RUTHFULLY YOURS

Post-Brexit: EU Still a Superpower
By Steven Hill
The Globalist
June 27, 2016

If you type the words “European Union” and “crisis” into the Google search engine, you instantly receive 115 million hits. When I did that back in 2009, before the eurozone crisis, “only” 58 million hits popped up. Is the EU really in that much worse shape today? Apparently yes, according to the daily headlines. Recall that even before the Brexit vote, French Prime Minister Manuel Valls declared that Europe could “fall apart within months.”

But this is not the first time that political leaders and media outlets have declared the end of Europe. Prior to the economic crisis of 2008, the European economy was written off by most analysts as suffering from “Eurosclerosis” and condemned to decline.

Here’s a small sample of brassy headlines from leading media outlets over the last decade, trumpeting imminent collapse:

“The End of Europe”, “Europe Isn’t Working”, “Will Europe Ever Work?”, “What’s Wrong with Europe”, “Is Europe Dying?”, “The Decline and Fall of Europe”, “Why America Outpaces Europe”, and many more. In the 1990s, The Economist dubbed Germany the new “sick man of Europe,” and other media doomsayers warned of a future of rising unemployment, crime, and taxes to “a level not seen since the Weimar Republic.” Yet now a prospering Germany has become a global player.

The superpower rationale

Yes, the EU is juggling a number of daunting situations, but that’s what superpowers do. They deal with one crisis after another, year after year, some of them domestic and others international.

A superpower by definition occupies a big corner of the world, in which messes happen and things have a tendency to fall apart.

That rationale, always applied to the United States of America, also has its place when analyzing the EU. But does the EU really qualify for that lofty status? Emphatically yes. First, the EU is powered by one of the world’s great economic engines. Even with the eurozone crisis, what I call the EU-Plus (EU28 + Norway and Switzerland) still has the largest economy in the world (post-Brexit, the UK would still be part of the EU-Plus, due to the deep integration of the UK and EU economies). These nations produce a quarter of the world’s GDP.

Indeed, according to World Bank figures, the EU-Plus economy is larger than that of the United States and India combined.

It has more Fortune 500 companies than the U.S., India and Russia combined, and some of the most competitive national economies according to the World Economic Forum (European countries hold 13 of its top 25 rankings). This vitality extends to small and medium-sized businesses (SMEs), which provide two-thirds of Europe’s private sector jobs and 85% of net job growth (in the United States, SMEs only provide half the jobs). I hear many leaders complaining, “Europe isn’t innovative enough. Where are the European Facebooks, Googles and Apples?” Before we fall too much for that Silicon Valley-hyped rhetoric, let us just remember that those companies actually don’t create that many jobs. They are using software and algorithms to replace human workers. You want innovation? Take a look at Germany’s Mittelstand (i.e., small and medium sized) companies which are world-class exporters as well as job creators, making products that are crucial to industrial growth all over the world. So much for excessive red tape supposedly strangling the European economy. In another display of bold innovation, Europe has led a small revolution for greater economic democracy and a broadly shared prosperity. It is based on practices like codetermination, works councils, effective labor unions and the “visible hand” of an active government that guides the “social capitalist” economy.

These are things largely unheard of and/or unimaginable in the United States to date. The way in which Bernie Sanders’ campaign resonates with large swaths of young people and others underscores that there is a stron appetite in the U.S. for a similarly fairness-based approach to the economy.

EU as world leader while US stands still

Amid so much post-Brexit gloom about Europe, Sunday brought some especially welcome news in the unlikely vehicle of a Spanish election. The country’s voters increased support for Prime Minister Mariano Rajoy’s center-right Popular Party (PP) while rejecting the bid for power by the left-wing Podemos movement.

The election improves on the muddled results of six months ago in which no party won a majority. This time the PP increased its seats in the new Parliament to 137 from 123. The Socialists retained second place with 85 seats, blocking Podemos’s attempt to become the main party of the left. Markets responded with relief, pushing the Spanish 10-year government bond yield down 0.17 percentage points, the sharpest drop since 2014.

Mr. Rajoy is short of an absolute majority, but this is nonetheless a case of sound policy rewarded. Since taking power in 2011, the PP has ignored the Keynesian councils of Brussels and Washington in favor of supply-side economic reforms. Mr. Rajoy has cut personal and corporate taxes and simplified the tax system, trimmed civil-service spending and made it easier to hire and fire Spaniards.

And what do you know, faster growth has followed. Spain’s economy grew 3.2% last year and about 3% over the past eight quarters, according to the European Union’s statistical agency, while the jobless rate has fallen to 22.7% from a crisis-era peak of 26%.

This Spanish revival is all the more remarkable considering the lackluster growth in most of the rest of Europe. Growth in Germany was 1.7% last year and a mere 1.3% in France, where the jobless rate continues to be above 10%.

These results no doubt helped to blunt the appeal of Podemos, which fancies itself a version of Greece’s hard-left Syriza party. Left-wing populism prospers amid economic stagnation. Some credit also belongs to the Socialists, who have behaved like a responsible center-left opposition that favors more government intervention but rejects Podemos’s anticapitalist platform. CONTINUE AT SITE

Herbert London is President of the London Center for Policy Research
Now that the London fog has cleared, a dispassionate analysis of the Brexit vote is possible, even with murky clouds over the British Isles. The pound plunged with the Brexit vote as did global markets. Political elites from Cameron to Obama shuddered. Investors on both sides of the Atlantic were pummeled. Some say the British vote to leave the European Union is an invitation to anarchy.

