In the case of the first world war, it is worth recording that five empires went to war, four of which were multi-national: Austria-Hungary, the British Empire, Russia and France’s Empire, understood as a multi-national nation all reading simultaneously about their common ancestor, Vercingetorix. Germany was a national entity, with claims to territorial enlargement based on ethnicity and on the concept of Lebensraum. Serbia, an irredentist nation-state, had the heir to the Hapsburg possessions assassinated, and Germany invaded Belgium a multi-national entity. Nationalists- German, British and peoples without a state, like the Irish, the Jews, the Czecks, all aspired to a national home, self governed and therefore legitimate. Nationalism was the progressive idea of the time.

By 1945, it had became reactionary. E.H. Carr expressed the position in his small book, Nationalism and After, first published in 1946.[1] E.H. Carr had been highly critical of the Versailles Treaty; sympathetic to Germany during the inter-war years and a prominent appeaser, to become during the war the lead writer for The Times, and an admirer of Stalin. The consistent line linking these apparently contradictory positions was that British liberal thinking on international affairs had failed to take the phenomenon of power into account.

The “catastrophic growth of nationalism”, he asserted , can be traced back to the years after 1870. Nationalism began to operate in a new political and economic environment: the masses became socialised into the affairs of the nation to protect them against the ravages of laissez-faire. “The single world economy was replaced by a multiplicity of national economies, each concerned with the well being of its own members”. When German and Italian unity was completed in 1871, there were fourteen independent units; in 1914, there were twenty; in 1924, their number had risen to twenty six. “The bare fact that there are in Europe to-day more than twenty, and in the world more than sixty, political units claiming the status of independent sovereign states goes far by itself to explain the aggravation of the evils of nationalism”.

He suggested that the enthusiasm of Asians for national independence would wane. He could not have been more wrong: China, India, Indonesia, Brazil, Japan, Russia, or Turkey are all ardent defenders of the Westphalian international system, which lay at the origin of Europe’s inherited international polity. Nationalism is the root of their legitimacy. Economic performance is their paramount concern. They champion the principle, of non-intervention in the affairs of other states, and they practice Realpolitik. The worldviews of aspiring powers in the twenty-first century definitely do not see nation states withering away on the vine. [2]

Carr had no clear idea in mind about Europe’s future. At the time, he envisaged  a deal between Great Britain and the Soviet Union to create some form of planned Grossraumwirtschaft. Marxist-Leninist ideology, greatly amplified by the victory of Stalin’s armies, in 1945 stood at the apogee of its influence.  As he admitted, his analyses were influenced by Marxist ideas. Modern technological developments, he wrote, “have made the nation obsolescent as the unit of military and economic organisation and are rapidly concentrating effective decision and control in the hands of great multi-national units”. The idea of the nation state as obsolescent due to technological developments had a fair wind for the coming seven decades.

Marxist ideas were far from alone in giving short shrift to “narrow” nationalism.  National socialism, though thoroughly discredited, was more of a pan-Aryan racial doctrine than national. Its practitioners, too, had little use for European kleinstaaterei-they annexed many of them to the Reich. Then, after 1945, there were the Washington D.C. and New York lawyers and business people, with their experience of U.S. federalism, an activist judiciary and the New Deal. When Europeans talked of creating a “sort of United States of Europe”, to use Winston Churchill’s phrase, US federalism sprang to their minds as a suitable model for Europe. Not least, there was the Catholic Church with its much older institutional memories of a supra-national law for Europe, before Luther’s launch of the Reformation. Finally, there was the advent of the cold war, and the search for a common pooling of European resources to meet the challenges of reconstruction, to contain communist pretensions, and to find an answer to the “German question”.

The UK was first and foremost a promoter of a Europe of the states, co-operating closely together in various multi-national fora. This approach, actively advanced by the post-war Labour governments, was quite compatible with the development and consolidation of parliamentary systems in all the states within the western, ie the US, sphere of influence. But France made a bid to create a supra-national Europe, where national parliaments would take a backseat, in which the UK could be sidelined when needed, and that would create a new power centre, distinct from either the United States or the USSR. The prospect for the UK was the recreation of a not very friendly super-power on its doorsteps. So the response in the course of the 1960s was to take the threat seriously, and join the EEC as it then was, with an official doctrine that was so supra-national on UK entry, that the UK was in fact the sole supra-nationalist on the European bloc. Others came along later to take up similar positions, but primarily because Germany was slowly consolidating its present position as first among continental Europeans. As both pro-and anti-EU commentators note, the member states of the EU, may talk federalism, supra-nationalism, open markets, integration etc, but they do not walk the talk.

