18-01-2024
13 minutes

What Kind of European Union Do We Really Need?

The following text was originally published in the Kongres Obywatelski thinkletter. Its PDF version (in Polish) is available here.

 

The world does not wait for what the Union will do, but relentlessly rushes forward. To not be left behind, everyone in the Union must realize the processes occurring globally. This affects not only the further standard of our life, technological and social development but also our security. We need to swiftly wake up from the lethargic bliss of the “end of history” and take actions to adapt the Union to the demands of reality.

 

The World of ‘The End of History

In the book ‘The End of History’, which emerged in the early 90s of the last century, Francis Fukuyama expressed a then-common belief that as a civilization, after the dissolution of the USSR and with the gradual opening of China, we had found ourselves at a point of optimal balance. According to the author, this ‘end of history’ was manifested in:

  1. The unique position of the United States, the only hegemon and guarantor of the global order,
  2. The dominance of the Western narrative based on three pillars: liberalism, democracy, and globalization,
  3. A sense of control over economic processes, evidenced by an era of high levels of global growth and low inflation,
  4. Eco- and techno-optimism, manifested in the belief that technological progress would allow for a seamless transformation to a green economy.

The world then seemed to be heading towards a ‘global village’, a synonym for universal cooperation, peace, and prosperity, where ships safely navigate the seas, transporting raw materials and finished goods, driving the processes of specialization (based on comparative advantages) and economic growth. It seems that the European Union believed in this vision perhaps the strongest, relying on the primacy of ‘economic efficiency’ – the main decision-making criterion became ‘whether and how much can be earned’. Perhaps this attitude was a derivative of the fact that the Union served as a precursor of economic integration, whose benefits were widely felt at the time. The ultimate expression of this optimistic outlook for the future was a significant reduction in defense spending and taking a position of a kind of connector, linking various, until recently antagonized elements: Russia as the main supplier of energy resources for the Union, China as a supplier of simple goods and a market for more advanced ones, and the USA as a strategic ally.

The result of this strategy was a gradual erosion of the so-called ‘hard power’ of the Union and a shift towards ‘smart power’. Although the Union’s share in global GDP rapidly shrank due to the rapid development of other countries (such as China), at the same time, a united Europe emerged as a global leader and promoter of regulatory solutions, green transformation, and policies promoting inclusivity.

 

The “World in Transition”

Today, the belief in the ‘end of history’ seems like a distant memory. We are functioning in the so-called transitional era – a period of numerous changes. We know that we are heading towards a new equilibrium, but we do not know what it will look like.

The first area of change is global demography. The aging process of the global population is accelerating, although unevenly. In this context, three facts seem crucial for Europe. Firstly, on the Old Continent, this process is the most advanced – already over 20% of the population is 65 years or older, which is twice the global average. By 2050, the proportion of those 65 and older will approach 30%.

Secondly, Europe’s neighbour – Africa – is, in turn, the youngest continent. Over half of its population is not yet 20 years old. According to UN forecasts, Africa will soon become a global leader in terms working age population increase. In total, by 2050, the number of people of working age will increase by nearly 700 million (while in Europe, it will decrease by several tens of millions). Whether and where these people will find their place in life and work, especially considering climate changes, remains an unanswered question.

Thirdly, significant changes will occur in China. The number of people of working age there is rapidly decreasing, and by 2050 the total decline is expected to be as much as 190 million. So if China really wants to change the global balance of power, it needs to hurry.

The second significant issue is the disappearance of a unipolar world. More and more evidence suggests that the USA may not be able or willing to continue playing the role of a ‘global policeman’. It seems that the isolationist trend in the USA may grow in parallel with increasingly evident internal (social-political) problems. At the same time, the dominant position of the USA will be increasingly contested both by direct rivals, aspirants for the title of ‘world power’ (e.g., China), as well as by those who want to take advantage of any potential weakness of the USA for their own benefit (e.g., countries of the Arabian Peninsula). Although the USA tries to maintain a strong economic position, the changes that have occurred over the past years in potential economic or military power are quite noticeable. While in 1990 the USA had 21.5% of the global GDP (IMF data, considering purchasing power parity), and China 4%, currently it is respectively 15% and nearly 19%. India, another Asian and eventually global power, is also growing rapidly.

