Washington is suddenly awash with major scandals. The IRS has been caught abusing its powers regarding conservative organizations. The AP had its phone records seized without a court order. The White House explanation for the Benghazi attack has been shown to have been a tissue of lies made for political purposes. There might be more scandals to come the Environmental Protection Agency has been waiving Freedom of Information Act fees for liberal organizations but not conservatives.
This has produced, naturally, a cacophony of talk among the chattering classes, much of it basically gossip and there’s nothing wrong with that. To gossip, after all, is to be human. We are the most social species on the planet, and the doings of our fellow creatures are thus always of great interest and when those doings transgress societal norms — in other words, become a scandal — well, people will talk. But the amount of talk is directly proportional to the square of the social status of the people involved.
There are scandals that are very useful indeed, for they point out vividly where reform is needed and powerfully help bring it about. What is needed is a spark, something so outrageous that the scandal suddenly becomes overwhelming and reform follows. Gerrymandering is not permitted in any other country in the democratic world and yet it flourishes here because the media have not brought it to public attention. Scandal cannot do its job unless the media decide that the situation is, indeed, a scandal. One of the greatest uses of scandal is to vividly demonstrate what new laws are needed and create the political conditions to get them enacted.
That had only recently become possible, for until the 1830s the mass media did not exist and it was the mass media that made public opinion a powerful force in the politics of democratic states. Before the days of mass media what we would regard as gross corruption was simply business as usual. In 1799, Aaron Burr, then a New York state assemblyman, was pushing for a charter for a company that was ostensibly to provide potable water in Manhattan, whose ground water had become badly polluted. But his real object was to establish a bank. Into the bill to charter a water company, Burr slipped a provision allowing the company to use any surplus capital “for any legal purpose.” Six months later, long before the company had laid a single length of pipe, it opened a bank. When Burr stepped down three years later — by this time he was vice president of the United States — he owed the bank $64,903.63, a moderate fortune at the turn of the 19th century. (The bank, by the way, is still with us known as Chase Manhattan.)
Lord Aberdeen’s demise was the first time that a government had fallen because of public pressure brought about by news coverage. It would not be the last by any means. Lord Macaulay had dubbed the press the “fourth estate of the realm” in 1828, but it was only in the 1850s that the estate truly became a major player in the world of politics. A bank clerk cheating on his wife is not big news. A president of the United States doing so, and with a White House intern, resulted in the biggest sex scandal in American history. In this country an endless series of government scandals, local, state, and federal, have rocked the nation courtesy of the press.
The Crédit Mobilier scandal erupted in the 1870s when the board of the Union Pacific Railroad, largely funded by federal funds and land grants, formed a construction company, gave it a fancy French name, and hired their own company to build the railroad at wildly inflated prices. It is said that they paid $72 million to build a railroad that was worth only $53 million. To make sure Congress didn’t object, the directors invited members to invest in the stock of Crédit Mobilier, offering to let them pay for it out of future dividends. Since the quarterly dividends were often more than the par value of the stock, they got it effectively for free. When the scandal became public however one-third of the members of Congress lost their seats in the 1872 election.
Many politicians found their careers in ruins thanks to Crédit Mobilier. But not Representative James Garfield, one of those named in the scandal. He denied involvement and went on to be elected president eight years later. Harper’s Weekly reported that the Erie war had ‘entirely superseded public interest in the impeachment of the president’ going on in Washington just then. But none went to jail because the law, lagging behind inventive individuals, did not cover the situation. Had Crédit Mobilier simply given the congressmen cash (or even stock) in exchange for a blind eye to what was happening, that would have been bribery. But by having them “pay” for the stock out of dividends, no crime was committed.
This is one of the greatest uses of scandal: it demonstrates what new laws are needed and creates the political conditions to get them enacted. And this is not just in politics. As industrial capitalism developed in the second half of the 19th century, the American economy was transformed. What evolved much more slowly was the regulatory apparatus necessary to keep the new economy operating in the public interest, even as it piled up unprecedented fortunes for the new capitalists of the Gilded Age what were perceived as scandals often helped focus public and therefore political attention on areas where rules needed to be created.
Such concentrations of economic power increasingly seemed to many to be dangerous and over a period of about 25 years such laws as the Sherman and Clayton Antitrust Acts banned such combinations in restraint of trade and secret dealings and the federal government began to enforce the laws vigorously. It was an effective, if not perfect solution to excessively concentrated economic power. This perfectly logical exploitation of monopoly power naturally infuriated the farmers and small merchants who were exploited. Their complaints were picked up by the newspapers and means were sought to bring the abuse to an end among them the formation of the Granger movement.
