Opinion

Felix Salmon

When peace does not mean prosperity

By Felix Salmon
October 12, 2012

The timing of the Nobel Peace Prize announcement was set in stone a long time ago, of course, but I love the way in which it comes just two days after EADS and BAE — two European arms-dealing behemoths — announced that their greatly-desired merger had been killed by European political infighting. Here’s the Nobel announcement:

The EU is currently undergoing grave economic difficulties and considerable social unrest. The Norwegian Nobel Committee wishes to focus on what it sees as the EU’s most important result: the successful struggle for peace and reconciliation and for democracy and human rights. The stabilizing part played by the EU has helped to transform most of Europe from a continent of war to a continent of peace.

And here’s EADS:

Notwithstanding a great deal of constructive and professional engagement with the respective governments over recent weeks, it has become clear that the interests of the parties’ government stakeholders cannot be adequately reconciled with each other or with the objectives that BAE Systems and EADS established for the merger.

The stock market, for what it’s worth, quite liked the failure of the deal: mega-mergers, after all, rarely work. Maybe they should send flowers to Angela Merkel, who bears most of the credit/blame. Meanwhile, as a proud EU citizen, I’ve been walking on air all day: I can now add the Nobel Prize to the Time Person of the Year award in the list of my personal achievements. Jose Manuel Barroso says so himself!

This prize belongs in much the same category as Barack Obama’s, or Paul Krugman’s: it’s designed to push a certain vision of how the world should look in the future, as much or more than it is designed to recognize some achievement which happened in the past. But there’s a problem here: the things which worked in the past won’t work in the future. The Nobel committee surely has a vision of prosperity and unity — as Dylan Matthews explains, the two have gone hand-in-hand for the past 60 years. But where they used to work together, they’re now working against each other: as Gary Cohn says, there’s a good chance that the EU, or at the very least the eurozone, is going to break up precisely in order to generate the kind of prosperity which no longer seems possible anywhere south of Milan.

All of which is to say that fractiousness, these days, seems to be more remunerative than unity. We’re becoming a go-it-alone, winner-takes-all world, where opposition beats cooperation — and that, in turn, bodes ill for peace and for federalism wherever it’s found. There’s no chance of outright war within the EU: that particular achievement is nailed down, and has been for decades now. But riots and unrest and national-independence movements are on the rise, in large part because the European project of ever-greater integration and unity has stopped producing wealth and started destroying it instead.

The dot-com boom of the late 1990s was financed in large part by the peace dividend of the early 1990s: money which used to get poured into the Cold War could be spent much more productively elsewhere. Indeed, for most of the past 50 years, western Europe has been steadily moving money out of swords and into ploughshares and the welfare state. But that trend has been taken about as far as it can go, at least in Europe. And so while peace and prosperity have historically been aligned, as the consultants might have it, that alignment is getting thrown out of whack right now.

Which is why I think the Nobel committee decided to give the EU its gong this year. It’s their way of saying that the European project is a worthy and noble one regardless of whether it creates wealth and prosperity. In reality, however, if a European economy falls into a deep recession where the only visible way out is exit from the euro, then that economy will inevitably exit the euro. Politics might sometimes trump economics, but economics nearly always trumps ethics. Almost everybody likes the EU in theory. But unless it works for them in practice, it will certainly fall apart.

Comments
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“This prize belongs in much the same category as Barack Obama’s, or Paul Krugman’s: it’s designed to push a certain vision of how the world should look in the future, as much or more than it is designed to recognize some achievement which happened in the past.”

Uh, I’ll give you Obama, but Krugman was known to be Nobel* short-list for years. Indeed, the first call I got that day was from an arch-conservative friend who said “Krugman finally won it.”

Geography isn’t just Destiny; it’s good economics.

*Yeah, yeah, Swedish mumble-mumble.

Posted by klhoughton | Report as abusive
 

Felix, you live in NY, you’re not an EU citizen any more. A native, maybe, but you don’t participate in their society. I’m guessing you don’t pay taxes there, nor spend much money there, either. You’re no more of an EU citizen than I am a New Jersey citizen, having left there decades ago.

Unless you moved back?

Posted by KenG_CA | Report as abusive
 

Duh, I live in the middle of Europe, and have an impeccable EU background. I agree with Felix completely.

Posted by seanmatthews | Report as abusive
 

@KenG I might not be an EU resident, but I’m certainly an EU citizen. Just ask Customs & Immigration at JFK.