Another element of the world of ‘the end of history’ that is undergoing strong erosion is the process of its democratization. After 1990, we witnessed the spread of democracy. However, in recent years, a rebuilding of the positions of autocrats can be observed, accompanied by a return of extremely nationalistic and revisionist narratives, as well as an arms race.

We are also dealing with a rapid acceleration of technological and social changes. A new technological-economic paradigm of the knowledge-based economy and society is increasingly taking shape, utilizing the first systems of artificial intelligence. There is also a chance that this new paradigm will consider environmental needs to a greater extent (e.g. biodiversity, renewable energy sources). However, it should be noted that rapid technological changes always pose the greatest challenge for those who must abandon what has brought them success. Many European companies are facing such a challenge today.

It is undeniable that today’s world is increasingly deviating from the vision of a global village. We are entering an era of intensified competition, which, due to numerous and intense connections resulting from recent turbo-globalization, causes numerous disturbances. It is a time when economic efficiency often takes a back seat, giving way to geo-politics, geo-strategy, and geo-economics. This is reflected in new concepts such as near- or friendshoring.

In the economic dimension, the final outcome of the ongoing transformations will be a new international division of labor. We are facing the biggest change in this respect in 30 years. In addition to the aforementioned, other significant elements that will determine the shape of the new deal will also include:

  1. Access to clean and cheap energy,
  2. The ability to adapt skills to the changing needs of companies, in connection with technological progress,
  3. Access to critical raw materials, including rare earth metals.

It should also be noted that this will be a time of escalating disturbances on supply routes (both maritime and land) and migratory movements. It is also undoubtedly a time for the end of the peace dividend in public spending.

 

What cards does Europe hold?

In the world of transfromation, the European Union remains a significant force. Although its share of the global population is now only 5%, its GDP (taking into account purchasing power parity) is three times larger. At the same time, it is worth highlighting the fact that the global role of individual EU countries has not been as small as it is currently for thousands of years. The leading EU economy – Germany – today represents only 3% of the global GDP. In the coming years, the socio-economic processes of the Union will be heavily weighed down by its demographics – according to UN forecasts, the labor force will shrink by about 15% by 2050. Moreover, with the aforementioned changes occurring in Africa, neighboring Europe, the Union is facing the challenge of increasing pressure from migrants. In this context, what is currently happening on the borders of the Union is only a prelude to what may happen in the coming years.

A significant challenge arises from the EU’s import dependency on energy resources – nearly 60% of the demand is met through imports. Until recently, Russia was the EU’s key partner in this area, providing about ⅓ of foreign oil supplies and 45% of gas. In 2022, there was a significant increase in dependence on oil and gas imports from countries such as Iraq, Saudi Arabia, Qatar, Liberia, Nigeria, Algeria, Kazakhstan, Azerbaijan. All of these are “high-risk” countries. And for several reasons. Firstly, China is now competing with the Union for the same supplies. Secondly, some of these countries have common interests with Russia (e.g., as part of the OPEC+ cartel). Thirdly, many of these countries are at risk of potential conflicts, which may affect the ability to deliver supplies. Fourthly, some of these countries are authoritarian regimes with limited predictability. Fifthly, many supply routes – whether maritime or land-based – may be potentially threatened (terrorist acts, sabotage, armed conflicts, etc.).

The Union also faces a series of challenges related to the technological revolution. In many key areas, it is currently losing the race not only to the USA but also to Asian countries (China, Korea). This is due to many factors, but among the most important are limited access to high-risk capital, regulatory fragmentation of the EU market (especially in relation to services), and a lack of ability to compete for attracting talents.

