POST-CHRISTIAN AND PAST CARING:

The End of Europe? (Niall Ferguson, March 4, 2004, AEI Bradley Lecture)

When we look closely at the way in which the European Union is evolving and try to set its evolution in some kind of historical perspective, I believe it becomes apparent that, far from approaching a kind of parity with the United States, whether in economic and cultural and political or in international terms, in reality the European Union is an entity on the brink of decline and perhaps ultimately even of dissolution.

Now, for the avoidance of doubt, I'm not saying that the European Union will disappear as an institution in our lifetimes. Institutions, in Europe particularly, tend not to disappear. They just decline in their power. Like, for example, today's Organization of Economic Cooperation and Development--once the prototype of a far larger post-Marshall Aid European union, today a harmless agency for gathering data and producing economic reports. And ladies and gentlemen, Europe is littered with such agencies, which once embodied grandiose plans--think, for example, of the Bank for International Settlements or the International Labor Organization. There's scarcely a European capital without the relic of some past plan for great greater European integration.

My suggestion is not that the European Union will vanish, but simply that its institutions are in danger of atrophying and that it, too, may one day be no more than a humble data-gathering agency with expensive but impotent offices in the city of Brussels and elsewhere.

Let me try to illustrate to you why I think this is. There are really three parts to my argument, one of which is quite obvious and I will deal with as swiftly as possible. And that is, essentially, to point out why so many of these signs of rapid integration and of approaching parity with the United States are false signs.

The second and more interesting part of the argument has to do with a fundamental historical insight into the way that the European Union or, to be precise, the process of European integration, has always functioned from its very inception until the present. I want to draw on the work of recent scholars, not all of which will be known to you, to suggest that there is a key to understanding the process of European integration, and that key can be summed up in a single phrase: German gravy.

Finally, having bored you near to unconsciousness with economics, I will soar away from such dry matter and offer a third cultural argument to the effect that Europe may not only experience a kind of institutional decline, but that its very culture is in itself authentically, and in the true sense of the word, decadent. So my conclusion will be as much cultural as economic.

First, the economics. In every year of the last decade but one--that was 2001--the economy of the United States has grown in real terms faster than that of the European Union. In every year but two out of the last nine years, productivity has grown faster in the United States than in Europe. If you look at the average of unemployment--and these are the standardized measures of unemployment that the OECD uses--you can see that on average over the last decade unemployment in the European Union has been double what it has been in the United States.

Why is this? I think there are two ways of explaining European economic under-performance in the past decade. One of them is that the labor market and indeed markets generally are less flexible than those of the United States. The other is simply that the monetary policy of the European Central Bank has been somewhat inept, or at least somewhat unbalanced, in the way that it has treated the different members of the euro zone.

The key point about economic under-performance in Europe is that it is principally, or at least predominantly, a German story. It is richly ironic that only 20 years ago scholars were warning that Germany--along, of course, with Japan--was going to surpass the United States among the world’s biggest economies. In truth, those of us who were living in Germany in the 1980s could see an impending economic crisis in that country, a crisis that German reunification temporarily postponed in an orgy of deficit finance and subsidized consumption.

Now we see the reality. There is a profound problem in the German economy that would be there whether the Bundesbank was still in charge of monetary policy in that country or not. The problem is worsened by the fact that, under the ECB, interest rates in Germany are probably around 100 basis points higher than they should be. And given that the German economy is roughly a third of the economy of the euro zone, an unhealthy Germany is an unhealthy European economy.

I want to add a little footnote to this story. If you look closely at man-hour statistics-comparing the productivity of, say, a Frenchman in a single hour with that of his American counterpart--there is in fact nothing to choose between them. As a worker, a Frenchman is just as efficient as an American. It's less true in the case of a German worker, but the difference is not huge. One of the biggest differences in economic terms between Western Europe and the United States has been an astonishing divergence in working hours. In the past decade or so, Americans have steadily worked more hours per year. In fact, according to figures from the OECD, the average American in employment works nearly 2,000 hours a year--and hours a year are a good measure of just how much work people are doing. The average German, ladies and gentlemen, works fully 22 percent less of the year.

Between 1979 and the present, the length of the working year grew in the United States. Or, if you want to put it in more conventional terms, the vacation shrank. Precisely the opposite happened in Europe. In Europe, working hours diminished, vacations grew. Labor participation also diminished. Fewer and fewer of the population actually entered the labor market altogether. And that in many ways explains that differential in GDP growth rates as well as anything I could suggest to you. It's a little hint of what I'm going to say in a minute, that this, I think, is more than just an economic phenomenon. In some ways it is a symptom of that cultural malaise in Europe that I want to see as a critical part of the end of Europe.

To put it very crudely, it is the work ethic itself that has declined and fallen. And it is, I think, noteworthy that the decline in working hours is most pronounced in what were once distinctly Protestant countries of northwestern Europe. Once. [...]

There's been some very good work on the history of European integration done recently. It hasn't been, I think, widely enough understood or received. Perhaps the most interesting work has been produced by the venerable British economic historian Alan Milward, but it's also been complemented by the young Harvard historian Andrew Moravcsik. Between them, working independently, they've arrived at a new interpretation--and I think it deserves to be called a new interpretation--of why European integration happened at all after the Second World War.

Instead of the conventional view that a few saintly figures, like Jean Monnet, realized a vision of European integration to prevent the recurrence of war in Europe and generally make everybody happier and better off, they argue that, beginning with the negotiations that produced the European Coal and Steel Community, the nation states of Western Europe made very limited concessions of sovereignty in the pursuit of the national economic interest---or, to be quite specific, in pursuit of the interests of well represented economic groups within their societies, principally heavy industry and small agriculture.

