The European Union

America’s Rival for Global Governance

March Plenary Session is on
The European Union : America’s Rival for Global Governance - David P. Calleo

The following is an excerpt from a speech given by Professor Calleo at the Bologna Center on December 6, 2005.

In my book of the late 1970s, The German Problem Reconsidered, I defined Germany’s problem as being too big and dynamic for the traditional European state system to contain. The Cold War, I argued, had provided three solutions simultaneously: Germany’s own division, external hegemonies over Europe as a whole and a European confederation. What would happen to these solutions, I asked, when the Cold War finally ended? Answering that question led me to another book, Beyond American Hegemony, and ultimately to my most recent book, Rethinking Europe’s Future, which came out in 2001 and had a new edition with a further conclusion in 2003. The book, which took me a decade to write, was a historical-analytical account of the European Union – of how Europe’s old states, sheltered by the Cold War, had resurrected themselves collectively and, in the process, created a new political formula. This new formula was not a federation, or even a federation in the making, but an association of free and still sovereign states, increasing their real sovereign power by cooperating. Together, they were able to achieve national aims that they could never have hoped to achieve alone.

Europe’s union is, as I see it, a great advance over traditional state systems. It is a community – a confederacy – that enables rather than diminishes national sovereignty; one that enriches and stabilizes national identity by adding a regional identity. This further identity supplies, for each of its members, a sort of institutionalized superego to discipline national power, on behalf of more general interests. It thus transforms regional interstate relations from a zero-sum game to one of mutual gain within a common community. This union has become, in my view, a vital element in the constitutional structure of each of its members. And, at the same time as the union has been intensifying harmony within its region, it has also provided the collective machinery for more effectively synthesizing and pursuing the external interests of the European states – in relations with neighbors to the east and to the south, and across the Atlantic.

This union embodies, in my opinion, a political technology of great promise, not only in Europe but elsewhere across the globe. It is, I imagine, probably the most appropriate model for what I suspect will be the world order of the future: A plural world of several great powers; not only the United States but also China, Russia, Japan; perhaps India and Brazil; eventually some sort of Muslim great power; and so on. The creation of such a European Union in itself implies a plural global system – a world of several great powers. The rise of such a European model, after the terrible experiences of the earlier 20th century, ought to favor belief if not in God, at least in Hegel. There is, however, also a darker side to my analysis of Europe’s future, to which I will return. But first, some words about the United States.

The pluralist vision of the future that I try to sketch has never been very popular in the US. It has never caught the American political imagination. Instead, following the collapse of the Soviet Union, that imagination has been bemused by a “unipolar” vision of world order – a global system of interrelated states with one clearly dominant “superpower.” According to that view, America’s power is radically superior to that of any other country, or combination of countries, and fated to remain so for the foreseeable future. For many American analysts, and political elites generally, events in the 1990’s seemed to confirm this unipolar vision. The vision came in two dimensions, economic and military. Projecting the economic dimension was the work of the Clinton administration. As you know, the mid-1990s saw an unprecedented boom, built on high consumption, low saving, and heavy investment in new technologies, and fueled by huge inflows of foreign capital. For the first time since World War II, America’s productivity growth regularly outpaced that of Europe and Japan. Unemployment was at near-record lows and inflation scarcely visible. When President Clinton left office at the start of 2001, the federal budget was pointed toward a large surplus. So much success naturally served to reinforce America’s self-image as the avatar of liberal globalization.

True, the United States continued to run a large, and growing, external or current account deficit. America’s economy was continuing to absorb – i.e., consume and invest – substantially more than it produced. That external deficit had to be financed by an equivalent inflow of foreign capital. In the 1990s, that seemed not to be a problem. Private foreign investors, attracted above all by the technology boom, regularly flooded the US with more than enough capital to cover the external deficit. Rather than worry about their deficit, Americans could congratulate themselves on the attractiveness of their huge and fast-expanding economy. And although our debts kept growing rapidly, our GDP grew still faster.

