Rethinking Europe's Future
David P. Calleo

FUTURECASTS online magazine
Vol. 8, No. 7, 7/1/06


Whither Europe?


"With so many contingent uncertainties, even the most knowledgeable predictions must rely heavily on historical imagination and intuition and ultimately on faith."

  In "Rethinking Europe's Future," David  P. Calleo analyzes a subject that he with commendable candor reminds us is inherently unknowable.

  "Europe's old nation states have left the twentieth century tied into a union that promises a better future. But that union is now embarked upon bold but hazardous experiments with monetary integration and territorial expansion. Its complex institutions are overstretched and need fundamental reforms. Meanwhile, ancient national rivalries smolder among the partners. With so many contingent uncertainties, even the most knowledgeable predictions must rely heavily on historical imagination and intuition and ultimately on faith."

Although the U.S. and the EU will likely remain in alliance for various purposes, they have divergent interests and concerns.

  However, today we live in one of those "watersheds of history," he accurately points out. The future is currently malleable - dependent on current decisions and the outcomes of current policies - making a book such as this especially timely.
  The fate of the European Union ("EU") is the central question. Now that the glue of Cold War fears has been removed, how will the EU evolve and expand - strengthen or weaken - economically, politically and militarily?
  The American protectorate benevolently remains in Europe - and indeed has expanded greatly into many of the nations of the old Soviet empire in Europe - assuring the stability and prosperity of the region. However, the author has for decades been writing that this American protectorate is unsustainable. Now, he reemphasizes that opinion in light of post-Cold War economics and political developments.
  Although the U.S. and the EU will likely remain in alliance for various purposes, they have divergent interests and concerns. Writing just before 9/11/01, he presciently points out that the U.S. will inevitably direct its limited military capabilities and concerns to the Middle East and Asia.

  "In the absence of any clear common threat, both Europeans and Americans themselves may grow progressively uneasy about continuing America's traditional postwar military hegemony over Europe. A new transatlantic relationship will have to be found, one in which Europe will depend more on its own indigenous forces, institutions, and balances."

Historic and philosophical context:

  The history of the EU and the forces propelling its development are perceptively summarized by Calleo. Most of the book is an overview of Europe's recent past - a useful reminder of how Europe got to where it is and what the existing trends and forces are that flow towards the future.

  World War I is wisely identified as a primary wellspring for twentieth century history. The earlier history and character of Europe's national states are briefly reviewed to provide important context for modern conditions. Some of the historic philosophical foundations of modern Europe are included.

  However, Calleo is afflicted with two prominent weaknesses typical of certain groups of intellectuals.

  • He fails to distinguish when philosophy constituted a prominent guide to action - as in the development of the Constitution of the United States - and when its role was predominantly that of a makeweight argument for actions taken predominantly for other reasons - as in the modern adoption of mercantilist trade protection policies.

  • He remarkably remains unaware of the blatant stupidity of prominent Marxian concepts. Not only were the "investigations" of Karl Marx not "scientific," they were not even logical. Of at least a dozen major and minor predictions based on the "science" of Marx in Das Kapital, not one proved correct. The errors of logic would provide material for a good course in logic. There were:

  1. Obvious internal inconsistencies;

  2. a basic reliance on tautological reasoning;

  3. selective (one hand clapping) analyses of causation;

  4. numerous distinctions without practical difference;

  5. bald denials;

  6. semantics games based on sly and nonfunctional definitions and redefinitions of terms;

  7. errors of basic mathematical reasoning; and,

  8. a host of omitted essential factors.

  See the six articles on the three volumes of Das Kapital beginning with Karl Marx, Capital (Das Kapital) (vol. 1)(I).

  Jean-Jacques Rousseau, John Locke, and Johan Gottfried von Herder are identified as important 18th century philosophical influences.

  • The "communitarian nationalism" of Rousseau emphasized a shared political culture - a common identity - and institutions that encouraged an ardor for the common good - a shared "general will" to virtue - that might tame the natural conflicts of factions in society.

  The concept of nationalism was powerfully reinforced by the French Revolution and was spread throughout Europe by the Napoleonic Wars. The "nation state" ultimately proved far superior for modern conditions than the previous dynastic authoritarian states. The idealist communitarian view of nationalism prevailed among Europe's continental democracies. It views the democratic state as "a moral partnership of consenting citizens."
  Calleo uses the word "communitarian" to refer to "neomercantilist" policies "serving the ideals of the welfare state." It also applies to some varieties of socialism that emphasize that "fellowship in societal, political and economic arrangements" is more important than competition.

  • A "liberal" view was provided by Locke and other Enlightenment philosophers of the 17th and 18th century. It was not concerned with popular consensus. It focused on "individual liberty and initiative rather than on communitarian solidarity." Conflict becomes irrational and peace can be maintained in a rules-based system under proper conditions of national self-determination, democracy and free markets.

  James Madison favored the liberal view, but suffered from no such idealistic delusions as Rousseau or Locke. He understood that privileged classes - political, economic or clerical - caused conflicts as they tried to maintain or expand their privileged status. He relied upon diversity and a system of institutions to mitigate the natural factionalism in society by obstructing efforts to monopolize power. He devised a system of checks and balances - with sovereignty divided between a federal government and the governments of the states - designed to make it impossible for any one faction to monopolize power and appropriate it for private purposes.

  The difference between these two philosophical viewpoints is quite real - but nevertheless just one of degree.
  Among the many economic myths that Calleo accepts as real is that of "laissez faire." In fact, not even the U.S. has ever had a "laissez faire" general approach to economic policy. A concern for the "general Welfare" is written into the Preamble to the U.S. Constitution, and governance in America has rested on the foundation of a politically, legally and economically empowered civil society that - since the days of Benjamin Franklin - has concerned itself with the collective needs for public endeavors. See the "Civil society leader" segment in Isaacson, "Benjamin Franklin."

  • A "liberal nationalist" view was provided by Herder, a late 18th century German philosopher. He celebrated the diversity of national entities and their cultures. There is no "chosen people" he usefully pointed out. As Calleo sums up Herder's views - views that remain influential:

  "History was a garden where each national flower possessed its own particular beauty, not to be crowded out by its neighbors or uprooted by imperial gardeners. The diversity of cultures was the key to general human progress, and to Europe's own particular vitality."

  Of course, national myths have also been invoked to legitimize domination and oppression and the vast conflicts of the 20th century. Interdependence and the need for cooperation on many fronts is widely noted - but all too frequently this cooperation has been shattered by conflicts arising from competing "sovereign" interests. Taming the anarchy of Europe's nation states became a difficult - and essential - task for modern Europe. Nevertheless, there remains a "Europe of states" rather than a "unified Europe."

  The multitude of independent European states has brought sometimes horrific periodic conflict. But Herder was quite right in his view that such diversity and competition is good for political, social, religious and economic progress. No matter how rigidly fundamentalist some states and clerisies might be, there were always places in Europe where a degree of freedom permitted progress that ultimately forced itself more broadly among the European states.
  The contrast with a unified China is stark. In China, monopoly political power over a continent-wide nation brought all progress to a halt - and yet did not prevent the outbreak of periodic conflict. Japan provides a similar example in an island nation.

