Sunday, 28 April 2013


Questions about German hegemony in the EU

In April 2013, German Chancellor Angela Merkel denied that there is such a thing as "German hegemony over Europe", but she insisted that EU countries must cede more national sovereignty to overcome the debt crisis. The irony of Merkel's comments made in an audience with the Polish Prime Minister was that Poland like the rest of Europe fears Germany has learned no lessons of its 19th and 20th century quest for hegemony and it is now trying once again to achieve the same goals under the protective bloc mechanisms of the EU. As some scholars are trying to determine if the post-Communist world structure has any resemblance to pre-1914, it may be useful to also consider the controversial book by Fritz Fischer, World Power or Decline? This is not to suggest that contemporary Germany resembles pre-1914 or that the modern world power structure does either, but there are some very useful parallels to consider.

1. What is the future of Europe and the common currency, given that Germany has become the unquestioned master unchecked by any other partner in the euro zone?  Does this mean that the integration of Europe has a limited lifespan and eventually nationalism will prevail over the integration forces, or will the German quest be realized?

2. Is the recession at fault for the deep division in the European Union (EU) and especially in  the euro zone that has Germany as the dominant core country trying to compete with the US, China, and Japan in the 21st century? If Germany did not accomplish hegemony over Europe in the two world wars of the 20th century, has it finally accomplished its goal economically, or is it simply playing the same rules of globalization under neoliberal policies as is the US? Can Germany thrive and enjoy hegemony if it does not impose limits on its own power over the rest of Europe? This question has been prominent in German history from the era of Otto von Bismark to the present.

3. Is Germany pursuing hegemony because it is part of its culture going as far back as pos-1848 Prussia pursuing German unification under Bismark with the intent to enjoy European dominance? Or has the global political economy provided Germany with the opportunity to manipulate the EU so that it serves to perpetuate German economic dominance no matter how such a condition undermines politically, and socially pacts between government, businesses and trade unions, and more widely the "social contract" as the people of the EU understood it being a tool of "embourgeoisement" (upward social mobility)?  

Synopsis of Austerity and the German-imposed integration model on the EU

Many people have been betting on the end of the euro zone, the end of the EU, the end of an economic bloc that has been around since the 1950s under the aegis of the US. Those predictions came about because of the public debt crisis plaguing the periphery countries of the EU, mostly southern and eastern Europe, and because Germany followed very harsh monetarist policies that essentially result in massive transfer of capital from periphery debtor nations to the core surplus countries like Germany. The result is a recession for all of EU, unemployment above 10% for the entire economic bloc, perpetual social unrest and political volatility especially in Italy, Spain, Portugal and Greece.

The question is what alternatives are there to Germany's monetarism intended to strengthen the core creditors like Germany for the duration at the expense of the periphery debtor EU members. One alternative is a cheap currency, as many people have proposed. However, cheap currency, as Japan and US have done to stimulate their economies since 2008, does not secure Germany's hegemonic role at the same level as pursuing austerity for debtors who must cheapen all asset values from land to labor and make them attractive for foreign investment, primarily German.

European politicians, business people, academics, journalists, trade unionists, and many among the general population recognize that Germany has used its economic dominance in the European Union to introduce a new model of integration that allows for unquestioned hegemony and relegates the members to the south and east to periphery (Third World-style status) intended to serve a supporting role for Germany. This means substantial weakening of the public sector for the sake of strengthening the private sector, especially foreign enterprises that are dominant over the national bourgeoisie. The EU today is not the same as it was before 2008 because the world economic recession presented the opportunity to Germany to use its economic strength to become the single dominant power within the euro zone bloc. In short, any other nation in Germany's place would have done the same. Besides, the prescription Germany is following is one benefiting its banks and corporate interests and it will secure their long-term benefits at least for the earlier part of the 21st century.

Some critics have argued that the debt crisis and Germany's insistence on harsh austerity that worsens unemployment and lowers living standards and sociopolitical instability entails risking splitting Europe between north and south in a similar manner as the east-west Cold War division. This is true but such divisions in patron-client integration models already exist between the US that is hegemonic over its neighbors in Latin America and in Asia where Japan historically played a similar role over its neighbors. Do the German political and socioeconomic elites care if the political price to be paid for imposing a new stronger economic hegemony means that the rest of Europe depicts it as a Fourth Reich?

For the past fifty years, Germany has collaborated with the US, its major European partners, France, UK, and Italy, as well as the IMF, World Bank, OECD to provide development loans to a number of countries around the world, assuming the loan recipients followed market-oriented policies and were receptive to terms that foreign investors demanded. In the post-2008 recessionary era, Germany has the dominant role at the table among creditor nations and it is able to impose fiscal, trade, investment, labor, and all types of other policies on the loan and aid recipients. What gives Germany that power is its dominant contribution to the European Central Bank, the European Investment Bank, European Financial Stabilization Mechanism, and every other EU fund designed to strengthen the EU bloc economies - everything from health and education programs to cultural.

