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How valid is the claim that the EU has delivered peace in Europe?

For many arguing that the UK should remain in the EU, the first and foremost claim is that it is a force for peace.

A few years ago, the EU was awarded the 2012 Nobel Peace Prize. The Scottish Herald described the award as ‘crass’, one which would inflame ‘tensions when many of the EU’s 500 million citizens have been thrown into penury by the worst recession since the 1930s.’ I remember some thought it was a joke. Lord Lamont was quoted saying the decision was ‘preposterous and absurd.’

But the Nobel committee was serious. It applauded the EU for its contribution over six decades to ‘the advancement of peace and reconciliation, democracy and human rights in Europe’ and being instrumental in ‘transforming most of Europe from a continent of war to a continent of peace.’

Now, the Remain campaign point to the attainment of peace in Europe as one if its highest ranking achievements. Whatever else it may have or have not done, the Union has helped avoid war between the current members of the EU since 1945. David Cameron makes that very point today, reminding us that countries previously at ‘each others’ throats’ now lived and worked together for peace. Even Boris Johnson in the Leave camp has been reluctant to contradict the assertion. He says the EU was ‘born of the highest motives – to keep the peace in Europe.’

For sure, ending fighting between the ‘great powers’ (France, Germany, Italy and the UK in particular, though most others have fought bloody wars too), has to be celebrated. For centuries, these countries had battled over territory, power, religion and God knows what else, regularly bringing the continent to its knees and regularly inflicting atrocities on its peoples. The Second World War was perhaps only the most destructive of a long history of conflict.

So stopping that cycle of violence for more than 70 years has to be worth applauding.

But then, some years ago, when I was writing about the EU’s values, it occurred to me that it was too simplistic to think of ‘peace’ as only meaning the absence of war. Just as I wouldn’t define ‘love’ as the absence of ‘hatred’, I thought ‘peace’ had to imply more than just an end to military conflict between European states. And now, as the Remain camp keeps referring to ‘peace’ as the fundamental achievement of the EU, it’s apt that we look a little more closely at the claim. How instrumental has the Union been in keeping the peace as well as stopping war for its members? How good has it been in developing a continent at peace and contributing to a world without war? What influence has it had in reducing and resolving conflict?

An internal peace?

When in 1984 the then Presidents of Germany and France, Helmut Kohl and Francois Mitterrand, held manly hands outside the First World War cemetery in Verdun, many remarked on the gesture’s historical significance. Age old animosity replaced with intimacy, they said. Past hatreds buried. No one believed anymore that war would ever be possible between the two countries again.

Great credit for this was (and still is) given to the EU’s method. In binding key western European nations together in a mutually beneficial free market, blurring economic if not geographical borders, the incentive for using war as a shortcut to power and wealth has diminished to the point of becoming unthinkable. That was the inspired idea behind the European Economic Community, now the EU, in 1957. A rapprochement.

But if peace means the resolution of hatreds, the righting of wrongs, then the original EU/EEC buried much. In tying age-old enemies together, a lot of forgetting had to be done. It was no coincidence that Mitterrand and Kohl chose a memorial of a particularly bloody First World War battlefield (where the men of both sides fell in their tens of thousands) to show their friendship. There was no posing outside Second World War sites: Natzweiler concentration camp in the Alsace Mountains, where the Germans had overseen the slaughter of tens of thousands of French citizens only a little more than a decade before the EEC was constructed. Mont Valérien fort near Paris, where the SS executed the largest number of French Resistance fighters during the German occupation of France. Compiègne from where the Vichy French and German authorities conspired to deport 50,000 Jews for extermination in the camps of Eastern Europe. It suited both countries, and those four others who formed the first members of the EEC, to forget the evils of Nazism and collaboration in its genocidal programmes. In comparison, WW1 held far fewer ambiguities.

There can be little doubt, though, that the EU eventually woke up to the need to come to terms with its past. Since the late 1980s, at least, there’s been much greater appetite to confront the twin evils of racism and nationalism (though it was only as late as 2005 that Holocaust Memorial Day was finally and officially adopted as a commemorative necessity for the Union). That may have had more to do with the threats of a resurgence in ethnic violence both internally and on its borders in the Former Yugoslavia after 1991.

