TheMarketForIdeas

The unions of states, in their either federalist or inter-governmental setting, are portrayed in economics and political science literature, by certain scholars and pundits, as quasi-romantic stories and, by others, as purely-cynical undertakings: they are, for the first, expressions of common destinies, while for the second, mere cartels of political exploitation. Though, beyond charitable or circumspect translation of state gatherings, the undeniable facts are that the state, as an organization of humans, has a maximizing logic and that this logic is exercised as the monopoly of (legitimate?) violence with the privilege of (unconsented?) expropriation, by taxation, regulation and inflationary redistribution of purchasing power. The maximization logic of the state (apparatus) – rightly de-homogenized from the rest of society – leads to a triple choice: to increase domestic exploitation, to expand abroad, or both.

The limit for internal expansion of the state is its citizens electing to “vote with their feet” or their revolution against a too unfree and unfriendly pack of policies and institutions set in place. The external limit is, (geo)graphically, the “edge of the world” and, (geo)politically, another state or coalition of states capable to stop its warlike, imperialistic odyssey at a certain point. But, supposing war as unwanted and the mutual respect for sovereignty as the rule of the game, both internal and external state pressure can still be manifest, while varying in intensity between the situations of a “competitive” statehood environment and a rather “cooperative” one. Peacefully competing states lead to incentives to treat mildly the residents (be they individuals or legal persons) while cartels of states facilitate the mistreat of trapped residents. What is true in imperfect / hampered business markets is equally true in political ones.

Relations between states can be bluntly-antagonistic – when governments’ expansionary tendencies do clash roughly at international level – or hypocritically-harmonistic – when they act as a cartel to “stably exploit” a perimeter populated by the sum of their citizens.

Summing-up: relations between states can be bluntly-antagonistic – when governments’ expansionary tendencies do clash roughly at international level – or hypocritically-harmonistic – when they act as a cartel to “stably exploit” a perimeter populated by the sum of their citizens. Why does a “cartel of states” look tempting? Simply, for inter-state differences in the degree of exploitation generate inter-state competition and instability that need to be tamed. If stability obtained through coordinated (cartel) exploitation is cheaper than belligerent, fierce competition, the states rationally gather in inter-governmental organizations – up to the level of economic or even political unions. If policies are similar, moreover similarly poor, citizens have fewer possibilities to react, and “governors” (across the usual political cycles) have fewer reasons to worry about the defection of the “governed”.

Do these three vast unions of states from the modern and contemporary world history – the United States of America (USA), the Union of Soviet Socialist Republics (USSR), and the European Union (EU) – respect such a dialectic? In a sense, all do, even if this reasoning is absent from the words of their “founding fathers”. In the case of the American union, it was not the inception point that best illustrates the tendency of political Establishments to favour centralization and fear competition, but the very clumsily explained episode of the Civil War. In the case of the Soviet Union, its birth from the ashes of the Tsarist Empire after the “Great October Socialist Revolution” was a mix of opportunism and fear of the regional soviet leaderships, facing Moscow’s sticks and carrots. As in the case of the European Union, it was the offshoot of a pacifying process in a space of “centrally-managed free movements”. 

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One American lesson. The development of all the institutional features of capitalism and democracy – equality in rights of the economically unequal people, the possibility to overcome social status by one’s own work and audacity, the primacy of the value of reason and the freedom of spiritual beliefs, the saving and accumulation of capital, and the free competition of entrepreneurs – is responsible for the long lasting viability of America’s political union. Even if far from a pure “laissez-faire capitalism”, flawed by the infamous epoch of slavery, biased by protectionist and secessionist episodes, manipulating credit and currency up to a world scale, America’s legacy of unity in common sense, in basic values and in fundamental truths allowed that, on this ample territory, populated by men with diverse cultural origins, good institutions would proliferate and its people(s) would prosper. Uni(formi)ty was not burdensome.

If stability obtained through coordinated (cartel) exploitation is cheaper than belligerent, fierce competition, the states rationally gather in inter-governmental organizations – up to the level of economic or even political unions. If policies are similar, moreover similarly poor, citizens have fewer possibilities to react, and “governors” (across the usual political cycles) have fewer reasons to worry about the defection of the “governed”.

One Soviet lesson. The economic chaos within the USSR was reignited by the Council for Mutual Economic Assistance (Comecon), an organization of socialist economic integration. Established in 1949 and reactivated in 1955 by Khrushchev with the aim of introducing the division and economic specialization between the socialist countries, it was meant to be above all a function of the Soviet economic, political and military power. The Kremlin planned to transform the Comecon into a supranational economic body in which the developed “North” (the USSR, Czechoslovakia, etc.) would produce industrial goods and the less developed “South” (Romania, Bulgaria, etc.) would supply raw materials and agricultural products. Besides the parodic division of labour (based on rough assessment of the endowment with factors of production), it also disturbed the national pride, in an apex of socialist discoordination.

In a book of impressive and arresting vision – How can Europe Survive (1955) –, Hans Sennholz warned against the tremendous side effects of integration among asymmetrical interventionist welfare states, as those had in mind by postbellum European politicians. Instead of freeing up their economies (internally and externally), scholars and statesmen devised plans for states to pool part of their sovereign powers into integrated Europe. The result was a “cartel”, a blend of overemphasized liberalization and disguised harmonization, called, after decades, the EU. It was an “alternative” equally to a new war as well as to a pure free movement of resources, both unacceptable for the politicians of the continent, all of them willing to secure for themselves a peaceful command over their national economies, but negotiated internationally. So, is the EU a fragile hybrid of the US and USSR routes to unity, a third (and blind) way?

In a book of impressive and arresting vision – How can Europe Survive (1955) –, Hans Sennholz warned against the tremendous side effects of integration among asymmetrical interventionist welfare states, as those had in mind by postbellum European politicians.

The Future of Europe International Conference, reaching in 2017 its 8^th edition, hosts a selection of papers which are not afraid to ask radical questions in a scholarly manner. Spread in several panels addressing national and international governance, business environment, corporate social responsibility and risk management, finance and banking, resilience of common institutions and policies, multiculturalism and diasporas, the papers prepared for presentation are as many exercises of prudent and thoroughly profound diagnosis and prognosis. This conference takes place in Romania, only one year before its centennial of national unity. That several layers of crisis are hitting the EU (economic and political, social and cultural) is a trivial observation for any decent person. That Romania, as any other member state, is part of the problem as well as of the solutions is a fact. That reflection should inform action is a must. 

(Foreword to the proceedings volume of “The Future of Europe” International Conference, 16^th-17^th November 2017, Bucharest, Romania, event organized by the Bucharest University of Economic Studies, the Faculty of International Business and Economics – for the detailed programme, click here).