Year XXVII, 1985, Number 1, Page 49

 

 

 

The Cost of Non-Europe and the European Alternative
 
MICHEL ALBERT
 
 
Mr. Chairman, ladies and gentlemen, I would like first of all to apologize for the absence of my French colleagues who were unable to come to Rome because they are discussing a vital matter with Maurice Faure, namely the preparation for the Milan summit.
As far as I am concerned, I will try to develop what is economically and socially at stake in the Milan summit around three basic points. 1) Non-Europe is on the way to suffering to an extent that we can scarcely imagine; 2) today United Europe would, to recall this congress’s theme, have all the possibilities of taking on the “challenge of the future”; 3) in this respect and in view of the Milan summit, the key to the future lies in Rome.
 
I
 
When we spoke of Europe’s decline in the report that James Ball and I presented to the European Parliament two years ago, we talked of “Non-Europe on the no-growth slope”. This, the title of the first part of our report, might seem a bit pessimistic. A lot of people said: but the American economy will pick up and the European economy will follow suit behind the American locomotive. Today, it is the Americans who are stressing Europe’s decline. Last year (1984) two of America’s leading magazines, Newsweek in April and Times Magazine in June, made Europe’s decline their cover story.
Two years after the American economy took off again, America can record a 10% growth for 1983 and 1984, Europe a growth of 3%. To see what that means, we need to recall that in the fifties and sixties, the growth rate in Europe was substantially higher than in America, nearly half as much again, and that in the seventies and until 1982 the growth rate was virtually the same as America. For the first time since the end of the Second World War, there is a gap of three to one between American and European growth. I wish to state and hope to prove that this is no mere chance, no mere accident.
It is the beginning of a long term trend which can only deteriorate if we do not create Europe. Thus, from 1970 to 1983, US industrial production increased twice as much as European industrial production and Japanese industrial production increased three times as much in the twenty years from 1963 to 1983. High technology exports increased 50% faster than in Europe while in Japan they increased ten times as fast as in the EEC. In other words, the EEC increasingly imports the products of the future and increasingly exports the products of the past.
Moreover, there is no need to be a great economist to appreciate this. Everybody has been inside a department store and gone to the household appliances department. And there anybody can spot the difference, because the old products are not the same colour as the new products. Consequently, when I say Europe increasingly imports new products and increasingly exports old products, all you have to do is to go to any department store anywhere in the world to see what I mean. The old appliances in the household electrical goods department are white – hence they are called white goods. They include vacuum cleaners, refrigerators, dishwashers, washing-machines. These products are usually European and very often Italian. Then, next to them you have the products of the future. They are not the same colour, they are brown goods: television sets, tape recorders, video cameras, personal computers. These products are only very rarely European products. They are nearly always Japanese or American.
What does this mean? It means that each time we buy these goods of the future, we create jobs, not in Europe, but in the US and Japan. This technological regression, this economic stagnation is apparent in what henceforth ought to be called “the daily referendum of the European saver against Non-Europe”. Because the European saver votes every day against Non-Europe. How come? A banker explained it to me recently. He told me: well, when people now come to us to make an investment in the bank we have got into the habit of saying: “dollars of course”. Yes, “of course” dollars. And you can understand the European saver.
You can understand – as Professor Triffin said yesterday – it is all intrinsically bound up with the world monetary scandal. But just a moment, I am not accusing the US of a world monetary scandal. What is causing the crazy rise in the dollar? Who is providing roughly half the financing for the US budgetary deficit and external balance of payments deficit? We are! Because we in Non-Europe should not be surprised if we have a Non-European behaviour and if we demonstrate our Euro-pessimism with our behaviour as savers. The Americans are not responsible for this. We are. So we should not be surprised if in these conditions we are on the road towards suffering. And two features of this road to suffering stand out to my mind as being highly characteristic. The first is tax in Europe. The second is unemployment.
Since we have little growth – and indeed I shall explain in just a minute that in Non-Europe there can be no durable, healthy, overall economic growth – one consequence is the permanent increase in tax. Here there are two figures that need to be known. In Europe, today, when we earn a 100, we give up 50 as tax and social security overall. The percentage of income tax and social security payments deducted from salaries is about 50% of GDP in Europe whereas it is about a third in the US and Japan. So that we are competing with the US and Japan roughly like three competing enterprises in the same sector, two of which have overheads of 35%, namely the US and Japan, while the third, i.e. Non-Europe, has overheads of 50%.
So we should not be surprised if we are going backwards and if we are still in a position of economic stagnation despite all the major advantages that America has given us in the last two years: first, its remarkable growth and, subsequently, the enormous rise in the dollar’s value which opens up the doors of America to the rest of the world’s goods. This has the result that America, currently, has the most anti-protectionist policy that I know of in economic history. When I see that the ratio between American imports and American GDP increased in volume from 10.1 % in 1982 to 12.7% in 1984, then I feel bound to say that an increase of more than a quarter in the import rate is something which, at least to my knowledge, is unique in economic history, and certainly for a country of this size. Which only goes to show that the Americans have enormously helped to develop our economy and to create growth. But despite this in two years all we have achieved is 3%, or 1.5% per year average in the Community.
This explains why we are on a road to suffering. But this is not the worst part about it. The worst thing is unemployment. While Japan has full employment, while America in ten years has created about 20 million jobs, Europe, which has so far been the homeland of full employment, has become a Sahara for employment. And to think about 10 to 15 years ago, even 10 years ago, in America there was unemployment, while we had none! In net figures Europe has destroyed 3 million jobs over the last ten years. It is like the Sahel where water and vegetation recede before the desert.
And we must not think that it is over. In 1984, there was about 11% unemployment in the Community, 13 million unemployed. This trend would give us 15% unemployed or 18 million unemployed in 1990. Alas, in this field, economists are seldom wrong. In Europe if the trend is not changed, if we the people of Europe continue to accept what can only be called the exploitation of the people of Europe by the Disunited States of Non-Europe vis-à-vis the United States of America, then we will continue on our road to suffering at the very moment when for a few years more – and this is my second point – a United Europe still has the possibility of taking up the challenge of the future.
 