Whatever the cause of this awakening, the EU now maintains that it is consistent in its opposition to the kind of extremism that could lead to conflict amongst its Member States. Over the past couple of decades, it’s put resources into confronting racism in particular, although the EU’s own Fundamental Rights Agency has very recently called on Member States and the EU itself to increase efforts to combat anti-Semitism and hate crime in the wake of disturbing evidence that both were on the increase.

Still, the way the EU does business suggests that it’s pre-programmed to resolve major disputes by negotiation and compromise. Resort to some kind of internal military clash is simply unimaginable, something that has undoubtedly attracted non-member European countries, particularly in Eastern Europe and the Balkans. In a world otherwise quick to resort to violence, this is quite an achievement and not to be given up lightly.

Closer to home, the EU has been supporting peace initiatives in Northern Ireland ever since 1995: over the next few years, it’s committed to providing a further €229m to support ‘projects that contribute towards the promotion of greater levels of peace and reconciliation’. That sends something of a message, doesn’t it?

Peace beyond the border

But has that peaceful mission extended to and beyond the EU’s borders?

When the more powerful EU member states have occasionally gone to war outside Europe, the EU has had very little to say. Worse: often it’s appeared like an embarrassed teenager, looking away from parental misbehaviour, pretending it has nothing to do with them. Hear no evil, see no evil has been its mantra on occasion. During the Iraq War in 2003, for instance, the EU was noticeable for its silence. Neither support nor condemnation came from Brussels, leaving the matter taboo as a Union issue. There may have been considerable dialogue between France and Germany and the UK and other member states, but the EU wasn’t involved.

Nor had the EU anything much to say in the bombing of Libya in 2011 and Syria over the past six months. France and the UK have made their decisions to use military force independently (as have Denmark and the Netherlands in attacks against ISIS targets in Iraq). Again the EU has buried its head. If peace was such a pre-eminent value for the EU the idealist might have expected more.

Perhaps, though, this is a price of peace inside the Union. If the EU allows itself to be drawn into external conflicts prompted by its most powerful members and their interests then it could easily succumb to violence. Far better, some might say, for those states, able and willing to intervene militarily in other parts of the world, to be distinct from the EU. That leaves the EU’s hands clean. It can act as honest broker or move into a damaged territory in the aftermath of conflict. It can provide humanitarian and development aid without being directly associated with the killing and suffering that inevitably comes with waging war for good or ill.

Beyond the unilateral conduct of its members, the EU has for some time now sought to pursue a foreign policy supposedly premised on achieving peace for the world. Ever since the 1970s it has tried to adopt an independent role in global affairs, an identity based on peace. The rhetoric has been consistent: conflict prevention, peace-building, crisis-management. And it has applied resources and a diplomatic service (now called rather blandly the European External Action Service) with these goals in mind.

Few think it’s been that successful. Inevitably critics look to its failures first. Ever since the Balkan wars after 1991, the EU has been accused of impotence in resolving conflict. Time and again, it has been seemingly incapable of intervening in a coordinated and effective way. The Former Yugoslavia disintegrated into chaos right under its nose.

It has performed little better in the Israeli-Palestinian conflict over decades. Or in the Ukraine. Or with the Russian annexation of Crimea. Sanctions may be imposed, diplomatic measures applied, but they’re often muted. Too frequently for some commentators, the economic weight of the EU has counted for nothing when faced with intractable conflicts around the world.

Perhaps this criticism is unfair, though. The EU may have failed to resolve terrible wars on its periphery, but what other power has been more effective? The UN? The USA? China? Have they better served the interests of peace or solved enduring conflicts in the Middle East and Africa? Hardly.

What the EU has done is pour money into a foreign policy supposed to be predicated on the attainment of peace. During 2014 it spent over €300 million, though the amount was spread pretty thinly, as the report on foreign affairs last year shows: there was some form of involvement in over 80 countries. And that was on top of collective action in limiting the arms trade, encouraging peace processes in the Middle East and the Great Lakes region of Africa, confronting international terrorism, addressing the threat of climate change and more. Whether any of this has been effective is very hard to judge: certainly there are those sceptical of individual efforts. And whether it truly looks to long term causes of conflicts, economic inequality and structural violence in particular, and tries to deal with them, is very doubtful.

On its borders, the EU has for some time been criticised for failing to resolve problems in a way commensurate with broader notions of peace and respect for others. Now, there’s more than a suspicion that the EU is failing in its approach to the migration crisis under international law. The UN’s Secretary General, Ban Ki-moon has been particularly scathing.

