My apologies for the lack of blogging recently, but travel had taken up some time, and then (with all the recent travel), there were some remedial activities to be undertaken on my apartment, which was quickly becoming chaotic even to the extent that it was beginning to make me feel uncomfortable. Speaking of chaos, there is quite a bit of it going on in Europe. The reshaping of the continent is proceeding apace, and the blogosphere has been pretty good about documenting the political coming of age of the New Europe, which refuses to be bullied by the Old. Another such example came from the Visegrád Group of nations, which consists of Poland, the Czech Republic, Slovakia and Hungary. They've been formally cooperating on various matters that affect their four countries, including accession to the EU. As recently liberated countries, they also share a particular view of the world that is deeply different from the Old Europe.

I've only been able to find this German-language version of their latest exploits, but the gist of it is that they've said in no uncertain terms that they're not going to be bullied around by France. After a meeting in Prague with the Czech foreign minister Svoboda, Polish foreign minister Cimoszewicz made the important announcement that the Visegrád Group would continue its work and cooperation also after the countries had become members of the EU. And just to underscore the point, he he drew attention the fact that the four Visegrád Group countries are going to have 58 votes in the Council of Europe, the same number as Germany and France combined. That is another reason why the New European Insurrection is giving the French fits. The other part of it is that France still thinks it's a world power and deserves respect for that reason alone; she still thinks she's a pretty young girl, when in fact she's become an old whore with drooping breasts and way too much make-up who bitterly wonders why business is down so much.

Economically the new member countries are still fairly insignificant compared to the rest of Europe, as this graph shows. Even adding up the four countries' GDP, it still comes to only 4% of the current 15 members' total GDP. So their economic clout is going to be limited in an absolute sense. On the other hand, the New European economies have much better growth prospects than Old Europe (unless there's a complete collapse in western Europe). New Europe's influence will come from the population that it brings into the fold of the EU, and not so much from the direct economic impact. Indirectly EU accession is going to remake the economic map of Europe; having Poland on its eastern border might just be what Germany needs to wake up from its stupor.

Here's a story that goes around in business school and consultant circles. I heard it from a colleague who picked it up during his education at INSEAD, a prominent European business school in France. The story concerns an experiment with a number of monkeys. They're placed in a room which contains a climbing pole. At the top of this pole, some nice juicy bananas are placed, so obviously the monkeys try to get at them. When any monkey climbs high enough to reach for the bananas, the entire room is soaked with cold water, which results in very unhappy drenched monkeys. This happens every time a monkey goes for the bananas and as they're pretty smart primates, they catch on. So when any of them makes an attempt at the bananas, the others quickly give him a good old pummeling to prevent getting drenched. Now the researchers remove one of the original monkeys in the room, as replace it with another one. The new one sees the bananas and tries to get at them, but gets a hefty beating at the hands of the drench-conditioned monkeys. The researchers keep on replacing monkeys in the room until none of the original ones remain. None of the monkeys in the room has ever gotten drenched or eaten the bananas. Yet the group still enforcers the no-pole-climbing rule, but without knowing why.

This story reminds me of the behavior of European politicians. They're stuck on autopilot where the future of the European Union is concerned, moving boldly forward into the barren snowcovered tundra of a European Superstate without exactly knowing why. Their predecessors set out on this course, and so did theirs, going back all the way to the times of Adenauer and De Gaulle. After the carnage of the Second World War, the post-war generation of politicians in Germany and France wanted naturally to make sure no such catastrophe could ever again befall the European continent. Aside from the military framework of NATO that extended American protection to Western Europe from the Soviet threat, the European set out on trying to integrate their economies. Prosperous and closely integrated economies would be less likely to attack one another militarily. The Treaty of Rome signed in 1957 established the European Coal and Steel Community, the precursor organization of the European Economic Community which in turn became the European Union.

Much has changed since 1957, of course. The ECSC consisted of six countries: France, Germany, Italy, the Netherlands, Belgium and Luxembourg, and the level of integration was minimal. The European Economic Community which flowed forth from it was essentially a customs unions, and later turned into a free trade zone. But the tone was set in the Treaty of Rome, which contained the fateful phrase of working towards "ever closer union." And thus it came to be. The ever closer union of European countries has been propelled by this original visionary document.