But sometimes the solutions brought about by these economic “scandals” were much less successful. Consider railroads, the dominant industry of the late 19th century. On runs where railroads competed, such as between New York and Chicago, served by the New York Central, the Pennsylvania, and the Erie, prices were kept low by frequent rate wars as the various railroads fought for business. Often these rate wars resulted in operating at a loss, and the railroads would form cartels to try to stabilize freight rates. But the cartels would always break down as one member of the cartel went for market share however, many customers were not on the trunk lines, where competition was fierce, but on the branch lines where the railroads had a monopoly on overland transportation. The railroads could — and mostly certainly did — charge high prices on these branch lines. This perfectly logical exploitation of monopoly power naturally infuriated the farmers and small merchants who were exploited. Their complaints were picked up by the newspapers and means were sought to bring the abuse to an end, among them the formation of the Granger movement.
When state governments proved unable to effectively deal with the problem, the federal government finally stepped in with several Supreme Court decisions. In 1889 the Supreme Court created a regulation agency, the Interstate Commerce Commission to regulate railroad pricing. It was the wrong solution. A simple law requiring railroads to have uniform pricing throughout their industry would have ended the abuse on the branch lines and the ICC quickly evolved into a fascist government-run cartel, one that didn’t break down. The result was higher prices and a stagnant industry. Trucking was brought under the purview of the ICC in the 1930s and airlines under their own cartel, the Civil Aeronautics Board, as well. It would be the 1970s before competition was restored to American transportation, resulting in greatly lowered transportation prices and thus lower costs for most goods.
Scandal produces solutions, but not necessarily the right solutions. Still, by shining the spotlight of public attention on a situation, scandal at least forces that situation onto the public agenda. Sometimes the solutions brought about by these economic “scandals” were much less successful. While earmark abuse in Congress grew by leaps and bounds over the last 15 years and several members of Congress went to jail because of it, the media chose to treat these as individual scandals involving individual congressmen such as Duke Cunningham and Bob Ney. In fact they were a systemic problem in Congress and only when a public outcry arose did Congress change its ways.
Similarly, scandals in tort law have been treated as individual transgressions, not as a fundamental problem with how tort law has developed in this country in the last 40 years. Recently, three of the most prominent and economically successful tort lawyers in the country, Richard Scruggs, William Lerach, and Melvin Weiss were all serving substantial sentences in federal penitentiaries for conduct committed in the course of practicing law and yet the media has not connected the dots.
Gerrymandering, which effectively disenfranchises millions of people by guaranteeing the election of candidates of one party in many legislative districts, should be a huge scandal in a country that prides itself on not only being a representative democracy but having invented representative democracy. Gerrymandering is not permitted in any other country in the democratic world and yet it flourishes here because the media have not brought it to public attention.
At some point they will, just as they will with a tort law system that serves only tort lawyers and with porkbarrel earmarks that waste public money in order to re-elect members of Congress. What is needed is a spark, something so outrageous that the scandal suddenly becomes overwhelming and reform follows.
As a new spate of scandals develops in Washington, one hopes that lessons will be learned and reforms instituted. What will be the sparks that set off scandals that lead to the reform of equivalent abuses we have now? It's going to be a lot of fun to read about them scandal, is not only useful it is highly entertaining.
“It’s like magic — you distract the audience while the real trick is being done — and I think right now, while Americans focus on President Obama’s unending difficulties, it’s good news for the Gang of Eight working on immigration,” said Republican strategist Alex Castellanos, referring to the four Republicans and four Democrats who crafted the bill… “To be able to go through this markup where nobody can claim that we’ve short-circuited the process — it’s been an open process, we’ve adopted some substantive amendments — to be able to do that without people calling press conferences outside and without groups calling members, it’s been a good process,” Senate Republican Jeff Flake said in an interview, referring to the Senate Judiciary panel’s actions. “I’d have to say it probably helped.”… “While the discussion on TV continues, the immigration bill marches on, and that’s because of that independent, strong support for the bill — labor, business, farm groups, it’s incredible,” said Senator Amy Klobuchar of Minnesota, a Democratic member of the committee. “It’s been actually a nice oasis to actually do some legislating during all of the somewhat radioactive news.” The hope/expectation among border hawks is that the free lunch is about to end now that the bill’s headed for the spotlight of a Senate floor debate, but I don’t know.
