The chart below provides a rough guideline of Eurozone economic performance (less, as noted, Ireland, Austria, and Finland) from before the onset of the global financial crisis through Q1 of 2013. (Q2 and Q3 saw anemic growth overall; Q4 is not yet available.) For a while, everyone thought it was great to be a German. Now all that’s clear is that it’s pretty awful to be Greek.
The story as expressed by this graph is a horrible, horrible story. It is a story of a continent that once sought to challenge the US economically, and that cannot now even match America’s middling economic output. It is a story where the dream of social justice was, depending on the day, more, less, or equally important to market performance. The regulatory output (unceasing) is now significantly greater than the market output (sputtering at best).
Why, then, would anyone want to join such a monstrosity?
In 2004, during the last major European expansion, bright skies were everywhere. An increasingly assertive euro, a bright future, and a pleasant neglect of demographic realities allowed economic reporters to see a world-beating Continent where a Byzantine regulatory state would finally triumph over the nominally free-market United States. It made sense then for former Soviet slave states to seek the embrace of a more benign Leviathan than the one from which they had escaped barely more than a decade before, a place where they could safely trade and grow without the threat of tanks rolling in the streets. (Total EU defense spending is a rounding error.)
Then this happened.
Today, there is no readily identifiable reason why any nation state would want to join the European Union. It cannot be for defense; the EU all but explicitly outsources its defense to NATO, and the forcible partition of Georgia in 2008 shows the robustness of European military readiness better than all the white papers in the world. It cannot be for its markets, because Eastern Europe produces very few products on the same par as EU industries do.
And anyway, it’s hard to sell your products to people with no money.
Some, caught in a never-ending cycle of corruption and cronyism, believe the EU will apply a magical anti-corruption potion and remove the taint of graft, instituting a rule of law. This is so much wishful thinking. The EU offers no special trick to ending corruption, a move that must arise from social expectations as much as any law. (Note that Russia, Uzbekistan, and Turkmenistan have harsh penalties for corruption in public and private life. Note that none of these is exactly corruption-free.) Even if the rule of law could magically come sweeping in, the way the eurozone nations have waved away the Maastricht Treaty conditions as need arises has been an object lesson in the extent Brussels prioritizes its core laws.
Dealing in Eastern European finance is a fast way to learn that outside of a few countries such as Azerbaijan, where the government deliberately and actively works to develop civil society in the wake of Soviet brutality, and Ukraine, where though torn, the people tend to see themselves as European, the advantages of European ties are ephemeral at best. The Baltics took European rules and regulations and simply grafted them onto their convoluted post-Soviet codes; the result is a nightmare for investors and all too many traders. Poland — along with Estonia, perhaps the least damaged civil society to escape Soviet domination — is still driving back from its communist past. The former Czechoslovakia — both of them — are some of the most corrupt in Europe. (Romania is worse, but it’s Romania.)
Even for those countries, the virtues of closer ties to Europe are symbolic more than real. Rejoining Russia would be suicidal; to head to Europe is merely a necessary fool’s game.
Yet a fool’s game it is, one for which blood is being shed and the likelihood of war rising. Great wars have started over less, and may yet start that way soon too.
Feature Image Copyright Wikimedia Commons
Inline Image Courtesy Brad Plumer