The key issue which the EU has never come to grips with is that the organization has been gathering new members through the years. The original structures, set up for six members, are already under severe strain from the current 15-strong membership. The Copenhagen summit has just resulted in the admission of a new wave of countries to the EU in May 2004. This will exacerbate the problems even more. The conceptual flaw that underlies the EU is not going to be addressed though, as solutions are going to be sought in reforming procedures rather than fundamental concepts. It's that vision thing.

The EU's problem is that none of the European politicians has a realistic vision for its purpose. They're still on the course of "ever closer union" that had been 45 years ago without really knowing why anymore. Aiming for ever close union is what European politicians do. Questioning this is just not done in polite (dare I say sophisticated) political circles. The process of integration pushed by the political elites has run far ahead of what the domestic electorate is willing to put up with, creating an internal problem. Thus far, it has been containable.

The EU will not survive in its current form. The imprint of the original small club of industrialized countries has already been coming under pressure with the admission of poorer countries like Spain, Ireland, Greece and Portugal which have economies greatly dissimilar from the original member countries. The Scandinavians and the British could be accomodated relatively easily. The others have received massive subsidies from the richer members. Only their relatively small size in relation to France, Germany and Britain made it possible to pull them along. Ireland in particular has done very well out of all this, in large part because of its domestic policies. In in its current state, it's doubtful whether enlargement is a good thing for the new entrants. They're more likely to get slowed in their economic development rather than helped with the ponderous weight of EU regulations weighing down on them. They may yet decide to decline the invitation.

There are two reasons why the new entrants will change the EU. First, the per-capita GDP of the new entrants is on average substantially below that of Portugal and Greece, the current worst performers in that regard. The gap now between the top and the bottom and per-capita GDP is going to be bigger than it ever has been within the EU. The second reason is the numbers. Ten new members with over 50 million extra inhabitants makes this the largest expansion the EU has seen thus far. So the EU is going to be much bigger and much more diverse than it ever has been. That's why it can't survive in its current form.

That could be a good thing. Could the EU become even worse than it is now? If the Euro-federalists get their way, certainly. The staggering inertia of the bureaucracy that has accumulated will not be deflected easily. But the changes that the EU will have to face are more fundamental than that. What is the purpose of the EU? Does it really want to become a country? Does it want to promote prosperity, civil society and a liberal democracy? The latter goal is much more achievable than the former, and more desirable too. The problem is of course that the EU is no place of moral authority to lecture on any of those subjects. Lately the EU's meddling with the economy has led to decreasing prosperity, while its opaque and elitist power structures have eroded the foundations of the social compact that makes civil society possible and democracy and the EU have been kept firmly separated.

Yet the EU's best chance for success and survival is to abandon its ambitions for creating a United States of Europe, and focus on more practical goals. Make the free trade area work. Help the new entrants in establishing and engraining the insitutions of a pluralistic society. Once you remove the prospect of the "USE" from the equation, many issues become more tractable. The key here is Turkish accession to the EU. If the goal is to create a single European Superstate, then there is no way Turkey can be admitted. But the Superstate idea would not work even now with the 15 members, as the divergences in culture and mores are too large to become part of a single country. If the EU becomes an enabler rather than the petri dish for a Superstate, then Turkish entry is no problem. In this whole debate it's not the Turkish domestic issues that are the impediment, it's the unresolved fundamental dilemma at the heart of the EU that has paralyzed the situation.

By allowing these 10 new countries into the club, the EU will be changing; it will never again be as politically or culturally homogenous as it was in 1957. The rearguard action to maintain the old spirit of those days (and the French vision of a Europe in its image) is now being fought at the constitutional convention. The new EU constitution will try to preserve the original spirit, and it may succeed in that on paper. But it will be overtaken by events on the ground. The positive outcome would be a reformed EU that makes more sense than the current structure, a Free Trade Area Plus. If things get ugly, then the EU will slowly disintegrate as it loses its relevance, and we'll see a Core EU develop in the west of the continent.

The is Old EU is dying. Let's hope the new one will do better.

Postscript: the story about the monkeys with which I started this article can be traced back to Competing for the Future by Gary Hamel and CK Prahalad. No references to any actual study can be found, so it's likely to be just a fable. These things tend to take on a life of their own and become a standard part of management consulting. As a parable they work fine, but it would have had much more impact if the story had been true. Oh well... welcome to the world of management consultants and their ilk.

Sometimes the electorate is a bit slow. They're not very bright, you see, and thus they end up doing silly things now and then, such as the Irish voting against the Nice treaty. Fortunately, we have the wise and steady guidance of the political elites to see us through such errors. It was an error of course. A momentary lapse of reason that has now thankfully been corrected. The Irish electorate, sternly spoken to and dutifully admonished, has produced the Elitically Correct (eliticiously? elitely?) result by ratifying the Nice treaty. The grand project of European expansion can continue, much to the relief of the euro-patrician guild everywhere.

