Dreaming Europe in a wide-awake world

National Interest, The, Winter, 2004 by James C. Bennett

Timothy Garton Ash, Free World: America, Europe and the Surprising Future of the West (New York: Random House, 2004), 286 pp., $24.95.

Thomas P. M. Barnett, The Pentagon's New Map: War and Peace in the Twenty-First Century (New York: Putnam, 2004), 320 pp., $26.95.

Christopher Booker and Richard North, The Great Deception: The Secret History of the European Union (New York: Continuum, 2004), 474 pp., $39.95.

Olaf Gersemann, Cowboy Capitalism: European Myths, American Reality (Washington, DC: Cato Press, 2004), 320 pp., $29.95.

Jeremy Rifkin, The European Dream: How Europe's Vision of the Future Is Quietly Eclipsing The American Dream (New York: Jeremy P. Tarcher/Penguin, 2004), 434 pp., $25.95.

THE WORLD today is a vastly different place from what it was thirty years ago. Then the picture was dominated by the stark contrast between the generally prosperous and free First World, the economically stagnant and drably totalitarian Second World, and the seemingly hopeless Third World. Today, that disturbing but fairly simple tripartite classification has been replaced by a much more complex picture. What stands out in this new picture is the way winners and losers are emerging within each of the former categories. Within the former Third World, erstwhile basket cases such as China and India have become awakened giants, economically dynamic and increasingly more assertive on the international stage, while other Third World locations have become more of a Fourth World, sinking into a Conradian heart of darkness, breeding a seemingly endless mess of massacre and terrorism. The bright lights of Prague, Budapest and Warsaw signal a reborn eastern Europe, while Belarus and Ukraine struggle, and Russia wavers in between. Even in the First World, more and more is heard of Atlantic Divides and a growing feeling that America and a uniting Europe have less in common with each other and more in common with other parts of the world. Making sense of this complexity and illuminating a path forward is the intellectual task of today, one which becomes a metric for judging all international trends and policy analysis.

One of the most interesting analytical problems is that presented by the divergent paths taken by the developed nations of the First World, and their respective degrees of success. These are sometimes segmented out as Europe, America and Japan, but the more useful division is probably one of Japan, Continental Europe and what are variously called the "Anglo-Saxon" economies or, increasingly, the Anglosphere. In the early 1970s, all three of these regions were seen to be facing roughly the same set of problems: first, stagnation of a modified market economy defined by substantial economic regulation, high marginal tax rates, and a fairly high percentage of GDP captured by the public sector, as well as high wage levels and inelastic industrial structures reinforced by strong unionism; second, a declining birthrate, which promised trouble downstream for pay-as-you-go pension and benefits programs; and third, a weakening of the old sources of social cohesion, particularly religion, patriotic narratives in education and the media, and (in some countries) ethnic homogeneity.

From the end of World War II to the early 1970s, all three sectors of the developed world enjoyed a general economic expansion. Continental Europe and Japan in fact each experienced more rapid growth and development than the English-speaking nations, mainly from the spur of postwar reconstruction. However, as more and more of the Third World began adopting aggressive, export-driven industrialization strategies, the old cozy collaboration of government protection and passing wage increases on to the consumer began to fall apart.

The Anglosphere nations, led by the United States and Britain, reacted by reducing marginal tax rates, privatizing and deregulating markets, and refusing to subsidize declining smokestack industries. High levels of immigration were accepted, reversing the demographic patterns of decline. Continental European nations responded by increasing European integration, thus expanding internal market opportunities but retaining and even reinforcing the "social market economy"--legislated job protection and generous social benefits, particularly for the unemployed.

A wave of European Union-mandated privatizations ended the most egregious boondoggles, and small, protected national companies were absorbed into a smaller number of EU-wide champions, which were protected more subtly by disguised subsidies and ingenious non-tariff barriers. Meanwhile, most European nations accepted "guest workers", increasingly from North Africa and Turkey. But their assimilation into European national cultures was never aggressively pursued.

Finally, Japan addressed essentially the same set of problems through aggressive use of automation and offshore production, honing their competitive capabilities, and continuing a rather blatant policy of domestic protection. Japan also employed other labor-saving strategies and a minimal number of temporary foreign workers, though making clear that they were expected not to become permanent residents.