Developing the military side of the unipolar vision – the US as the only global superpower – began in Clinton’s time but has been the particular specialty of the Bush Administration. Never in modern history, we like to say, has one nation been so militarily predominant as the United States is today. American conventional forces, enabled by satellites, now have something analogous to the “shock and awe” achieved by the German Blitzkrieg in the early days of World War II. Transforming the American military into such a force has had great aesthetic and intellectual appeal. And having such military predominance has gradually encouraged a geopolitical ambition to fit it. Global hegemony has begun to seem an obligation imposed by history. The power to dominate creates the duty to dominate.

As we all know, America’s unipolar visions have lately been having painful encounters with reality. To start with our military expectations: Our military transformation to “network-centric warfare” seems not compatible with the requirements of our unipolar global role. The invasion of Iraq, for example, however brilliantly executed at the outset, seems in the end to have replaced a rogue state that was being successfully contained with a failed state that requires an indefinite and bloody occupation. Failed states, societies in chaos obsessed with their grievances, are natural breeding grounds for global terrorism. We feel ourselves highly vulnerable, despite our egregious military predominance. We console ourselves by arguing that terrorism is an illegitimate form of military power. We should not be surprised if the argument carries little weight with the terrorists themselves.

Terrorism is the natural recourse of the weak and dispossessed of this world, the asymmetric populist weapon. Against terrorism our large and spectacularly expensive military establishment is of limited use. It is trained and equipped to attack other military establishments that cooperate by meeting us head-on. But our enemies do not always cooperate. They sometimes refuse to fight the wars for which we are so lavishly prepared but they are not. Instead they turn to terrorism – the form of warfare that suits their weakness and mocks our strength.

The United States is also vulnerable at the other end of the military spectrum – the realm of strategic nuclear weapons. These, like terrorism, produce highly asymmetrical results. As with terrorism, a perverse military logic works against the US. The more America’s overweening military power threatens smaller countries with forcible regime change, the more they seek asymmetric weapons to deter us. As they can no longer fight, toe to toe, against our conventional military power, their options are terrorism on the one hand and nuclear weapons, or other weapons of mass destruction, on the other.

Meanwhile, it is no secret that many of our military leaders feel the US is already dangerously overstretched. The greater our military victories, it almost seems, the weaker we have grown. In Iraq and Afghanistan, the US has defeated two undoubtedly evil regimes. But, by itself, the US lacks the military power, as well as the political and moral authority, to bring either victory to a tolerable conclusion. To do so will require the military, political and economic assistance of many countries. To enlist those resources requires legitimacy from a genuine consensus in the international community. Under such circumstances, a militarized American foreign policy, scorning allies and global institutions, is not very promising.

If the evolution of military power belies a Pax Americana, what about the evolution of economic power? Is the world economy “unipolar?” Both recent events and long-term trends suggest otherwise. In 2001, the feverish American stock market bubbled and collapsed. The administration and the Congress reacted with substantial tax cuts and, after the atrocities of 9/11, with security spending approaching a Cold War scale. Big fiscal deficits returned, while the big external deficits continued growing. Private foreign investment, however, fell sharply, and the dollar with it.

Today, the principal financiers of America’s big external deficit are Japan, China, and the OPEC countries. In effect, their central banks finance their own national exports to America. Japan, rich and stagnant, has done this for decades and may well continue. But sooner or later China, still a very poor country with a huge internal market of its own to develop, seems likely to find a more satisfactory use of its savings than subsidizing America’s consumption. Without its big Chinese subsidy, the dollar would presumably fall and America’s foreign consumption would falter. This might help to revive manufacturing in America, but also would imply a painful drop in living standards. A major breakdown in the world’s financial system could very well follow. Certainly, the assumption of unlimited resources, implicit in the vision of the unipolar superpower, would be more difficult to sustain.

Longer-term trends in the world economy also seem in disharmony with the unipolar vision. Respectable projections, for example, see the Chinese GDP overtaking the American [one] in a few decades. Nothing, of course, guarantees China’s continuing rapid growth. As has happened so often in modern times, war and revolution may rob this gifted people of the fruits of their labor and talent. But if China does collapse, the rest of the world is unlikely to escape unscathed. China could, however, continue growing rapidly for a long time. There is still a huge reserve of Chinese labor to draw on, plus an enormous gap between Chinese and Western wages. China, moreover, has a phenomenal savings rate – some estimate roughly 40 percent of GDP. And the country is becoming a major technological and scientific power in its own right.