Posted by FelixSalmon | Report as abusive
 

” But where they used to work together, they’re now working against each other: as Gary Cohn says, there’s a good chance that the EU, or at the very least the eurozone, is going to break up precisely in order to generate the kind of prosperity which no longer seems possible anywhere south of Milan.

All of which is to say that fractiousness, these days, seems to be more remunerative than unity. We’re becoming a go-it-alone, winner-takes-all world, where opposition beats cooperation — and that, in turn, bodes ill for peace and for federalism wherever it’s found.”

Slow down here, kemosabe. There’s space between “fractiousness” and tethering yourselves to march in lockstep with people. The US and Western Europe in particular have engaged in trade and cooperation for the last sixty years; while there have occasionally been differences, there has been no threat of war and very little risk even of mutual subterfuge, but also something far from autarchy; it has been cooperation, but without subverting ourselves to each other.

Too much of what people think of as democratic principles these days seems to suggest that if five friends go to an ice cream parlor and three want vanilla while two want chocolate, they should all get vanilla because, you know, majority rules. It’s not the least bit “fractious” to order chocolate. If everyone in Europe can be made better off by moving, not to 1946, but closer to 1992 or so — not even eliminating the euro altogether, but perhaps putting it at the core of an ERM — that doesn’t preclude trade, cooperation, even regulatory harmonization, and certainly doesn’t require everyone “go[ing]-it-alone” or being at war. Indeed, conditional on that premise, keeping the eurozone intact would seem to be sacrificing actual harmony to a misplaced romanticism.

Posted by dWj | Report as abusive
 

** rubs eyes in disbelief at His Excellency’s substantive reply to mere ‘commenter’ **
** rubs eyes again – no, not a mirage **

At the risk of being immodest, I believe my credentials as a Krugman critic/hater need no elaboration. Even for one as jaded as I, to lump Krugman’s Nobel for his work centered on ‘total factor productivity’ in with Bobo’s and the current ‘inside joke’, well – just too damn CRUEL, FS!

What a great line this – v v – let’s all pray it’s ‘original’.

“… the European project of ever-greater integration and unity has stopped producing wealth and started destroying it instead.”

Posted by MrRFox | Report as abusive
 

MrFox, who are you calling a mere commenter? And Felix, I mean virtually, not politically, you are no longer a citizen of the EU.

As for all that noise about wealth creation and destruction, about whether deficit spending causes it, or integration and unity, as Felix and many others surmise, it is mostly just political marketing. The western world achieved an advanced standard of living relative to countries like China because technology was created and manufactured here. Because we could build cool things that the rest of the world had to buy from us, we enjoyed a higher standard of living. It had nothing to do with independent states or balanced budgets.

Then, to maximize profits for a select few, the job of building all that cool stuff was given to those countries who previously didn’t have the technology to do so. But they do now, and they are willing to work for less. The main reason standards of livings are under pressure all throughout the developed world is because the developing world is willing to work for less, and they can now build everything. The people who normally used to earn a living building things for the world can no longer do that, and they are expecting the governments to compensate for what they lost.

Europe (and the U.S.) isn’t destroying wealth, they are just not producing as much as they used to, and nobody is happy with the current distribution of what they do produce.

Posted by KenG_CA | Report as abusive
 

You equate the Eurozone with the EU at the end. I don’t see any reason the EU needs to have a single currency to achieve the peaceful outcomes we’re talking about. Even the economic achievements are fairly disconnected from the Euro (or have the UK, Demark, and Sweden been left behind the Eurozone?).

Posted by AngryInCali | Report as abusive
 

The EU has both peace AND prosperity. How many people in the EU live on $2/day. (0.0%) How many live on $20/day? (single digits would be a fair estimate.)

Not unlike the U.S. working class EU residents at large make 3-5x the global mean hourly wage. If you exclude Germany, more than half of all their debt is externally held.

The Germans will soon learn that the fruits of their labor lent instead of spent will not be repaid in full. Not since the days of slave owning plantation owners have so many enjoyed such an artificial level of largess.

Cry not for the Greeks, the Spanish, or the Italians… they’ve eaten and drank far better than they deserved for 11 years. The bill is now on the table and they simply won’t be picking up the full check.

Posted by y2kurtus | Report as abusive
 

“The Germans will soon learn that the fruits of their labor lent instead of spent will not be repaid in full.”

That’s a beautiful line, Kurt; so is this -

“Smart rats know when to leave ship.” (Charlie Chan)

Posted by MrRFox | Report as abusive
 

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