That depends on what’s happening in Scandalmania, doesn’t it? If a bombshell bursts next month about IRS malfeasance going further up the chain than thought, that’ll suck the media air out of the room again. Wouldn’t surprise me, in fact, if Harry Reid’s keeping an eye on Darrell Issa’s committee schedule to make debate on the bill coincide as much as possible with what’s going on in House Oversight. There are still hurdles to final passage even if the Senate rubber-stamps it — Bob Goodlatte sounds as sour on the Gang of Eight bill as ever, at least for now — but if they get a big showing of Republican support in the upper chamber, that’ll put extra pressure on House Republicans to sign off. And the more distracted conservatives are by scandal, the more likely it is that fencesitters in the Senate GOP will feel safe to sign on. Here’s what I’m wondering: Even if something passes while grassroots righties are focused elsewhere, could there be a “delayed” backlash of sorts before the midterms? i.e. could conservatives wake up six months after now, after Obama’s signed the bill and the various scandals have finally died down, and decide that the GOP sellout warrants a little boycott at the polls next November? I’m guessing no, partly because Scandalmania will goose turnout regardless of what happens with immigration and partly because a delayed backlash would require some sort of spark or rallying point and I’m not sure what that would be. But I don’t know. This is why I’m asking. By the way, Marco Rubio would like you to know that he doesn’t trust Washington D.C. — on budget matters. On immigration reform, which has been conducted via closed-door negotiations and which will hand Obama’s administration all sorts of new discretionary powers, Obama trusts D.C. just fine.
Congressional Republicans head into next week’s Memorial Day recess armed with a strategy designed to keep the controversies that have consumed Washington in the news back home. Both House and Senate Republicans will focus on the Internal Revenue Service targeting conservative groups for extra scrutiny as well as the still-open questions about Benghazi. And more and more, they’ll try to tie them together into a made-for-2014 narrative of an unaccountable and out-of-control government. In interviews on local television and radio programs and with newspapers, Senate Republicans plan to talk about the Obama administration’s “credibility gap.” They’ll throw into the mix Health and Human Services Secretary Kathleen Sebelius’s request that health industry officials help fund "Obamacare," a move Republicans call a “shakedown” of the companies she regulates, according to a Senate GOP leadership aide. Lawmakers will argue that a “lack of details, stonewalling,” and what they call an “ever-changing White House narrative” on both Benghazi and the IRS have led to a trust deficit with the public, a sentiment reflected in recent polls, the aide said. Part of the aim is to get voters to question how they can trust the administration, and the IRS more specifically, to enforce key provisions of Obama’s health care law after improperly targeting Americans.
This fits into Republicans’ emerging scandal-riding midterm election strategy—one that the GOP’s congressional campaign committees think can blend easily into their anti-Obamacare message to help the party take the Senate in 2014. On the House side, Republicans will tell voters back home that they’ll “definitely see more hearings” on the IRS and Benghazi, a House leadership aide said. “We’re focused on getting to the bottom of this. What we saw over the last week demonstrates that we need to look further. That we need answers on the who, what, where, when, and why,” the aide said. “The message is IRS overreach,” a senior House GOP leadership aide said. “This is a problem about government inserting itself into your life.” And don’t forget the national press. House Republicans seem sure that the other controversy — the Justice Department’s seizure of phone records from reporters and editors at the Associated Press — has as much staying power as the IRS and Benghazi issues. It’s a “double-barreled attack on the First Amendment,” the aide said, noting that the press, always game to write about itself, is sure to keep both IRS and DOJ in the news for weeks, with little help from the GOP.
The National Intelligence Council, in its quadrennial report on global trends, described this era as similar to 1815, 1919, 1945 and 1989 – times when the actions of political leaders shaped history. The world now faces the most dramatic shift in political and economic power and influence since the 19th century. With its relative economic size and influence in decline (the American share of global GDP has fallen from 50% in 1945 to 18.9% now), the United States needs Europe more than ever if it is to shape global outcomes. Obama will have to grasp the historic stakes, however, and be fully engaged with European leaders if he is to overcome the obstacles that lie before one of history’s most complex trade and investment agreements. Vice President Joe Biden at the Munich Security Conference in early February warned that a new US-EU agreement had to be done “on a single tank of gas,” and US and EU leaders have vowed to conclude their negotiations within two years. Obama framed the agreement narrowly in his State of the Union address as something that would help the United States create jobs and growth but failure to reach agreement will increase the likelihood that China and others will set the rules for the 21st century.
