Rogue Nation: American Unilateralism and the Failure of Good Intentions (2003) (34 page)

This effort frequently involved calling together the marketing managers from the various countries to discuss changes. The first difficulty was language. English was supposed to be the working language, but it didn’t always work. Beyond that there were a thousand reasons why Europe-wide strategies couldn’t be adopted. For example, we had a paper mill in the north of Italy and another in the north of Belgium. We wanted to supply the French market from these two mills, but it happened that paper towel rolls were a little wider in Belgium than in Italy, making for chaos when shipments arrived in French supermarkets. Or the label in Britain had to have different information than that in Holland. I could go on, but you get the picture. It was a long, tedious, often maddening process, and I was dealing with only one company and one fairly simple product line. I marveled at the energy, patience, and dedication of the European officials who were building the EU one standard at a time.

And look at what’s been accomplished. The EU conquered rampant inflation, reduced runaway national budget deficits and set limits on new deficits, established a single European Central Bank, and now uses only one currency. Today, you can travel all over Europe and never change money or show your passport. It is often said that the United States has the world’s biggest economy, followed by Japan. But that is an out-of-date way of looking at things. On December 13, 2002, the EU decided to add ten new member countries, effective June 2004, bringing its total population to 450 million people and its GDP to $9 trillion – double the size of Japan and just behind the U.S. $10 trillion GDP. Moreover, if the euro strengthens much more against the dollar, the EU could become number one.

The significance of this development cannot be overestimated. In global economics, where Europe is a full-fledged superpower, the United States cannot act unilaterally. Where the EU speaks with one voice through one top official – as it does on matters of trade, agriculture, technology standards, competition policy, and currency – it is fully the equal of the United States and can in no way be pushed around. If anything, it sets the standard. Jack Welch, the former CEO of General Electric and former business icon, learned that the hard way when, as his swan song before retiring, he tried to bring off a merger of GE with Honeywell. When it sailed through the U.S. Justice Department’s antitrust review process, he and Wall Street figured it was a done deal and ordered champagne. Too soon, as it turned out. They had reckoned without Mario Monti, the EU’s Competition Policy Commissioner, who killed the deal and wrecked Welch’s retirement party. Thus, he proved that no merger of two U.S.-based companies, assuming they have operations in Europe, can be consummated without European approval. In doing so, he also asserted the validity of a competition doctrine that focused on the impact on competitors rather than on consumers, as is typical in the United States.

Even more than competition policy, however, currency is king. Before it occurred, the line on Wall Street, and particularly on the pages of the
Wall Street Journal
, was that the unification of European currencies would never happen. When it did happen, the new line was that it wouldn’t work and even if it did, the euro would pose no challenge to the dollar. Whether it will work over the long term, only time will tell, but we are already seeing an impact on the dollar. In late February 2003, Russia moved some of its reserves from dollars into euros as the dollar continued its weakening trend. The euro is emerging as something the world hasn’t seen for sixty years: a viable alternative reserve currency to the dollar. As it does so, the United States will find its freedom of action on interest rates, savings rates, and trade deficits increasingly constrained. It may find itself wrestling generally with Europe for control of the IMF, the World Bank, and the international monetary system. This competition could become particularly intense if the gap between America and Europe widens on broader global issues. Ultimately it could affect Americas ability to project power.

The two economies are likely to see increasing conflict in other ways as well. Just as Rome and Byzantium eventually developed very different societies after the split of the Roman Empire, so the United States and Europe have evolved quite different socioeconomic models that, owing to globalization, increasingly rub against each other. At the heart of the difference are the roles and responsibilities of the individual and government. America, of course, emphasizes the individual and distrusts government. It believes in equality of opportunity but embraces a vast inequality of results. In its lead editorial of August 26, 2002,
Business Week
magazine urged adoption of policies that would widen the gap between rich and poor in the United States, and did so on the grounds that despite the wider gap, the absolute level of income of the poor would rise also.
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This would not be a popular argument in Europe, where emphasis is on modulating inequality of result and government is thought to have a positive role to play in promoting the welfare of the community. In the growth-versus-welfare-state debate, the United States has always argued that its laissez-faire approach fosters start-ups, innovation, growth, and productivity while keeping unemployment low. U.S. commentators point to the low growth and high unemployment rates of Europe, while Europeans argue that their unemployed live better than many Americans with jobs. Europeans lament the high numbers of Americans who lack medical insurance and live below the poverty level.

During the 1990
s
, it looked as if this argument might be settled in the Americans’ favor. Europeans began to try to deregulate and privatize while speaking the word ‘shareholder’ and creating Nasdaq clones. But with the collapse of the technology bubble, the American model looks less attractive, and the argument is going the other way. As Renault’s chief executive Louis Schweizer noted in a recent conversation, ‘It is hard to believe the American idea that the price of a share in some short time period is the best way to measure the value of a company or of a manager’s performance.’ Moreover, despite America’s generally dismissive view of ‘eurosclerosis,’ many European economies with high taxes and welfare payments, like Sweden and the Netherlands, are doing quite well; and overall, the EU’s performance does not lag far behind that of the United States. For example, when proper adjustments are made for accounting practices, it turns out that the recent, much ballyhooed increases in U.S. productivity growth are actually behind those of Europe.’
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More importantly, in many respects the EU’s economic fundamentals look better than those of America. EU savings rates are 6.35 percent compared to America’s roughly 3 percent,
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while EU trade is roughly in balance compared with the large structural U.S. trade deficit.
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Thus to get whatever superior economic growth it may have, the United States has to borrow about $500 billion a year from Europe and elsewhere. As Martin Wolf points out, U.S. borrowing is now so high that it is becoming unsustainable. Moreover, many see Europe as more advanced in the processes and techniques of globalization as a result of its own experience in thoroughly integrating its national economies into the EU. As globalization proceeds, the EU will vigorously promote its model and that model will be attractive. Thus instead of U.S. accounting standards, for example, the world may adopt those of the EU, and instead of U.S. rules on Internet privacy, the world may adopt those of the EU. Globalization may quickly cease to be America’s game.