II
 
To be aware of our capacities, we must first of all understand that what is happening to us, the suffering that I have just spoken of and which we are just about to experience is not the result of a mishap, of fatal destiny, nor of any particular historical determinism. All this suffering, all this unhappiness is more or less directly due to one and the same cause and we are directly responsible for this cause since the cause is Non-Europe.
I would like to demonstrate this to you, first, as regards growth and then as regards employment, and, finally, as regards scientific and technological development.
Firstly, as regards growth, all the instruments of economic policy are still held by the States. But the European States are powerless today to continue sustained, non-inflationary and continued growth by themselves. You will forgive me if I quote myself, but I think that the major scientific contribution of the report that I carried out with James Ball for the European Parliament is precisely in chapter 3 which is called the “Powerlessness of the States”. I will summarise it for you rapidly because I think it is the most important.
Since the beginning of the seventies, since the oil crisis, the four major countries of the European Community have tried to emerge from the crisis and have tried to relaunch their growth. To give them their due, it was the British who tried first. The Italians took over. Finally, the Germans agreed in 1978-79 under pressure from their partners to act as the locomotive. As for the French, they needed two attempts and not just one to understand that, henceforth, growth cannot be achieved by national policies. In France, we have had two comparable experiences at the beginning of each of the last two seven-year Presidential terms. First in 1974-75, we had a policy of relaunching growth and then in 1981-82 the very same thing. The first time round it was with M. Giscard d’Estaing, and the second time with M. Mitterrand.
In fact, there is a basic phenomenon in French political life, which is that we elect a President of the Republic with universal suffrage once every seven years. It seems that the President elected is a happy man and that this happy man wishes to look after the happiness of his electors and his people. Father Christmas comes down the chimney at the beginning of each seven-year term.
And then what happens? Well, the same thing as happens with all other experiences: the British experience, the Italian experience, the German experience. You discover that it is very easy to relaunch the economy by stimulating consumption. You increase wages, you increase the deficit. It is easily done. You get faster growth than your neighbours. Then exports start declining and imports start rising. So that the European country which wants faster growth than the others, runs up a balance of trade deficit. Whatever country it is. And when it runs up a balance of trade deficit what happens? Well, Father Christmas changes his uniform. Father Christmas becomes a policeman which explains why there are so many similarities between the economic policy we have had in France since 1983 and the one we had from 1976 onwards, when M. Giscard d’Estaing had to call in M. Barre. The techniques of the gendarmerie are by no means the techniques of Father Christmas and they go beyond ideological considerations. Whether you are left-wing or right-wing, you have to eliminate the balance of trade deficit. That is what being a policeman means.
What really needs to be understood is what leads to no Common Market country having any growth significantly and stably higher than the others’ average. The real cause is that the EEC is a half constructed Community which has two major characteristics: firstly, it is a market with a very high degree of trading interpenetration and, secondly, a very low degree of economic policy integration.
A high degree of commercial interpenetration: for countries like the 4 major ones, the external trade coefficient i.e. imports on GDP is in the order of 25 to 30%. For small countries like Belgium and Holland it is over 50%. Half of these exchanges are carried out with the other countries in the Common Market (not entirely in Britain but it is increasing rapidly). So each of the member States of the Common Market is very sensitive to its balance of trade deficit with its Common Market partners because of the high degree of commercial interpenetration. Consequently, once we have a country with a higher rate of growth, that country very quickly runs the risk of an external deficit. I wish to draw your attention to the fact that Germany which has a growth rate which is a little faster than the others today, is no longer talking about being the locomotive as she did in 1978-9 because that experience cost Germany dearly. Politically, it cost the former Government its majority; economically, I am not ready to forget the moment at the end of the seventies, when, suddenly, the deutschmark found itself in a position of weakness vis-à-vis other European currencies in the snake because of the difference in the rate of growth and the internal deficit which it brought for West Germany. Germany has not forgotten. Nothing indicates that she is prepared today to start the little game of the locomotive.
This is the consequence of this very high commercial interpenetration, which puts the countries of Non-Europe in a system of sterile deflation. None of them can relaunch growth alone. And, in addition, the Community does not have the necessary instruments to compensate for the inconveniences of commercial interdependence by integrating economic policy. Indeed, we have no common currency. We have a common budget which is equal to 1% of GDP which is ridiculously low and badly used. We have no common policy as regards the future and particularly as regards research and development.
We have strong commercial integration which explains the wealth we have reached, because we would be semi-developed countries if we had not created the Common Market. But on the other hand, we have a low level of integration of the instruments of economic policy, which explains why we are in a system of sterile deflation. All of us, whether we like it or not, are in Non-Europe.
