In May 2023, when the British Office of National Statistics (ONS) released the March-quarter national…
I note the US have been rather quietly urging the EU to resolve the so-called ‘Greek crisis’, which I really think is a euro-crisis, even though its current epicentre is in Greece. What the Americans are doing beyond the purview of the public gaze is anyone’s guess but we can be sure it is interventionist, self-interested and probably not helpful to the well-being of ordinary Europeans including Greeks. The US influence over Europe has, in fact, culminated in the crisis, even if that realisation is not understood by many. I have just finished reading a book by the French journalist/publisher and politician – Jean-Jacques Servan-Schreiber – who died in 2006. The book – Le Défi Américain (The American Challenge) was very popular when it was published in 1967. It initially was a major hit in France and later was translated widely. It helped me understand how the US intellectual tradition has at critical times in Europe’s modern history been so definitive.
Jean-Jacques Servan-Schreiber (aka JJSS) was implacably opposed to the anti-US and British sentiment expressed by Charles De Gaulle and believed the Anglo world was critical for the development of Europe after the devastation of World War II.
He founded the weekly French Magazine L’Express, which fulminated continually against the Gaullist policies and was the darling of the young intellectual left in the 1950s and 1960s in France. While it is a right-leaning publication now its beginnings were certaintly not of that persuasion.
This New York Times obituary (November 8, 2008) – J.-J. Servan-Schreiber, French Man of Ideas, Dies at 82 – provides more personal background if you are interested.
The thesis is the Le Défi Américain is that Europe would ultimately succumb in both economic and cultural terms to the relentless push by American corporations into the European markets. But this penetration would not only be in terms of goods and services but also narratives and ideas.
While he supported ‘free trade’ and was anti-protectionist, which brought him squarely into conflict with the Gaullists, he challenged European political and corporate leaders to resist the American threat to European independence. He believed that Europe was “witnessing the prelude to our own historical bankruptcy”.
… we are now beginning to discover what was concealed by 20 years of colonial wars, wars that dominated our thoughts and our behavior: the confrontation of civilisation will henceforth take place in the battlefield of technology, science and management.
Charles De Gaulle was clearly hostile to the American involvement in Europe via the Marshall Plan and the development of NATO. He considered that France was under a cultural attack as well as being economically threatened by US corporations. I am sure you are all familiar with the French attempts to sequester their language from contamination from English, in particular. That paranoia went back to this period.
But by the 1960s, the cultural threats were seen as less of an issue than the role that technological innovation was playing. Many people started talking about the so-called ‘technology gap’ that Europe was facing vis-a-vis the Americans.
American was clearly seeking to exploit its leadership in technological innovation to exert political influence on the Continent. As the time, the Soviet leader (Kosygin) even went to the lengths to visit Paris to try to stitch up a Soviet-Euro alliance against the growing fear of US imperialism.
There was a great article in the Science Magazine in February 1967 that I dug out of my archives today. It is a one-page commentary by Philip H. Abelson (Science, February 17 1967, Vol. 155, No. 3764, 783) – European Discontent with the “Technology Gap”. The link is to JSTOR if your library has access.
He said that:
In many fields, Europe’s technology is at least equal to that of the United Sitates, but in some highly visible areas, such as aerospace, electronics, (and computers, America is preeminent. European leaders feel that the technology gap is growing, and some foresee an “under- developed continent” dependent upon the United States.
And the reasons advanced for this:
1. “The large U.S. market encourages investments, such as the $130 million that RCA poured into color television, and the U.S. devotes a greater fraction of its large gross national product to research and development than Western Europe does”
2. “Less talked about are other differences between us. One is la matter of education. In Germany only 8 percent of college-age youths enter universities, while in the United States 40 percent do so. This contrast contributes to a difference in managerial skill. Middle levels of Ameri- can management are more competent than their European counterparts”.
And the classic quote relating to “differences in social attitudes”:
An illustration was provided me by an official of a large European-based oil company that operates laboratories on both sides of the Atlantic. The company had discovered that the cost of performing comparable work on the two continents was the same despite much higher salaries being paid in the United States. The man’s explanation was this: in Europe scientists directed the work of techni- cians while in the United States scientists personally made the measurements. Moreover, in America top scientists were willing to eat cafeteria-style. In Europe, a leisurely lunch must be served, on a white tablecloth.
One could say that even today, that what one finds at a typical EU-Brussels type talkfest (meeting, conference whatever) in terms of sumptuous catering and wines is quite apart from what is on offer at similar gatherings in the Anglo world.
The Science article also noted the rise of Japan after the Second World War was not just about “a willingness-even an eagerness-to work” but was due to it creating the “best ideas” as a result of their “educational policy” which sees the nation “a larger proportion of their youth than the Europeans do”.
… if present tendencies continue, the third industrial power in the world, after America and Russia, could be, not Europe, but American industry in Europe.