The Supplying Knowledge Based Immigrants and Lifting Levels of STEM Visas Act (H.R. 2131), also known as the SKILLS Visa Act, provides American employers with access to the world’s best talent by allocating green cards to foreign graduates of U.S. universities with advanced degrees in science, technology, engineering, and math (STEM) fields, increasing H-1B visas. “In today’s global economy, our nation needs access to the world’s best talent to maintain our competitive edge. Although high-skilled immigrants are often in demand by American employers, many of them end up on the green card waiting list for years. Consequently, many of these foreign workers and students go back to their home countries and work for one of our global competitors. “The SKILLS Visa Act provides a solution to this problem by eliminating immigration programs that do not meet the needs of our nation and reallocating those visas to high-skilled immigrants who will help make us more competitive in the today’s economy. By increasing high-skilled immigration and creating a new entrepreneur visa program, the SKILLS Visa Act will boost economic growth and create new jobs here at home.” “This bill is an investment in our Nation’s future. The SKILLS Visa Act will allow the best and brightest foreign graduates of American universities to stay in the U.S., encourage entrepreneurs and investors to grow our economy. “In addition to keeping the world’s best and brightest here in the U.S., the SKILLS Visas Act will modernize immigration laws to help our growing technology sector. By bringing highly skilled workers into our economy, we will help ensure our Nation’s future as a leader of growth and innovation.”
Key Components of the SKILLS Visa Act:
- Increases Green Cards for STEM Grads: The SKILLS Visa Act allocates up to 55,000 green cards a year for employers to petition for foreign graduates of U.S. universities with advanced degrees in STEM fields.
- Supports STEM Education in U.S.: The bill raises the current fee on H-1B visas and institutes a fee on employers petitioning for green cards for workers that will go towards strengthening STEM education in the U.S.
- Increases and Strengthens H-1B Visa Program: The SKILLS Visa Act increases the H-1B visa cap for high-skilled workers to 155,000 and increases the special pool of visas for foreign graduates of U.S. universities to 40,000. The bill contains enhanced anti-fraud provisions and allows H-1B spouses to work.
- Provides Entrepreneur Visas: The bill allocates up to 10,000 green cards a year for alien entrepreneurs who can attract investment from venture-capital firms to establish businesses that will create five jobs or have already created five jobs over 10 years through the E-2 treaty investor program.
- Strengthens Investor Visa Program: The bill strengthens the investor visa green card program by making the regional center pilot project permanent, indexing investment requirements for inflation, and adding anti-fraud protections.
- Eliminates Arbitrary Caps: The bill eliminates the employment-based green card per-country cap, allowing American employers to have access to the best talent.
More than any other group, the high-tech industry got big wins in an immigration bill approved by the Senate Judiciary Committee last week, thanks to a concerted lobbying effort, an ideally positioned Senate ally and relatively weak opposition. The result amounted to a bonanza for the industry: unlimited green cards for foreigners with certain advanced U.S. degrees and a huge increase in visas for highly skilled foreign workers. And thanks to the intervention of Sen. Orrin Hatch, R-Utah, the industry succeeded in greatly curtailing controls sought by Sen. Dick Durbin, D-Ill., aimed at protecting U.S. workers. The legislation written by four Democratic and four Republican senators awards a permanent resident green card to any foreigner with a job offer in the U.S. and an advanced degree in science, technology, engineering or math from a U.S. school.
Fossil fuels—coal, oil, and natural gas—are elite energies for the simple reason that they are found only in select places. They require a significant military investment to secure their access and continual geopolitical management to assure their availability. They also require top down command and control systems and massive concentrations of capital to move them from underground to the end users. The ability to centralize production and distribution— the essence of modern capitalism— is critical to the effective performance of the system as a whole. The centralized energy infrastructure, in turn, sets the conditions for the rest of the economy, encouraging similar business models across every sector. Virtually all of the other critical industries that emerged from the oil culture—modern finance, telecommunications, automotive, power and utilities, and commercial construction—and that feed off of the fossil fuel spigot were similarly predisposed to bigness in order to achieve their own economies of scale. And, like the oil industry, they require huge sums of capital to operate and are organized in a centralized fashion. Three of the four largest companies in the world today are oil companies—Royal Dutch Shell, Exxon Mobil, and BP. Underneath these giant energy companies are some five hundred global companies representing every sector and industry—with a combined revenue of $22.5 trillion, which is the equivalent of one-third of the world’s $62 trillion GDP—that are inseparably connected to and dependent on fossil fuels for their very survival.
