Benoît Coeuré: Asserting Europe's leadership
Panel remarks by Mr Benoît Coeuré, Member of the Executive Board of the European Central
Bank, at Rencontres Économiques d'Aix-en-Provence, Aix-en-Provence, 8 July 2018.
* * *
Global governance since World War II has been characterised by American leadership.
According to the famous distinction introduced by Thucydides in his History of the Peloponnesian
1
War , leadership can be exercised in two very distinct ways.
"Legitimate" leadership builds on trust and common identities. This is what the ancient Greeks
called hegemonia. But leadership can also be based on arkhe, which can be understood as
exercising powers through command and control. Interpretations suggest that the move from
hegemonia to arkhe is what Thucydides saw as the root cause of Athens' defeat by Sparta.
I would argue that American leadership over the past seven decades was of the first, legitimate
2
type. In other words, it went largely unchallenged because it was built on shared fundamental
values that brought nations around the globe together - the values of human rights, freedom,
democracy, equality and the rule of law. These are also the values for which we Europeans
[3]
stand.
Globalisation and free markets were a natural consequence of American hegemony. Both rested
on the ideological victory of the capitalist system on which the US economy is built. Free and
open markets were seen as a vehicle to sustain and expand this economic model.
Ironically, this system is now being challenged by its most ardent champion.
Putting one's country first marks a departure from the sort of prudent and vigilant policy that
leadership by a legitimate hegemon would entail. The transactional nature of such an approach
arguably belongs much more to arkhe - hard power - where policies and doctrines are imposed
on others, without their consent and regardless of the consequences. International agreements
are repealed, the international rule of law is questioned and other nations are challenged.
How Europe reacts to this dismantling of the current international order will have a profound
impact on the world.
Dismissing the current tensions as an accident would be a mistake in my view, not least
[4]
because they are deep-rooted and predate recent political events.
In particular, the acceleration of globalisation and technological progress in the past 30 or so
years has radically changed the world we live in. While millions of people have been lifted out of
extreme poverty, wealth and income inequality has soared, and countries have become more
vulnerable to foreign spillovers, and to international crises more generally. Many people feel that
not all countries are abiding by the same rules and standards, and that the open market has
weakened our democratic control.
[5]
These concerns are real and need to be taken seriously.
But too often the solutions offered to today's global challenges are simplistic and short-sighted.
For example, raising tariffs and withdrawing within national borders will deprive people of the
economic benefits of trade and integration. According to ECB staff estimates, in an hypothetical
scenario where the US raises tariffs on all imports of goods by 10 percentage points, and its
trading partners impose the equivalent on US exports, US GDP could be up to 21⁄2% lower than in
[6]
the baseline in the first year alone.
Paradoxically, it will also offer people no refuge from the effects of global competition: isolating
oneself from global value chains will raise input prices, make exports less competitive and make
the country less attractive to investors, with adverse effects on employment and growth.
There is therefore a need for sustainable and effective solutions to today's challenges. But here
lies a dilemma: although globalisation has increased the need for stronger and better domestic
policies, it has also progressively reduced the range and effectiveness of policy tools available to
individual countries to respond to the challenges it creates.
For instance, globalisation makes it harder for policymakers to regulate and supervise financial
markets and prevent recurrent crises. And by making the tax base footloose, it weakens
governments' ability to support people's incomes and retrain those displaced by global
competition.
More and not less international cooperation must therefore be part of the solution.
This is also consistent with the lessons we have learnt from earlier episodes of globalisation -
that it needs to be governed by strong institutions to prevent recourse to harmful protectionism or
other excessive measures. Already the ancient Greeks were aware that alliances were key in
protecting against arkhe.
In Europe, international cooperation starts with the European Union (EU). Despite its
shortcomings, the EU is one of the strongest alliances of sovereign nations in human history. It
provides its Member States with the means to both defend their interests at a global level and to
[7]
address the negative effects of globalisation.
For example, in the EU we have the tools to address tax arbitrage by multinational corporations.
And EU regulation, together with the European Court of Justice, provides the strongest possible
reassurance that openness does not promote rent-seeking and does not harm consumers.
Our response to "America first" can therefore only be "Europe united", as the German foreign
[8]
minister Heiko Maas recently put it. In other words, we should foster cooperation on security
and defence, speak with one voice on international affairs, and complete both the Single Market
and the euro area's architecture.
Let me stress the importance of the last objective: completing the euro area's architecture. The
European Central Bank has a fundamental stake in this project, given its mandate to protect the
stability of the euro. But completing the euro area's architecture is also necessary for Europe to
be able to attain its other objectives. We won't be able to foster cooperation on security and
defence, or to speak with one voice on international affairs, or to complete the Single Market if we
repeatedly have to tackle economic crises which are largely of our own making.
A series of crises has already taken its toll on welfare and jobs, and they have sown the seeds of
division in a way that is still holding us back at a time when we need decisive action. A sound and
sustainable euro area institutional architecture will help redirect political capital where it is most
needed.
So, these and other shortcomings need to be overcome, not only to strengthen the workings of
the EU but also to protect and defend our interests abroad.
If we Europeans fail to make further progress, or if Europe remains divided between north and
south and between east and west, then we will be playing into the hands of those who are trying
to divide us and marginalise our actions.
Thank you.
1
See Lebow, R.N. and R. Kelly (2001), "Thucydides and hegemony: Athens and the United States", Review of
International Studies, Vol. 27, No 4, pp. 593-609.
2
Many people in the rest of the world may have seen it differently, of course.
3
See europa.eu/european-union/about-eu/eu-in-brief_en.
4
See Pisani-Ferry, J. (2018), "What leadership for tomorrow?", Introductory note, Les rencontres économiques
d'Aix-en-Provence, 8 July.
5
See Coeuré, B. (2018), "Taking back control of globalisation: Sovereignty through European integration", in: The
Schuman Report on Europe, the State of the Union 2018, Robert Schuman Foundation, March.
6
See Coeuré, B. (2018), "The consequences of protectionism", panel contribution at the 29th edition of the
workshop "The outlook for the economy and finance", Villa d'Este, Cernobbio, 6 April.
7
See Coeuré, B. (2018), "Taking back control of globalisation: Sovereignty through European integration", op. cit.
8
See Maas, H. (2018), "Courage to stand up for Europe - #EuropeUnited", speech at Pulse of Europe and the
Schwarzkopf Foundation Young Europe, 13 June.