So..?

Where does that leave me? Wary certainly of a simplistic assertion that the EU has given the continent peace. Though the claim that it has made the ‘scourge of war’ unlikely if not unthinkable in Western Europe may be valid, it’s also often been blind to the roots of war, inefficient and chaotic in its response to conflict, and all too willing to turn away from difficult questions involving the actions of its Member States and the problems faced in the world.

But ultimately, the EU is institutionally programmed to favour peace and not the use of military force. Though it can and does leave the challenges of confronting violence directly to other organisations (NATO particularly), the EU signals a pacific intent. And that might be its enduring virtue. The fact that many people are disappointed that it hasn’t done more or enough for the cause of peace perhaps indicates the EU’s potential as a vehicle of the non-violent resolution of conflicts, wherever they occur. And if so, isn’t it better to be at the heart of such an organisation intent on solving violent disputes peacefully and collectively?

Idealistic that may be. But is peace an ideal that we should ignore in favour of hard economic benefit?

This article was originally published on Lacuna magazine, and is republished here with permission.

Andrew Williams is Lacuna's editor-in-chief. He teaches law and creative writing at the University of Warwick and is the author of A Very British Killing: the Death of Baha Mousa, which won the George Orwell Prize for Political Writing in 2013. The book tells the story of a murder in Basra in 2003, for which no one has yet been brought to justice.

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We're racing towards another private debt crisis - so why did no one see it coming?

The Office for Budget Responsibility failed to foresee the rise in household debt. 

This is a call for a public inquiry on the current situation regarding private debt.

For almost a decade now, since 2007, we have been living a lie. And that lie is preparing to wreak havoc on our economy. If we do not create some kind of impartial forum to discuss what is actually happening, the results might well prove disastrous. 

The lie I am referring to is the idea that the financial crisis of 2008, and subsequent “Great Recession,” were caused by profligate government spending and subsequent public debt. The exact opposite is in fact the case. The crash happened because of dangerously high levels of private debt (a mortgage crisis specifically). And - this is the part we are not supposed to talk about—there is an inverse relation between public and private debt levels.

If the public sector reduces its debt, overall private sector debt goes up. That's what happened in the years leading up to 2008. Now austerity is making it happening again. And if we don't do something about it, the results will, inevitably, be another catastrophe.

The winners and losers of debt

These graphs show the relationship between public and private debt. They are both forecasts from the Office for Budget Responsibility, produced in 2015 and 2017. 

This is what the OBR was projecting what would happen around now back in 2015:

This year the OBR completely changed its forecast. This is how it now projects things are likely to turn out:

First, notice how both diagrams are symmetrical. What happens on top (that part of the economy that is in surplus) precisely mirrors what happens in the bottom (that part of the economy that is in deficit). This is called an “accounting identity.”

As in any ledger sheet, credits and debits have to match. The easiest way to understand this is to imagine there are just two actors, government, and the private sector. If the government borrows £100, and spends it, then the government has a debt of £100. But by spending, it has injected £100 more pounds into the private economy. In other words, -£100 for the government, +£100 for everyone else in the diagram. 

Similarly, if the government taxes someone for £100 , then the government is £100 richer but there’s £100 subtracted from the private economy (+£100 for government, -£100 for everybody else on the diagram).

So what implications does this kind of bookkeeping have for the overall economy? It means that if the government goes into surplus, then everyone else has to go into debt.

We tend to think of money as if it is a bunch of poker chips already lying around, but that’s not how it really works. Money has to be created. And money is created when banks make loans. Either the government borrows money and injects it into the economy, or private citizens borrow money from banks. Those banks don’t take the money from people’s savings or anywhere else, they just make it up. Anyone can write an IOU. But only banks are allowed to issue IOUs that the government will accept in payment for taxes. (In other words, there actually is a magic money tree. But only banks are allowed to use it.)

There are other factors. The UK has a huge trade deficit (blue), and that means the government (yellow) also has to run a deficit (print money, or more accurately, get banks to do it) to inject into the economy to pay for all those Chinese trainers, American iPads, and German cars. The total amount of money can also fluctuate. But the real point here is, the less the government is in debt, the more everyone else must be. Austerity measures will necessarily lead to rising levels of private debt. And this is exactly what has happened.

