The post-1989 European system is disintegrating. Time for a rethink

In the National Gallery in Washington are several rooms of Italian gothic art, including Giotto’s Madonna and Child, and the death of St Anthony, believed to be by Sano di Pietro. These religious works were early products of the Renaissance that began well before America was even settled, never mind developed. Centuries later when a new empire and dominant American civilisation emerged, powered by a capitalism that owed much to the financial and political thinking that took place in the city states of the Renaissance period, collectors in the United States scooped up the Madonna and Child and St Anthony, along with thousands of other European art works, and put them on display in grand new museums that embodied the cultural heft of the New World.

By coincidence I happened to be looking at those pictures on Sunday when I decided – like a politically obsessive saddo – to take a seat, check Twitter and see if there was any news of a result from Italy, where voters were deciding on whether or not to agree constitutional reforms. It transpired Matteo Renzi had lost the vote and not even a miracle worker as famed as St Anthony, a disciple of St Francis of Assisi depicted on his deathbed by Sano di Pietro, would have been able to save the career of the now outgoing Italian Prime Minister.

What an extremely interesting year this has been… To Brexit and the election of Donald Trump can now be added the defenestration by referendum of Renzi. And there may be more to come before the year is out. If the problems in the Italian banking system are not contained they could threaten the country’s financial system and destabilise the euro itself. That is the euro which was introduced on January the 1st 1999. Since the introduction of the single currency the Italian economy has barely grown, creating the conditions for the latest round of that great country’s tragic decay and decline.

Of course, Renzi the reformer had latterly become a favourite of Angela Merkel, the German Chancellor and over-rated leader of Europe who has such a gift for survival but can never seem to do anything useful with it. Now Renzi is gone the same way as the UK’s David Cameron, and with populism surging, the British leaving the EU and Trump preparing to move into the White House, Merkel must try to fashion a response to what is turning into nothing less than the disintegration of the post-1989 Western European system.

It is perfectly possible that the euro and the EU will limp on, of course, with Merkel winning re-election next autumn and Francois Fillon (surely as much of a cert as Hillary Clinton was) becoming President of France. But it is not guaranteed. Indeed, the year of Trump, Brexit and Renzi’s departure has a special, era-defining, distinct quality that may well make it a political, economic and cultural inflection point. Perhaps we should think of it as the end of what was termed a little hubristically in the early 1990s as the new world order.

Indeed, to find anything similar to 2016 we do have to go back to 1989, to the fall of the Berlin Wall and the unanticipated collapse of communism. Out of the collapse of the Cold War system came the creation of a new system in Western Europe. The revolutions in Eastern Europe in the late 1980s led to German reunification. That was agreed only if Germany would accept a European single currency, a French demand. This was required, the French believed, to constrain Germany. Of course the British stood aside on the currency, although latterly we did not challenge the fundamental forward integrationist push in the EU despite British leaders making occasional speeches complaining, while signing up for the Nice and Lisbon treaties.

Many of the key institutions involved existed before the late 1980s, of course, such as the Nato transatlantic alliance and the European Commission. But what had been developing in Brussels from the mid-1980s, with the creation of the Single European Act and what became the Single Market, at the instigation of the British, was supercharged when the Wall came down. The EU was the future, or so it seemed to a lot of people.

Over a quarter of a century, the consensus view among many European electorates, articulated by elites of both left and right, was that this system, this emerging empire even – multilateral, integrationist, without borders, globalist, supra-national, even anti-nation state – was the settled system. The EU as a bloc would negotiate with other large blocs, who all bought into a similar globalist mindset. Trade negotiations would become increasingly complex, happening over the heads of government, with the nation state diminishing in importance with every passing decade.

Oh, and the United States would take care of defence and paying for the European umbrella to keep out the rain.

Every one of those post-1989 assumptions is now in serious doubt, and every part of the post-1989 settlement, bar German reunification, is weakening. A major country – Britain – is leaving the EU. Open borders are seen increasingly as a weakness. And a protectionist President-elect who seems to have little time for multi-lateral rule-making is preparing to move into the Oval Office. There are even question marks over Europe’s defence arrangements at a time when Russia is resurgent via cyber-warfare.

Why did this weakening of Western Europe and the West more broadly happen? The worst financial crisis of 70 years is the right place to look for a trigger.

The globalist orthodoxy overseen by the West delivered many benefits in terms of increased trade and specialisation. It has lifted hundreds of millions out of poverty in the developing world and while the concerns in the West about manufacturing are valid, consumers now take it for granted that clothing has halved in cost. And computing power is 90% cheaper than it was two decades ago. Globalisation did that.

But at the heart of the process in the West was an arrogant, culturally bossy, patronising, post-nation state message that those who ran the system had it all covered. Economics was settled and they had the global institutions that floated above countries.

Then something predictable happened after the financial crisis in 2008. The bill for disaster, the cheque, when it came was national. The tab for a globalist disaster was to be picked up by national taxpayers, either in the form of economic disruption and pain, increased taxes now or later in the form of an explosion of borrowing. Voters are not stupid and they noticed the contrast between the utopian assurances given pre-crisis about the safety of the new system and where the bill landed.

In the UK the crash produced resentment and left deep scars. In the US, after a period of excessively assertive foreign policy leadership the change in the economic weather in 2007 and 2008 discredited the Republican free market orthodoxy, and ushered in a President with social democratic views. He also took an anti-interventionist, back seat approach to international affairs. Obama too was a product of the crisis.

Simultaneously, in Europe, the EU or the eurozone moved into meltdown. The assurance that the financial crisis was an Anglo-Saxon affair did not last long when it emerged that the eurozone was also riddled with toxic debt. After that crisis came a migrant explosion, produced by Western weakness in the Middle East. In the midst of this maelstrom, the great EU project could neither provide secure borders nor a well-functioning currency and economic system. A governing organisation or alliance with aspirations to empire, even to long term survival, that cannot provide both of those things will not last long.

What is surprising – considering the context – is that anyone should have been remotely surprised by the vote of the British on June 23rd to leave the EU. British voters had been telling pollsters for decades, even before the decline of the EU, that they were deeply uncomfortable with EU integration. Simultaneously they were concerned about the speed and pace of immigration in a borderless EU. This should be understood principally as a cultural concern, about a world moving too fast and decisions being taken without reference to national electorates. The British are far from alone in feeling this. They just got a vote on it.

Can the EU save itself? Confronted by the enormity of Brexit, and the simultaneous meltdown in Italy, and the poor economic performance of large parts of the eurozone, the leaders of the EU continue to mouth the mantras they find so comforting, about punishing heretics, about the supposed inviolability of freedom of movement and the perfectibility of ever closer Union that voters don’t want. It is like listening to a religious incantation uttered to ward off a terrible storm. Yet they put all that blind faith in shaky arrangements that are in their current form less than 30 years old, which is nothing in relation to Europe’s long history.

The phrase wake-up call is overused, but that is what 2016 is for the integrationist EU and Europe. As the alarm bells ring, is it beyond the wit and wisdom of the Europeans – a great civilisation – to rethink rapidly and to establish a much less rigid continental system that encourages trade and cooperation with partners such as the UK while allowing for self-government and control of borders? It really should not be, but I fear it is.