Another important issue relates to the management system. For years, the principle that “to move forward, the Union needs crises that stimulate change” was cherished. However, the costs of such a strategy are increasingly visible today. A classic example of this approach was the introduction of a common currency in a form that had to lead to serious disturbances. It is worth noting that crises inevitably focus the attention of member states on what is happening inside the EU, while simultaneously distracting it from a global perspective. This would not be of much importance if the external world was stable – but it has not been for some time now.

Social issues should not be forgotten either. Aging societies are characterized by making conservative political choices, opting for people who preach utopian ideas of a “return to the past” by their nature. This was the case, for instance, with Brexit, which was decided by older age groups. Aging naturally translates into an increasing aversion to risk. However, in a world of change, if one wants to succeed, taking risks is unavoidable.

 

How to navigate?

In a world of rapid change, the key to developing a strategy for the Union seems to be the realization of two crucial issues: first, essentially no EU country can afford to play a “solo game” today, and second – the sovereignty of the Union is now greatly limited due to the military dependence of its members on the USA, as well as raw material and technological dependence on imports.

In this situation, to meet the challenges described above, there is a need for more thinking in terms of the Union as a whole, rather than from the perspective of individual countries. The current Union was built on the foundations of three communities, whose main goal was to balance the interests of their members. Hence the importance of the consensus principle within the EU. However, it seems that today it is crucial to define and defend the interests of the EU as a whole against the rest of the world. These two approaches can be reconciled if mechanisms were created to compensate – at the level of individual countries – for the adverse effects of actions aimed at defending the interests of the EU (e.g., through a larger EU budget).

The Union must also demonstrate the ability to coordinate and integrate actions much more effectively in areas key to its broadly understood security, among which we can include: ensuring supplies of critical raw materials, basic pharmaceutical substances, and energy resources; border defense and protection of critical infrastructure. The potential increase in US isolationism should not be underestimated either. In this respect, the Union needs a “Plan B”. Primarily, it is worth developing military cooperation within the EU itself. Although this is an area under the exclusive jurisdiction of member states, it is worth looking for solutions that would allow, for example, optimization of defense spending based on the unification of armaments. In the context of security, the rapid aging of society also means the need to maintain a significant technological advantage over potential aggressors.

In the socio-economic dimension, there is a need to develop and implement a strategy that ensures the ability to “service” aging societies, especially in terms of healthcare services, long-term care, etc. To maintain the whole system and simultaneously ensure a high quality of life, a productivity leap is needed, so Europe must become a leader in automation and robotization.

The current global situation also requires a well-thought-out supply policy, ensuring production safety under growing risks related to access to strategic raw materials and their supply chains. It may be needed to temporarily relax environmental restrictions for mining projects to increase the level of raw material independence of the Union. The EU has greater resources than its share in the global extraction of certain raw materials would suggest. Their limited use often results from regulatory restrictions.

It is also in Europe’s interest to place part of its production in Africa. Take the example of Japan – a society aging even faster than the EU – it utilizes capital investments in countries with a growing demand for goods and services to finance the maintenance of a high standard of living with the profits derived from them.

The second – perhaps even more important – justification for investments in Africa is to create attractive jobs there, encouraging people to stay on the continent and thus reduce migration pressure. In the context of the impact of climate change on the African continent, Europe must also engage in the creation of infrastructure supporting adaptation to new climatic conditions.

Europe also needs a wise immigration policy. Young, well-educated, and ambitious migrants are needed in Europe to protect the continent from mental regression. It is also worth looking for solutions that would limit the impact of this phenomenon on shaping public policies, whether at the level of individual countries or the entire Union.

Based on its smart power, the Union should also actively engage in building a new international institutional order, as the current one proves to be highly ineffective.

 

The image accompanying the text was generated by AI (DALL-E)

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