Now the UK is leaving, the excuse of the UK as an alibi has gone. That does not mean that the EU will not coalesce. It does so with an ideology that says nationalism as the cause of war has to be tamed, and that the answer is an apolitical supranational space where policies are run by experts, and the politicians are purely national/local country bumpkins. The UK could never have survived in such a system.

The bottom line is that Germany is on top and Europe is cowed. The bien pensants in the UK argue that Germany is a “reluctant hegemon”. This is nonsense. The Deutsche Wirtschaft is the same in structure as created by Bismark. [3] It is very hard nosed, and has learnt not to give hostages to fortune by talking national interests. But that is what it pursues. Now that reunification is 25 years ago, the Wirtschaft is calling the political shots in Berlin, with occasional fig leaves for international consumption. Merkel is its instrument. Furthermore, the result of the German Constitutional Court’s opinion on the Lisbon Treaty is to have inserted a change in the Basic Law (Article 23) whereby a European Germany is to shape a German Europe. There is no more pretence that Germany is not the federator of the continent. The German interest is conflated with the European interest, and the cause is a still undefined European peace and security order, centred on the European Union.

The main reason for voting Remain was rarely mentioned, if ever, during the campaign. The Remain campaign was all about Project Fear: how it would cost the UK dearly to exit from the single market. The main argument that should have been made for staying in was that Brussels had become the hub of European diplomacy; that diplomacy was about business; and business, especially big business, liked Brussels for its convenience. Rather than traipse around 28 capitals, you could lobby in Brussels, make coalitions, and have one solution for all.

Project Fear hid what it really meant: fear of Germany, disguised in the old saw, the balance of power in Europe. If truth be told, it never went away. The creation of the European Coal and Steel Community(ECSC) and its subsequent institutional progeny, was about France seizing the leadership of post-war Europe from the UK, while Germany was down, and the US was supportive. But from the late 1960s onwards, the “correlation of forces”, as Soviet leaders used to say, shifted increasingly in Germany’s favour.

Lord Heseltine, the Tory grandee and former deputy Prime Minister, put the point rather bluntly: it was quite unacceptable, he is quoted as saying, that Germany would be in a dominant position in Europe having lost the second world war. “We’ve now abandoned the opportunity to influence Europe, the council of ministers will meet and we won’t be there. Our ability to speak for the Commonwealth within Europe has come to an end. The Americans will shift their focus of interest to Germany (He could have mentioned China, Russia and India too). “And if I can put it to you for someone like myself, he goes on, it was in 1933, the year of my birth, that Hitler was dramatically elected in Germany. He unleashed the most horrendous war. This country played a unique role in securing his defeat. So Germany lost the war. We’ve just handed them the opportunity to win the peace. I find this quite unacceptable”. [4] Germans hearing this must have wondered who their friends were in the UK.

When Boris Johnson mumbled something about attempts to unite a diverse Europe having a long history of failure, he was drowned out by cries from the bien pensants. How mad and bad , they entoned, to think there was any continuity between Wilhelm II, Hitler, and Merkel. The difference of course is that the Federal Republic is a constitutional democracy, Wilhelm’s Germany was not, and Hitler established a racial dictatorship, and tried to extend it to the whole of Europe.

Pointing out the domestic differences between the various Germanies does not mean, however, that there is no continuity with regard to the ideal of a united Europe pursued by Berlin for over a century. The continuity is one of method, and  has been neatly encapsulated by   Brendan Simms:[5] the salient feature, he writes,  of post-1945 Europe is that unity is being sought by merger through integration, in contrast to the preferred pre-1945 method of merger by hostile takeover. The distinction seems lost on Lord Heseltine, presumably because he thinks in terms of a balance of powers in Europe, and does not give credence to all the chat about integration with a federal endpoint. If so, it is difficult to ascertain the difference between Heseltine and Johnson.