Germany and the end of the "Embourgeoisement Thesis"
A fundamental reason that countries wanted to join the EU and the euro zone was the promise of economic improvement through an integration model that would lift the weaker nations via financial help from the stronger ones. This would then translate into the promise of upward socioeconomic mobility for the majority of the population and the realization of stable pluralistic societies. In short, the EU model was rooted in the EMBOURGEOISEMENT THESIS (something more or less like the American Dream). Instead, the recession of 2008-present, and Germany's insistence on impoverishing the entire periphery area from southern to Eastern Europe has grossly undercut the embourgeoisement thesis.

To compete with China and all of the BRICS nations (Brazil, India, Russia and South Africa) as well as with the US and Japan, Germany had to abandon the 'embourgeoisement thesis' that promises incorporating more workers into the lower middle class. Politically, people believe they really have no choice but to reluctantly accept neoliberal policies and austerity. Given the end of the Communist bloc and failure of Communist regimes, what do the mainstream "middle of the road voters" do but follow whatever capitalism offers no matter how dreadful for their lives.

As a result of the embourgeoisement thesis taking root in capitalist culture, there is already decreased class consciousness, lack of working class solidarity, disillusionment with corrupt trade union leaders and with politicians claiming the label left, but when in office pursuing policies not very different than conservatives. Given this sociopolitical reality, why should Germany allow proposals that would result in a cheap currency through quantitative easing (as Japan and US), or issuance of an EU-guaranteed bailout fund backed by eurobonds, or any other proposal that would compromise the road to unquestioned German economic hegemony in the 21st century? The current IMF-EU austerity combined with neoliberal policies that result in a weak state structure only strengthen Germany that continues to strengthen its national economy and its state structure.

German neo-REALPOLITK or neoliberalism under globalization?
Some critics see Germany as the greatest threat to Europe because it is refusing to place limitations on its economic power. Others see it as following neo-RealPolitik policies that became famous under Chancellor Otto von Bismark from the 1860s until 1890, an era when Germany masterfully practiced domestic and diplomatic manipulation to become a Great Power all by containing the strengths of its neighbors and rivals at home and abroad. Prussian Junker Bismark disarmed his opponents by skillfully adopting a portion of their agenda to disarm them of a cause and coopt their followers, a strategy that worked, but that also had its limitations, given the continued rise of the left in the later half of the 19th century. Can RealPolitik work today, and has Germany made use of it? The reality of the EU and euro zone makes for very different circumstances, as does the fact that Germany is a Great Power overshadowed by the US, China, Japan, and to a smaller degree Russia.

It is true that German multinational corporations today have global influence because the government supports their expansion, just as it did from the Bismarkian era to WWI. Given that Russia has been closely cooperating with Germany, France having no choice but to cooperate because its capitalist enterprises benefit more under the patron-client integration model of corporate welfare than they would under a more costly social welfare model that existed before 2008, and having to deal with much weakened EU members, the German government can afford to impose its hegemonic policies and determine the future of the EU. The UK, outside the euro zone, would love to challenge Germany, but it has its own economic problems, and its banks and multinationals actually benefit from the weakening of the entire EU periphery because labor values and all assets become cheaper.

There are those who argue that Germany has gone back to 19th century ideology rooted in Ludwig von Rochau, Grundsätze der Realpolitik angewendet auf die staatlichen Zustände Deutschlands (1853)
If indeed some Germans among the political, economic and social elites believe that the imperative of nature on which the existence of states depends is fulfilled in the historically given state through the antagonism of various forces, then it is the realities of the current regional and global political economy that are responsible for it, and not any commitment to ideology. Assuming that the law of the hegemonic forces in society is similar to or a reflection of the laws of nature in its hierarchical patterns, then one must assume that if France, Sweden or any other country was in Germany's dominant economic position, and the international climate permit it, that country would follow the same path as the Angela Merkel government. In short, the structural patterns of the political economy domestically, regionally, and globally are far significant in how Germany is behaving than any ideology that is used subsequently to justify/explain those patterns.

Germany's NAZI past revived under EU austerity
Germany's Nazi past is one of the forces that is holding it back from being even more aggressively imperialist toward the rest of the EU members. When Die Welt, one of the largest publications openly asks the government to give serious consideration to the forced loans that Nazi Germany imposed on Greece and to consider the war reparations question it becomes a political problem with far reaching economic consequences.The reason for this is because Germany used Greece for the austerity experiment in the EU, and to a very large degree with relative ease proved that it is possible to impose all sorts of fiscal austerity policies on a euro zone member even if those policies violate the national constitution as well as EU protections accorded to its members.