China’s continuing success will undoubtedly shake things up in the world. As its GDP eventually overtakes those of the US and the EU, and perhaps goes well beyond either, its competitive prowess also appears to threaten Western living standards. Why should that be? After all, the postwar rise of Japan and Asia’s “Little Tigers” also disturbed many Western interests. But the competitive adjustments made Western economies better off in the end. Why should China’s rise, or India’s for that matter, have different effects? The answer is that both introduce an unprecedented problem of scale. The earlier rising Asian economies – South Korea, Taiwan, Hong Kong, Thailand, Singapore, or Malaysia – had populations of middle-sized or small European states. Even Japan’s population is smaller than that of France and Germany combined. As competition drove Japanese and Western wages toward a common average, the pressure on Japanese wages to go up was much greater than on Western wages to go down. Bringing the huge populations of China and India into the global workforce will have a different impact. The new global average for wages will have a long way to fall from current Western standards. Naturally, Western workforces will fight to insulate themselves – to preserve their living standards and their welfare systems. Under such circumstances, wide-scale protectionism seems a likely political imperative.

What do these trends imply for world order, for global governance in the future? Today’s world is neither economically nor militarily unipolar, nor is it moving in that direction. Instead of a closely integrated and US-dominated world economy, we should expect one that is more segmented and politically regulated. Countries relatively compatible with one another will perhaps group into large blocs, perhaps built around a dominant or common currency, or a relatively stable monetary union. Ideally, these blocs will remain reasonably open to each other. But the occasions for severe conflict – both within countries and among them – will be very great. In other words, today’s unfolding trends do not promise automatic abundance or peace. Instead, they point to a harsh confrontation between Asian growth and Western prosperity.

If catastrophe is to be avoided in this new century, as the global system grows more plural, and inherently more conflictual, the world’s great powers, rising and declining, must learn to conciliate each others’ reasonable dreams, and develop machinery to anticipate problems before they grow unmanageable. Under these circumstances, it is difficult not to regard the whole American unipolar perspective on the future as a serious historic misperception, leading to dangerously confrontational policies. In a nuclear world, such policies are – to say the least – dysfunctional.

If the most promising model for global order in a plural world is not likely to be unipolar America’s hegemonic fantasy, is there an alternative? If we are lucky, perhaps it will be something like the currently unfashionable European Union. As I wrote in 2003, and was trying to explain a few minutes ago, Europe’s “hybrid confederacy” is a “highly creative evolution of the nation-state, a genuinely new political form” — a model for the “new regional systems needed elsewhere” – one that encourages states to moderate their goals and ferret out their common interests. There is, however, a dark side: Europe faces severe challenges and its success seems problematic. On the one hand, the challenge is organizational: Thanks to the Soviet collapse, Europe’s union has doubled in size and is still growing. How can the Union embrace so many diverse countries without losing coherence and direction? On the other hand, the challenge is social and economic: In a global economy where European labor will increasingly be competing with the labor forces of China and India, how can Europe preserve its welfare states?

Each challenge is also a dilemma. The promise of enlarging the membership seems the most effective way to stabilize former communist countries, and induce them to rapid and effective transformation toward constitutional governments and market economies. But while enlargement may bring great benefits to the liberated states of Central and Eastern Europe, it also threatens to seriously weaken the EU itself. Some constitutional formula will have to be found to restore the EU’s cohesion and direction. Since I wrote all this in 2001 and 2003, a major attempt has been made to redo Europe’s constitution – and it has failed. Indeed, the attempt generated a strongly adverse public reaction in two of the European Community’s original member states – France and the Netherlands. No one can now think resolving the constitutional challenge will be easy. And yet some solution must be found if the Union is to regain its vigor.

What about Europe’s welfare states? They face, I argued, a similar dilemma. Continental Europe’s communitarian states are a great advance over the more primitive capitalism being vaunted in Britain and America. But with global markets growing radically competitive, Europe’s economic models will be increasingly challenged to reconcile their humane social values with greater economic efficiency. Improving efficiency was the thrust of the so called Lisbon goals, proclaimed already in March 2000: The idea was to improve Europe’s technology and upgrade its labor. The goals were admirable, and necessary, I agreed, but an insufficient response. Given the huge size of the Chinese and Indian labor forces, and their extremely low wages, protectionism – political regulation of trade – seemed to me an inevitable component of any successful European adaptation to the new globalism. Having the EU might, I thought, greatly strengthen Europe’s ability to manage such a policy successfully. Protection within an internally liberal but large and diverse bloc would risk far less collateral damage to Europe’s competitiveness than protection on a national scale. It would be much harder for special interests to dominate the process – to turn it into a racket.