There was one option for Prime Minister Cameron to win his referendum with a landslide, and that was to hire a QC for a day to rewrite the wording of the 1972 European Communities Act Section 2 which recognised the supremacy of EU over UK law in all matters relating to the Treaty of Rome. The Act made no allowance for repeal, let alone challenge to EU rules, and in effect ditched the centuries old UK tradition that voters could sanction their legislators at elections. The EU Council of Ministers is the EU’s legislator and executive. What is decided there cannot be reversed by voters in UK elections.

The centuries old UK tradition that voters sanction their legislators at election time  was ditched for a complex of reasons, one of which was to be an insider of the potential European superpower, and not an outsider and a target of its vindictiveness.  But when the idea was proposed to revise the Act, two replies came from Remainers: the UK must abide by its Treaty commitments; Leavers would exploit every opportunity to challenge EU rules. They, the Remainers, got their just deserts on June 23 2016. The result is that Leavers, having won the June 23 referendum,  now definitely challenge EU rules, and a Treaty commitment is being ditched. In the self congratulatory world of the Whitehall “bubble” that may be considered as an honourable defeat, or it may be considered an idiotic consistency of purpose. Which way you judge depends of course on what you value most: had Remainers really wanted to Remain, they would have agreed to give more powers to Westminster to challenge EU rule-making. But that would have meant disguarding their closet supra-nationalism.

There was no chance of this happening. The consistency of purpose is that Whitehall’s mandarins in fact accepted, as the terms of Prime Minister Cameron’s four conditions to stay in made only too clear,  that the UK was to be a province, or rather four,  in  an EU super- state. They advised Cameron to go to the country in defence of a muted parliament..

The British voting public did not like what it saw, and voted out on June 23, a high risk position to take. What to do?

  1. Remainers want to creep back in. The terms for this will be merciless. No cherry picking, ie Germany and France pick as many of the UK cherries as they possibly can. Re-entry is defined in Article 49. It would mean the UK renegotiating from scratch. i.e. the UK would be tapped for the full £20 billion per annum of its annual gross contribution to the EU, without any refund. So far, over the past four decades or so, the UK has paid in £500 billion. In addition to its ongoing obligations until 2019, a Merkel led EU wants to put the leaving bill for then UK at 60 billion, then 80 billion, then 100 billion Euros. The Berlin-Brussels-Paris axis do not intend to negotiate. They intend to dictate and intimidate.
  2. The UK exits and hardens up, big time. The fact of the matter is that German war debts were forgiven in 1953; the EU, led by Germany, has: crushed Greece, whose debts since 2010 have soared to near 200% of gdp; defenestrated elected officials in Italy and Greece; did so with support of its UK supporters to Prime Minister Thatcher; and precipitated southern Europe into a seven year depression with sky high youth unemployment. The June 23 was a narrow victory for self-government. The imperial diktats of the axis will make it a giant majority in the UK. Whether or not the UK succeeds with Brexit, will depend entirely on the determination of the UK people and of the UK government.

If the UK had voted Remain, it would have stayed in a system that is deployed increasingly and solely on German terms and in the German interest. In fact, Germany has for some years made clear that it can ONLY merge into a USE on its own terms: most importantly, that guarantees its citizens fundamental rights; that has a non inflationary currency; that absorbs its own social-liberal preferences on immigration, abortion, or other highly controversial matters. In other words, Germany’s collective body language is saying if you cannot manage this challenge, then there is an alternative Europe of the states, where, we, Germany, are No 1.

There are excellent reasons for Germany to adopt such a position. It cannot afford to subsidise other countries as the Europayer, AND have its corporations compete successfully on world markets; it cannot sacrifice the fundamental rights of its own citizens because there is a clamour in other parts of Europe for a supranational USE; it is only too aware that in a federal/supranational Europe, it would be on the financial hook of poorer countries which are only too eager to demand more transfers from richer members. Not least, Germany’s people do not feel sufficient solidarity with the rest of the EU to finance them indefinitely.

There are excellent reasons also for the UK to leave such a Europe. The bottom line of the UK constitutional arrangement is that voters can sanction their own lawgivers. By the definition which the UK executive gave of its membership in the EU, this fundamental right of  UK citizens was increasingly flouted. By subsuming itself into an entity, which the UK defined ab initio as supranational, and that has defined itself as supranational(though without being so in fact) since at the latest the passage of the Lisbon Treaty, the UK gravely weakened the adherence of its own citizens to their country. France, too, by failing to reform, has gravely weakened itself. But France is still in the system it created. The UK is leaving.