New applicants - ardently seeking to be included - have been driven to undertake significant reforms politically, economically and even ideologically to prepare themselves for EU membership.

  The stick of military force had for many bloody centuries failed to unify Europe. Systems of shifting balance-of-power alliances were repeatedly challenged by the dominant hegemonic powers.

  Economic and military power migrated through Europe as the means of transportation and communication improved - first in favor of the coastal powers Spain and then France and England with improvements in sailing ships - then to Germany and then Russia - when the development of the railroads opened their vast inland empires to exploitation.

  The carrot of EU membership, however, has proven far more powerful than the stick of military force. It has driven nations to surrender substantial elements of their sovereign powers. New applicants - ardently seeking to be included - have been similarly driven to undertake significant reforms politically, economically and even ideologically to prepare themselves for membership.

Its major continental components - France and Germany - now suffer stagnant economic conditions and intractably high unemployment levels. The crises in the Yugoslav region "mocked European pretensions to diplomatic and military coordination."

  Nevertheless, the EU suffers many weaknesses, the author points out. Its major continental components - France and Germany - now suffer stagnant economic conditions and intractably high unemployment levels. The crises in the Yugoslav region "mocked European pretensions to diplomatic and military coordination." (It also demonstrated a startling degree of military and diplomatic impotence - which recent EU efforts to deal with Iran have only served to reemphasize.)
  Popular support for the EU has plummeted. However, the EU continues to expand with startling success - spreading prosperity, security, and liberal democratic institutions into many Central European states.
  While some additional elements of integration are likely to take place, Calleo views with realistic skepticism the prospects for further major integration steps among EU members. He raises key questions about its future.

  • How will the EU's relationships with Russia and the U.S. evolve?  If further integration should succeed politically and militarily, it might create conflicts with the U.S. and rising Asian powers - but Calleo is hopeful that it would not.

  • How sustainable are Europe's communitarian forms of capitalism? Europe's expensive labor markets and welfare systems and low levels of research and development are ominous indicators of future problems.

Philosophic foundations of modern Europe:

  Four distinct schools of political and economic philosophy are identified by Calleo as predominant intellectual influences on modern European developments.

  European communitarian economics relies on the state to overcome the shortcomings of the market. Communitarian concepts range from Marxist rejection of capitalism and the nation state, "to various socialist and social democratic or fascist theories." However, modern European communitarian systems have many imbedded liberal economic features - and liberal economic systems like that of the U.S. have increasingly employed communitarian policies to achieve social and economic aims.
  Nevertheless, Calleo accurately notes, there has not nearly been such convergence as to remove the distinction between the two systems. That distinction, with associated possibilities and problems, has to be kept in mind.
  These four differing philosophical views conflict in many fundamental ways - and yet all contribute to the current status and future possibilities of modern Europe.

  It is important to consider even the philosophical views that are blatantly ridiculous - like those of Marx and Keynes - since so many intellectuals - like Calleo himself - suspend disbelief when evaluating some of them. Because these intellectuals continue as a group to influence events - and political leaders remain periodically addicted to Keynesian policies - Europe is fated to repeat many of the failed experiments of the past - and suffer again the dire results of those failures. The U.S. is currently headed towards a repeat of the 1970s, as FUTURECASTS has been warning its readers with increasing certainty in its last four annual Near Futurecasts.
  Thus, despite these weaknesses - indeed, because of these weaknesses - this book provides valuable insights into the future prospects and problems of Europe.

  Calleo's explanations of current conditions and future prospects rely to a considerable extent on these philosophical viewpoints.

  • Friedrich List - a German "liberal nationalist" from the first half of the 19th century - asserted the need for state action to encourage a nurturing civil society for economic development, and to protect infant industries until they could compete with those of Great Britain which had a head start. Free trade was good, but would have to wait until after the infant industries became suitably mature to compete effectively. Education and a communitarian spirit as well as market incentives were needed. State expenditures on such matters were an "investment" in the future, rather than just current consumption.

  "It is not merely the division of labor that makes the modern economy possible, List taught, but the 'union of labor' -- the 'confederation or union of various energies, intelligences, and powers on behalf of a common production.' An efficient union of labor depends on being situated in a cultural community conducive to it, in other words, in a nation with broadly shared cultural and moral values that foster cooperation. Linked to these values are many of a society's nonmaterial elements: culture, morality, communication and fellowship, together with human rights, laws, politics, and national security."

  List was neither rabidly nationalistic nor mercantilist. Protectionist policies were a temporary expedient. (Good Luck!) He recognized the essential interdependence of the many nation states of Europe and their ultimate need to coalesce into broader economic markets. He recognized that free trade and international economic competition provided essential economic discipline and assured open and liberal societies. According to Calleo, the modern EU embodies List's views. (But the EU's import restraints and agricultural subsidies are permanent - and are based on political influence, not the economic interests of the people.)

  • Karl Marx and Friedrich Engels condemned all capitalist systems as exploitative of workers and thus unjust. They promoted an alternative communist system (that would exploit workers to a degree far in excess of the most ruthless capitalist practices of the 19th century). They asserted that the persistent accumulation of greater amounts of capital in fewer hands would ultimately render capitalism chronically unstable. This would stunt demand and fatally squeeze profits. Lenin then emphasized the Marxian myth of the "mature" capitalist state. Capitalism was fending off inevitable decline through expansion at home and abroad, war, and the acquisition of empires.

  Calleo has a massive knowledge of political and economic theory, but exhibits a disconcerting ignorance of the realities of economics. He incredibly accepts much of this Marxian nonsense. He expresses the view that Cold War expenditures served to fend off capitalist economic decline after WW-II. He is far from alone - noting that Marxist ideas "enjoyed an almost hegemonic ascendancy over large segments of the intellectual establishments of the West" before the Soviet collapse. (How could so many "intellectuals" be so stupid?) Nor is he now willing to let go of this infatuation.

  "The Soviet Union's ignominious decay in the later twentieth century has collapsed Marx's popular appeal for a time but may well strengthen it in the longer term. The Soviet Union, after all, was an odious caricature of Marxist principles. In many ways, its very existence shielded postwar Western capitalism. Now that the terrible Soviet experiment is gone, it is easier to appreciate why Marxism exercised so powerful an appeal in the past and to reflect more soberly on its possible relevance for the future. Marx's basic idea that capitalism is unstable by its very nature has had wide currency over several generations. In today's circumstances, it does not yet seem ready for the museum of history."