If one understands the process of European integration in these terms--essentially an economically driven set of deals between still largely sovereign nation states--one thing becomes abundantly clear. And that is, ladies and gentlemen, that from the very outset this process relied on what I rather crudely called a moment ago "German gravy." It was the Germans who, from the very word go, were prepared to subsidize the other parties in the process of European integration.

To give you just one example: The fundamental bottom line of the coal and steel community was that German taxpayers would prop up the inefficient coal mines of Belgium at the cost of hundreds of thousands of marks. In the same way, it was German taxpayers who paid the development aid to the French colonial empire, aid that was an integral part of the Treaty of Rome.

It's often forgotten that where the British saw a choice between empire and Europe, and dithered and hesitated about that choice, the French did what I always do whenever I see a choice. They said, "We'll have both, please." Not only did the French seek to retain their African empire and what was left of their Asian empire within the structures of the emerging European community, but, with a brilliant stroke of diplomacy, they insisted that the other five members that signed the Treaty of Rome should subsidize their colonies. And so it was that, in an extraordinary deal, Konrad Adenauer agreed to payments to French colonies that came very largely from German taxpayers. Likewise, the Common Agricultural Policy, which became the single largest item in the budget of the European community, was from its very inception underwritten by net contributions from German taxpayers. That was how it worked.

If you add up all the--to use the technical term--unrequited transfers that Germany has paid through the European budget since its inception, one of the most striking facts that I can offer you is that the total exceeds the amount that Germany was asked to pay in reparations after the First World War. It is more than 132 billion marks, the sum that the Germans in the 1920s insisted would bankrupt them if they paid it. Well, they finally did pay it. They paid it not as reparations, but as net contributions to the European budget. [...]

But ladies and gentlemen, I didn't come here this evening to make a purely economic argument. What I've said I think is in fact a sufficient argument to explain the end of the process of European integration as we have known it up until this point. But I have one last argument to make that is not, in the end, an economic argument at all.

The fundamental problem that Europe faces, more serious than anything I've mentioned so far, is senescence. It's a problem that we all face as individuals to varying degrees, but from society to society the problem of senescence, of growing old, varies hugely. In the year 2050, which is less remote than it may at first sound, current projections by the United Nations suggest that the median age of the European Union countries, the EU 15, will rise from 38 to 49. The median age will rise in the United States, too, though less sharply. (I wish I had time to tell you about the problems that you are going to face, because then it would stop you feeling the complacency that you may have begun to feel this evening.)

The situation in the United States is not great at all in this respect, but it is--and I believe this is the most one can say--better than the situation of the European Union. The German population is projected to decline absolutely from 82 to 67 million between now and 2050. Falling populations will be a characteristic feature of the once globally dominant societies of Western Europe. An increase in retirement ages would help only slightly, but it is not an adequate answer to the problems that already beset the social security systems of Western Europe. The implicit liabilities of the German social security system at the moment are currently around about 270 percent of German GDP. There are problems with the social security and Medicare systems in this country--very serious problems indeed. But the problems in Europe are much worse, and they will bite politically much sooner.

There is only one way out for this continent, and that is immigration. There is an obvious source of youthful workers who aspire to a better standard of living. All around Europe there are countries whose birth rate is more than twice the European average, indeed, significantly more than twice. The trouble is that nearly all these countries are predominantly Muslim. Not only that, but there is, right next door to the European Union, in fact between the European Union and Iraq, a country that now has a very plausible claim to European Union membership. And that country is Turkey.

Turkey's per capita income is in fact, by some measures, higher than that of Hungary, Latvia, and Lithuania, all of which are about to enter the European Union--certainly higher than those Balkan economies that hope to be in the next, or next but one, wave. The arguments against Turkish membership--and the Turks have been pressing for some form of membership since the 1980s--are getting weaker and weaker. And you know the only one that is left? It's one most often heard among German conservatives, but occasionally it slips out of a French mouth, too. That argument is a cultural argument. It is the argument that Europe is fundamentally a Christian entity; that the European Union is a kind of latter day secular version of Christendom.

Ladies and gentlemen, I only wish that were true. The reality is--and it is perhaps the most striking cultural phenomenon of our times--that Western and Eastern Europe are no longer in any meaningful sense Christian societies. They are quite clearly post-Christian--indeed, in many respects, post-religious--societies. In the Netherlands, Britain, Germany, Sweden, and Denmark, less than 1 in 10 of the population attends church even once a month. A clear majority do not attend church at all. There are now more Muslims in England than Anglican communicants. More Muslims attend mosque on a weekly basis than Anglicans attend church. In the recent Gallup Millennium Survey of Religious Attitudes conducted just a couple of years ago, more than half of all Scandinavians said that God did not matter to them at all. This, it seems to me, makes the claim to a fundamental Christian inheritance not only implausible but also downright bogus in Europe. The reality is that Europeans inhabit a post-Christian society that is economically, demographically, but, in my view, above all culturally a decadent society.

They cannot, though they will try, resist forever the migration that must inevitably occur from south and from east. They will try. Indeed, they try even now to resist the migration that really ought legally to be permissible from the new member states to the old member states after May the 1st. Even that has become contentious. Increasingly, European politics is dominated by a kind of dance of death as politicians and voters try desperately and vainly to prop up the moribund welfare states of the post-Second World War era, but above all to prop up what little remains of their traditional cultures.

Here's something to consider: John Kerry may very well be the last Atlanticist candidate of the major parties. Europe simply doesn't matter anymore except to the bicoastal intellectuals.

Posted by Orrin Judd at March 24, 2004 10:23 AM