EU requires a Jeffersonian, not a Hamiltonian, moment

EU requires a Jeffersonian, not a Hamiltonian, moment

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President of the European Commission Ursula von der Leyen, Brussels, Belgium, September 10, 2019. (Reuters)

Casting aside functionalist duplicity, Europe’s leaders have at last made their intentions crystal clear. Goaded by dynamic French President Emmanuel Macron and (surprisingly) joined by German Chancellor Angela Merkel, the European elite has made its play for a dramatic increase in the centralization of the EU. Echoing the two leaders’ earlier proposals for providing economic relief for the Southern European states hardest hit by the coronavirus pandemic, European Commission President Ursula von der Leyen last week outlined two unambiguously ambitious centralizing proposals.
First, the EU would provide €500 billion ($561 billion) in grants and €250 billion in loans for the hardest-hit countries, such as Spain and Italy. For the first time, Brussels itself would borrow the €750 billion on international capital markets, taking advantage of the European Commission’s AAA credit rating to raise cash, with the loans being repaid over 30 years after 2027. In addition, far from shrinking in size following the fiscal hole that Brexit has left, the commission has instead proposed an increased budget for the next seven years of €1.1 trillion, largely to deal with the pandemic’s massive fallout.
These amount to significant firsts for the EU in a number of ways. It is the first time the “Big Four” — Germany, France, Italy and Spain — are all on the same economic page. It is the first time mutualized debt would be assumed at the European level. It is also the first time grants rather than loans would be directly given to economically stricken EU member states — a significant, centralizing change of direction.
Supporters of the commission’s power grab went further, and for once their hyperbole at what is being attempted was entirely accurate. They called the plans Europe’s “Hamiltonian moment,” comparing it to the late 18th century US Treasury Secretary Alexander Hamilton’s policy moves toward centralizing tax and debt-raising powers, which were a key step on the way to a truly federal government with strong central powers characterizing American politics.
But such a grand declaration betrays a startling lack of comprehension of history, a flaw which will doom such ambitious plans to failure. So let us take the Hamiltonian analogy seriously. Like any individual, as the magisterial biography of Hamilton by Ron Chernow makes plain, the great man was a product of his time, as were his successes.
The US he found himself helping to lead during the Washington administration of the late 1780s-1790s had come into being through a unique set of circumstances that organically made creating an increasingly centralized, federalized country a serious possibility. All of the original 13 colonies spoke the same primary language. All were part of the same economic system, wherein they provided raw materials in exchange for finished goods from the mother country, England. Most had the precisely same political system — also modeled on London — wherein they had a lower house for the commons (what became the House of Representatives at the national level) and a more elite upper house (the Senate), with a governor (or then president) as the chief executive. All had the same historical experience of largely benign neglect over the 170 years that preceded independence.
Yet, despite all these commonalities — none of which modern Europe possesses to nearly the same extent — the US was still dragged through a bloody civil war costing more than 600,000 lives fourscore years later, only after which was the basic question of federalist centralization answered, and then only imperfectly until the New Deal of the 1930s.

Europe cannot hope to have enough organic commonalities to make such a centralized system work.

Dr. John C. Hulsman

A Europe without a common language, structural economic position, history, and political system cannot hope to have enough organic commonalities to make such a centralized system work in such a heterogeneous continent. Indeed, threats loom to the EU’s centralizing plans. Both the budget and the pandemic plans have run afoul of the “frugal four” — Austria, Denmark, Sweden, and the Netherlands. The four, all of whom are net economic contributors to the union, strongly disagree with the ambitious EU budget, in which they would have to pay yet more; in February, there were 28 fruitless hours of negotiation over the budget without any success. They also strongly urge the EU to center its pandemic recovery plans on conditional loans and are strongly against mutualized debt, precisely because they do not want their economic policies subsumed and hijacked by freer-spending southern states.
In other words, the four have a very different take on what the EU means to them due to their differing economic, historical, political, and social experiences. This is a reality that cannot be erased, given the unanimity rule for EU voting on both measures. Most likely a compromise will be reached, which is as it should be. However, in the future, given Europe’s unique organic history, a Jeffersonian moment (rather than dwelling on Hamilton’s centralism) actually suits the EU far better. For confederation, while allowing for more centralization than now exists but less than the EU elite dreams of, is possible and suits Europe. The tragedy is that, for the moment, the EU has picked the wrong American Founding Father.

  • Dr. John C. Hulsman is the president and managing partner of John C. Hulsman Enterprises, a prominent global political risk consulting firm. He is also senior columnist for City AM, the newspaper of the City of London. He can be contacted via www.chartwellspeakers.com.
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