Europe rising

I wrote this Note in advance of the Independence Day weekend here in the US, which my husband and I will celebrate in a socially distanced way, by watching fireworks from the roof of our brownstone (climbing up the fire escape with champagne bucket and picnic dinner in hand does present its own risks, especially after the bubbly is finished).

But being American doesn’t feel like something to celebrate at the moment. In fact, I’ve been spending a lot of time pondering whether we might be about to see a resurgence of the Old World, even as the New World is diminishing. The US has officially lost the war on Covid-19, with red state cases spiking, even as Europe has beaten back the virus. Germany seems to have finally got on board with fiscal stimulus, and the idea that the EU must ultimately become more economically integrated in order to survive as a political union (my colleague Martin Wolf has written eloquently about what a big step Covid bonds are). Europe has provided the inspiring counter case to America’s horribly mishandled response to the virus. 

This new coming together of Europe will have economic implications for America, and for the world. As I’ve argued, I think that we are entering the post-dollar era, not only because of the growing trust deficit in the US and the rise of China (which is launching its own cryptocurrency) but also because the euro, backed by an increasingly integrated Europe, will provide a strong alternative to the greenback. 

Markets seem to be taking this in already — I was struck by this piece in the FT last week about how European equities are beginning to outshine Wall Street. Having been out of US equity markets for a while now, I’m starting to think about how I can go long on euros (annoyingly, my husband keeps telling me that the Tuscan villa I have my eye on just isn’t liquid enough . . .). 

Just as all veteran economic journalists have written “Japan is back” at least once or twice since the early 1990s, most of us have penned a Europe rising column, too. But I honestly think this may be a tipping point in the transatlantic balance of power. Covid-19 has pulled back the scrim on the vulnerability of Anglo-American capitalism. Despite the recent Wirecard scandal and the argument that it undermines the German approach to stakeholder “value”, I still think that the continental European model of capitalism is more resilient and better suited to the moment, since it has a more equitable sharing of wealth between capital and labour, as well as the public and the private sector. 

Assuming a Joe Biden victory in the autumn, America will be looking to heal the rifts in the US-EU relationship. If I were Angela Merkel and Emmanuel Macron, I’d be thinking about how to leverage the new European unity and the economic advantages it imparts to craft a transatlantic alliance that is based on European goals around things such as digital taxation, climate change and labour rights.

Ed, you’ve been a high-profile political speech writer — what would you tell Europe’s leaders to push for post-November? And do you agree with me that the Old World might be the New New World? 

Recommended reading

• This piece by Bruce Bartlett in The New Republic does a good job of explaining the links between western individualism and Southern conservatism. I always thought Mitch McConnell and Mark Zuckerberg had a few things in common. 

• I really enjoyed this New Yorker piece by Yale scholar David W Blight on whether we are seeing the death of lost causes, and in particular the mythology that the South created for itself following the US civil war.

• This Jamelle Bouie column in The New York Times last week linked the issues of social justice and economic justice in the Black Lives Matter movement, which I wrote about myself a few weeks back. The NYT usually looks at these issues in silos, so this is an important piece. 

• And in the FT, don’t miss Camilla Cavendish on how Boris Johnson is trying to channel Franklin D Roosevelt, my colleague Martin Sandbu’s piece on whether Covid could become a turning point in economic polarisation, and our summer books picks.

Edward Luce responds

Rana, I love the idea of Europe cohering fiscally and becoming a geopolitical force. It would be a positive force in the world. But it’s very unlikely. There are three geopolitical forces on the global stage: America, China and Russia. If we’re lucky India will become a fourth, but it’s not there yet. The EU is not going to become a coherent geopolitical player within the near future, except on trade relations. The euro is not going to become the world’s reserve currency.

Projection of external power is a function of internal coherence. The EU is a single market. It is also a great visa-free zone. But it is not a nation state. To become that, you need a dominant language and culture. Forgive my scepticism — speaking as an ardently europhilic Brit — but Europe’s geopolitical dreams are hypothetical. 

The original purpose of Europe was to prevent war. It’s doing a great job on that score. But it is incapable of declaring war, which is a basic measure of a coherent nation state. I agree with your diagnosis of Europe’s fiscal response to Covid-19 relative to the US. Keeping people on the corporate payroll makes economic and social sense. But in evaluating economic “Europe”, I assume you mean Germany and like minded countries? The economic response to the pandemic was decided at the national level. Merkel has moved roughly an inch towards the mile that the Club Med countries are demanding. Her signals are considerably better than nothing. But they are principally political not fiscal. 

I thought your column was great. As you said, you could have written it many years ago. You could also write it many years from now. My fiscal, economic and currency-based measure of the EU’s geopolitical potential will be based on one measure: will Brussels have the means to threaten Hungary, Poland or any other potential renegade with consequences? If you can’t picture that happening, the rest is talk. 

Your feedback

And now a word from our Swampians . . . 

In response to A tale of two statues:
“I read ‘A tale of two statues’ just after reading the detailed announcement of Princeton’s U-turn over the honouring of Woodrow Wilson. Even now, the president of Princeton University stresses that “Princeton honoured Wilson not because of, but without regard to or perhaps even in ignorance of his racism”. When I read these words, I felt like quoting the words of Colonel Nathan R. Jessup (in A Few Good Men, 1992): ‘You can’t handle the truth!’. It is one thing to say that Princeton was insensitive to the issue (‘without regard to his racism’). That probably fits the truth. But to even suggest that the university was ‘in ignorance of his racism’ is preposterous. A third-rate undergraduate of a provincial university would (or should) know better. The statement, read in its entirety, is an insult (to its readers, but also to Princeton’s past board directors). If you have to honour a racist, at least do it properly.” — Guido Franzinetti, Vercelli, Italy

Source: Economy - ft.com