Mark Leonard on Europe

This is a discussion of Mark Leonard's book, "Why Europe Will Run the 21st Century." It comes after the United Arab Emirates announced they are converting their foreign-currency holdings from 2% Euros to 10% Euros. I expect to see more countries turning away from the dollar and to the Euro over the next couple of years.

I have long been skeptical of Europe's government policies in general. Though everyone craves job security, I think it is distinctly possible that Europe's labor friendly policies have hurt their economy and its ability to innovate. I had not read anything that seriously challenged my views of Europe until I read this book. It challenged many of my assumptions. That being said, I don't plan to investigate much further because I would have to learn more economics and I'm not going down that path just now.

Many have argued that the U.S. economy has been growing much faster than Europe's. Mark Leonard challenges this claim.

The truth is that this overall figure hides the fact that the growth in the US economy has been driven by a growing population rather than better economic performance. Population growth in the USA in the 1990s average 1.2 per cent a year compared with 0.5 per cent a year in the eurozone. This means that if you look at the average GDP per person, the US growth collapses to 2.1 per cent, narrowing the gap between the two continents to just 0.3 per cent. What is more, the EU's underperformance can b e explained by a single country, Germany, which has been struggling with the costs re-unification. This may be cheating, but if you take Germany out of the calculations, the gap between Europe and America actually disappeared, leaving Europe and the USA with identical figures.

Additionally, the numbers hide many important issues that impact the final tallies. U.S. economic indicators have some advantages due to fundamental differences between our societies.

• Cars rather than public transport: for example, Americans must buy cars because public transport is so lousy. The value of the cars is calculated in American GDP, but European public-transport systems are counted not at their value to passengers but as a cost to the government.
• The social costs of inequality. For example, Americans keep two million of their fellow citizens in jail: the cost of building the prisons and paying the jailers is also included in the GDP.
• Air conditioning and heating. America's more extreme climate - colder winters (save in Florida and California) and hotter summers (save in Washington, Oregon, and California) - means it must spend more on heating and cooling.

If you add all these 'sunk costs' into the mix, Gordon argues that although Western Europeans only work three-quarters as much as Americans, they get ninety per cent of the return, coupled with far more equal income distributions and lower poverty rates.

We read this book for a class I took and many argued that Europe simply cannot pass the U.S. As I listened the discussion, I pictured a similar debate in previous empires. Let's temporarily ignore the baggage with the word empire and focus on the fact that the U.S. is the strongest state in the world.

Will another state (or collection of states such as the European Union) surpass us? Is that how it usually works? Or does history suggest that the U.S. will encounter serious problems and fall behind the EU? Doesn't history suggest that when the second strongest state (or confederation) becomes the strongest not when they suddenly achieve greatness, but when the most powerful state screws up? In this situation, the second strongest state actually inherits the preeminent position rather than earning it.

Thus, I find the prospect of an EU dominated century a possibility. Especially with Americans that elect Bush to two terms and a Congress that remains cowed by the Executive Branch (less so than last year though I hope). I don't think China is interested in being a world power, they remain focused on regional issues.

The EU also has some good stuff going for it. Its economy is integrated and if you want to deal with them, you need to adhere to their rules. This is the essence of their power. Often called soft power, other states voluntarily make the changes the EU agrees upon without being forced to merely because they want to work with the EU.

This sortof leads me into my favorite quote from the book. It explains the power of the EU in ways that the U.S. cannot understand due to its reliance on force and threat. Such tactics follow naturally from a traditional understanding of how the world works. That understanding is incorrect.

The classical definition of a state is a body with a monopoly on legitimate force. ...

But Foucault shows us that this image of domestic politics is wrong. The real reason that societies do not collapse into chaos is that their citizens do not want them to. Order is not produced through hierarchy, but because a majority of people have a stake in preserving order. That is why people internalize the rules and police themselves. The key to order, therefore, is co-opting people - or countries, for that matter -- to uphold the rules themselves, rather than coercing them into submission.

This is also why we do not need religion to have morals.