  Somehow, Calleo neglects to mention that Marxist and autocratic socialist experiments failed disastrously not just in the Soviet Union, but wherever and however they were tried. They blighted the lives of billions of people for several generations. Except in some limited circumstances where subjected to the competitive discipline of international markets, socialist efforts also failed in democratic systems.
  Rather than being confined to the Soviet Union's "odious caricature of Marxist principles," Marxist experiments of all types failed disastrously everywhere. Moreover, all  of these failures can be directly related to economic weaknesses that reflect the numerous errors of logic in Das Kapital.
  Marx stupidly thought every economic recession during his time would be the expected ultimate collapse of capitalism - and those who stupidly accept these views react similarly to every recession to this day. As late as 1992, John Kenneth Galbreath was writing grimly about the limited prospects for recovery from the recession of 1991 - which in reality proved remarkably short and mild. Lester Thurow was similarly grimly certain at that time of the inevitable decline of the U.S. capitalist economy. See, Modern Advocacy Scholars. Apparently, Calleo remains similarly afflicted.
  Recessions, of course, are a natural part of  the capitalist business cycle. They are as inevitable as the imperfections in market mechanisms and the inherent weaknesses in human management - both private and government - that accumulate in prosperous times until they bring on periods of economic reversal. Marxists and other critics of capitalism blame all recessions not on this reality of the limits of human management, but on a mythological chronic instability inherent in "mature" capitalist systems. Yet, it is hard to point to any significant recession or depression in any major advanced capitalist state that wasn't predominantly the result of errors and excesses in government policies.
  That clearly applies to the Great Depression - the poster child for believers in the weakness of "mature" capitalist systems. See, Summaries of Great Depression Myths and Facts, and the Great Depression Chronology series, beginning with The Great Depression, The Crash of '29. Galbreath - in order to support his fall-back ideology of the entitlement welfare state - was ultimately forced to accept the great resiliency and stability of capitalism within its natural business cycle. He did this so he could assert the undoubted ability of capitalism to bear all the burdens of the entitlement welfare state. In this, he was just as wrong as when advocating socialist alternatives by arguing inherent capitalist instability and decline. Such intellectuals do not analyze - they rationalize.

  • John Maynard Keynes accepted the Marxian "mature capitalism" and "savings gap" fallacies, among others. Savings are the villain. They increase in wealthy capitalist systems until they undermines demand and cause economic decline.

  He provided politicians with an intellectual excuse for the irresponsible policies of budget deficits and monetary expansion that they anyway wanted to adopt to delay the time when they would have to face the difficult political chore of tackling their own dysfunctional economic policies. We can thus expect to be periodically afflicted with repetitive variations of the 1970s.

  Calleo blandly accepts the absurd notion that savings were just too great to permit full use of productive facilities - and thus were the primary cause of economic instability in the 1920s and 1930s.

  This belief is only possible for those who are totally ignorant of the realities of modern banking and money markets. ALL savings are readily put back into circulation throughout ALL prosperous periods. Not until a depression has already plunged to significant depths do savings lie idle in bank vaults and mattresses.
  In any event, wealthy people in advanced capitalist systems rely on asset wealth and their credit for reserve purposes. They thus actually save much less than people in undeveloped or developing economic systems. See, Keynes, "The General Theory," Part (II), "Keynesian Monetary and Fiscal Policy."
  The "mature capitalism" fallacy gains credibility because of the Malthusian fallacy that infected the work of David Ricardo. See, Ricardo, "Principles of Political Economy," "Introduction" and segment on "Wages." It appears in Adam Smith, written well before Malthus. See, Adam Smith, "The Wealth of Nations", Part I, "Market Mechanisms," segments from Book I on "Wages," "Profit rates and interest rates," and "Mature economy fallacy." This weakness in these classics infects economic thought - especially about labor markets - to this day.

  Keynes became the darling of the governing political class - and undoubtedly the most influential economist of the 20th century as Calleo asserts. The author readily notes the rock upon which Keynesian  demand management policies must eventually crash - their noxious impact on a nation's international accounts. Nevertheless, he incredibly attributes the collapse of Keynesian demand management efforts in the 1970s to a weakness in international financial institutions rather than a weakness inherent in Keynesian policies.

  No institutional response can have more than a temporary palliative impact on the problems of inflationary Keynesian policies. Administered alternatives MUST ALWAYS result in the worsening of such problems. See, Understanding Inflation.

  With the collapse of Keynesian demand management efforts in the 1970s, it was time for the ascendancy of a fourth economic theory.

  • Friedrich von Hayek provided a "rejuvenated liberalism" in the middle of the 20th century that became dominant by the end of the century. He advocated free markets, but emphasized that governments were responsible for the establishment of suitable rule of law systems and for providing for the general welfare. "In short, where Marx and Keynes emphasized the destabilizing tendencies of market freedom, Hayek emphasized the dangers of unlimited state power, draped in good intentions and driven by technocratic arrogance." See, Hayek, "The Road to Serfdom." His influence was felt - selectively - even in the EU, which by the 1990s was mired in "Eurosclerosis."

  ""His teachings were embodied in the European Union's drive to achieve monetary union around the strict fiscal and monetary regime imposed by the Maastricht criteria, and the subsequent Stability and Growth Pact. In effect, Hayek was appropriated by continental communitarians -- not to abolish the postwar welfare state but to rejuvenate it with a diet."

Legacies of the Cold War:



  The realities of Cold War Europe and the legacies that remain after the collapse of the Soviet Empire are examined by Calleo with commendable humility and appreciation for complexities. His approach to providing some understanding of this complexity is to divide the subject into three broad "systems" plus relations with Russia and other East European states.

  The Atlantic Alliance, the Common Market, and globalization are three dominant factors that powerfully influence conditions in modern Europe.

  "Each system embodied a distinct worldview, drawing different lessons from history and a different vision of the future. Each had its own inner logic, dynamism, and evolutionary path. But each also grew up in close company with the others, in criss-crossed relationships, sometimes antagonistic but frequently reinforcing. As a result, it is impossible to tell the story of one without regularly referring to the others."

  The author explains how the Soviet threat drove the various Western European states into deepening collaboration with each other and with the U.S. - forcing a harmonization of a variety of often disparate national objectives. There was also the need for the other European states to feel secure living in proximity to a rapidly reviving Germany. He readily (stupidly) credits Cold War government spending for overcoming the mythical insufficient demand of the capitalist systems and for enabling the post WW-II successes of capitalist systems. More cogently, he summarizes the political and international developments that ultimately led to the current EU and its relations to America, Russia and East European states, and the global economy.
  The end of the Cold War neither ended the development of the EU nor changed the varying perspectives and practices of the several "systems." There was, instead, "more a redefinition and rebalancing of these old systems." How they are likely to evolve will determine how the EU will evolve.







  Prospects for Russia remain grim, Calleo notes, due to its communist heritage of a dysfunctional economic system - the lack of a legally, economically and politically empowered civil society - and the corruption and demoralization of its elites.

  High oil prices are providing a respite from these problems - but these high oil prices are temporary - and Russia is not using this time well to get itself straightened out. Russia is currently accumulating massive financial reserves - but reserves are no substitute for an efficiently functioning broad based economic system.

The Soviet Union demonstrated all the economic and political weaknesses and instabilities that Marx envisioned for capitalist systems.

    The financial strains of the Cold War led to  overspending, deficits and inflation in the West. (So how could Calleo believe this was the foundation for capitalist economic success?) However,  they led to economic collapse in the rigid Soviet system. Calleo perceptively notes that the Soviet Union demonstrated all the economic and political weaknesses and instabilities that Marx envisioned for capitalist systems.

