Prepare for disintegration: How new technology and the euro-crisis legacy could break the EU apart
Somewhat lost in the current debate over the UK and the EU is the fate of the European Union itself. Are we arguing over the membership of a club which might not exist 10 or 20 years from now?
The pre-eminent American historian of the EU, John Gillingham, has written: “The EU is unfit for the challenges of the coming age of global competition and high tech. In sum, the drive for an ‘ever closer union’ has set Europe on the wrong course: plunged it into depression, fuelled national antagonisms, debilitated democracy, and accelerated decline… the very survival of the EU is now at stake… the history of the EU has run its course, and in times to come its role in Europe will at best be greatly diminished.” Strong stuff indeed, but with the added weight of being from someone looking in from outside the EU.
Gillingham argues that, in order to prosper in the future, the EU requires political devolution and the revival of national power. A heretical thought in Brussels, no doubt, but let’s explore why an American historian would take such a view.
Essentially, Gillingham’s point is that, to generate a dynamic, innovative, digital economy, countries must fully exploit peer-to-peer, cloud computing, the Internet of Things and crypto-currencies, and that they could make the shift faster outside the EU.
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Cloud computing is estimated to be a $180bn market growing at 50 per cent per annum. McKinsey estimates the total future value of the Internet of Things at between $3.9 trillion and $11.1 trillion. The development of Bitcoin and crypto-currencies threatens to break the link between governments and the money supply full-stop. In this world of transition from 4G to 5G (to provide the necessary bandwidth), the EU is seen as just too slow. But it is not just the threat posed by future change. The EU has a pile of historical problems as well.
The legacy of the euro crisis is huge non-performing loans across the banking sector in Europe. These, combined with the fundamental structural flaws at the heart of the Eurozone, threaten a resurrection of the crisis at some point in the future. Firstly, Eurozone economies don’t control the currency in which they issue their debt. Secondly, Eurozone countries struggling for competitiveness only have the option of an internal devaluation i.e. wage freezes or reductions. The combination of weak banks and a weak non-bank sector (in comparison with the US) raises serious questions as to how future growth will be financed.
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Globally, technological change, market competition and the process of market-led integration is likely to continue, but the paradox at the heart of the Gillingham thesis is that, in an EU context, this could be best exploited by a return to the nation state.
I get the arguments regarding disintegration, but I don’t think that is the end of the story. So here’s a Black Swan event: the EU does begin to unravel over the course of the next decade (a process accentuated by an economic downturn), but there’s a reaction from those dedicated to an ever-closer union. The EU begins to break up, but an inner core of countries, perhaps 10 or fewer, push towards a much deeper economic and political union, with a pseudo United States of Europe. A long shot I know, but shorter odds than you would have got for Leicester to win the Premier league.