- Special Reports
Europe, Not Euro, May Break Apart
Europe, Not Euro, May Break Apart
SINGAPORE: The fear about the euro’s collapse has receded, but Europe as forged after the industrial revolution is fracturing, reverting to traditional regional entities with cultural traditions, languages and animosity against nation-states that swallowed them without their consent.
There’s Scotland in Britain, Catalonia and Basque Country in Spain, Flanders in Belgium, Lombardy or Padania in Italy. Soon maybe Wales in Britain, Bavaria in Germany, Brittany and Occitania in France. On top of this litany, there’s also growing concern about Britain exiting from the European Union.
The Holy Roman Empire dominating Central Europe before industrialization counted 1800 states ruled by kings, knights and bishops. The states were too small to reap the fruits of industrialization. Fragmented markets prevented transnational supply chains and were incapable of shaping the logistics; transport infrastructure; and, most important of all, the political system necessary for transition from feudal and agricultural states to manufacturing. So the European nation-state emerged. Admittedly Britain, France and Spain could trace their roots back 100 or 200 years earlier, but were not solidly secure until around 1800. Italy and Germany were born between 1860 and 1871.
The nation-states masterminded regional economic integration, but never completely succeeded in shaping a national culture. Yes, a national language gradually took over, but the regions preserved distinct cultural identities. They acquiesced with the nation-state and obeyed respective capitals in London, Paris, Berlin, Rome or Madrid because force compelled them to do so and the economic advantages were evident. The standard of living rose as industrialization conquered the regions, and prosperity followed. The end result: The increasing standard of living was sufficiently higher to compensate for attacks on cultural identity to ensure the nation-state’s prerogative. The people in the regions traded in some but not all cultural identity.
This became even more manifest as industrialization went into the next phase: Economic globalization. International treaties strengthened the capitals’ hold over regions. The regions could not access global markets without the capitals’ consent as laid out in international rules negotiated among nation-states. Scotland could not on its own strike a deal with the United States or Argentina for export of ships from the shipyards at the Clyde. Only London could. And over the first half of the 20th century, Europe showed little support for regionalism or cultural identity. Few Scots genuinely felt as Scots or saw Scotland in any other way than as part of the United Kingdom.
The role of the nation-states as imperial powers solidified this view. For the Scots, being part of the United Kingdom provided a platform for a central role in running the empire and profiting by doing so.
Conditions favoring the nation-state are disappearing – and rapidly. The empires are gone. Industrialization is giving way to an economic age shaped by information and communication technology, ICT, opening access to the world outside the nation-state framework. Manufacturing used to be the cornerstone of European economic activity, but except for Germany, no longer. The burden of transition has been unevenly distributed aggravating the skepticism among regions about the virtue of the nation-state. Over the last four years national political systems have lost legitimacy because of impotence in dealing with the crisis. A feeling of unfair distribution of hardship and burdens when capitals cut welfare and increased taxes fuels the idea among regions that more fairness may be found if they handled these questions on their own while relying on the EU despite its shortcomings for economic policy.
Most important of all, the EU has taken away from the nation-state and its capitals the key to participate in economic globalization. Regions no longer need to go through the capital to request changes in rules of the game or help in accessing foreign markets. Regions have set up embassies and lobbying associations to promote export and attract investment abroad. For example, in Washington, a Scottish Affairs Office implements Scotland’s plan for engaging with the US. To drive home the point, the office flags its Gaelic name, Riaghaltas na h-Alba. Or the Scots work via the European Union with Scotland’s European Union Office implementing an action plan for engagement. If Scotland, Catalonia or Lombardy want to safeguard their interests in global negotiations, the negotiators are no longer found in London, Madrid or Rome, but in Brussels. Sure enough, politicians and civil servants in the capitals still want, indeed crave, serving as the channel to the EU for all regional preferences, but this posture increasingly falls on deaf ears. The view in London that Scotland’s interests should be weighed against interests put forward by other parts of Britain doesn’t matter much north of the border.
The wave of austerity rolling through all of Europe reinforces the separatist sentiment. During the industrial age, in particular when the welfare state was introduced, the center or capital was shuffling large sums of money around via taxes and welfare payments to and from the regions. Then, it seemed quite the gamble to cut this lifeline. Now such fiscal transfers are falling by the wayside as the state pulls back from the super welfare state. Regions increasingly view themselves as capable, perhaps even better equipped, of competing without the support of the nation-state, and find it less attractive to be part of an acrimonious redistribution struggle.
The European Union is on the radar screen. Not only do the nation-states shave fiscal transfers, but current plans for a fiscal union augur a stronger role for the EU. Plans are being drafted to give the EU some kind of veto over national budgets, further transferring power from the capitals of the nation-states to the EU, stimulating regions to strike their own deals with the supranational political leadership. The proposed banking union works the same way. The regions do not see why their interests and the negotiating about a European supervisory body should be controlled by the nation-state. They may or may not have common interests with banks in other parts of the nation-state, but it cannot be taken for granted, and in some cases they may fear being held hostage to nation-state policies disregarding their interests.
It’s no coincidence that Scotland stands first in the queue to have a go at secession. Britain’s conservative party, the leading coalition partner in the British government, toys with the idea of a referendum about continued membership of the EU. Polls indicate that in the UK as a whole 51 percent of the voters favor leaving the EU with only 34 percent preferring to stay. Inside the conservative party 83 percent want a referendum, and 70 percent would vote to leave. But Scotland has always voted overwhelmingly with the Labour Party and abhors the risk of being forced out of the EU by a political party that enjoys limited support among the Scots. The prospect of the conservative party taking Britain out of the EU combined with Scotland leaving Britain to join the EU might have once seemed like pure fantasy, but no more. Breakup may be the most realistic scenario.
The Scots will vote yes or no to stay in the UK in 2014. The next general election of the British parliament is set for 2015. But if Scotland decides to leave the UK, all dates and plans are up in the air. The vote in Scotland may advance the parliamentary election, giving the EU referendum a dominating role.
Joergen Oerstroem Moeller is a senior visiting research fellow, the Institute of Southeast Asian Studies, Singapore Management University He is also adjunct professor for Singapore Management University and Copenhagen Business School.