The overriding imperative of further EU expansion thus steamrollers over local opposition. The outgoing Dutch government has now also dropped its opposition to enlargement, meaning that the way is clear for the newly liberated countries of central and eastern Europe to join the EU club. It is far from clear that this is really a good thing, either for the EU or the applicant countries themselves. I am surprised that I am even writing this, for a decade ago accession to EU would have been a no-brainer for me. Binding the countries so ravaged by communist tyranny to the democratic institutions and community of the EU was an obviously good thing. Yet things have changed since then, both in the EU and in the applicant countries themselves. The Soviet Union is but a nightmarish memory, and Russia's expansionism is contained for now, and might even be channeled constructively (but that's a blog item in itself). The economies of the east have done reasonably well outside the EU, although they still have not really sufficiently advanced to "developed market" status.

The EU itself is like an old, collapsing star. The gravity of the star keeps pulling mass ever inward, now that the fusion reactions of hydrogen and helium have exhausted themselves. The energy is gone, spent. With the gravitational contraction still ongoing, will the EU become a black hole, sucking everything into it without chance for escape? The bureaucracy and the institutional self-preservation it breeds is reaching critical levels. The interference from Brussels is becoming ever larger, without even the semblance of a commensurate increase in democratic legitimacy or accountability. What once was a good idea (European intergration through free trade), has now morphed into an ominous threat to self-determination, civil liberties and economic dynamism. The countries of central and eastern Europe might well be better off staying outside of the EU. In order to be allowed to join, the countries must agree to implement the basic set of EU laws, known as the acquis communautaire which runs to tens of thousands of pages. This will shackle their economies with the same kind of stifling regulatory environment that has sapped the strength of many prosperous west European countries. The countries of the east don't have the momentum that the established wealth of the west provides to keep them going. They need to keep growing, not just muddling along.

For the existing member states of the EU, there is also a danger from enlargement. Having too disparate a group will impose further strains and dilute the effectiveness of the group as a whole. The admission of Greece to the EU is in retrospect not the best of moves. We're stuck with the banana republic in the south, and some of the next wave entrants have the risk that they might join the ranks of Greece.

But there are also positive aspects to enlargement. By diluting the existing base of countries, the Franco-German axis will be of less importance, especially since the French in the past have been the dominant partner in the axis. The Germans were (and still are to some extent) fearful of asserting themselves after the second world war (and rightly so), which the French used to get Germany to back their plans for the EU, which in most cases were extensions of French national interest. But the synergistic effects of enlargement can also work to the benefit of both joiners and existing members, by injecting a points of view and new dynamism into the processes of the EU. It will also force the abominable Common Agricultural Policy to be amended, as it would cost too much to extend it east in its current form. I am too much of a cynic by now to hope that it will be actually scrapped.

My main worry is that the EU has become so intrinsically stagnant, that these effects will have not a chance to assert themselves. And giving the blighted countries of the east the chance to rejoin the broader culture and community of Europe is a good thing, even a necessary one. EU membership might help to strengthen the concepts of civil society, democracy and the rule of law. But again, the EU's shortcomings in this regard raise doubts over the effectiveness of such support. I wonder if bilateral ties with western countries might not be more effective.

So I don't know. I really think the countries of the east should be given every opportunity to join the European and global trading systems. They need to take steps to build an institutional memory of democracy and rule of law. The EU would be ideally placed to serve these purposes, but its evolution into the bureaucratic monstrosity that it has become makes this role much harder to fulfill. On balance, I do think enlargement will be positive. Grave doubts continue to simmer.

Browsing happily along, iTunes playing Count Basie, I decide on a whim to head over to Magyar Hírlap, a Hungarian newspaper. Their lead: "Decrease in Swiss watch production." They go on to inform us that compared to August 2001, the Swiss produced watches for a total value of 663.7 million Swiss Francs, a decrease of 7.7%. It is mildly fascinating, but why would they lead with this story? Is there a secret economic pact that links Swiss investment flows into Hungary to watch production? Do the Hungarians have a secret fetish for Swiss timekeeping equipment? Are there Hungarian fake Swiss watch producers who would be impacted? Are they economically significant?

I swear, I had only one glass of Jack Daniels tonight.