Does Geography Beat History?

After World War II, the economies of Germany and other Western European states that had been weakened by the terrible conflagration managed to recover with the help of exports to the United States. The American economy, based on services and speculation, was able to absorb European products and thus sustain Europe’s economic growth.

American political scientist George Friedman has rightly pointed out that the situation is different in the E.U. Germany’s exports support its development and, for this reason, the country does not need to provide the demand that could sustain the exports of less-developed Eastern European states, which are also experiencing market deficits. This conflict of interest, which creates an opposition between the main economic power of the E.U. and the Union’s most recent member states, could prove to be lethal for the European political agenda.

Things would be different if Germany itself (and the other highly-industrialized Western European states that depend on exports) would not need increasingly larger market outlets in order to absorb its production. The German market is too small, and the recent financial crisis that broke out in the U.S. highlighted the risks underlining the excessive dependency on the American market. Should the Obama administration reach the right conclusions after the crisis, it will implement reforms that will put an end to America’s role as the driving force behind European growth for an indefinite period of time. As Russia and China reinforce the political control exerted over domestic economic and social processes, in order to strengthen their foreign activities and thus secure their growth by increasing domestic consumption (and by importing foreign capital), Germany will be forced to rely on the European market in its geographical and cultural proximity. For this reason, Berlin has been, and will continue to be, given its geographical position, the pillar of the European domestic market and the agent of its development.

The problem is that the latest stages of development have generated, as the single market expanded, unprecedented domestic economic and social disparities. New member states of the European Union were required, as a pre-accession condition, to abandon growth policies and reduce their production capacities in order to diminish national competition on the European market. The process was amplified by turning the national economies of candidate states into groups of branches of Western companies. Such an expansion strategy makes it impossible for Berlin and Paris not to notice now that they had relied on a fictional market, which, in order to become a real asset for their exports, needs the less developed member states to grow so that they can stimulate their sustainable demand.

The solution lies in supplementing economic, social and territorial cohesion funds, as well as accepting “social dumping”, i.e., a set of European norms that include elements of positive discrimination in favor of these states. The alternative would be the re-nationalization of the E.U. and reinstating the competition between nations. And the last time this happened, the consequence was war.