Our industrial civilization is at a crossroads. Oil and the other fossil fuel energies that make up the industrial way of life are sunsetting, and the technologies made from and propelled by these energies are antiquated. The entire industrial infrastructure built off of fossil fuels is aging and in disrepair. Governments, businesses and consumers are awash in debt and living standards are declining everywhere. Since the beginning of the Great Recession in the summer of 2008, governments, the business community, and civil society have been embroiled in a fierce debate over how to restart the global economy. While austerity measures and fiscal, labor, and market reforms will all be necessary, they are not sufficient to re-grow the economy. Let me explain by way of an anecdote. Just months after arriving in office, the new Chancellor of Germany, Angela Merkel, asked me to come to Berlin to help her administration address the question of how to create new jobs and grow the German economy in the twenty-first century. I began my remarks by asking the chancellor, “How do you grow the German economy, the EU economy, or, for that matter, the global economy, in the last stages of a great energy era and an industrial revolution built on it?” “It is becoming clear that the Second Industrial Revolution is dying. What we need now is a bold new economic narrative that can take us into a sustainable post carbon future.” It is becoming increasingly clear that the Second Industrial Revolution is dying and that industrial induced CO2 emissions are threatening the viability of life on Earth. What we need now is a bold new economic narrative that can take us into a sustainable post-carbon future. Finding that new vision requires an understanding of the technological forces that precipitate the profound transformations in society.
A New Economic Narrative
The great economic revolutions in history occur when new communication technologies converge with new energy systems. New energy revolutions make possible more expansive and integrated trade. Accompanying communication revolutions manage the new complex commercial activities made possible by the new energy flows. In the 19th century, cheap steam powered print technology and the introduction of public schools gave rise to a print-literate work force with the communication skills to manage the increased flow of commercial activity made possible by coal and steam power technology, ushering in the First Industrial Revolution. In the 20th century, centralized electricity communication—the telephone, and later radio and television—became the communication medium to manage a more complex and dispersed oil, auto, and suburban era, and the mass consumer culture of the Second Industrial Revolution. Today, Internet technology and renewable energies are beginning to merge to create a new infrastructure for a Third Industrial Revolution (TIR) that will change the way power is distributed in the 21st century. In the coming era, hundreds of millions of people will produce their own renewable energy.
New Business Models and Jobs in the 21st Century
Germany is leading the way into the new economic era. The Federal Government has teamed up with six regions across Germany to test the introduction of an energy internet that will allow tens of thousands of German businesses and millions of home owners to collect renewable energies on site, store them in the form of hydrogen, and share green electricity across Germany in a smart energy internet. Entire communities are transforming their commercial and residential buildings into green micro-power plants. To date, more than 1 million buildings in Germany have been converted into partial green micro power plants. Companies like Siemens, Bosch and Daimler are creating sophisticated new IT software, hardware, appliances and vehicles, that will merge distributed Internet communication with distributed energy, to create smart buildings, infrastructure, and green mobility for the cities of the future. “The transition to the Third Industrial Revolution will require a wholesale reconfiguration of the entire economic infrastructure of each country, creating millions of jobs and countless new goods and services.”
The transition to the Third Industrial Revolution will require a wholesale reconfiguration of the entire economic infrastructure of each country, creating millions of jobs and countless new goods and services. Nations will need to invest in renewable energy technology on a massive scale; convert millions of buildings into green micro power plants; embed hydrogen and other storage technology throughout the national infrastructure; lay down a green energy internet; and transform the automobile from the internal combustion engine to electric plug-in and fuel cell cars. The remaking of each nation’s infrastructure and the retooling of industries is going to require a massive retraining of workers on a scale matching the professional and vocational training at the onset of the First and Second Industrial Revolutions. The new high tech workforce of the Third Industrial Revolution will need to be skilled in renewable energy technologies, green construction, IT and embedded computing, nanotechnology, sustainable chemistry, fuel-cell development, digital power grid management, hybrid electric and hydrogen-powered transport and hundreds of other technical fields. Entrepreneurs and managers will need to be educated to take advantage of cutting edge business models, including distributed and collaborative research and development strategies, open source and networked commerce, performance contracting, shared savings agreements, and sustainable low-carbon logistics and supply chain management. The skill levels and managerial styles of the Third Industrial Revolution workforce will be qualitatively different from those of the workforce of the Second Industrial Revolution. The lateral scaling of the Third Industrial Revolution shifts the fulcrum of power from centralized global companies to distributed small and medium size enterprise networks. The rapid decline in transaction costs brought on by The Third Industrial Revolution are leading to the democratization of information, energy, manufacturing, marketing, and logistics, and the ushering in of a new era of distributed capitalism that is likely to change the very way we think of commercial life. The Third Industrial Revolution offers the hope that we can arrive at a sustainable post-carbon era by mid-century. We have the science, the technology, and the game plan to make it happen. Now it is a question of whether we will recognize the economic possibilities that lie ahead and muster the will to get there in time.