The book noted that the US firms that had invested directly in Europe were “the most dynamic element of industry in the Common Market countries” (Source).
The technology gap emerged because even though US firms were operating in Europe, the technology available at the time could not produce the products that the corporations were developing and as a result they had to be produced in the US and imported into Europe (Source).
The problem Servan-Schreiber identified as three-fold:
1. The flow of profits out of Europe to the US-owned firms.
2. The colonisation in an economic sense of Europe by US firms.
3. The cultural invasion.
So there was a massive debate at the time on ways that Europe could emulate the American model to ensure it kept in the technology race.
I should add that I have been studying this literature of the late 1960s as part of a broader project examining the demise of the ‘left’ narrative in European politics and the way economic policy has become homogenised as neo-liberalism – a conflation that, ultimately culminated in the Maastricht Treaty and the current crisis.
At the time, Servan-Schreiber’s ideas were not widely accepted by the French establishment and De Gaulle is rumoured to have dismissed the book as being “trivial” (Source)
In the Daily Telegraph Obituary (November 9, 2006) we read that De Gaulle’s dismissal of the ideas in ‘The American Challenge’:
… encapsulated the sense of rivalry, almost antagonism, towards America and the American free market model that has been a hallmark of French political discourse ever since.
The Belgian economist Jacques Drèze wrote an interesting reflection on these ideas in 1969 when he was at the University of Chicago – The American Presence in Europe.
[Reference: Drèze, J. (1969) ‘The American Presence in Europe’, Selected Papers No 31, Graduate School of Business, The University of Chicago, 1-16)].
Drèze considered “Le Défi Américain” to be “one of the greatest publishing successes ever to be known” in the French-speaking Europe.
He considered that “one sign” of America’s innovation:
… is the great regard in which education is held-not only education of the type we try to provide at Chicago, but also education of the type that millions of Americans are getting in community centers, or buying through the mail, and so on).
He said that:
I hope that no matter how much American presence there ever will be in Europe, there also will be a discovery by Europeans of the best of the United States-and this can only happen through European presence in the United States.
Well that certainly ˙happened with regard to the evolution of the monetary union, although I would vehemently disagree with Drèze that the import of American ideas in the area of economics was desirable, particularly the ideas disseminated by the University of Chicago.
In my my current book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015) – I examined the evolution of the monetary union from the late 1940s and traced it in terms of the ideas that underpinned the various policy proposals.
It was clear that the earlier, organised attempts at designing a monetary union embodied, for example, in the 1969 Werner Report and the MacDougall Report in the late 1970s.
The great European visionaries in the immediate post World War II period did not desire to put the European economies into a straitjacket of austerity and hardship.
Rather they aimed to achieve peacetime prosperity. Europe’s political leaders devised the ‘European Project’ as an ambitious plan for European integration to ensure that there were no more large scale military conflicts fought on continental European soil.
The Project began at a time when the advanced nations had embraced a broad Keynesian economic policy consensus with governments committed to sustaining full employment.
The Keynesian era emerged out of the Great Depression, which taught politicians that without major government intervention, capitalism is inherently unstable and prone to delivering lengthy periods of unemployment.
Full employment came only with the onset of World War II as governments used deficit spending to prosecute the war effort. The Keynesian era of macroeconomic policy that followed was thus marked by government deficits supplementing private spending to ensure that all workers who wanted to work could find jobs.
The broad political and economic consensus that emerged after the war brought very low levels of unemployment in most Western nations, which persisted until the mid 1970s, although some European nations had bouts of sustained higher unemployment as a consequence of having to defend their weaker currencies.
Within this broad policy consensus, the discussions about integration were conditioned by Franco-German rivalry. France was determined to create institutional structures that would stop Germany from ever invading it again.
It saw an integrated Europe as a way of consolidating a dominant role in European affairs but was determined to cede as little national sovereignty as possible to achieve these aims.
As noted above, France was also resentful of the influence that the US was exerting in Europe, particularly through the Marshall Plan, which intrinsically tied West Germany to the US.
The Germans, suffering a deep shame for their past militarism and associated deeds, had only their economic success including the ‘discipline’ of the Bundesbank to generate national pride.
As well as a need to expand its export markets, Germany wanted to be part of the ‘European Project’ to demonstrate a rejection of its ugly history. But an obsessive fear of inflation meant that this participation had to be on German terms, which meant that the new Europe had to eventually accept the Bundesbank culture.
This became a grinding process. Within the German ‘stability’ environment, it was seemingly overlooked that Germany, in fact, relied on robust import growth from other European nations for its prosperity.
The fact that not all nations in a Bundesbank centric ‘stability environment’ could have balance of trade surpluses was ignored.
The 1970 Werner Report outlined a comprehensive timetable for the creation of a full economic and monetary union by the end of the decade.
It was clear the Committee wanted monetary and fiscal policy to be centralised with the “centre of decision of economic policy … [to] … be politically responsible to a European Parliament”.
