POLICY DOSSIER
How Europe should address the challenges of the “Asian century”
Autumn 2007
Europe is tired and faces decline, says Béla Kádár, Hungary’s former Minister for international economic relations, who believes a “new renaissance” is needed that goes further than EU-level regulation. Without that rejuvenation, he warns, Europe could end up as little more than a museum that survives on tourism
Europe’s achievements over the past 50 years cannot hide its fatigue symptoms. The European Union’s triumphal march from free trade zone to a single market and a common currency, its enlargement to 27 countries, its strong position in world trade, its bargaining power are all impressive. Yet Europe is now falling behind in important areas. A particular danger signal in today’s knowledge-intensive world is that Europe still lags behind the United States in investment in research, in patent applications and in the development of human capital. Consumption has become a basic value in Europe, culture is being eroded and money is now the yardstick of our quality of life. Europe’s population is both declining and ageing, undermining the basis of welfare. The rapid expansion of the Roma population in some central and southern European countries, and waves of illegal emigration to more desirable regions, are posing costly problems for socio-economic integration.
Predicting the future for Europe against this worrying background would deter even a latter-day Nostradamus. Yet for someone like myself who grew up in a part of Europe where for 40 years even voicing an opinion about the past could be risky, the lack of reliable forecasts on Europe’s longer-term future is disturbing. Yet analysts are generally well aware of the different variables that will shape our future, and by taking stock of these we can perhaps sketch out some ideas on the European Union’s possible position by mid-century.
Europe has been slow to appreciate – and adjust to – Asia’s technological progress. The accelerated modernisation of Asia under the driving force of being a late-comer is shifting the world economy’s centre of gravity away from the West. After 400 years of European and then American economic domination, there is now a possibility that by mid-century we will see an Asia-centred world economy. Such, it could be argued, is a consequence of the natural rhythm of global change. For China, to have lagged behind Europe for a few hundred years is perceived merely as an ephemeral period in its long history of playing a central role in much of the world. Coming to the fore again is seen by many Chinese as a return to the natural state.
The risk of conflicts resulting from the shifting of economic power from one region to another could in principle be managed by some new system of global government. But our experience of the United Nations and its problems also suggests that this is unlikely. One should therefore not rule out a possible confrontation between China and an alliance of Europe and the United States, perhaps with Russian support because it fears China’s eyes on almost empty Siberia for its overcrowded population.
Rather than risk such a dangerous polarisation, a multipolar world would better suit the interests of mankind. But this would not necessarily favour Europe. Our gradually declining continent could subsist for several decades on its heritage, becoming a kind of open-air history museum living on tourism and related services, but slowly Europe would fade away like the Roman empire in the fourth century. Strengthening Europe’s relationship with the United States could provide an umbrella of sorts, but junior partner status would be politically questionable in many European countries. And in any case a weak and declining European ally would hardly be attractive to the United States.
Yet Europe need not decline. As well as the United States, the whole world is going to need a stronger and more dynamic Europe in the next 50 years. For the developing world, Europe represents the biggest potential market for their products. The European Union is also seen as a grouping that is primarily interested in the safe and harmonious development of the world. The increasingly global role of the euro is promoting international financial stability, while Europe’s military aspirations are much less in evidence than those of other powers. And the cultural distance between Europe and many non-European countries is relatively smaller than among other power centers, regions..
The big question, then, is whether Europe can become and then remain a global leader. Can it compete successfully worldwide, and can it become a unified system capable of responding speedily to new challenges and acting as a single body with one voice? It is no daydream to say that Europe has not lost yet its chance to be all of these things, providing that a new renaissance can be launched that is spiritual, institutional and even conceptual. Such a rejuvenation therapy, though, would require a holistic approach; our salvation does not lie in the details of EU regulations.
The Europe of our forebears grew up in a system based on three basic values − solidarity, performance and freedom. These seem to have weakened or even been lost in the present Europe. The European value system is in economic terms hardly competitive with the present strength of Confucian values. To return to Europe’s Judeo-Greek-Christian cultural roots is therefore essential if we are to shape a better future. Competitiveness is no longer a simple financial, microeconomic formula; in today’s global markets not only products and services compete with each other but also the socio-economic systems behind them. The quality of the infrastructure, the standard of education, the efficiency of the civil service, the social insurance system: all are components of competitiveness. Call it, if you like, social competitiveness.
The diversity of EU member states’ interests means that it might well be counter-productive to try and squeeze them into a universal frame, at least in the foreseeable future. In the lifetime of the next generation of Europeans, there will probably be no rational alternative to today’s confederation of states and reliance on the subsidiarity principle. In any case, agreement on common foreign, defence and monetary policies can provide the necessary cooperation framework for the Union, just as it did for Austria-Hungary until World War I.
But institutions, even those of the EU, do not improve on their own. A long-term grand strategy is therefore needed for the Union. For us Europeans, the central problem of the 21st century will be security, with the most sensitive part of that being energy supply. Despite a long gestation period, Europe has still not given birth to an energy strategy that covers supply, technological development and energy saving.
At a global level, market conditions have been radically changed by the entry of three billion Asians who are prepared to work for far less pay than Europeans. The bargaining power of European labour will therefore continue to be under threat. Meanwhile, the power of transnational enterprises is increasing in the absence of any forms of global governance that could deal with the excessive ambitions of some business interest groups. A strong European Union could function as a countervailing force.
Further enlargement of the EU will be important in both an offensive and defensive sense. The integration of the Balkan states will not be easy, but would head-off the risk of the region remaining a powder keg. The integration of Ukraine and Turkey into a functioning Union would extend its security zone and provide economic and political benefits. Then there is the issue of market protection. In the global economy of the mid-21st century it would be unwise to try and protect any European economic activity that could be performed more efficiently in other countries.
New global power structures may compel both Latin American and African countries with historic ties to Europe to draw closer to the European Union. At the same time, continued enlargement, together with extended partnerships, will strengthen the global position of the “old continent”. The opportunities are out there for Europe, and must be firmly grasped.