The US and the European Union on Wednesday launched their most ambitious attempt to liberalise transatlantic trade following Barack Obama's commitment to a new pact outlined in his state of the union address. A joint statement from Obama and the presidents of the European council and commission, Herman Van Rompuy and José Manuel Barroso, said they would kickstart moves in the US Congress and among the 27 EU governments to open negotiations on a new free trade pact seeking to eliminate or minimise barriers everywhere from the car to the pharmaceuticals industries, to services, agriculture and investment. Britain said the talks should start this year. In Brussels, leaders said they wanted the negotiations launched by June and envisaged a two-year process, although Karel De Gucht, the EU trade commissioner, hoped the talks could be concluded by next year. De Gucht described a potential pact as "groundbreaking", while Barroso called it a "win-win solution" which could generate a bonanza for the European farming, food and car industries. David Cameron said he would use Britain's chairmanship of the G8 countries this year to push the transatlantic trade agenda. The political momentum appears to have shifted in favour of a more comprehensive trade pact, although the devil will be in the detail. The conclusion of any talks could be influenced by the German election in September, followed by European elections next year and the installation of a new commission, and by any potential glitches in the US Congress. Britain and Germany – as a global export champion – are particularly keen to strike a deal, particularly if the German car industry will not have to make different models for the US market. France, traditionally more protectionist, could prove more awkward. For the strong French food and farming sectors to reap the benefits of competing freely in the US market, Europe would have to make concessions to the US Congress on difficult issues such as genetically modified foods, hormone-fed beef and a longstanding row over US chlorine-washed chicken exports. The aims are to eliminate or cut tariffs and tariff-rate quotas, dismantle hurdles to trade in goods, services, and investment, make regulations and standards compatible on both sides, and also through an agreement to try to set the rules for the rest of the world. US and European business leaders were also euphoric. The US Chamber of Commerce and Business Europe, representing EU national employer federations, said: "Eliminating tariffs only would boost US-EU trade by more than $120bn within five years."
The first summit of the new Trans Atlantic Basin Network promises to advance a number of key goals along the Atlantic rim. The peoples of the North and South Atlantic are interacting in a whole host of ways. The most striking development of the past decade has been the new dynamic encompassing the peoples on all four continents of the Atlantic Basin. As we consider our specific goals for this new initiative, it is perhaps useful to reflect on developments that have spawned the Atlantic Basin Network and given it such relevance. The simple fact is that globalization has generated more connections across the four continents of the Atlantic than perhaps ever before. People across this vast region are increasingly influenced by interrelated flows of money, weapons, goods, services and people, technology, toxins, terror, drugs and disease. Not only have corporations of the Atlantic gained greater access to each other’s markets, resources, and ideas, we are also confronting challenges that create the possibilty to erase invisible National dividing lines that have separated the North and South Atlantic for so long.
The Atlantic Basin Network agenda is ambitious: advancing cooperation on resource and energy connections; promoting trade and investment; coping with migration and integration; building resilient societies; enhancing good governance; investing in health and human development; and fighting organized crime, drugs and other transnational challenges. If the Summit is successful, there is a good chance that this initiative can avoid becoming just another acronym of new multilateral groups. In fact, its key strength is its role as an international non-organization a network of networks that can facilitate robust functional linkages among the Atlantic continents organized around the principle of open regionalism.
I know that our history in dealing with our North Atlantic neighbors could give us pause when contemplating a new initiative bringing us closer together. But as I have outlined here, a host of developments suggest that broad, interwoven, multi-directional hemispheric cooperation is possible. Nonetheless, as Europeans and Americans reposition their own economies and societies for the new global economy, they share a keen interest in integrating others into mechanisms of global good governance and building the societal resilience of other nations. While there are some reasons to remain skeptical of Western intentions, it is an opportunity we in the South Atlantic should seize. Most countries along the Atlantic rim take our budding cooperation seriously and see it as essential to their development. As we look to future challenges, an Atlantic Basin Initiative has the potential for us all to address opportunities and challenges particular to the Atlantic while positioning Atlantic nations for a very different world as we look to 2030.
Nonetheless, the economic revival of the North Atlantic has contributed to a staggering increase in the volume of Atlantic commerce. Despite the rise of the Pacific, more trade and investment continues to flow across the Atlantic than any other part of the world. Never have so many workers and consumers entered the Atlantic's international economy as quickly or as suddenly as in the past fifteen years. While in the past rapidly developing Atlantic countries were best known for the inexpensive goods and commodities they supplied to the rest of the world, today our consumers have become a major engine of the global economy. Moreover, the 2008 global financial crisis and the 2015 financial crisis finally convinced corporations to consolidate their increasingly global and increasingly vulnerable supply chains of products and tasks toward more inner-regional mass production.
