Exporting Western Rule of Law through the EU

By Boris N. Liedtke

It is undeniable that Western culture based on “rule of law” has established itself as the dominant system throughout the world.

The geopolitical foundation for this incredible journey can be traced back to a historic event of almost one thousand years ago in a small commune in Northern Italy called Canossa, where the powers of Emperor Henry IV, the equivalent of today’s US President, were checked and balanced by those of the Church. Each time the story of the Emperor in penance, bare-footed in hair-shirt clothing, desperately waiting for the Pope’s absolution was retold, it reinforced the fact that under Western governance there was a power larger than the earthly might of even the Emperor.

Humanism as a Philosophy and the Revolutions that logically followed during the Enlightenment simply swept away the Church as the primary force restraining the most powerful in society. Instead, Western civilisation adopted the impartial institution of Law as the ultimate Ruler. This concept not only gave rise to human rights, the right of freedom of expression, and democracy, but also allowed contractual certainty and stability for fair trade and ownership of private property, the basis for the West’s incredible economic blossoming. It is the foundation of our free capital market economy and hence our global wealth.

Without it, people would not be willing to purchase their homes or save for retirement; nor would businesses negotiate and enter mutual agreements to transfer funds, goods and services in different jurisdictions often thousands of miles away. Without it, trillions of dollars in financial transactions would not satisfy our need for a working capital system. Even totalitarian regimes feel a need to at least pretend to be operating under a fig leaf of a system that recognises the rule of law.

This concept not only gave rise to human rights, the right of freedom of expression, and democracy, but also allowed contractual certainty and stability for fair trade and ownership of private property, the basis for the West’s incredible economic blossoming.

There should be no doubt that the concept is entirely unnatural to humanity; hence the importance to defend it vigorously. Of course, it must be confessed that the West has not always lived up to its admirable pedigree in exporting this concept through slave trades in Africa, on the back of the Polo-playing British Raj in India, or indeed with gunboats in Kowloon or Edo Bay. Yet overall, the concept of the rule of law has characterised both the West and its phenomenal rise.

With the escalation of the Cold War, the requirement to insist on rule of law among Western allies disappeared entirely. This compromise included the Eisenhower administration propping up a vile dictatorial Francoist Spain and found its zenith under President Johnson’s support for authoritarian South Vietnam.

With modern technology allowing information flow to increasingly permeate the Iron Curtain, it became obvious how politically impactful the rule of law had been in establishing prosperity and wealth.

No better example exists than the diverging living standards between East and West Germany. One had risen from the ashes of destruction after WWII and gone through an economic wonder, transforming itself into a leading industrial nation. At the same time, the other was languishing under a totalitarian Communist regime, whose everyday consumer reality consisted of empty shelves, long lines, poor quality merchandise and monochromatic drabness.

When at the end of the Cold War, the suppressed people of Eastern Europe risked their lives to dismantle totalitarianism, the West had a unique opportunity to carry its winning message to the rest of the world. The hopes and dreams of intellectuals around the globe even carried them as far as to proclaim the end of history as a dialectic confrontation between political systems. The free market, and democracy under the rule of law had won! All that was needed was to open the gates, allow access to information and free trade. A world based on this concept would follow naturally.

Alas, the newly elected president, former Governor of Arkansas, William Jefferson Clinton, failed, or rather did not even see the need to exploit this unique opportunity. There would be no equivalent to a Truman Doctrine, no Marshal Plan, no access to free markets, nor punishment for totalitarian and apartheid regimes. Unlike after WWII, America shied away from creatively transforming the world to the benefit of humanity; in its inaction, the USA had failed to bring about the end of history.

However, the challenges created by globalisation and faced by humanity in the twenty-first century can no longer be tackled primarily through the use of our long-standing nation-state model. The modern horsemen of the Apocalypse – Nuclear Proliferation, Climate Change, and Global Trade Collapse – make no halt at national borders.

What hope is there, if the USA, as the most powerful nation in the history of humanity, has not only repeatedly failed to tackle any of these global challenges but instead is presently pursuing policies that aggravate these dangers. Under the Trump Administration, Climate Change is denied; agreements with totalitarian regimes to limit the risks of nuclear proliferation are replaced by photo ops with nuclear renegades; and global foreign trade is used as an arbitrary weapon against friend and foe alike.

