Thursday, September 8, 2011

The End of Empire by Stealth

A recent post by “Charlemagne” in The Economist (September 3rd) describes “the end of Monnet”, the EU’s godfather.

“The French functionary believed in gradually unifying post-war Europe through discrete projects run by a caste of technocrats, with the end-point left deliberately ambiguous.” His method has gone far. Too far in fact.

By the time when the common market project – a classical free trade zone with obvious economic benefits for the protectionist and fragmented post-war European economies – was achieved, in the late 1980s, the caste of eurocrats led by the prototypical Jacques Delors launched a very different enterprise, that of a supranational public good, a single currency, meant to force a later political integration of several nation-states members of the European economic association. Instead of decentralization through market unification, the process became one of statist centralization without the explicit consent of voters. It was a process of technocratic empire-building by stealth.

The whole enterprise is now in shambles because you cannot manage a public good without a centralized political authority, a state in fact. And precisely at the moment when this statist project was launched, in the 1980s, the underlying prerequisites for its eventual success vanished. On the political ground, the integration of several independent states, quite difficult in itself, requires a common external enemy against which the fundamental public good of a common defense could provide the benefits of economies of scale and increased efficiency. But by 1991 the Cold War was over and the USSR had disappeared. Symmetrically, the US lost interest in the political unification of Europe. On economic grounds, the information and communication revolution of the 1980s (computers plus the internet) reversed the previous trend towards centralization and the advantage of large size, into a trend of general decentralization of large hierarchies, whether private or governmental, into smaller and more efficient units. In organizational matters small became beautiful, or at least efficient. Whereas in the 1970s the use of computers (and thus of efficient information gathering, storing and processing) was restricted by its high cost and limited availability to big organizations (large firms, state bureaucracies) it became available to every individual in the 1980s and 1990s, and instant communication worldwide became the rule. Hence the trend towards democracy, the counter example being found in information repression by Communist China and Middle East dictatorships. The organizational consequences of that revolution were devastating for the largest hierarchies (see my book “The Second Twentieth Century: the Decline of Hierarchies and the Future of Nations”, Grasset, 2000 and Hoover, 2006). Large and heterogeneous states – usually called “empires” – were the first victims, coming just after large and heterogeneous corporations – usually called “conglomerates”. Smaller and ethnically or economically fragmented states followed, such as Czechoslovakia and Yugoslavia, while separatist movements prospered everywhere. Small entrepreneurial firms multiplied. It was no time for large bureaucratic structures and empire building.

That mutation made the European process of multi-state integration obsolete overnight. It thus happened that the technocratic "empire-building by stealth" enterprise was doomed at the very moment it was launched, with the currency centralization as its first stage. It follows that the failure of the euro is not specific: it is just one example of the new trend towards general decentralization that characterizes the second twentieth century and the ICT revolution. It is in my opinion a durable trend.

In Europe, governments and banks tried to resist the trend by cartelization, and succeeded temporarily to avoid the downsizing necessity. Instead of reducing their excess capacity they could in that way temporarily increase it. But as a consequence they are now confronted with bankruptcy. The call for a “European governance” (read: a major step in political integration) is just plain wishful thinking and is no real option. The only solution now is to downsize these overblown technocratic structures and increase by this means the overall social efficiency (and level of living for the European populations) by returning to smaller and autonomous and competitive bureaucratic organizations, public as well as corporate. This is also the condition for a return to effective democracy, breaking away with the rule of technocracy.

Yes, this is the second death of Mr. Monnet.

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