15.3: The European Union

At the start of the postwar boom, most of the nations of western Europe entered into various international groups that sought to improve economic relations and trade between the member nations. Those culminated in the creation of the European Community (EC) in 1967, essentially an economic alliance and trade zone between most of the nations of non-communist Europe. Despite various setbacks, not the least the enmity between French and British politicians that achieved almost comic levels at times, the EC steadily added new members into the 1980s. Its leadership also began to discuss the possibility of moving toward an even more inclusive model for Europe, one in which not just trade but currency, law, and policy might be more closely aligned between countries. That vision of a united Europe was originally conceived in large part in hopes of creating a power-bloc to rival the two superpowers of the Cold War, but it also encompassed a moral vision of an advanced, rational economic and political system, in contrast to the conflicts that had so often characterized Europe in the past.

The EC officially became the European Union in 1993, and various member nations of the former EC voted (sometimes barely) to join in the following years. Over time, passport controls at borders between the member states of the EU were eliminated entirely. The member nations agreed to policies meant to ensure civil rights throughout the Union, as well as economic stipulations (e.g. limitations on national debt) meant to foster overall prosperity. Most spectacularly, at the start of 2002, the Euro became the official currency of the entire EU except for Great Britain, which clung tenaciously to the venerable British Pound.

The period between 2002 and 2008 was one of relative success for the architects of the EU. The economies of Eastern European countries in particular accelerated, along with a few unexpected western countries like Ireland (called the “Celtic Tiger” at the time for its success in bringing in outside investment by slashing corporate tax rates). Loans from wealthier members to poorer ones, the latter generally clustered along the Mediterranean, meant that none of the countries of the “Eurozone” lagged too far behind. While the end of passport controls at borders worried some, there was no general immigration crisis to speak of.

Figure 15.3.1: The European Union. As of this writing, Britain is poised to exit the EU in the near future.

Unfortunately, especially since the financial crisis of 2008, the EU has been fraught with economic problems. The major issue is that the member nations cannot control their own economies past a certain point – they cannot devalue currency to deal with inflation, they are nominally prevented from allowing their own national debts to exceed a certain level of their Gross Domestic Product (3%, at least in theory), and so on. The result is that it is terrifically difficult for countries with weaker economies such as Spain, Italy, or Greece, to maintain or restore economic stability. Instead, Germany ended up serving as the EU’s banker and also its inadvertent political overlord, issuing loan after loan to other EU states while dictating economic and even political policy to them. This led to the surprising success of far-left political parties like Greece’s Syriza, which rose to power by promising to buck German demands for austerity and by threatening to leave the Eurozone altogether (it later backpedaled, however).

In the most shocking development to undermine the coherence and stability of the EU as a whole, Great Britain narrowly voted to leave the Union entirely in 2016. In what analysts largely interpreted as a protest vote against not just the EU itself, but of complacent British politicians whose interests seemed squarely focused on London’s welfare over that of the rest of the country, a slim majority of Britons voted to end their country’s membership in the Union. The political and economic consequences remain unclear: the British economy has been deeply enmeshed with that of the EU nations since the end of World War II, and it is simply unknown what effect its “Brexit” will have in the long run.