Political Economy of Europe

History, Ideologies and Contemporary Challenges

Hardy Hanappi

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000451481
• Edition: 1
• Topic: Economía
• Subtopic: Macroeconomía

The development of European unification has reached a critical stage. Despite 75 years of peace, increases in welfare, and growth since World War 2, there is now a growing scepticism of the European agenda from various quarters, most notably embodied in the exit of the United Kingdom from the European Union. To fully understand the dynamics at work, this book presents an introduction to the development of the political economy of Europe from 1900 to 2020.

The first part of the book provides an overview of European economic and political history from 1900 to the present. It is clear from this history that Europe's population, and most notably its leaders, have been deeply influenced by ideology during this time. This sets the context for the second part of the book, which takes a closer look at some major paradigms framing European dynamics: (1) the market-oriented paradigm, (2) Marx's paradigm, and (3) the fascist paradigm. In this part, the essential core of each of these paradigms is presented and critiqued. In the third part, the current bottlenecks of European evolution (the migration crisis, Brexit, rise of new Fascism, the climate crisis, the COVID-19 pandemic) are investigated in the light of a possible emergence of a new scientific paradigm. Europe's role in the global division of labour – its possibility to serve as a role model for the advantages of democratically governing a highly diverse set of populations – is also explained.

This book is an ideal text for students undertaking courses on the political economy of Europe in either economics or politics departments.

1 History

DOI: 10.4324/9781003123378-2

Introduction: Periodization of European history

The history of Europe often is assumed to have seriously started with ancient Greece beginning some 3000 years ago. What has been happening since is a long stream of evolution, each stage always provoking the succeeding stage of development. But though events of a distant past still exert some influence on today's European dynamics, it is also evident that in general the more recent past seems to be more influential.

But this need not be the case. Think of some recent events that most people would consider being random events that only disturb the usual path of what they experience. This usual experience is something that is based on a longer historical observation than the recent event that is assumed to be a random disturbance. On average, human individuals can remember their lives backwards till the age when they were five years old. What they were told by their parents gives them a slight extension of their personally experienced past because they often feel it as their family's past. So as a first guess, let's assume that ‘what is usual’ covers a time span of the last 120 years. This leads to the start year 1900¹, when the trajectory of what happened could be seen in front of a background labelled ‘normality’.

Indeed, much of what had happened in the 20th century was definitely not normal². For the first time, a worldwide war occurred, and it even occurred twice. These wars indicated that the world had finally been completely conquered by the human species; that different models of social organization compressed in the nationalisms of different countries could not escape into the exploration and colonization of uncharted territory. Colonialism had done its work; a clash between the leading nation states to conquer territory occupied by another country became inevitable. With World War 1, the old military power structure of Europe's competing nations collapsed.

After this catastrophe, the centres of directly coercive power, i.e. of military power, started to move away from Central Europe: The USA had played a decisive role in defeating Austria-Hungary, Germany, and the other Central Powers, while in Europe's east, the Russian Revolution had led to a completely different form of social organization, contributing to that victory. The many fault lines, the contradictions, which WW1 had left behind in Europe's and the world's societies, could not be handled by the divided and disoriented human species, nationalism exploded into Fascism and World War 2 broke out. But WW2 now was a multi-level world war. It was not only a war on geographical territory like WW1. Besides these territorial conflicts on dominating Europe and dominating the Pacific Basin, it was also a conflict between three systems of social organization: Capitalism, Fascism, and a Socialism that had turned into Stalinism³. Fascism lost WW2 and for decades faded into an underground option of social organization.