I would say the vote represents a monumental assertion of free will, a vindication of a millennium of democracy and self-government. While those in London favored remaining in the E.U., the rest of Britain rebelled against the stain of migration that has disrupted the countryside, even leading to the massive rape of underage girls in one community by recent Muslim immigrants. The idea that Britain could absorb another 650,000 immigrants under E.U. mandate is, in the minds of many, a prescription for disaster.

Multiculturalism is in retreat as are the politically correct nostroms that have unsettled life for the average Brit. Brexit speaks to the Grand Old England, the one led by Margaret Thatcher who was the original Euroskeptic. She understood that the arrogant assertion of a united European entity undoing 500 years of history since the Westphalian accord was a fantasy. It has taken forty years for that fantasy to reveal itself, but now it has and dissolution is on the horizon. Brexit will lead to Czechit and Italianit and the slow but inexorable splitting of the elitist conception of Europe.

Most Brits were tired of a group of bureaucrats in Brussels telling them whether the use of an electric teapot was permissible or the allowable size of a lawn mower. Who are these bureaucrats anyway? They weren’t elected by British citizens. In fact, the entire E.U. is supra – democratic – a reach beyond sovereignty to unassigned authority. Ordinary people understand the disconnect with a government over which their control cannot be exercised.

The catastrophe that has hit Syria — hundreds of thousands dead, millions dislocated, and a multi-year stream of refugees headed to Europe that now numbers in the millions — is a political and human disaster with multiple godfathers. After several years of war, there is still no evidence that the fighting will soon end, or that a political solution is at hand.

One of the biggest reasons for this calamity has been the near complete abdication of responsibility for or interest in addressing the conflict by the Obama administration, a neglect that history will not regard as benign. When over 50 State Department officials expressed their dismay at American policy towards Syria in a written statement, and their disgust was made public, it was, unfortunately, only a one-day story for the national networks and leading papers.

This is, after all, a press corps that was never eager to embarrass the administration, which they have so ably served for more than seven years. This history of journalistic obeisance was what enabled White House adviser Ben Rhodes to gloat over how easy it was to deceive the reporters on what was really in the Iran nuclear deal. Rhodes

classified most of the reporters as young know-nothings. Of course, there were also those who were knowingly in the bag for the deal for other reasons (such as former Ambassador Thomas Pickering, who was bought and paid for by Boeing while he was lobbying Congress for the Iran deal, never disclosing his financial arrangement with the plane manufacturer).

It is obvious in one regard why the Obama administration shied away from any serious military involvement in Syria, including the time when the president reversed course on responding to Syria’s use of chemical weapons, the supposed red line that he set up that was crossed and presumably demanded military action. The president saw his role as being the un-Bush, the leader who would take America out of conflicts into which his predecessor had led it. These conflicts included the wars in Iraq and Afghanistan. The president put little effort into achieving a separation agreement with the Iraqi government that would have enabled a modest American force to remain in the country. The rise of Islamic State in Iraq and Syria was hastened by the American withdrawal and the perception in Iraq among the minority Sunni population that the Shiite government in power, now linked up with Iran, would make life miserable for the country’s Sunnis. The American “surge” effort in the final years of the Bush administration enabled President Barack Obama to begin his term with the country in far better shape than had been the case a few years earlier in terms of both military status and political arrangements. Today Iraq and Syria are in a state that makes the worst days of the conflict during the Bush years seem like a stroll in the park.

Over the weekend, friends asked my opinion of Brexit. You lived abroad, they said, and you’re an analyst or something, so what can you tell us?

It wasn’t what they wanted to hear.

Most Americans who support Britain remaining in the European Union have characterized “leavers” as ignorant, backward-looking bumpkins, motivated by chauvinism or even racism: the British version of Trump supporters.

In a way, that’s what they are — a sizable group of ordinary people with valid concerns who’ve been neglected and misled by elites for so long that they’re seizing their only chance to register their rage at the established order. But just like in the U.S., Britons’ concerns have been buried under an avalanche of prejudice and mischaracterization.

Can we Americans learn anything from this … or is it too late?
The Shadow on the Cave Wall

Like the shadows in Plato’s allegory of the cave, politics is never what it seems. Brexit is a case in point.

Elite opinion says that English cultural chauvinism explains Thursday’s “leave” vote. Many “leavers” were bigots, but for most, anti-immigrant sentiment was just one way they dressed up their underlying frustrations. Tellingly, “leave” seems to have been just as popular amongst nonwhite lower-class British as amongst whites. Second- and third-generation South Asians and West Indians voted the same way as the Andy Capp pub-and-darts set.

Here’s my take on what happened — and why it’s going to happen here, too.

The EU is essentially a supersized free-trade agreement. It provides for the free movement of capital, labor, goods and services throughout the EU. But to avoid competition between member states, EU rules override laws that were previously decided by sovereign parliaments, such as agriculture, fisheries, external trade, the environment and, above all, budget policy.