  Also, the absence of the "valueless" capitalist financial and commercial systems - and thus the absence of the "benefits" that Marx recognized that these systems provided - destroyed much of the "value" of communist labor.

  With the passing of the WW-II Soviet leadership generation, Soviet elites became increasingly disillusioned as their economic system failed to fulfill Marxist expectations other than as a means of total repression and control. The Soviet economy was even failing to maintain military capabilities.

  And, there was no brake on corruption - which just grew inexorably. As all pretense to higher purposes dissolved, party and economic elites increasingly concentrated on padding their own nests. Detent opened opportunities for elites to acquire Western consumer goods, and undermined Soviet fears of Western military intentions. The Soviet system became increasingly dependent on imports of Western goods and technology.
  Calleo's review of the final decade of the Cold War and the Soviet Collapse is sketchy and inevitably lacking in important details. See, Gaddis, "We Now Know," Kotkin, "Armageddon Averted," and, Meier, "Black Earth." Nevertheless, the important fact for purposes of this book is the collapse itself.
  The author summarizes the positive aspects of the Soviet Union's role after WW-II. It acted as the glue that ultimately overcame the "German problem" and led to the EU. It controlled the quarrels of the Central Asian and Eastern European states. (By promoting insurgencies, it also catalyzed the breakup of the Western European empires.)

Prospects for Europe:





  The 1990s posed many questions for Europe:

  • How would Russia evolve?

  • How far to the east could the EU extend its stabilizing influence?

  • Could Europe remain comfortable with an enlarged Germany?

  • Would Germany - and Europe - remain content with dependence on U.S. military strength?

  • What would the U.S. do with its dominant position?

"The very existence of an Atlantic Alliance helped to calm those Europeans whose natural inclination was to fear continental integration."

  "Atlantic Europe" remains tied to the U.S. economically, culturally, and still in many ways militarily. Mutual interests still predominate in the diplomatic sphere as well. Despite some strong conflicts of interest between the U.S. and the EU, the U.S. remains a strong - indeed an essential - supporter of a successful and expanding EU.

  "In general, moreover, the American presence made it easier for Europeans to integrate. NATO provided collective security without requiring Europeans to resolve highly divisive military issues among themselves. And the very existence of an Atlantic Alliance helped to calm those Europeans whose natural inclination was to fear continental integration."

By entering a consensual confederacy, European states become actors in determining policies that affect all the interdependent states of Europe. They gain freedom within the confederation. They are no longer just objects reacting to the policies of others.

  However, powerful divergent forces continue to strongly influence prospects for Europe. Federalists vie with confederalists over the evolution of EU governance.
  The "Europe of states" is based on the belief that the individual European states will become stronger as confederated parties in the EU. By entering a consensual confederacy, European states become actors in determining policies that affect all the interdependent states of Europe. They gain freedom within the confederation. They are no longer just objects reacting to the policies of others.

  "In actual practice, this has been the postwar experience of Europe's states with their Community, which explains its success and durability."

  Of course, the whole exercise could fall apart - in part or in whole - at any time. The ties that bind are not military. However, the economic and diplomatic advantages are very real and remain very powerful incentives. The political miracle of the EU remains in place.
  In reality, the current EU is a mix of federal, confederal, Atlanticist and nation state systems. It is composed of economic markets at all levels, non-state actors, civil society and much more. Thus, questions of identity, loyalty, and authority become "inevitably complex." The balances remain "forever subtle and dynamic." Divisive forces continue to be held at bay by the immense advantages all have gained as EU participants.

  Like the federal government of the U.S. during most of the 19th century, the EU offers many benefits and imposes few obligations - and so it continues to expand by the force of attraction. An EU with a stronger central government would be a less attractive EU.

"Not surprisingly, the European Union has been more successful in the economic sphere than in the diplomatic or military spheres, both of which often require rapid and decisive action to be effective."

  France and Germany have been the major actors in the formation of the EU. Calleo provides considerable insight into this essential EU relationship. He sums up:

  "In short, France and Germany have together created a hybrid hegemony to go with a hybrid Europe. The hybrid hegemony has some special advantages. Collectively, it tends to be more sensitive to the rest of the union. When France and Germany do settle on a policy together, it usually has more appeal and legitimacy for the rest than a policy backed by only one or the other. There are also obvious disadvantages, which grow apparent whenever quick decisions are needed and the couple have differences that take time to resolve. Not surprisingly, the European Union has been more successful in the economic sphere than in the diplomatic or military spheres, both of which often require rapid and decisive action to be effective."

  The problems of enlargement during and after the Cold War are also covered. To a large extent, these problems remain unresolved.
  Calleo provides a reasonably accurate factual sketch of EU economic development from the 1960s through the 1980s. Unfortunately, this aspect of the book is marred by glaring gaps in economic understanding.
  He blames international money markets and their participating speculators for the numerous currency crises of the last few decades. This completely ignores the obvious dominant influence of the pertinent irresponsible economic and financial policies of governments, reckless private leveraging decisions, and the inevitable existence of marginal facilities - all of which accumulate during prosperous times.
  However, he is nevertheless correct when setting forth factually some of the adjustments made to deal with floating and adjustable exchange rates and failures of expansionist Keynesian economic policies. He also explains the problems of Eurosclerosis - the mix of welfare and rigid labor market policies that undermine European economic vitality.

  The role of the U.S. in Europe after the end of the Cold War has been the subject of much speculation.

  When the Cold War ended, the much feared military-industrial complex promptly collapsed as it always does in the U.S. when conflicts end. Defense spending as a percentage of GDP was cut in half - back to levels not seen since before WW-II. Congress had other uses for such funds, and many aspects of military preparedness were greatly reduced and constrained - most notably in the intelligence services.

  Nevertheless, as Calleo notes, Russia remains a possible threat, Europe remains frightened of living with a suddenly enlarged Germany, Germany doesn't want to be an object of fear for Europe, and other potential European quarrels - such as those that broke out in Yugoslavia - provide ample reason for a continued if much reduced U.S. military presence.

The EU thus remains "a confederacy of sovereign nations" that finds their sovereign powers reinforced rather than weakened by membership.

  Incentives for the additional surrender of sovereign powers to the EU have been considerably reduced by the end of the Cold War. The EU thus remains "a confederacy of sovereign nations" that finds their sovereign powers reinforced rather than weakened by membership.

  "The lesson of the EU's postwar history was, therefore, that integration succeeds when member states can compromise around broadly shared interests, particularly those shared by France and Germany. Cold War experience also suggested that European integration works best as a civilian project. Its difficulties mount in the realms of security, defense, and geopolitics."

  Expansion further into Central and Eastern Europe increases the difficulties of policy integration. It thus undermines prospects for the development of unified diplomatic and defense capabilities that are essential if Europe is to play a leading role in some future pan-European system of balanced powers. See, "Pan-European arrangements," below.

Communitarian instincts remain strong in France and Germany and several other EU states, and many mercantilist policies remain in force. Internal political pressures favoring communitarian policies that benefit the politically influential at the expense of the nation as a whole remain a feature of democratic politics.

