European Wankers

© 2003 Christopher Suits

Why are Europeans such wieners? Such was the essay topic a friend suggested as an effective if cynical attempt to surf a very strong wave of popular sentiment in America at present. You know, serve them up some sour Krauts to accompany their freedom fries. I had proffered a somewhat more pedestrian theme, namely an explanation of why European economic competitiveness and dynamism will never match US levels.

Then I realized the topics are the same, or at least have the same answer. You don’t believe it? Just watch.

Firstly, let’s set out the reasons why Europe will always lag the US economically. They are multiple but straightforward:

Arithmetic – Even if the single market become far more real than it is now, Europe will always be split into several cultural and linguistic sub-markets. Even under the super-heroically unlikely assumption that tax and commercial law and practice are unified, this linguistic variation will always entail higher cost and effectively reduce potential growth.

Absence of efficient structural mechanisms for tax and risk sharing – Europe does not have analogs to limited partnerships or sub-chapter S corporations found in the US. This lack directly affects – by decreasing it – capital formation and therefore the ability to form and grow companies.

Weak Legal and Business Support Infrastructure – Europe does not have a cadre of lawyers, accountants and other business support professionals that are familiar with practice outside the home market, let alone international best practice, or even are aware of elements of commercial dealings absolutely commonplace in the US. For example, while it may be possible to replicate some of the benefits of a limited partnership structure using Luxembourg holding companies and prudent capital management, the lawyers and accountants capable of structuring such arrangements are few and far between.

Multiple Tax and Corporate Law Jurisdictions – Europe has neither a Uniform Commercial Code nor a single tax code. Formulation of a common Takeover Code acceptable across the Continent proved to be beyond the wit of man, or at least the wit of homo Europeus. One result is that, even if qualified counsel if found (not an easy task), the costs of identifying and putting in place appropriate structures for a given transaction or company will be much higher than their equivalents in the US; and the time required will be greater.

No Unified Stock Market – unlike the US, where the dozen-odd national and regional markets share price reporting, settlement & clearing, Europe does not have a mechanism which allows efficient, transparent price formation. Though consolidation is widely supported, the road to it is littered with the smoking remains of failed mergers.

Inappropriate Securities Regulation – The US regulatory shibboleth is adequacy of disclosure and the SEC is, possibly by historical accident, a very efficient guardian of this standard, even in the aftermath of Enron, WorldCom et al, especially in view of the fact that it was starved of resources as the 1990s boom put multiple strains on its resources. In Europe, the principles of regulating securities markets are not uniform, are split between government regulators and stock markets and tend to be normative rather than ‘merely’ requiring adequate disclosure. One consequence of these two previous points is that capital formation in Europe is inefficient. There may be willing buyers and sellers, but they cannot or are not allowed to find each other.

Ignorance of International Best Practice – In terms of both principle and substance, this means that not only are key policy makers and business people unaware of what best practice in a given area might be, they are also ignorant that best practice should be measured globally – that the comparators and competitors to individual companies, economies and regulatory systems are to be found literally everywhere in the world.

OK, so we’ve analyzed European (un)competitiveness into a box. But what has this to do with our main preoccupation, namely, Why ARE Europeans such wieners? For the benefit of those of you who may not have had the advantages of growing up with American idiom, let me rephrase: Why do Americans perceive Europeans as selfish, cynical and difficult? To answer this question, let me pose several others.

►Why has Jean Monet’s vision of a European Union not materialized?

Why did the European context demand that the removal of barriers to the unfettered movement of capital, goods and labour necessitate the addition of an enormous political and legal superstructure?

What is it about Europe and Europeans that makes any sort of change so slow, painful and difficult, even when change seems inevitable, beneficial to the common good, and practically uncomplicated?

Look, as if by magic, the beginnings of an answer to our question can be conjured/perceived out of the wording of that last question. It is difficult to achieve the common good in Europe because Europeans do not believe in common good. Their history has convinced them that the Commonwealth is a mirage credited only by the incurably romantic, naïve, or stupid.

On sunny days, Europeans view life as a zero-sum game. The rest of the year, it’s negative-sum. This explains why Europeans abhor change and are reluctant to agree to anything: change and agreement generally involve compromise, giving up something. To a European, something one gives up can never be recovered. A negative-sum attitude means that, viewed ‘positively’, one can only gain something by taking it from someone else; more negatively, anything abandoned or foregone can never be recovered.

In other words, economic stinginess has made man in Europe spiritually small. Don’t take my word for it. Read Balzac (Madame Bovary) for the socio-moral story. Read Sartre (La Nausée) for its metaphysical elaboration. Watch Coppola (Godfather III) for the religio-ethical treatment:

‘Look at this stone. It has been lying in the water for a very long time, but the water has not penetrated it. Look: perfectly dry. The same thing has happened to man in Europe. For centuries they have been surrounded by Christianity, but Christ has not penetrated. Christ doesn’t live within them’.

You might think that this spirituality deficit is perhaps understandable in light of the economic, social and moral horrors of the twentieth century. Except that it predates 1900. In that case, how are we to explain European man’s moral midgetry?

The answer, of course, is history -- history and politics. It is a significant feature of European man’s make-up that he is formed by his history and political institutions rather than forming them. In giving hermeneutical primacy to economics as the embodiment of historical political relations, Marx was of course right; his error lay in supposing that social iniquities in Europe were self-correcting and that European man would rise up and cast off his chains. They haven’t and won’t. (Americans, by contrast, are very much children of the Enlightenment and optimistically believe that man can and should improve and correct his physical and political environment until it is faultless. The flaws in this vision I will take up in a future article. For the moment, we’re talking Europe.)

