History is not on Europe's side

Despite daily talk of European disunity, and the Czech declaration last night that it won't join a fiscal compact, we are (yet) living through the strongest phase of the European “concert system” since 1815.

Parallels with past, weaker iterations of such a system of what was (then) nominal co-operation and (mainly) diplomatic summit politics are intriguing. In each time, great powers have clubbed together (“in concert”) to constrain hegemony and protect the status quo and have ultimately failed.

After Napoleon, in the first phase for which the phenomenon gets its name, the “concert” powers of Britain, the German Confederation, Austria-Hungary and Russia dared not see Christian monarchy suffer again at the hands of French-style revolution. From 1815 until around 1840, these powers put nations into effective administration by more “able” hands if they edged too far above the parapet.

Amongst those were Spain and Greece – Spain suffered an intervention by the powers to restore its (briefly deposed) monarchy in the 1820s. Greece, after its war of independence against the Ottomans, in 1829, was bequeathed a nice, acceptable monarchy from German nobility lest it take ancient traditions too seriously and fashion a republic.

Merkel may have backed off sending a bureaucratic princeling to Athens 170 years later, but it is telling that the prospect seems like anything but a joke in 2012. It's tempting to sense a certain cyclical trend.

A house divided couldn't stand and the Crimean War (in the 1850s) and ‘German’ wars leading to that country's unification (in 1866 against the Austrians/in 1870 against France) set the stage for the First World War. The concert powers, unimpressed with the virtues of peace, turned on each other (being covetous of colonies and trade which had been outside the ambit of “concert” politics; except to inequitably divide up the spoils.)

The discrediting of failed “concert” politics in the inter-war period (1919-1939) was no remedy for its absence. Thus, in 1944, we were thrust into an internationalist project to regulate global trade named the Bretton Woods system (a second phase.)

Bretton Woods ordained worldwide fixed currency exchange rates pegged against gold. Bretton Woods dissolved when the United States abandoned gold in favour of fiat currency and floating exchange rates (1971). This, and deregulation of financial markets afterwards, changed institutions utterly from what they were when they were born under the initial Bretton Woods architecture.

We are familiar with some of these institutions: the WTO (erstwhile GATT – General Agreement on Trade and Tariffs) and the IMF. The last becoming reviled by those working in International Development, and infamous in geography classrooms, for its programmes of tied financial aid, which ravaged developing countries. How upsetting that we now find ourselves as their ward. It's not surprising though, given what a lapse in capital controls, consequent financial instrument ‘innovation’, and currents of globalisation created: a global debt bubble.

Truthfully, the IMF isn't the bogeyman. Its disagreement with the ECB over Ireland's financial programme points to a historical trend – stalling of worldwide concert while European concert with actual teeth resurged. We called it the Common Market in 1957 and the European Union after 1992. It was granted ever more powers, to achieve “ever-closer Union”, in 1997, 2001 and 2009.

This is the latest concert phase. In 2002 a certain foreign-policy wonk suggested it be christened The Kantian Paradise. Europe evaded brutal power politics and fashioned a “perpetual peace” based on rule of law and equitable (democratic) interdependence. When the common advantage of what states shared had greater value than each state's relative advantage they compromised – through common institutions – to preserve their Common-wealth.

That system, now ever more institutionalised (the post-Napoleon concert was mere fait accompli) seems to be speeding towards demise because all of that is just not strong enough. The commonwealth is forgotten: there is occasional German lip-service paid to political union, and the respite from continental war which it provides, but scarcely anyone is truly animated by this anymore.

Ireland, its people anyway, want a debt write-down; Germany shudders that profligates might fritter away the farm; Greece seeks to be allowed to default; Italy and Spain protest that they followed the financial rules yet are instructed to be austere. France hasn't changed form – always seeing itself as the ‘natural’ leader of Europe (resentment will brew at Germany's retention of triple-A status -something it couldn't do). Britain didn't change either – it sees itself as ‘outside’ Europe and the cooling of its ‘special’ relationship with America didn't drive it into Brussels's arms. Eastern European states are apt to secure opt-outs per the British paradigm (see the Czech Republic but also reference Poland.)

Tentatively, I propose a two-fold solution: 1.) European debt federalisation; 2.) European capital controls akin to the 1933 Steagall-Glass Act to ensure crisis doesn't recur. The Fiscal Treaty doesn't remedy structural flaws inherent in modern capitalism, instead seeking to embed austerity in member-state law (a useful short-term prescription, perhaps, but nothing more).

Nevertheless, historical precedent would suggest that in 2013 Croatia will join a concert that has run out the clock.

What follows may be frightening, and assuredly not as predictable as in the 67 years since 1945.

Image top: SamueleGhilardi.