To fight back, the Greek conservative led government, supported by all political parties, has decided to demand reopening the dormant argument of widespread damages that the Nazi occupying forces inflicted  during World War II. This translates to wartime reparations estimated as little as 55 billion euros to as much as half-a-trillion, an amount well above the entire Greek public debt. Because Greece was under the tutelage of the US that had the dominant influence in German foreign policy in the 1940s and 1950s, Greece essentially accepted whatever the US dictated from Germany for war reparations. At the Paris Conference on War Reparations in 1945, the USSR had suggested that Germany owes Greece $20 billion, but the US convinced the Greeks to demand half that amount. The Paris Conference finally decided that Greece would only receive $25 million in the form of machinery and other German supplies. This was a US decision opposed to Germany providing any heavy reparations that would essentially be paid by the US as Germany's protector. The US view prevailed, allowing Germany to put off paying further reparations as Greece demanded, and the government in Athens obeyed the US demand. 

As a NATO member since 1952 and a member of many European organizations since 1961 under the aegis of the US, Greece found it difficult to demand reparations. In March 1960, Germany offered 115 marks provided Greece never demands any future reparations. However, besides claims from the descendants of war crimes victims in Greece, there was also a forced loan from the Greek National Bank by the Nazi government, a loan estimated at $95 billion at current value, assuming 3% annual interest. If Germany recognizes the legitimacy of this forced loan, then it opens itself up for other countries to make demands as well. No one can possibly predict what will become of the Greek war reparations demands, and they will take years to come to any kind of settlement. Meanwhile, they serve to assuage the Greek public that has become angry at the Germans, and they provide a sense of shame for many Germans who feel that their government and businesses are exploiting a country of Nazi war crimes.

No doubt, the issue of war reparations is used now because Germany is perceived as a hegemonic trying to impose its policies on the rest of Europe and win today what it did not win in two global wars in the 20th century. The war reparations issue is very sensitive for Germany also because it understand that it has become increasingly unpopular with the rest of Europe, especially among workers and the middle class that has been seriously undermined by austerity policies. It is true that Germany has become the scapegoat for the problems that the debtor countries helped create because they had corrupt governments, unsound fiscal policies, engaged in unproductive investments, especially with EU funds, and manipulated public debt statistics with the help of firms like Goldman Sachs to show they enjoyed a surplus when they suffered huge deficits.  In the final analysis, Germany's quest for hegemony was made possible by the ineptness and corruption of the weaker EU members, but above all because the political economy favored as it still does the strongest core nations.

1. There are those arguing that the EU must end and let each country go its own way, so that Germany would not be compromising the national sovereignty of the rest of the continent. Even if that were to take place, and it could at some point, Germany would still have strongest economy, thus giving it greater leverage of the rest of Europe, but in a different form.
2. There are those who maintain that the EU was a political idea created by the US to counter the Communist bloc, and then accepted by the northwest Europeans as useful tool to regain global economic prominence. However, the EU before 2008 was created with Keynesian mechanisms, greater equalization of economic and social systems across Europe. Given that neoliberalism is prevalent in the age of globalization, this means that Keynesian era is now replaced with gross social, economic and geographic inequalities.  Germany is simply taking the lead to restructure the EU accordingly. When Merkel demands that the EU members cede national sovereignty, she is demanding that they comply with globalization marketplace realities, although such realities do lead inevitably to Germany hegemony.

3. There are those who warn that the division of EU into the rich and poorer nations is dangerous politically because it means social instability. In fact top EU leaders have been warning of this, much to the dismay of German government seen as the cause of sociopolitical instability. However,, this is not as realistic as it appears for the following reasons.
First, the political parties that take over governments, center-right or center-left, follow the same neoliberal policies and try to erase the Keynesian system of the past, thus projecting the illusion in the public mind that there is no alternative to neoliberalism. 

Second, there is no Communism to act as a threat to the West as there was during the Cold War. 

Third, trade unions that acted as a protective institution for workers are weak and cannot counter the power of finance capital backed by the state. 

Fourth, Europeans have lived under recession for five years and have not done much more than protest and elect leader following neoliberalism. Therefore, the idea that Europeans will stage revolution any time soon is unlikely, at least in the near future. Finally, the advocates of neoliebralism as well as those accepting of German hegemony in the EU believe that the economy will bounce back and people will see the new phase of anti-Keynesian capitalism as normal if not a good thing.
Meanwhile, the national sovereignty of the EU members would have been seriously compromised because a segment of capitalists within those countries will benefit from neoliberalism under German hegemony. As long as a segment of the national capitalist class retains benefits and the protection of the political class at the expense of the middle class and workers, then Germany will emerge as the unquestioned hegemonic power, no matter how clumsily Merkel tries to deny it.

1 comment:

Anonymous said...

pardonnez-moi please, but could you establish whether they are a Confederate or making decisions based on a Federation?