What we call the Common Market is in reality a very uncommon market. More exactly it is a Common Market for the people’s goods and in no way is it a common market – if you will permit me to use the language of Machiavelli – for the prince’s goods that is spending in public administration, telephones, railways and in particular defence, the latter representing 15% of the Community’s GDP. The princes (the States) have told us the exploited peoples of Non-Europe this: do what I say, but above all do not do what I do. The Common Market is good for you the people. Me, I intend to keep my power. I intend to choose my suppliers. I intend to go on practising the quiet policies of administrative protectionism.
Which explains why the Common Market is common only for the products of the people and the sectors of the past: our princes, our States, are in complete agreement about bringing together the sectors of the past, for the good reason that the sectors of the past are the sectors which are in difficulty, those which give them the biggest headaches: agriculture, steel, coal, shipbuilding, textiles. These things they want to share in common, but they would not dream of doing it for the things of the future because this gratifies the people in power. It brings enjoyment. It gives rise to dreams. You can make people dream about these things. So they keep that for themselves. So we have a Common Market for those sectors where integration is least necessary, since obviously it is in the sectors which relate to the future that economies of scale are the most essential. That’s where there is no common market.
There are many examples. I give many in my book. But there is one which particularly struck me: the President of the European Parliament told me that he had to put two telephones in his car. Yes two, because Non-Europe is so badly organised and has so little sense of good housekeeping in public finance that the President of the European Parliament has to travel between three capitals: Strasbourg, Luxembourg and Brussels. Well, by a bit of bad luck, the telephone regulations are not the same in France and Belgium so that the President of the European Parliament has had to install two telephones in his car, one for Strasbourg and the other for Brussels and Luxembourg. This is the symbol of Non-Europe in the sectors of the future. This is the source of the exploitation of peoples. This is what we do to become a huge factory of unemployed.
Finally, the following is the cost of Non-Europe. We have shown with James Ball on the basis of the works of the Common Market Commission that each citizen in Europe on average works one week a year to maintain customs officers in the EEC. I say that each citizen in Non-Europe today is exploited by these States who surround their territory with customs barriers which are supposed to protect but which in fact, instead of protecting us, exploit us. Yes, the citizen of Non-Europe is exploited by the State a little like the middle-age serf was exploited by his lord. We pay our tithe. I propose that we turn our excess customs officers into much-needed police officers. One of the consequences of Non-Europe is that we have insufficient police officers because Non-Europe is not good for law and order: where there are unemployed people, there are thieves. Where there are thieves, you need policemen. We have too few policemen and too many customs officers. Hence, I suggest we turn customs officers into police officers.
With things this way, our chances are still intact – but not for much longer despite the immense wastage which is tied to any intergovernmental co-operation where everything has to be dealt with in frightening marathons. United Europe’s capacity can be measured in terms of the success of such projects as the Airbus, Ariane and Jet Torus projects. In this respect to understand the disparity existing between what we are today and what we would be socially and economically if we were united, just think for a moment what the economy of the United States would be if the territory of the United States were split up into ten monetary areas, their budget divided up between ten Pentagons – a federal budget reduced to that of the EEC, which is twenty times less – and with two thirds of this budget dedicated to agriculture... You would agree, in these conditions, that America would be much less athletic than it is today.
If I say athletic it is not by chance. In fact, I was thinking of the Olympic Games in Los Angeles last year.
As regards the Olympic Games, I learned one thing that seems to me to be highly significant as regards the chances that we would have as Europeans if we were all united. Everybody interpreted these Olympic Games as being a triumph for the United States. Now do you know how many medals the US had: 174. And do you know how many medals the ten Community countries together won at the Olympic Games in Los Angeles? I would be surprised if you did, because nobody thought of adding them up. Which just shows you how deep European spirit is! If they had been added up, we would have discovered that we won 181 medals in the Olympic Games in Los Angeles against the 174 won by the US.
I believe that in these circumstances we would be seriously in the wrong to be angry with others. If we are on the road to suffering, if we do not play all our aces we should not be resentful about it with other people, we should blame ourselves, and only ourselves, because only we can redress our economic growth when we wish. Yes, we can turn growth round whenever we like, in Europe. We can begin to create new jobs when we like, as long as we manage our economic policy in an integrated way in order to bring what James .Ball and I called the multipliers of Community efficiency into play. We still have the chance to do this, but we need to pay urgent attention to it, because time is running short.
There are four reasons for this urgency. The first is that this time France is not the bad boy in the class, so we had better take advantage of this, because it does not happen too often. Certainly, when it is not France, it is England. Indeed, in European affairs the behaviour of the French and the English is often comparable. Not merely for the reason that Spinelli likes to state that they are two old nation-States, nearly a thousand years old. More than this, they are old powers who have become accustomed to looking at the world from a centre which could be either Paris or London and see their colonies spreading out around the globe. Hence the superiority complexes which have suffered badly from decolonisation have been transferred to a number of original projects such as Concorde or national nuclear arsenals, not to mention the computer and data processing industries. So when it is not Paris who is the bad boy, then it is London. We need to take advantage of this when there is one of them on the right side. Currently, it is the case of France: you have been able to see that M. Mitterrand recently played an extremely positive role as regards European problems.