So after 1945, only two global powers, the USA and the USSR, representing the two different systems of social organization, capitalism and Stalinism, were remaining. Europe was not the centre of global evolution anymore. It was a peninsula, which was split between the two large global powers. This was the bipolar world in which most of the older people alive in Europe today grew up. In their lives, the most visible turning point in modern geopolitical history most probably was the breakdown of this bipolar constellation in 1990. Nothing has affected all spheres of politics like this elimination of the Soviet Union. The remains, even a still militarily strong Russia, clearly were just survivors of a failed attempt the Stalinist experiment. Capitalism in US style started to claim that it is the superior form of social organization. But against all expectations, it did not penetrate the parts of the world that it just had freed from Stalinism as quickly as it was thought. As the new global reach of capitalism developed – which never resembled the image that neoclassical theory was drawing – it changed several core characteristics: (1) International finance, already a powerful driver in many events since WW1, became a separated power centre organizing the global production structure by channelling money according to expected profitability towards a diversified worldwide power structure. In the face of this globalized finance, local national governments worldwide lost much of their sovereignty. (2) Firms directly involved in the different stages of the production of global commodities are now geographically distributed worldwide; this is an immediate consequence. Depending on the local, i.e. national, political regime, a new variety of authoritarian and patriarchal forms of firm leadership is now enabled; some call it new type of colonialism. Production units in autocratically governed countries can neglect standard work protection measures, drive down wages, and scale up work time. A major part of exploitation can take place via exchange rates of currencies of countries settling at different stages of democratic development. (3) Global exchange rate exploitation managed by globally acting firms is vulnerable to several types of worldwide crisis, each of them showing characteristics that closely linked to the newly available information technology infrastructure, or to the lack of it.

Part 2 of this book is a brief look back on the history of Europe since 1900. It is a diachronic interpretation of what were essential events and why each one followed its precursor. This story of Europe is divided into four sub-chapters. The first one leads up to from the last decade of feudal governance to World War 2 and includes the first attempt to establish integrated capitalism in the interwar period. The second one tells the long story of the rise and demise of the second attempt to establish integrated capitalism from 1945 to 1990. The much shorter time period from 1991 to 2008 then is dealt with in sub-chapter three. It is characterized by a rapid globalization of the worldwide production system. Europe's role, in particular the role of European Union as driving force in the European unification process can only be understood in this global context. Finally, with the financial crisis of 2008, Europe as part of the global political economy entered a new age, the age of a sequence of severe crisis. In sub-chapter four, the main features of the critical developments from 2008 till 2020 are summarized.

It has to be emphasized that the story told is insufficient if it is not supplemented by the contributions of parts 2 and 3 of the book. The emergence of World War 2 cannot be understood without a thorough discussion of the force of ideologies. This is the task of part 2. That ideologies are important has been amplified since then by the development of information technologies and the mass media empires that today shape the mind-sets of large parts of the population. The task of part 3 is to focus attention again on Europe by a study of its current political and economic structure. This is a jump to the above-mentioned synchronic approach. To come back to the major challenges Europe faces today in this part – but now with several amendments from the sphere of ideology and the special characteristics of the European peninsula – is just a natural consequence.

Part 4 does not concern the interpretation of Europe's history; it only takes it as a starting point for some ideas of Europe's place in the global economy in the future.

1.1From 1900 to 1945

The breakdown of feudal regimes in World War 1 was the final result of the dynamics of the second half of the 19th century. The hegemonic power of the world of industrial capitalism, which was conquering production processes reaping the fruits of scientific progress since the late 17th century, was the British Empire. Within England, the manufacturing sector used new production techniques, new machinery, the country became the workbench of the world⁴. The first challenge to feudal political dominance in Europe had been beaten by the military forces commanded by the nobility in 1848, but the following decades saw a growing influence of bourgeois money owners on the political process. Compromises in governmental decisions between the bourgeois class and the feudal class had to be made.

The advantage of England with respect to technical knowledge started to diminish. The countries on the continent were successfully copying the British global workbench. So, the internal working of national economies was rather quickly improving giving the bourgeois class more and more weight in the national political processes. This development implied also that modern machinery needed better educated workers. But since the Middle Ages, the central institution responsible for education in European feudalism was the church. The hierarchical organization of the church was the perfect mirror image of hierarchical organization of the military power of the worldly emperor. As production in feudalism was mostly agricultural production, there was little need for a general education of all members of the population. The church thus rather had to provide an ideological framework, which kept the poor in mental immobility, in a belief in a paradise after death, which could be reached if they just worked and prayed. Evidently, this type of ideological framework was inadequate for the capitalism of the late 19th century. An increasing part of the working class had to get some basic education to be useful in the modern production processes⁵. Therefore, Napoleon's idea of a general public education finally could gain ground and complemented the still powerful influence of religious ideologies.