Now, if this seems to have very little to do with the way politicians talk about such matters, there's a simple reason: most politicians don’t actually know any of this. A recent survey showed 90 per cent of MPs don't even understand where money comes from (they think it's issued by the Royal Mint). In reality, debt is money. If no one owed anyone anything at all there would be no money and the economy would grind to a halt.

But of course debt has to be owed to someone. These charts show who owes what to whom.

The crisis in private debt

Bearing all this in mind, let's look at those diagrams again - keeping our eye particularly on the dark blue that represents household debt. In the first, 2015 version, the OBR duly noted that there was a substantial build-up of household debt in the years leading up to the crash of 2008. This is significant because it was the first time in British history that total household debts were higher than total household savings, and therefore the household sector itself was in deficit territory. (Corporations, at the same time, were raking in enormous profits.) But it also predicted this wouldn't happen again.

True, the OBR observed, austerity and the reduction of government deficits meant private debt levels would have to go up. However, the OBR economists insisted this wouldn't be a problem because the burden would fall not on households but on corporations. Business-friendly Tory policies would, they insisted, inspire a boom in corporate expansion, which would mean frenzied corporate borrowing (that huge red bulge below the line in the first diagram, which was supposed to eventually replace government deficits entirely). Ordinary households would have little or nothing to worry about.

This was total fantasy. No such frenzied boom took place.

In the second diagram, two years later, the OBR is forced to acknowledge this. Corporations are just raking in the profits and sitting on them. The household sector, on the other hand, is a rolling catastrophe. Austerity has meant falling wages, less government spending on social services (or anything else), and higher de facto taxes. This puts the squeeze on household budgets and people are forced to borrow. As a result, not only are households in overall deficit for the second time in British history, the situation is actually worse than it was in the years leading up to 2008.

And remember: it was a mortgage crisis that set off the 2008 crash, which almost destroyed the world economy and plunged millions into penury. Not a crisis in public debt. A crisis in private debt.

An inquiry

In 2015, around the time the original OBR predictions came out, I wrote an essay in the Guardian predicting that austerity and budget-balancing would create a disastrous crisis in private debt. Now it's so clearly, unmistakably, happening that even the OBR cannot deny it.

I believe the time has come for there be a public investigation - a formal public inquiry, in fact - into how this could be allowed to happen. After the 2008 crash, at least the economists in Treasury and the Bank of England could plausibly claim they hadn't completely understood the relation between private debt and financial instability. Now they simply have no excuse.

What on earth is an institution called the “Office for Budget Responsibility” credulously imagining corporate borrowing binges in order to suggest the government will balance the budget to no ill effects? How responsible is that? Even the second chart is extremely odd. Up to 2017, the top and bottom of the diagram are exact mirrors of one another, as they ought to be. However, in the projected future after 2017, the section below the line is much smaller than the section above, apparently seriously understating the amount both of future government, and future private, debt. In other words, the numbers don't add up.

The OBR told the New Statesman ​that it was not aware of any errors in its 2015 forecast for corporate sector net lending, and that the forecast was based on the available data. It said the forecast for business investment has been revised down because of the uncertainty created by Brexit. 

Still, if the “Office of Budget Responsibility” was true to its name, it should be sounding off the alarm bells right about now. So far all we've got is one mention of private debt and a mild warning about the rise of personal debt from the Bank of England, which did not however connect the problem to austerity, and one fairly strong statement from a maverick columnist in the Daily Mail. Otherwise, silence. 

The only plausible explanation is that institutions like the Treasury, OBR, and to a degree as well the Bank of England can't, by definition, warn against the dangers of austerity, however alarming the situation, because they have been set up the way they have in order to justify austerity. It's important to emphasise that most professional economists have never supported Conservative policies in this regard. The policy was adopted because it was convenient to politicians; institutions were set up in order to support it; economists were hired in order to come up with arguments for austerity, rather than to judge whether it would be a good idea. At present, this situation has led us to the brink of disaster.

The last time there was a financial crash, the Queen famously asked: why was no one able to foresee this? We now have the tools. Perhaps the most important task for a public inquiry will be to finally ask: what is the real purpose of the institutions that are supposed to foresee such matters, to what degree have they been politicised, and what would it take to turn them back into institutions that can at least inform us if we're staring into the lights of an oncoming train?