It should not be thought that this is purely politics and that only M. Mitterrand has changed in France. On the contrary, there has been a very big trend in the direction of common sense which has characterised France. I am going to read you a little text recently written by Albin Chalandon, de Gaulle’s former minister and one of the most representative people as regards the Gaullist perennial tradition and legitimacy in France: “the national feeling, born from struggles and blood spilt for dominance, has been profoundly modified. Among the young there is only an awareness of a difference without any superiority. They do not believe any more, these young French, in an original and irreplaceable destiny of the nation, a witness of a Messianic vocation (...). Our arrogant and exclusive singularity is being attenuated (...). Membership of the EEC is part of our way of thinking (...) it is necessary first of all to establish a minimum of European political power”. This is a new language. So do not let us disappoint it. There is a spirit of urgency in France.
There is also great urgency in West Germany. If France is once more becoming European, I am beginning to become very worried, like other people about what is happening in Germany. Professor Triffin yesterday rightly spoke of the attitude of the Bundesbank as regards the ECU. I fear, moreover, that there is in Germany today a new temptation which I will call the temptation of national neutralism. But there again, if this temptation develops, then it is the fault of us who have not created Europe. We must remember, in this respect, what Adenauer said: Europe is indispensable to anchor Germany alongside the Western democracies. There is also urgency for technical reasons, reasons which are related to currency. M. Volcker does not tire of saying that it is inevitable that the US external trade deficit will one day end up in a dollar crisis if the deficit is not reduced. But this is hardly the point. The real question is what would happen on that day for the European Monetary System? The European Monetary System would simply crack up.
The third reason for the urgency is the fact that for the first time since the beginning of the construction of Europe, European companies have played a really positive role in European construction, which is something new.
Yesterday, Professor Majocchi recalled how, when de Gasperi made his proposals on the ECSC, the Bank of Italy and Italian industry were against. The same was true of France. It was the same thing in most of the other countries with the exception of Germany where industry was stronger.
Thus it was people in government and politicians who were behind the construction of Europe. Since then, Europe has become enmeshed in the snares of Non-Europe. But it is very interesting to see that industry has understood the need for Europe and is attempting to step into the politicians’ shoes. It is they who are developing the private ECU, while Governments and Central Banks are holding back the development of the public ECU. It is industry, the big companies, who brought off the ESPRIT programme around this admirable commissioner Viscount Davignon.
A man like Dekker, the Chairman of Philips, does not tire of fighting for Europe and I am not naturally speaking of the great Italian entrepreneurs who have understood this for a long time. The most characteristic case perhaps is that of a great European entrepreneur who does not belong to the ten, Guyenhammar, the Chairman of Volvo, who nearly two years ago created a club for great European enterprises which he called “European initiative” to promote a great programme of public works, making it possible to improve in particular communications and which includes the Channel tunnel and the tunnel between Sicily and Italy.
But something new is occurring in this respect. Today, I think enterprise wants to do for the unity of Europe what the philosophy of Enlightenment achieved in the 18th century to overthrow feudalism – and we are in a feudalistic position with our customs officers – and what the Romantic movement and spirit of progress achieved in the 19th century for the growth of national movements. But let us be careful, with States one is never pushed for time, they have an eternity before them. With the leaders of industry it is not the same picture. They are pushed for time and if the project fails, they change projects. This is the first time that they have, at this point and with this strength, a plan to create the unity of Europe. There is a need for urgency, let us hurry up because soon it will be too late.
Finally, the fourth reason for the need for urgency: the social problems of Non-Europe which can be summed up in the new expression the “new poor”. We had new philosophers, new economists and now we have the new poor.
The new poor are the poor created by the curtailment of social security programmes and are hence the poor of Non-Europe. Indeed, there can be no lasting social security without growth. And there can be no sustained and lasting growth in Non-Europe. So Non-Europe is a threat to social security. And what is more precious? Do not forget that we are the only ones in the world who have a social security system. The Americans and Japanese do not. And the age of the Common Market is the only age in history of the world where there has ever been a social security system like ours. I would fear for European democracies’ future if our social security systems were threatened by a no-growth situation. And I wish to point out here and now a tendency in the last elections, because of the crisis, for the Governments in power to lose elections. The great lessons of the European elections is not that the left has won or that the right has won. It is that in almost all cases the majority lost. The opposition won because people are really beginning to be fed up. And probably deep down in their subconscious, these people who are not so stupid, are beginning to understand what I have just tried, perhaps in too many words, to explain to you.
 