Europeans are justly proud of these accomplishments and of the values that produced them. It has long been a mantra of U.S.-European dialogue that we share the same values. But while we are heirs of the same broad cultural background and advocates of democracy, there are actually big differences in values. One of the biggest is religion. While half of all Americans attend a place of worship on any given weekend, in Europe the number is closer to 15 percent. Europeans generally find the American debates over abortion and evolution versus creationism hard to comprehend. Even harder to comprehend, and more irritating, are the frequent calls by U.S. political leaders for God to bless America, as if this nation were more deserving of God’s favor than other nations. It is highly unlikely that Tony Blair or Jacques Chirac would ever in a public speech ask God to bless Britain or France.

Europeans, are concerned that this religiosity imbues American foreign policy with a crusading, manichean element that can lead to unnecessary and unnecessarily violent conflict. Not believing so much in good versus evil, Europeans tend to look for the social and economic causes of problems. Just as Europeans do not share America’s religious commitment, neither do they share its super-patriotism. A Swiss exchange student who stayed for several months with my family was shocked at the flag displays and frequent pledges of allegiance he encountered in the United States. Again, there is a feeling in Europe that this passionate Americanism can too easily turn into hostility. As a result of their history, Europeans downplay nationalism and seem to indulge in endless negotiations to resolve dangerous issues.

While Americans emphasize equality of opportunity, Europeans focus more on equality of results. Noting that Nokia is the world’s leading producer of cell phones even though it pays its executives relatively modest salaries, Europeans wonder why American executives need to be paid so much more than their workers. They also question the shareholder-driven values of U.S. business and instead recognize a wide range of stakeholders in addition to a business’s owners – including its employees, suppliers, customers, and local community. This community orientation includes a faith in government as an instrument for good. Europeans see the American emphasis on individualism and distrust of government as having created a violent, crime-ridden society whose incarceration rates (417 per 100,000 inhabitants for white men and 3408 per 100,000 for black men, compared with fewer than 100 per 100,000 men in Europe) are simply insane.
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They particularly don’t understand the easy availability of guns in America and the argument that guns are necessary to assure democracy. They deem their own democracy assured without every citizen’s being armed to the teeth. They find the death penalty especially odious and have refused to extradite terrorist suspects to the United States if they face a possible death sentence. Indeed, it is puzzling to them how such a religious society can also embrace such an unforgiving penalty. Finally, they see American democracy, with its susceptibility to wealthy special interests, as very imperfect. Still, for all the flaws they find in American society, 61 percent of even the French have a positive overall attitude toward the United States.
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On the other side, Americans see the godlessness of the Europeans as the source of their susceptibility to the destructive secular religions of fascism and communism from which the United States had to save them repeatedly in the last century. They also see the Europeans as ungrateful free riders who have never met a dictator they wouldn’t appease and take advantage of America’s defense umbrella to posture smugly as morally superior. For Americans, the Europeans’ resistance to immigration despite their declining populations, their hesitance over approving Turkey’s application for full EU membership, and their criticism of Israeli policies smack of racism and anti-Semitism. From the American perspective, Europe is not a democracy at all, but a collection of bureaucracies run by quasi-aristocratic elites far removed from real people and bent on constraining the more dynamic United States out of envy and nostalgia for a lost global dominance that they will never regain. Again, I must emphasize that polls show Americans having overall favorable attitudes toward Europe. But again, their criticisms are also views expressed by leading commentators.

Which brings us to the crux of the matter – the future of Europe and of the alliance. From its inception the European project envisioned an eventual political union to be achieved through gradual economic integration. With that integration now virtually complete, European leaders are turning to the question famously posed by Henry Kissinger: What telephone number do you dial to reach Europe? As I write, former French President Giscard D’Estaing is leading an effort to write a European constitution that will be presented for consideration to Europe’s leaders in June 2003. If adopted, it will create a more unified EU structure with a more sincere voice. Its objective, however, has already been foreshadowed in documents and speeches. In accepting the Charlemagne Prize in May 1999, British Prime Minister Tony Blair said, ‘For Europe the central challenge…is the challenge posed by the outside world about how we make Europe strong and influential, how we make full use of the potential Europe has to be a global power for good.’
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Blair later emphasized that ‘this is about the projection of collected power and influence…that makes a superpower.’
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In September 2000, the European Commission issued instructions to the European Parliament saying that ‘our objective must be to make Europe a global actor, with a political weight commensurate with our economic strength, a player capable of speaking with a strong voice and of making a difference in the conduct of world affairs.’
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Achieving anything like this, of course, means submerging ancient sovereignties in the larger European whole. Thus EU External Affairs Commissioner Chris Patten noted in the 2000 Chatham lecture at Oxford that ‘sovereignty in the sense of unfettered freedom of action is a nonsense. A man naked, hungry, and alone in the Sahara is sovereign – and doomed.’
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He was echoed by Swedish Prime Minister Carl Bildt, who said that ‘the nation state is dead as an independent actor.’
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That sentiment would not appeal to any American politician or statesman, but as
Die Zeit
editor Josef Joffe noted to me, ‘the European leaders are raging against their own impotence.’ That impotence was masked throughout the Cold War. Although World War II ended the era of European great powers, Europe’s status as the main battlefield of the Cold War and the consequent need for the United States to consult and work closely with the Europeans, maintained the illusion of great-power status long after the actuality had passed. With the collapse of the Soviet Union, American interests turned elsewhere and European phones were not ringing nearly so often.