  The communitarian capitalist systems of Europe were shocked by the collapse of the Soviet Union, Calleo notes. (Again, he fails to note the wide variety of other communist and socialist systems all around the world that collapsed at the same time.) These EU states responded - some more grudgingly than others - with various deregulation and privatization reforms.
  However, communitarian instincts remain strong in France and Germany and several other EU states, and many mercantilist policies remain in force. Internal political pressures favoring communitarian policies that benefit the politically influential at the expense of the nation as a whole remain a feature of democratic politics.
  Eurosclerosis continues - especially in France and Germany where communitarian and welfare state policies continue to be strongly supported. Rigid labor markets result in intransigent rates of unemployment of around 10%. European economic competitiveness falls behind. The German effort to quickly pull East Germany up by means of state investments and welfare payments not only failed but also destabilized monetary systems throughout the EU. Public dissatisfaction with national political leaders and the EU has increased sharply.

The European Monetary Union:



  The establishment of the European Monetary Union on time in 1998 was a significant political accomplishment - especially considering all these difficulties. Calleo accurately summarizes the benefits of Europe's new common currency - and the reasons why the results have been disappointing.

  The euro eliminates transaction and hedging costs, facilitates competition, encourages cross-border investment, and eliminates national incentives to inflate currency. However, Europe lacks flexible cross-border markets for labor, goods or services - and considerable market rigidities exist within many of the member states.
  Calleo - with his strong belief in Keynesian fallacies - asserts that monetary manipulation within states could overcome many of the difficulties of these rigid systems.

  "Changing exchange rates will be an easier way for these diverse parts to adjust to new competitive conditions than trying to change sticky prices and wages directly, or trying otherwise to force adjustments that meet strong social, cultural, or political resistance. In other words, trying to impose homogenous monetary conditions within too diverse an area can be expected to be more damaging than the extra costs of exchanging currencies or the costs that come from shifting exchange rates."

  With thinking like this, there will never be any end to society's periodic affliction by inflation. Calleo and similar intellectuals continue - determinedly - to ignore the obvious limitations of monetary manipulation - no matter how often such efforts drive nations off an inflationary cliff.

Many European states are prevented from responding to changing conditions by welfare systems, unions, rigid markets that are politically untouchable, and the vested interests of those with political influence.


By itself, the euro cannot make up for all the various economic policy weaknesses that afflict the various EU states.

  Many of the European states are blocked societies. Calleo notes that they are prevented from responding to changing conditions by welfare systems, unions, rigid markets that are politically untouchable, and the vested interests of those with political influence. He acknowledges that Europe's experience during the 1970s led it to reject national policies of monetary manipulation, thus paving the way for acceptance of the euro as the single European currency.

  Incredibly, Calleo cites the U.S. experience as proof that a large economic entity can prosper with a weak currency - despite the failures of U.S. monetary manipulation policies during the 1970s. The U.S. is currently condemned to repeat those failures. He also cites British prosperity after it left the previous European Monetary System in 1992. He completely omits mention of the Thatcher reforms that accompanied the initial devaluation and the subsequent resulting strengthening of the pound.

  However, he correctly recognizes the substantial protection from outside financial shocks bestowed on euro states by the strength of the euro. He accurately notes that the euro could - indeed, is - slowly joining the dollar as one of the world's primary reserve currencies, with all of the numerous advantages that accompany that status.
  In the event, the euro has been conservatively managed by the European Central Bank with good results. France and Germany have too much at stake to permit the euro to fail, Calleo points out. As a rival to the dollar as a reserve currency, the euro provides one of the props that are essential for EU economic, political, diplomatic and military power. However, by itself, the euro cannot make up for all the various economic policy weaknesses that afflict the various EU states.


  Europe reacted badly to globalization.

   Communitarian policies reduce economic competitiveness and flexibility. The ability to adjust is greatly reduced. In EU communitarian nations, unemployment soared to double digit levels in the 1990s and remained chronic at or near 10% - concentrated in the young.

  "Triumphant global capitalism was challenging Europe's postwar welfare states, with their corporatist mentalities and self-indulgent communitarian bargains. And the EU, with its cumbersome machinery and lavish handouts, seemed to rob Europe's states of the capacity either to adapt rapidly to competitive markets or even to protect their communitarian values. In effect, globalization was threatening to make Europeanization obsolescent."

  Despite recognition of the limitations and abuses of communitarian economic policies, Calleo accepts much of the current intellectual criticism of globalization. The movement of production to more efficient sources is called "free riding" for failing to support conditions in higher-cost nations. He accepts the nonsense about the "withering away" of the political power of states within their own borders.

  Such "power" has never actually existed. States - and those of their peoples who lack political influence - have for centuries been punished - often severely - for protectionist and autarkic policies.

  Globalization, however, is not without some important real problems, as Calleo notes. Most important, production workers are less mobile than capital - especially the least skilled workers.

  EU nations have responded in various ways to different aspects of globalization. The author examines responses to financial globalization, international markets in goods and services, direct corporate investment, and labor market impacts.
  In finance, volatile exchange rates generated huge markets dedicated to hedging instruments. Calleo blames the messenger - the markets - for the monetary crises generated by obvious failures of government economic and financial policy and excesses in private leveraging. These markets are "monsters" driven by "speculators" that destroy the ability of governments to sustain the irresponsible policies that have made fixed or otherwise stable exchange rates impossible. Yet, he is well aware of the variety of views contrary to his own.

  Writing in 2000 and the beginning of 2001, soon after the Asian Contagion series of monetary crises, Calleo's book does not reflect the reforms forced on the stricken states - or the rapid recoveries of the most flexible systems. He still writes of "chaos" and lack of sustainability - one of the obvious fallacies of critics of capitalism and competitive markets for almost two centuries.

  Europe responded by implementing the European Monetary Unit - ending volatility in European currencies and establishing the euro as a rival to the dollar as the world's most reliable currency.

Many European nations remain hostile to foreign mergers and acquisitions of national firms - even when the acquiring firms are from other EU nations.

  In international trade, government mercantilist policies have always played a role. Calleo sketches some of the recent characteristics of European and U.S. diplomatic, protectionist, subsidy and other efforts on behalf of politically influential domestic producers. Here, too, a global market still powerfully influenced by mercantilist policies has provided powerful incentives for the development of unified European policies through the EU system.
  Foreign direct investment, international commercial agreements and international licensing have expanded greatly during globalization. Approximately 20% of foreign-owned assets is owned by the 100 largest transnational corporations. The U.S., EU and Japan account for almost 90% of these foreign owned assets, and receive well over 50% of the investment.
  However, many European nations remain hostile to foreign mergers and acquisitions of national firms - even when the acquiring firms are from other EU nations.

  Organized labor is threatened by globalization and engages in widespread obstruction to it. Calleo sums up his views on this contentious issue.