In retrospect, it is strange that until now there has been no framework for Atlantic nations to address the issues they face together, even though there are many such efforts in the Asia-Pacific region. But of course we know that globalization is not confined to one region of the world, and the new Atlantic dynamic is really quite striking. You will want the government, corporations and NGO leaders to focus their attention on this new Atlantic dynamic, and to consider ways to work more effectively together. Our four continents are incorporating together in new ways, the growing latticework of interdependencies across the Atlantic Basin has generated new vulnerabilities along the interconnected arteries and nodes that support the movement of people, goods, services, capital, ideas, and technology upon which our societies depend. As our interconnections widen and deepen, our mutual vulnerability to breaks in these flows has increased, requiring mutual efforts to enhance the resilience of these networks and the critical functions of societies across the Atlantic space. A key goal of the transatlantic summit is to get both Political leaders, the private sector and NGO stakeholders who will be attending to agree that together we are called to protect our connectedness, not just our territorial security.
That is why the Summit’s headline project the creation of the public-private Atlantic Movement Management Initiative (AMMI) is so relevant. AMMI promises to align security and resilience with commercial imperatives in Atlantic movement systems, including shipping, air transport, even the internet. It will improve cooperation among public and private stakeholders and could serve as the core for a more ambitious global governance framework. AMMI is a prominent example of how the Atlantic Basin Network can serve as midwife for the new Atlantic system that is emerging under globalization. The Atlantic Hemisphere is characterized by new interdependencies, the rise of new actors, a new technological and ecological environment, and new power relationships. Concerted efforts are required to enhance and protect the global economic, political, technological and human flows on which the globalized Atlantic system depends; and to ensure that societies along the Atlantic Basin are resilient enough to capitalize on the opportunities and deal with the potential disruptions they may face. In our increasingly interconnected region, capacity is derived from connectivity. This should prompt Atlantic leaders to strengthen connections to solve shared problems.
It was the ability of the U.S. to put together a new coalition — EU, Japan, Brazil, Mexico, India, South Africa and Korea that made the difference. This new type of coalition building is now much more characteristic of American approaches than in the past, and affords critical countries on each of our continents new opportunities for influence. The Transatlantic Forward Technologies Council created in 2016 to align regulations and standards governing new commercial innovations has yet to demonstrate its effectiveness. The EU’s decision to ban human RFID implants until it can sort out not only the legal implications but the potential consequences for human development itself has triggered a major transatlantic row, even as both sides continue to their decade long fight over appropriate legal systems. The dispute has spilled over into NATO, where a fierce but largely abstract debate rages over whether NATO would ever allow use of “drone armies” to fight human enemies on the battlefield.
Even though U.S. power has declined relative to other rising powers, the United States military remains highly capable, whereas Europe’s military capabilities continue to decline. Even though Europeans took the political lead in the 2011 Libya intervention, they remained reliant on critical American assets that European militaries simply do not have. As James Dobbins notes, Europe thus remains fully as dependent on American military capabilities today is it did sixteen years ago in the Balkans, despite all of the intervening rhetoric and institutional innovation designed to strengthen Europe’s capacity for independent expeditionary warfare. And despite consistent and highly public American admonishment, there seems to be little prospect that European governments will halt the decline in their military capabilities or narrow their differences over the use of armed force as an instrument of policy. National decision-making is likely to remain decisive, with EU military expeditions limited to the least demanding of cases. Taken together, these trends suggest a transatlantic relationship that is no longer sufficient to tackle the most critical challenges facing each partner; a relationship that remains important for both sides, As Bruce Jentleson suggests, the relationship “needs be in the 21st century: the partnership of the world’s most stable democracies who have established a security community among themselves and who seek not just to advance their own interests but to promote broad international cooperation and foster a greater sense of global community.” Europe and America may no longer represent ‘the’ Free World, but at their best they can still be an anchor in a far freer and more fluid world. Our influence is likely to rest on the socio-economic performance at home; a normative consistency at home and abroad; and the ability to work together to engage others in support of the liberal order.
There is a paradoxical lesson on security. While investment in national and global security clearly remains essential, this needs to be kept in proportion with the importance of security issues within this overall global economic environment. Operations such as those in Afghanistan, while vital to combating terrorism and preventing greater regional instability, have also been extremely costly. In the context of meeting the challenges of massive global economic change, investment in such security operations, and in homeland security measures in our own countries, also needs to be as efficient and cost-effective as possible. Even so, James Dobbins underscores an important reality: as the world’s predominant power for another generation at least the United States will continue to assume leadership responsibilities for protecting the global commons, including freedom of the seas, space and cyberspace, even as it seeks to share that responsibility more broadly. Security for the global commons also means ensuring the resilience of transboundary arteries carrying energy, people, money, data, goods and services, a task which is also essential to Europe’s future. Although the U.S. is apt to be less dominant than it has been over past decades, it is likely to remain the world’s principal power for another generation, whereas Europe appears to be waning faster as others rise. Grevi and Youngs highlight the difference: whereas the U.S. is a superpower able to switch through different modes of interaction, from occasional bargains and coalition-building to balance of power and coercion, the EU is unequipped institutionally and politically to do so.