To succeed, it has to learn to be hard headed.  That means ditching a lot of bien pensant baggage, inherited from the liberal internationalist tradition of the UK, and bring moral considerations into line with British interests. These moved seriously out of kilter during the 43 years that the UK was a fully signed up member of the EU. British moral preferences in international relations are about the promotion of human rights, parliamentary democracy, the ability of the economy to deliver jobs,  and the rule of law. On June 23, 2016, the EU’s record on these accounts was not convincing enough to give Remain a victory.

Fundamentally, Remainers believed, and still do, that the EU is supra-national. By analogy, they are more Catholic, and supra-national than the Pope. They have gone medieval, forgetting that more modern Popes preach subsidiarity, and Pope John XXIII, was also a strong advocate of national self determination. In constitutional states, that spells parliament’s ability to make and amend laws. It does not mean that parliaments become rubber stamps. Remainers rather like rubber stamp parliaments.

Paradoxically, only by advocating constitutional democracy for all European states as a whole can a common European interest in peace and in prosperity be consolidated. In his last speech in public, at the Guildhall, William Pitt, one of the great British Prime Ministers, said “ I return you many thanks for the honour you have done me; but Europe is not to be saved by any single man. England has saved herself by her exertions, and will, as I trust, save Europe by her example.”[6] There is much at stake in the slogan “Brexit means Brexit”. I suggest that it be given the meaning of Brexit from the EU of the Remainers, and Brentry to a European alliance of constitutional states. There is precious little sign that this is on the cards.

[1] E.H.Carr, Nationalism and After, London, Penguins, reprint 1968.

[2] Henry Nau, Deepa M. Ollapally, Worldviews of Aspiering Powers: Domestic Foreign Policy Debates in China, India, Iran, Japan and Russia, Oxford University press, 2012.

[3] Jonathan Story, The Politics and Markets of German Financial Services, Discussion Papers in German Studies, December 1995. Institute for German Studies.

[4] Michael Heseltine: “Germany will win the peace” because of Brexit”. The Guardian, April 16, 2017.

[5] Brendan Simms, Britain’s Europe: A Thousand Years of Conflict and Cooperation London, Allen Lane, 2016.

[6] The War Speeches of William Pitt, Oxford University Press, 1915, p. 351

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About Jonathan Story, Professor Emeritus, INSEAD

Jonathan Story is Emeritus Professor of International Political Economy at INSEAD. Prior to joining INSEAD in 1974, he worked in Brussels and Washington, where he obtained his PhD from Johns Hopkins School of Advanced International Studies. He has held the Marusi Chair of Global Business at Rensselaer Polytechnic Institute, and is currently Distinguished Visiting Professor at the Graduate Schoold of Business, Fordham University, New York. He is preparing a monograph on China’s impact on the world political economy, and another on a proposal for a contextual approach to business studies. He has a chapter forthcoming on the Euro crisis. His latest book is China UnCovered: What you need to know to do business in China, (FT/ Pearson’s, 2010) (www.chinauncovered.net) His previous books include “China: The Race to Market” (FT/Pearsons, 2003), The Frontiers of Fortune, (Pitman’s, 1999); and The Political Economy of Financial Integration in Europe : The Battle of the Systems,(MIT Press, 1998) on monetary union and financial markets in the EU, and co-authored with Ingo Walter of NYU. His books have been translated into French, Italian, German, Spanish, Chinese, Korean and Arabic. He is also a co-author in the Oxford Handbook on Business and Government(2010), and has contributed numerous chapters in books and articles in professional journals. He is a regular contributor to newspapers, and has been four times winner of the European Case Clearing House “Best Case of the Year” award. His latest cases detail hotel investments in Egypt and Argentina, as well as a women’s garment manufacturer in Sri Lanka and a Chinese auto parts producer. He teaches courses on international business and the global political economy. At the INSEAD campus, in Fontainebleau and Singapore, he has taught European and world politics, markets, and business in the MBA, and PhD programs. He has taught on INSEAD’s flagship Advanced Management Programme for the last three decades, as well as on other Executive Development and Company Specific courses. Jonathan Story works with governments, international organisations and multinational corporations. He is married with four children, and, now, thirteen grandchildren. Besides English, he is fluent in French, German, Spanish, Italian, reads Portuguese and is learning Russian. He has a bass voice, and gives concerts, including Afro-American spirituals, Russian folk, classical opera and oratorio.
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