A later study by the MacDougall Committee in 1975 also emphasised that an effective economic and monetary union would require a strong fiscal presence at the federal level.
They assessed that:
It is most unlikely that the Community will be anything like so fully integrated in the field of public finance for many years to come as the existing economic unions we have studied.
The Werner Report was not implemented because of the growing currency instability the French fear of German dominance and their unwillingness cede power to supranational institutions, combined with the German inflation obsession, stood in the way.
The two nations could clearly find ways to cooperate on a political level but trying to form an economic and monetary union was difficult.
In 1972, the Governor of the Danish Central Bank said (quote from my book):
I will begin to believe in European economic and monetary union when someone explains how you control nine horses that are all running at different speeds within the same harness.
What eventually allowed the ‘nine horses’ to be harnessed together was not a diminution in Franco-German national and cultural rivalry but rather a growing homogenisation of the economic debate.
The American influence was manifest.
The surge in Monetarist thought within macroeconomics in the 1970s, first within the US academy, then in policy making and central banking domains around the globe, quickly morphed into an insular Groupthink, which trapped policy makers in the thrall of the self regulating, free market myth.
This was the ‘American Challenge’ – but it was not in the form that Servan-Schreiber envisaged in his 1967 book. Europeans started flocking to US graduate programs in economics and came out with shiny new PhDs and very little knowledge about how monetary systems operate.
The American intellectual invasion of Europe in the 1970s was not a qualitative improvement – rather a race-to-the-bottom of ignorance and ideological supremacy for neo-liberal ideas.
The Europeans imported these inferior economic ideas and analytical techniques via their young PhD students as they returned hometo take positions in government, central banking and in other places of influence.
The accompanying ‘confirmation bias’, which is ‘the tendency of people to only notice information consistent with their own expectations and to ignore information that is inconsistent with them’ overwhelmed the debate about monetary integration.
The introduction of the Monetarist inspired Barre Plan in 1976, by French Prime Minister Raymond Barre, under President Valéry Giscard d’Estaing, showed how far the French had shifted from their Gaullist ‘Keynesian’ days.
Across Europe, unemployment became a policy tool aimed at maintaining price stability rather than a policy target, as it had been during the Keynesian era up until the mid 1970s. Unemployment rose sharply as national governments, infested with Monetarist thought, began their long-lived love affair with austerity.
The Delors Report (1989), which informed the Maastricht conference, disregarded the conclusions of the Werner and MacDougall Reports about the need for a strong federal fiscal function because they represented ‘old fashioned’ Keynesian thinking, which was no longer tolerable within the Monetarist Groupthink that had taken over European debate.
The new breed of financial elites, who stood to gain massively from the deregulation that they demanded, promoted the re-emergence of the free market ideology that had been discredited during the Great Depression.
The shift from a Keynesian collective vision of full employment and equity to this new individualistic mob rule was driven by ideological bullying and narrow sectional interests rather than insights arising from a superior appeal to evidential authority and a concern for societal prosperity.
The Monetarist (neo-liberal) disdain for government intervention meant that the EMU would suppress the capacity of fiscal policy and no amount of argument or evidence, which indicated that such a choice would lead to crisis, would distract Delors and his team from that aim.
Delors knew that he could appease the French political need to avoid handing over policy discretion to Brussels by shrouding that aim in the retention of national responsibility for economic policy making. He also knew that the harsh fiscal rules he proposed that restricted the latitude of the national governments would satisfy the Germans.
Monetarism had bridged the two camps.
The Americans had won!
The Eurozone is now locked down in a straitjacket of economic austerity, driven by an economic ideology that is blind to the evidence of its own failure.
The neo-liberal policies of deregulation and the demonisation of the use of discretionary fiscal deficits (government spending greater than tax revenue) created the crisis in the first place, and now the same sorts of policies are prolonging it
The current policy approach has institutionalised economic stagnation, widespread retrenchment, and the deterioration of working conditions and retirement pensions.
Millions of European workers are now unemployed, youth jobless rates are around 60 per cent in some advanced nations, inequality and poverty rates are rising, and massive daily losses of national income are being endured.
The dramatically high youth unemployment rates will ensure that the damage will span generations and undermine future prosperity as a cohort of jobless youth enter adulthood with no work experience and a growing sense of dislocation from mainstream societal norms.
But there is, of course, one thing that the Europeans failed to grasp as they soaked up American monetarism like illiterate sponges thirsty for anything that they could parade as ‘sophistication’ – such has been the inferiority of Europeans that goes back to the debates that we discussed earlier (Technology Gaps etc).
They failed to grasp that the US President floated the US dollar and abandoned any notion of convertibility – that is, in August 1971 the US dollar became a true fiat currency and the US government inherited significant federal capacity to maintain economic growth and low unemployment.
The European embrace of Monetarism led to the Maastricht Treaty and frightening fiscal rules that have created the crisis throughout Europe and the Depression in Greece.
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That is enough for today!