The most significant social development in the last decades of the 19th century was the rise of the labour movement. Marx’ book on capital (Marx, 1967) did itself not have any direct influence on workers. It was difficult to read and to understand and only some dozens of highly educated scholars had read it immediately. But a decade later, the somewhat softening oppressiveness of the ruling classes⁶ allowed for the emergence of some labour movement organizations, of political parties and unions. The leaders of this new mass movement were happy to reduce Marx’ theory to a handful of catchy slogans that could stir up workers. The union movement soon became a European-wide phenomenon attracting workers that now were more accessible to political agitation, working close to each other in factories. As long as they were working on farms in the open land, they were geographically dispersed and hard to reach⁷.

As European continental nation states were reforming their internal structures, they also were trying to challenge the leading position of Great Britain in world trade. The race for colonies, in particular between England and France, soon had transformed almost all continents into parts of a handful of colonial empires. Historians call this process the first globalization. The strengthened national coalitions between a new bourgeois class and an old feudal elite did feed this into this rivalry between nations; nationalism surged. The very old conflict between France and Germany – reaching back to the split of the empire of Charlemagne from 817 to 843 – lead to a renewed fanatic nationalism when German soldiers marched through Paris after having won the Franco-German war of 1871. Modern nationalism of this kind, based on the social identity it enables for a coalition of different ruling classes, was a somewhat new phenomenon.

Another new and important development was the emergence of a new global player out of the most powerful colony of Great Britain: the forming of the United States of America. The USA came into existence as independent state in 1783, but only after the Civil War (1861–1865), it started to become a global power. After the war, new technology made a transcontinental railway possible and the economic upswing enabled to buy Alaska from Russia (1867), to annex Hawaii (1898), and other expansions. In the years till World War 1, the USA had consolidated its internal and external struggles⁸. It had attracted large numbers of migrants and refugees from Europe, who often had to flee from conservative and backward circumstances, e.g. 50,000 Jews migrating from Czarist Russia in the 1870s and 236,000 Jews from Galicia (Austria-Hungary) from 1870 to 1910. The transfer of an enormous intellectual potential of migrants from still feudal states in Europe to the USA was later repeated when Fascism came into state power in the 1930s. The USA seemed to offer a land of the free⁹, and indeed for white Anglo-Saxon protestants (so-called WAPs) economic prosperity flourished – while racism with respect to the black population already had been re-established in a compromise agreement between North and South in 1877. The economic and military power of the USA after the turn of the century became so strong that it can be considered as the country that definitely decided the victory of the allies in World War 1.

The contradicting forces of global politics in the mentioned dimensions were getting less and less controllable. The politically ruling feudal classes in European countries obviously became increasingly dysfunctional.

At the same time, the economic background looked very prosperous. It was a time of basic innovations. With the new production methods of steel production, transport systems could be revolutionized by big train companies. The introduction of electricity allowed for a wide range of new consumer goods, e.g. the introduction of washing machines. With the partially successful fight of the unions for higher wages, there slowly developed the possibility of mass consumption of goods that exceeded what for centuries had been the simple subsistence consumption of the working population. And the rich social strata in European countries were not only getting richer, the more liberal circles of the bourgeoisie could afford to support the fine arts and cultural experiments.

But a look at international rivalries reveals that local cockiness was only a dance on a volcano. The stability of the global monetary system used to be based on the so-called gold-standard-mechanism¹⁰ with the British pound sterling being the generally accepted world money. But any mechanistic arrangement on money and gold flows hinges on the existence of an unchallenged and strong hegemonic power, like England at the height ...

Table of contents

• Cover Page
• Half-Title Page
• Title Page
• Copyright Page
• Contents
• About the Author
• Introduction
• 1 History
• 2 Ideology
• 3 Structure and Challenges
• 4 Afterthoughts on Europe’s Future
• References
• Index