In Albert Einstein’s words, the definition of insanity is doing the same thing over and over again, while expecting differing results. Unfortunately, humanity does not have the luxury to keep trying to solve its current issues with insanity. No matter how powerful or how well-wishing, a single nation- state is incapable of solving these global issues alone or through the creation of multi-national institutions based on nation-state representation. The League of Nations one hundred years ago, the United Nations over half a century ago and most recently the Paris Agreement on Climate Change all ended up being taken hostage to the self-interest of individual nations. To keep trying this tired approach over and over again will lead to the same result. Hope that this tactic will somehow lead to salvation is but a sign of insanity.

It is not surprising that a more promising approach to these challenges developed in Europe, the war-ravaged cradle of the rule of law, and not in Ronald Reagan’s shining city upon a hill. While the USA had the luxury of dominating the world, Europe after WWII lay in ruins. Its nations were even incapable of assuring the safety of its own people from the threat posed by Communism. Instead they had to rely upon the unwavering dedication of the Americans under NATO and other generous commitments. The continent was a fragmented heap with asylum seekers numbering in the tens of millions.

It will forever amount to merely speculation to try to simplify the beginning of the European Union into a single cause: Perhaps it was the necessity to deal with the wave of asylum seekers that flooded from Soviet- occupied countries to the West; perhaps it was the unnecessary and vexatious border bureaucracy of inter-country trade in coal and steel between BeNeLux, Germany, and France; perhaps it was the fear of Soviet tanks breaking through the Iron Curtain. There is no single answer as to why nations in Western Europe decided to expand the power of international institutions, thus slowly reducing their own sovereign decision-making capabilities.

The genius of the founding fathers of the European Union like Konrad Adenauer, Jean Monnet, Robert Schuman, Joseph Bech and Winston Churchill in bringing together their countries is a legacy for which peace-loving Europeans should be eternally thankful. Systematically they put in place institutions that allowed deeper economic, financial, and political integration and crucially avoided military confrontation that had ravaged their continent so frequently. Yet their biographical similarities as politically centre-right, upper middle class professionals from wealthy families meant that none of them even contemplated the necessity to create popular institutions to communicate their extraordinary project to the broader working class of Europe.

The rare but crucial initiatives of cultural integration for Europe through events such as the Champions’ League football, the Eurovision pop music contest or easy European travel for youngsters via InterRail remained outside the institutions of the EU. The sheer growth of participants as well as the ease with which these social events have incorporated cultures from Communist and Capitalist Europe and more recently from outside the continent give proof of the missed opportunity by the founding fathers to incorporate these cultural aspects into their initiative.

However instead of going from strength to strength, present leaders of the EU, like the French President Macron, warn that their country and the European system are facing existential threads from within and without.

The threat from within is a direct result of the failure of the political institutions of the EU to connect with its people. Mainstream and even strong pro-European domestic politicians have for decades decided to sell the achievements of the European integration as their own, while using the EU as a scapegoat for any negative development.

The EU needs to convince its population of its vitality by focusing more on cultural and social activities as well as providing a broader and more aggressive long term vision for a new world order.

As deepening of trade relationships under a common market drove economic growth, political leaders claimed authorship of this prosperity as a result of their own brilliant domestic policies. However, when the voting population raised concerns about increased immigration, the political national elite willingly pointed the finger towards Brussels as the ultimate culprit. The constant mocking of the EU in domestic politics has hallowed out the belief and trust of the common people towards integration like water dripping endlessly on a stone. As a result, the EU is finding it harder and harder to continue the logical path of its once daring policies for a broader and deeper Union. It remains militarily weak, politically divided with an economy facing sclerotic decay.

The threat from within the European Union needs to be tackled quickly if its institutions are to survive. However, it will not be sufficient to just avoid the mistakes of the past by creating initiatives that will expand integration away from just a financial, economic and political project. The EU needs to convince its population of its vitality by focusing more on cultural and social activities as well as providing a broader and more aggressive long term vision for a new world order. This takes us to the rising threat from outside the EU and the three strategies available to tackle this.       

Western Europe finds itself frequently at odds with its once closest ally in terms of trade and more importantly defence strategy. With a USA focused on “America First” the prevailing geopolitical structures such as NATO are coming to an end. The initial reaction to this new reality is a – ignore and retreat strategy. It is tantamount to hiding behind the walls of Western Europe and hoping that somehow the threats will magically go away or that an America under a new president will come to its rescue. This is the position taken de facto by most of the EU including its economic powerhouse – Germany. With a defence budget in 2018 of less than USD50bn, a meagre 1.2% of GDP and under 10% of what the USA is spending, the once feared German military has become the butt of a joke. Only a quarter of its tanks are operational, only one in 5 submarines work, the assault guns issued to its infantry do not shoot straight and the list goes on and on. This on-going strategy of retreat without an investment in defence is a recipe for disaster.

