The Question of German Power Returns to Europe

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Since the middle of the 19th Century, the central questions in European politics have been the closely-connected questions of nationalism and the rise of German power.  As my good friend and eminent historian Gabriel Kolko shows in this brilliant essay, the post-war solutions of NATO and the European Union, together with the exigencies of the Cold War, put these questions on hold.

But their fundamentals remained, sleeping beneath the surface. Today, the conflicting questions of nationalism and German power are again coming to the fore to create ominous problems for Europe and the world.

There can be no question that, until 2007 or so, the European Union — particularly the opening of borders, the free flow of labor and capital, the disappearance of tariffs, and diminution of non-tariff trade restrictions, etc. combined to make life better for the mass of average Europeans.  Standards of living rose steeply and social services improved in parallel.  This was particularly evident in the poorer EU countries on the southern rim.

I saw and experienced this astounding improvement in the quality of life on a very personal level, living on a sailboat in southern Europe since the summer of 2005.  I will never forget the comment made to me by an Italian psychologist in Calabria in 2006, which is the heart of the provincial south of Italy: “It is a great time to be a European.” To be sure, he was an educated member of the upper-middle class, and not representative of the average Calabrian, but it struck me that this Calabrian saw himself as a European.  It was not very long ago, that such a person would only loosely consider himself to be an Italian, not to mention a European.

But the EU also benefited the richer countries of northern Europe, especially Germany. It became the world’s largest export economy, in part due to the industriousness of the German people, but also in part because of the advantages bequeathed to Germany by the world’s largest duty-free zone.  German banks, among those of other countries, also benefited enormously from the debt-driven, global hyper-capitalism.

That achievements in Germany, as well as Europe, are now  at risk. In part that’s because of the contradictions implicit in the rise of neo-liberal economics, created the worldwide debt crisis, and are now distorting the response to that crisis. But it’s also because of hubris in the European project itself.  As Kolko writes, it is becoming clear that, within this context, Germany is again evolving a hegemonic policy that, in effect, is struggling to have its cake and eat it too.

The most outward manifestations of this evolution can be seen in the effort to save the Euro by attempting to intensify the EU’s integration by increasing reliance on a kind of German neo-Calvinist economics.  One irony in the integration crisis not mentioned by Kolko is that the proximate cause of the political rigidity aggravating the debt crisis — the Euro — was adopted just when advances in electronic banking were drastically reducing, if not eliminating, the practical advantages of a common currency.

Yet the adaption of the common currency placed member governments in fiscal straightjackets.  Had the Euro not been adopted, and everything else remained the same, Spain could have devalued the peso, Italy the lira, etc, but then those devaluations would have increased value of the mark and created discomfort in Germany — which brings us back to Kolko’s analysis.