  "Europe's generous benefits and high standard of living depend ultimately on its remaining competitive. But competitiveness in rich societies depends not only on a high level of skills and infrastructure, but also on social peace. In many European states, social cooperation is closely linked to the smooth functioning of various corporatist structures that compel a broad consensus. At times, such structures seem a serious handicap, particularly for welfare states in need of reform. Nevertheless, Europe's overall postwar experience suggests that the effort needed to cultivate and sustain a broad national consensus is worth the trouble. - - - For rich and well-endowed Europe, the optimal strategy for attracting investment and sustaining competitiveness should be not to degrade home labor, but to increase its quality, as well as to enhance further the continent's already highly cultivated physical, social, and cultural environment. Continental Europe's high unemployment throughout the 1990s, however, indicated that a successful balance between competitiveness and welfare had remained elusive."

  Global commerce is certainly not laissez faire commerce. Calleo notes the widespread activities required of governments to facilitate global commerce.

  "Much of the competition for investment concerns assets where the state's role is critical -- a well-trained work-force, social peace and discipline, infrastructure, technological research facilities, transparent property rights, laws and regulations without arbitrary interference, tax holidays and other direct or indirect subventions, and diplomatic assistance to secure favorable treatment."

  Calleo labels this type of activity as "neomercantilist," as if it were some novel modern departure from traditional capitalist economic policy. However, some of this is just the traditional activities always required for successful capitalist commerce. Governments of advanced capitalist states have always provided property rights, rule-of-law legal systems, physical protection, infrastructure, and much more, to facilitate the people's commerce. Policies only  become "mercantilist" when they facilitate the commerce of the politically influential at the expense of the people as a whole. Laissez faire is and always has been a myth. See, Future economic myths, segment on "The 'Laissez Faire' Straw Man."

Thus, the different national markets remain largely distinct, with the various national firms cooperating by means of strategic partnerships for particular purposes rather than combining in a formal way.

  Consolidation has nevertheless proceeded in response to competitive pressures. European integration and direct investment between EU states is widely - but hardly universally - viewed as supporting European integration. However, England is the only major EU nation to broadly accept foreign takeovers of major national firms.
  Thus, the different national markets remain largely distinct, with the various national firms cooperating by means of strategic partnerships for particular purposes rather than combining in a formal way.
  Calleo accurately expects further economic and financial development to reflect confederal national characteristics rather than to evolve into federal European structures. Individual European states remain fiercely committed to the national characteristics of their major economic and financial entities. "Every European country has its own structures of ownership and power, with public and private sectors, woven together in unique ways." Imaginative methods of cooperation with European as well as with American firms will certainly be employed, but Europe's ancient national and neomercantilist structures will not disappear.

  Labor market impacts of technological developments by themselves and with globalization are perceptively explained by Calleo. As the pace of change accelerates, both benefits and costs of adjustments increase sharply. Many European states have reacted to the human and social costs with resistance to the adjustment process - and have been afflicted with sclerotic economies and chronically high unemployment levels. Market pressures for change increase remorselessly.
  Public support for the neomercantilist state remains strong
even at the cost of increasing economic and financial problems and loss of competitiveness. However, Calleo expects these pressures to induce public support for increasing labor market and economic integration within the EU.

  "Protectionism on a collective European scale should be more effective and less costly than individual national protectionism. How far European neomercantilists and communitarians actually do embrace protectionism is likely to depend on how disruptive and traumatic the consequences of technology and globalization turn out to be in coming decades."

  But then, Calleo reveals his Malthusian tendencies. He believes that the huge low-wage and high-skilled labor pools of China and India will produce too great a shock for Western and Westernizing nation labor markets to absorb. Adjustments cannot possibly occur rapidly enough to adequately employ the displaced workers, he confidently states.
  Revealingly, he expects the initial blow to fall first on competing developing nations - and stupidly attributes the Asian Contagion series of financial crises in large part to competition from China.

  The resilience and rapidity of recovery by the Asian Tiger states quickly revealed yet once again the stupidity of Malthusian and similar Marxian concepts. Those looking for holes in the capitalist doughnut somehow find Malthusian fears irresistible - no matter how often their imminence is confidently predicted and fails to materialize.

  The author candidly notes previous failed Malthusian expectations, but concludes that Asia's billions of workers will be too big a pig for world capitalism to conveniently swallow.

  Government efforts to protect labor markets from this mythical problem will cause world capitalism far more trouble than cheap labor from China and India. Capitalism ALWAYS thrives on expanding markets - and the markets of China and India constitute vast expansions of world markets.

Calleo repeatedly describes liberal economics as a type of religious faith - rather than as a collection of oft proven concepts.

  The need for the EU to accommodate cheap labor from Eastern Europe, Turkey and North Africa is also thrown into this mix. Calleo feels thus impelled to consider protectionism as a proper response for Europe. Repeatedly, he describes liberal economics as a type of religious faith - rather than as a collection of oft proven concepts. He recognizes the liberal arguments against protectionism - but in a casual manner. He accuses liberals of too tolerant an attitude towards the growth of inequality and the adverse impacts that globalization has on important segments of Western labor. Reactions against globalization are thus viewed as justified.

  "Under present circumstances, with Western living standards threatened by global labor markets, not only is an increase in protectionism and neomercantilism probable, but arguably, it is also desirable. An efficacious mix of protection for older industries and neomercantilist subsidies for new ones seems very much in order. And if mainstream politicians fail to protect Western living standards, they will predictably be shoved aside by less conventional political forces [that are already visible]. - - - How long, for example, can traditional elites stay in power when unemployment rates are over 10 percent or when youth unemployment is 25 percent,  - - -?"

  However, it is communitarian and mercantilist policies that cause this unemployment - not globalization. Now, as always, it remains the most open and liberal economic systems that are the most prosperous. Unfortunately, intellectuals like Calleo persist in trying to confuse the public over these facts.

  He expects a "general drift toward neomercantilism and protectionism." While he recognizes that these policies might fail, he believes they can be rationally designed to promote sufficient competitiveness to succeed.

  "Achieving effective policies and disciplining them in the interest of international comity requires a broad philosophical framework, one that honors economic values but synthesizes them with the moral, political, and geopolitical values that are certainly no less relevant to public policy, or indeed to lasting economic success itself."

  This is an impossibility as a matter of both politics and economics. It cannot be repeated too often: It is political influence - not economics or philosophical values - that drive protectionist policies.

  Friedrich List provides the philosophical basis for such policies. They are an appropriate melding of liberal and national communitarian policies. List favored international trade - but believed it should be managed to meet national purposes.

  "List neither expected nor wished that global integration would progressively enfeeble and atomize nation states. A truly liberal international order would, he thought, base itself on the cooperation of national governments that recognized each other's vital functions and respected every nation's right to have its own space to develop."

    The EU "more or less" conforms to List's vision of a European confederation that balances national competition with "a shared sense of social justice, humane values, mutual respect, and common geopolitical interests." Calleo asserts that List would support neomercantilist and protectionist policies as part of the remedies for Europe's structural unemployment - certainly not for individual states, but for the EU market as a whole. The author accurately notes that this was what the U.S. was like in the 19th century - liberal and diverse internally but autarkic externally.

  But the U.S. was not then burdened with welfare state programs, high tax rates and regulatory burdens, inflexible labor markets, and entitlement subsidies.