The second alternative to these geopolitical threats is the approach taken by President Macron. He rightly characterizes Europe as a continent standing unaware of the danger of its own demise. His response is to build a solid and independent defence by appealing to his fellow European leaders to deepen European integration. Instead of ignore and retreat, he wants to build and defend. However, all his enthusiasm for a European defence force is running counter to the willingness of other member states to deepen the continent’s integration at a time when the population has still not bought into the necessity of fighting for Europe. Rising Eurosceptic parties which appeal to a deep nationalistic feeling of purpose and belonging all over the continent run counter to this vision of a deeper integrated Union without a global purpose.

There is a third and more aggressive alternative for Europe. The EU has something unique to offer to the world that will create economic growth, freedom of expression and reduce social inequality – a path to the Rule of Law. As the US is slowly retreating into its shell, it leaves behind a geopolitical and power vacuum that is being filled by established and emerging powers such as a lethargic Europe, a dictatorial China, an aggressive Russia, a corrupt India and an amalgamation of pseudo-failed states in the Middle East.

For any student of history this amounts to a recipe for disaster. A global world with great powers expanding their influence while others attempt to defend their status will inevitably lead to conflict. In the past the fallout of such a fragile world order was local wars. In a modern world with nuclear weapons, a looming climate change catastrophe and the necessity for global trade, the risk of miscalculation becomes a threat to the whole of humanity. It simply is not enough to defend the EU behind an ever-increasing wall. Instead Europe must dare to export its Weltanschaung.

It has the means and experience to do so but needs the necessary willpower. Following the end of the Cold War, the EU opened its institutions to Eastern Europe and gave countries a pathway to join. Ironically, it was the EU which brought democracy and rule of law to more countries than its big American brother.

The word “Europe” in European Union is but an unnecessary geographical limitation.

No doubt some ex-Communist countries such as the Baltic States, Czech Republic or Slovenia embraced rule of law easier than other countries. However, in historical terms, the progress is remarkable by anybody’s standards. There is absolutely nothing that holds back the EU from offering a similar path to countries outside Europe. Nothing, that is, apart from a lack of ambition and narrow-mindedness.

The word “Europe” in European Union is but an unnecessary geographical limitation. While Brussels might be prone to regret the departure of Britain, it should instead seize the opportunity to offer full membership to other Anglo-Saxon nations that share a similar culture, history and focus on rule of law. Canada and Australia would bring valuable additions to the market in form of natural resources and global outlook.

By gaining a foothold on two new continents, the cradle of Western culture will be in a position to absorb other non-European nations that have proven to embrace similar cultural concepts. Singapore and Japan could be offered a path to full membership. At this stage the economic power of a common market with close to 1 billion consumers in mainly developed countries will be so attractive that other nations will see the need to follow its regulations and eventually join by increasingly subjecting their own sovereignty to international institutions, just like the great powers in Western Europe did after WWII.

Instead of naval-gazing after the departure of Britain and the rise of populist anti-European parties, Brussels could proudly export its values through expanding the EU to a Global Union, thus channelling misplaced nationalistic feelings into a global mission for saving the world. By doing so, we might see an emerging world that is no longer based on nation states, but instead on far more effective institutions with the means to tackle the global challenges of our time.

Rather than floundering in decline, the EU could become the 21st century beacon of hope, the new city on the shining hill. Expansion through integration beyond the shores of Europe might allow humanity to face the three present riders of the Apocalypse by meaningfully discussing, coordinating and implementing responses to existential threats and perhaps bring about the best answers for the survival of humanity in the next century. It could be Europe’s last chance to export its most important product – the philosophy of Rule of Law.

About the Author

borisliedtke

Dr Boris N. Liedtke is the Distinguished Executive Fellow at INSEAD Emerging Markets Institute and has over twenty years experience in the financial sector. He was the CEO of the largest bank by assets in Luxembourg and board member for Operations at the largest German fund manager. He is author of numerous articles on finance and trade as well as having received his PhD from the London School of Economics for the publication of Embracing a Dictatorship by MacMillan.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.