But hold on. Where does Britain fit in this handily dualistic analysis? Predictably, in the middle, if hardly on the fence. Yes, Britain displays many of the weaknesses enumerated above. It has no such vehicles for risk sharing tax efficiency as condominiumised flat ownership or limited partnerships – but it is thinking of them, has introduced halfway-house Venture Capital Trusts and is conducting an agonized and agonizing redraft of Company Law. There is a reason London and the Southeast, notwithstanding a high and rising cost of living, are the destination of choice for so many multi-national companies from America and elsewhere. Likewise politically, though Britain now seems inextricably caught in the grasp of the nanny state, this can be construed as an aberration, an unfortunate hiatus before British political life reverts to its foundations as laid down at Runnymede. In short, in its economic, social and political life, Britain is Anglo-Saxon, not Continental. Surprised? The shock is that anyone should have to state something so obvious.

But I digress. To get back to our discussion of Europe’s spiritual dysfunction and moral depravity, let’s cast an eye on the nature and background of European political relations.

The European nation-state arose out of and as the crowning glory of feudalism. Over the course of centuries, local strongmen had consolidated their power over ever greater areas – kingdoms, principalities and so forth -- and at the 1648 Peace of Westphalia these thugs-become-kings colluded to confer on each other political and religious legitimacy, not to mention greater military security, by inventing the nation-state. Being a king or his acolyte-nobles was great work, of course, but what of the common man? The nobility rode on his back. The medieval economy, society and political model was based on bestowing to elites the increasingly unearned rents and rights which had been stolen from commoners.

And nothing fundamental has changed since then. Several revolutions later, we’re dizzy but no further forward. Oh, sure, the continuing effects of the Reformation (itself one of the main reasons for the Treaty) created a degree of religious pluralism and spiritual support for a more dynamic economy. The Industrial Revolution changed the form of economic activity. The French Revolution initiated the renaming of the nobility and institutions of government. The Technology Revolution gave the state supremely efficient ways of controlling its citizen-proles.  But essentially you still have a situation where self-perpetuating elites enjoy unearned benefits to the disadvantage of everyone else in society. Politicians, bureaucrats and industrialists rise from the same families and enjoy under-the-table subventions of material goods and privilege.

And don’t imagine that the people don’t sense this, and resent it. Their reactions differ, though. Look into the eyes of a globalization protester and I defy you to find anything there. This is 21st-century nihilism, another venerable European tradition. Youth find nothing in their societies to believe in, to motivate them. So they embrace the conception of negation in its two embodiments: iconoclasm and anarchy. They advocate demolition of the existing order – no matter what good it might do the developing world and others – and promise not to rebuild: we should all revel in the destruction. At another socio-economic locus, farmers and the middle class prolong the vicious circle by responding to the state’s injustice with their own: they jealously guard their subsidy-bribes from the center because they know that the state doesn’t work for them.

Cynicism is a much-misused word. Often used synonymously with ‘pessimism’, in fact it denotes a much more profoundly inhumane belief: that man is evil and will always behave accordingly. Like the roller pigeons in Thomas Harris’ Hannibal, there are deep cynics and shallow cynics. Shallow cynics conclude that man’s activities are profoundly meaningless, so nothing an individual does matters very much. They are amoral. Deep cynics conclude from their appraisal of human nature that they can derive personal advantage from the situation, and attempt to do so. They become immoralistes.

Comprehending cynicism is a difficult and exhausting task few will undertake. For the best thinking on the subject, let’s dust off the Masters: Nietzsche, Dostoevsky and Stone.

‘A man looks in the abyss. There’s nothing staring back at him. At that moment, a man finds his character. And that is what keeps him out of the abyss.’

Now I wouldn’t be one of those intrepid critics who puts Gordon Gekko on an artistic par with Papa Karamazov, but the depiction of evil in both Wall Street and The Brothers Karamazov has the same cautionary objective. Both Dostoevsky and Stone -- in contrast to Nieztsche, who seems to see personal immorality as a way of attacking the distasteful European moral status quo -- portray the human costs of cynicism.

European society and political culture is profoundly cynical, though the manifestation of this cynicism varies considerably, from the happy insouciance of the Italians, grinning through their gnocchi while their temporal and spiritual leaders loot the state; to the Germans, who painstakingly legitimize the bribery of foreign governments by legislating tax deductions; to the French, who shrug off any public consequence of a former President’s son selling machetes to the Rwandans.

How can we characterize the effects of this cynicism on the political, social and economic life of Europeans? Easily: their governments are illegitimate, their societies incoherent and their workers alienated. Alienated workers, whether manual or cerebral, are not likely to find the commitment of time and sweat required to innovate products, services and business processes. An economic system where the attainment of position and wealth is skewed to existing elites will not be as responsive as a more pure meritocracy, nor will it thrive in the sunlight of open competition.

And Europeans see this. It was his recognition of Europe’s uncompetitiveness that gave impetus to Jean Monet’s vision: to compete with the US, Europe must create a single market of comparable size and lack of barriers. Has this happened? In a word, No.  The smart money believes that Europe will prove un-unifiable, at least to an extent sufficient to achieve its stated goals. Former US Presidential economic adviser Martin Feldstein has predicted recently in print that the common currency will not survive ten years.

But enough of these comforting thoughts. Time to wrap the coffee grounds of these observations in the newspaper of a conclusion and dispose of the topic. OK. In fine, the reason that Europeans are ‘weiners’ and cannot compete with the Anglo-Saxon economic model is that they’re cynics, and no cynic ever made serious money, except by stealing it.