  Calleo casually assumes the possibility of a global commercial market sensibly "managed" by its major components - especially the EU, the U.S., and the major states of Asia.

  This is an international version of the "industrial management" policies discredited in the 1990s. However, it is on a vastly larger, more complex, and more impossible scale.
  Intellectuals like Calleo never surrender dreams of vast administered economic efforts. They simply cannot acknowledge the inherent ineptness of government management and the impossibility of achieving their noble goals by means of complex administered economic systems. See, Government Futurecast, Part II, "Government management."

The EU constitution:



  EU constitutional development and problems are set forth by Calleo - accurately reflecting the difficulties that arose subsequent to publication of the book. He views the European Parliament as the best available institution for mitigating these difficulties, but realizes the difficulties of establishing sufficient cohesion for effective action with a parliamentary membership drawn from different nations.

  EU constitutional developments as of the Nice summit at the end of 2000 are summarized by Calleo. It's a mixed and complex bag of compromises and accommodations. Some progress was made, but the result did little to enhance the unity and influence of the EU.

  "To make a parliamentary system work requires political parties that can form majorities unified enough to sustain a disciplined and coherent government. To have a political system of such parties requires a reasonably integrated political culture. Such cultures do exist within most European nation states, but they are the fruit of a long historical development, generally within a shared language and culture, as any good nationalist theorist of the nineteenth century would have been quick to point out. - - - De Gaulle would conclude that, since Europe is not a nation, it should not attempt to be a state. It should remain a confederacy -- a Europe of States."

  These constitutional problems are similar to those that beset the U.S. at its constitutional convention in 1787. There are representation issues between big states and little states - conflicts between those who want a strong central government and those who want to retain the rights of the individual states - and conflicts between agricultural and industrial and commercial interests. See, Bowen, "Miracle at Philadelphia (I)," and Bowen, "Miracle at Philadelphia (II)."
  However, for the EU, the existence of the benign environment created by the U.S. security umbrella and liberal U.S. commercial leadership greatly reduce incentives for surrender of sovereign powers to a central government. Thus, the EU remains a consensual confederation of states existing for particular limited - albeit undoubtedly very important - purposes.

  Through the various EU institutions, the EU nations negotiate, compromise with and accommodate each other. Generally - although lacking in efficiency or dispatch - they manage to get things done surprisingly well.
  Calleo notes that the prospects for any cohesive diplomatic or military initiatives under such governance is not promising. The new EU members are burdened with relative poverty and many have a political heritage of communist governance that may, the author fears, render them unable to constructively participate in this complex system.

  The concept of "variable geometry" has arisen in response to such problems. Groups of EU nations - each still sovereign - can agree among themselves to move forward on various aspects of federalist integration - always open to adherence by other member states.
  However, initial portents for this approach have not been propitious. No EU states have indicated any appetite for further surrender of significant sovereign powers. The European Monetary Union ("EMU") administered by the independent European Central Bank ("ECB") remains the most recent success for this approach.

  The euro continues to confound its critics with its increasingly obvious success - which is also undoubtedly beyond the expectations of a skeptical Calleo. Further integration on particular aspects of governance - such as in the area of law enforcement - continue to occur as the needs become apparent.

  Much more problematic has been the experience with the Common Foreign and Security Policy. Calleo's skepticism here seems amply justified by subsequent developments. The EU members are unlikely to surrender national control over foreign policy and defense.
  The EU has thus developed slowly - organically - as new integrative elements have been suggested and some have been implemented. The Franco-German alliance has provided its driving force. It has proceeded only so far as these two major nations have been able to agree to move it.

EU expansion:

  A host of new - poor - states clamoring for entry raises difficulties. Their admission will be expensive and require long transition periods.

Popular support for further broadening dropped precipitously as the beneficiaries of existing subsidies and grants sought to hang on to their benefits - and Germany tired of being the EU's cash cow.

  The EU's corporatist economic policies put social and political values ahead of market efficiency and increase the difficulties of EU expansion. These policies include various subsidies and grants to encourage convergence upwards, and a wide array of regulations that inevitably slow it down. East Germany epitomizes the difficulties of this approach.
  Popular support for further broadening dropped precipitously as a result as the beneficiaries of existing subsidies and grants sought to hang on to their benefits - and Germany tired of being the EU's cash cow. Enlargement also inevitably diluted EU cohesion, which had revolved around German-French leadership. (This loss of cohesion and reduction in leadership position has been much resented in France.)
  Nevertheless, security considerations have predominated. Broadening has proceeded into Central Europe - both for the EU and NATO. Calleo noted the strength of this security interest and emphasized the economic benefits, but overestimated the difficulties the new states would experience in transitioning to EU and EMU status. He fears the revival of old European rivalries - which, in the event, have been swamped by the massive benefits of enlargement.

Pan-European arrangements:



  Through association agreements with neighboring states in Eastern Europe and North Africa, and with old colonial dependencies, the EU has offered many benefits and extended its influence beyond its borders. The evolution of further pan-European arrangements - to include such important states as Russia and Turkey - will depend on EU cohesion that Calleo fears could be undermined by too rapid an effort at expansion.

  NATO has expanded further than the EU. NATO enlargement is covered at some length and viewed critically by Calleo. He perceptively noted that the extension of NATO so far east into the Baltic region would infuriate Russia, would be difficult to actually defend, and depended on the dubious view that Russia was finished as a great power.
  Calleo believes that this NATO expansion undermined any hope of pan-European cooperation with Russia. Russia quickly became unhelpful with respect to the conflicts in the Yugoslav region (and in subsequent conflicts as well).

  The author frets that Russian hostility to NATO enlargement undermines any likelihood of Russian assistance if containment of China is ever required. Without this hostility, it would seem that Russia's long vulnerable lightly populated border with China would induce it to seek good relations with the U.S. Instead, it has been thrown into China's arms and increasingly cooperates with China.
  Writing during the waning years of the Yeltsin administration in Russia, Calleo emphasizes the EU need for Russian cooperation. He is highly critical of the reluctance of the U.S. to support Russian influence or rely on such Russian assistance in dealing with international crises, whether in the Balkans or the Middle East. Repeatedly employing such pejorative terms as "triumphalist," "neo-imperialist," "hegemonic," "hubris," Calleo heaps criticism on U.S. international policies during the 1990s, and views U.S. actions as additional reasons for further development of an enhanced EU diplomatic and defense capability.

  Despite all the perfervid criticism of U.S. actions during the 1990s - and even since the subsequent initiation of conflicts in Afghanistan and Iraq - the EU member states remain as a practical matter content with U.S. military and diplomatic leadership. U.S. actions remain too benign and reassuring to warrant the surrender of sovereign powers and the dedication of substantial resources required for development of a competing robust EU diplomatic and defense capability.
  Europeans favor efforts at  conciliation (appeasement?) rather than confrontation in dealing with threatening international situations. However, conciliation and "soft power" failed in the Yugoslav region and have so far had little impact on Iran.
  How far should conciliation go? Would Calleo favor conciliation of Russia by the refusal of support for democracy movements in East European states like Ukraine and Georgia? Would he conciliate Middle Eastern threats by turning against Israel? China, by turning against Taiwan? al Qaeda by surrendering Spain?
  With European intellectual attitudes like this, the new NATO members in Central Europe and the Baltic states are unlikely to rely on any independent EU defense force for their security from an increasingly assertive Russia.
  The ghost of Czechoslovakia hovers over conciliation policy. Efforts at conciliation from a position of strength are noble. Efforts at conciliation from a position of weakness are disastrous.