III
 
So let me reach my conclusion and tell you that today it is clear to me that the future of Europe is in Rome.
I am all the more happy to see that Professor Majocchi spoke admirably yesterday about the role of various Frenchmen at the beginning of European construction.
If I say today that the key to the future of Europe is in Rome it is because the Italian presidency of the European Council, which will end with the Milan Summit at the end of June, will have a decisive role to play.
The first essential point is that since the Fontainebleau Summit the “Dooge report” has been accepted not unanimously but by a majority. The members of this Committee have decided to make a break with the rule of unanimity, i.e. the rule about Non-Europe. Everybody has understood this here. They have decided for majority vote.
The second essential point is that they have taken the Spinelli report as the basis for their works. So in Milan there is a straight choice:
– the first hypothesis is that the Italian presidency will play in full the dynamic game of the seven countries who signed the Dooge Committee, the “hard core” that John Pinder spoke of so courageously yesterday – because there may be French Europeans, but there are also British Europeans! And hence, if the Italian presidency plays this game of seven countries to the full, without any compromise, then I believe that we can hope for everything and, in particular, that enlarging the Community which is a duty for all us democrats – will be no trickery for Spain and Portugal;
– or, on the contrary, we can bury the Dooge report like so many other reports of its kind (Non-Europe is a cemetery of excellent reports). And then, we should not be surprised to see disappointments come tumbling down on us. Then the richest of us will not fail to plan their retirement and say to themselves that they have the choice between Florida and California. And as regards young people, our children, in growing numbers they will have a choice between unemployment, drugs and Euro-terrorism.
Italy, today, has already supplied Europe with its new Jean Monnet. The new Jean Monnet, is Altiero Spinelli.
Ladies and gentlemen, I am an optimist. I have never yet said: this is the last chance. For the first time, now, I really think that this is the last chance. My hope and my appeal in the name of my children is that the Italian President at the Milan Summit manages to fulfil the historic task which Europe expects of the man who will be the new Spaak. Italy has already given us the new Jean Monnet. It is up to Italy to give us the new Spaak in June, the new Spaak of the new treaty of Rome, who will understand one thing which is well-known in Rome, which is known better here than in any other place in the world: the Renaissance, the Renaissance of Europe.
 

 

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