The real challenge, however, would be whether a protectionist EU could reconcile its own needs with those of a rapidly rising China. China, too, had a right to grow and flourish and would certainly assert that right energetically. China was itself a huge and rapidly expanding market, with particular opportunities for Western industries. Europe could not afford to lose those opportunities – to cut itself off from the most dynamic parts of the new world economy.

In short, balancing the conflicting aims and values of old rich Western states and newly rising giant Asian poor states poses a great intellectual and practical challenge, one requiring a systematic and energetic search for common interests. In the twentieth century, the world had paid a terrible price for the failure of the global system to make room for rising states. Today, China’s huge scale – not to mention India’s – makes those problems of the 20th century seem comparatively trivial. That is why Europe’s rich postwar experience in supranational institution building is so important for the world, as well as for itself. Our new world urgently needs Europe’s gift for appeasing rival interests – for transforming conflict into cooperation. In effect, as Rethinking Europe’s Future argued, Europe’s postwar confederal experience is central to managing the problems of our new century.

From this perspective, what happens in Europe now seems critical to what eventually happens in the world. If it is America’s proper role to accept the plural world that it has done so much to foster, it is Europe’s proper role to precipitate the advent of that world and shape its character. For the United States, this means exorcising the demon of unipolarity. It means finding a new way of looking at the world, one that accepts pluralism and finds a more subtle way to manage it. For Europe, it means consolidating and reinvigorating its union and accepting once more the responsibilities of great power in the world. For both parts of the West, it means finding together the political and institutional imagination needed to embrace China, India, Russia and the rest of the rising world.

For most of modern history, Europe has been a furnace of creativity and energy. The last century shows vividly what can happen when that force fails or is misdirected, and what can be accomplished when Europe is at its best. We are, I suspect, at a critical time for setting the patterns of the future. And Europeans, whether they like it or not, have a determining role to play.

A final thought to close: We should never forget that a strong Europe, with a mind of its own, is very much in the interest – not only of the world in general, but of the US in particular. This is not only because the US – by itself – lacks the resources, legitimacy and skill to manage today’s global challenges, but for a more intimate reason: America’s hyperactive power abroad threatens its own constitutional balance at home. So much military power and financial wealth, combined with an enthusiastically imperial mindset among America’s political elites, threatens to overwhelm our country’s old-fashioned system of national checks and balances. Europe and the US have become part of each others’ constitutional balance. The more powerful the US becomes, the more a friendly but strong Europe becomes essential not only to limit, refine and reinforce American power in the world, but also to contain it at home. A strong, cohesive and assertive European Union would itself go a long way toward ending American daydreams of a unipolar world. The US needs a strong Europe – to preserve its own sanity. A global superpower, it seems, requires a global dimension to its constitution. Europe, to be sure, also needs the US. There would never have been a European confederacy without strong American support. The US was Europe’s silent partner, a guarantor against Europe’s Bad Old Times returning.

If Europe and America are to regain their interest and regard for each other, their relationship now urgently needs redefinition and rejuvenation. If we fail, as we failed in the Iraq war, we shall end up defeating each other. Instead of a united and balanced West, there will be an overextended and hysterical America and a fragmented and embittered Europe. In the great Eurasian drama that is to come, we can pray that both Europe and America play their parts well, that each exercises its own best form of leadership, that each lives up to its responsibilities before history.

David P. Calleo is Dean Acheson Professor and Director of European Studies at Johns Hopkins University’s Nitze School of Advanced International Studies (SAIS) in Washington, D.C. He received his B.A., M.A., and Ph.D. degrees from Yale University; has taught at Brown, Yale and Columbia Universities, and at the Institute d'Etudes Politiques de Paris; was a research fellow at Nuffield College, Oxford; and served as consultant to the US undersecretary of state for political affairs. He has published extensively on political and economic issues concerning Europe and the United States.