The U.S. is constitutionally not organized to employ hegemonic - let alone imperial - international power. The U.S. is thus inherently a benign - if not always wise - super power.

   The author looks forward to a multipolar world balanced between U.S., EU, Chinese and perhaps Russian spheres of influence - all induced by interdependence to somehow cooperate in a pan-European effort to maintain the peace.

  "The pluralist vision, - - - shuns hegemonic 'hyperpowers' and favors a variety of regional systems with a global balance and a division of responsibilities among several clusters of power."

  He correctly notes that the U.S. is constitutionally not organized to employ hegemonic - let alone imperial - international power. The U.S. is thus inherently a benign - if not always wise - super power.

  Perhaps that's why left wing rants about U.S. "neoimperialism" and "hyperpower" draw so little real concern.

  However, as Calleo candidly and repeatedly notes, the U.S. conduct of its leadership role after WW-II was both wise and successful.

  Indeed, it has been incomparably superior to that of the major European powers after WW-I - or indeed during any other period other than the Pax Britannica after the Napoleonic Wars. But that was accompanied by the golden age of European imperialism.

  He correctly notes that America's multiple financial deficits will inevitably bring about economic decline in the not too distant future. This will undoubtedly enhance the role of the euro (as long as the ECB continues its disciplined monetary policy).

  However, the U.S. economy remains flexible and resilient enough to recover rapidly from such periods of decline. With a return to reasonable disciplined economic policies, the U.S. will yet again move on to even higher levels of prosperity and economic power.

"Close Russian cooperation is needed to manage" many of the EU's security problems as well as the economic interdependent relationship with Russia itself. U.S. challenges to Russian influence in Russia's "near abroad" undermine EU efforts to conciliate Russia and gain its cooperation.


Russia remains a threat. Thus, maintenance of the Atlantic alliance between the U.S. and EU is realistically viewed as essential.

  He warns that extending the EU and NATO too far will overstretch both America and Europe. He draws the line to exclude Ukraine. Russia's influence in the trans Caucuses and in Central Asia, too, should not be challenged. He warns perceptively that the EU and the U.S. "have neither the means nor the vocation to master" the "swarms of demons" that afflict those territories.
  He fears revival of German ambitions in Central and Eastern Europe more than a revival of Russia as the hegemonic power in these regions. However, the ultimate international catastrophe would be the collapse of Russia - loosing all those "demons" into an anarchic environment. "Close Russian cooperation is needed to manage" many of the EU's security problems as well as the economic interdependent relationship with Russia itself. U.S. challenges to Russian influence in Russia's "near abroad" undermine EU efforts to conciliate Russia and gain its cooperation.

  However, Poland, too, is now a member EU state, and it sees its interests advanced by stable and democratic systems in Ukraine and eventually in Belarus.
  The U.S. "hegemonic" power is unique in that it does not seek and is not dependent on maintaining dominance. It succeeds by creating regions of increasingly strong independent and reasonably democratic states able to defend themselves with minimal U.S. military support. The EU itself is a prime example. This policy has not always been successful, but major successes have been achieved. These successes don't result in overstretch - they actually reduce the potential for conflicts requiring U.S. military intervention. Again, the EU is a prime example.
  In this first half of the 21st century, Russia, itself, would be the great prize for this policy. However, as yet, Russia appears at least one generation - and probably two generations - away from being able to sustain a truly free political system. Its economy is still dysfunctional - rendering its current stability and level of prosperity dependent on high oil prices that will not survive the next significant recession. It still lacks even the rudiments of an economically, politically and legally empowered civil society.

    Calleo's dream of a peaceful, prosperous pan-European system is dependent on a successfully conciliated, satisfied, "well-intentioned" Russia. With that, the EU, Russia and the U.S. might be constrained to operate "within a cooperative pan-European framework with a structured bias toward collective rather than unilateral action."
  However, he is not so impractical as to ignore the temptations that arise in powerful states with weak neighbors. Russia remains a threat. Thus, maintenance of the Atlantic alliance between the U.S. and EU is realistically viewed as essential.

  Policies leading to an interdependent but "tripolar" pan-European world are thus favored by the author. They should be designed to achieve a more "balanced" Atlantic Alliance and "cooperative coexistence" with Russia.
  International institutions should evolve to bring Russia into such a system of cooperative coexistence. He refers to the NATO-Russia Charter and Partnership for Peace, and Russian participation in a revised Organization for Security and Cooperation. This system might ultimately be extended to take in Turkey and nations from the Middle East and North Africa.
  The effort should be inclusive - to "encourage multilateral and rule-based interventions" - to "soften and civilize Russian predominance in its own near abroad."

  Of course, such "multilateral interventions" could only occur if none of the major powers view their commercial or other national interests as in opposition. Iran, for example, is under no pressure to surrender its nuclear ambitions under such an international response. The international response to the conflicts in Sudan has been practically nonexistent outside persistent U.S. diplomatic efforts.

  The EU would remain Western European. However, it would extend economic cooperation eastwards to ultimately include Russia as the EU's "privileged" long-term supplier of energy and raw materials. (He offers no hint of what the characteristics of that "privileged" status might be.)

For the EU to play a meaningful role with the U.S. in providing a multilateral alternative to U.S. unilateral leadership, the EU must first "strengthen its own structures."

  Calleo recognizes the multiple difficulties of this vision. There are, as always, all the old internal EU demons from Europe's bloody past. There is the need for "resolute reasonableness from Russians," as well as from Europeans and Americans.

  "Russia must overcome its brutal and dysfunctional past and must find a worthy modern version of itself." (Very unlikely in this generation.)

  Calleo expects "great turmoil" in the "new Asia." This will occupy all of America's energies. A strong EU with a unified diplomatic and defense force capable of managing affairs in its own space and engaging cooperatively with Russia is in the most profound interests of the U.S. For the EU to play a meaningful role with the U.S. in providing a multilateral alternative to U.S. unilateral leadership, the EU must first "strengthen its own structures."

  "In particular, the EU must adopt the constitutional reforms and achieve the security arrangements needed to consolidate a coherent European bloc."

  Unfortunately, there is as yet no real signs of such EU unity and strength - and Russian cooperativeness is hardly a reliable expectation. Even economic integration remains woefully partial.
  And, therein lies the rub. Lacking any likelihood in this generation of such EU consolidation, there is no practical substitute for U.S. leadership. Europeans may resent the U.S. as a "hegemon," but they lack the political will to commit the financial resources and sufficiently sacrifice their national sovereign powers to consolidate EU economic and military power.
  Thus, they tremble at any prospect of U.S. withdrawal back into isolation, and a world without the increasingly demonized U.S. hegemon.

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  Copyright 2006 Dan Blatt