We have such potential for influence in part because the U.S. President has recognized that in a world of diffuse influence the U.S. can still play a singular role as a pivotal power, able to profit simultaneously from its position in the Atlantic Hemisphere and from its deep ties in the Asian Hemisphere. She has maintained close relations with traditional allies in Europe and Asia, but her trademark initiatives have all sought to encourage more effective and inclusive networks with other countries, including our own. The green economy technological revival of the U.S. economy has facilitated her efforts; after struggles with recession and war there is a new consensus in the U.S. that Americans must band together with others if they are to advance their values, protect their interests, and extend their influence, and that without the engagement of other partners, Americans alone would pay the costs, in lives and treasure, of maintaining global political stability.
Differences in relative power can account for differences in the application of principles. For superpower America, multilateral engagement remains a choice. As a result the U.S. has been and continues to be simultaneously a guardian of international norms; a norm entrepreneur challenging prevailing norms as insufficient; a norm externalizer when it tries to advance norms for others that it is reluctant to apply to itself; and a norm blocker when it comes to issues that may threaten its position, or that exacerbate divisions among conflicting currents of American politics. On balance (and despite exceptions), the U.S. has sought to manage this normative hegemonic interplay by accepting some limits on its power in exchange for greater legitimacy and acceptance of its leadership by others. The unresolved question today is whether the U.S. and other key players are prepared to stick with this bargain. Grevi and Youngs underscore that for the EU, in contrast, multilateralism it is not a matter of convenience but one of essence, as it goes to the heart of the European project. The growing normative assertiveness of rising powers will arguably test the EU’s role as a leading normative entrepreneur more than that of the U.S.
Europe and the United States having declined with neither one able to come to grips with its fiscal imbalances, changing demographic pyramid, and high-cost, uncompetitive economic structures, while the relatively unregulated, lowcost, and often state-led economies of the newly developed world have boomed, turning the transatlantic relationship into a sideshow. The focus of global development and competition is now among players in the South, rather than in the interplay of North and South. This has left the transatlantic community with the choice of continued erosion in a losing global competition, or erecting higher barriers around a more integrated transatlantic marketplace in a (perhaps futile) effort to preserve the liberal international economic order and high living standards in the developed North. The EU has maintained its share of world exports despite the rise of other trading powers, and is a more significant trading partner for both the BRICs and the BRINKs (Brazil, Russia, Iraq, Nigeria, Kazakhstan) than either the U.S. or Japan. Rapidly emerging economies continue to register high demand in the types of products in which many European exporters specialize.
The rise of other powers clearly seek influence commensurate with their growing presence in their respective regions and on the global stage, will these powers challenge the prevailing order or accommodate themselves within it? Hanns Maull and James Dobbins argue that they seek greater say and better status within the current international order, but not any fundamental revolutionary reconstitution of that order although they acknowledge that at the regional level, for example in the Persian Gulf and East Asia, some do challenge existing arrangements. In contrast, Michael F. Oppenheimer argues that rising states will pose a severe challenge to the liberal order: they were not ‘present at the creation;’ many pursue illiberal economic and political policies; and they are ready to assert their growing power in the face of an uncertain and divided West. Bruce Jentleson, Giovanni Grevi and Richard Youngs add that what had been a sense of global convergence around such Western norms as rule-based institutions of collaboration, open non-discriminatory trading rules, the ‘democratic peace,’ and the ‘Washington consensus’ on development has given way to a broader and more complex global competition of ideas over such issues as multilateralism, the use of force, the rights and responsibilities of state sovereignty, international justice, and alternative models for domestic governance, particularly the relationship between state and market.
If the short-term success of state led economic development and managed trade relationships continues, it could increasingly disadvantage Europe and the United States. An urgent priority for the transatlantic partners, therefore is to reinforce the international liberal economic order. In the short-term, this may mean more economic conflict, rather than less. There may need to be greater push-back on rapidly developing economies through established trade and regulatory mechanisms in order to increase the incentives for these countries to become true “responsible stakeholders” in the global economic system. But the goal of such push-back must clearly be to strengthen the global system itself, not to engage in cheap protectionism for shortterm political expediency. It should be possible to develop a transatlantic dialogue about how to avoid destructive competition for emerging markets while enhancing our collective leverage for liberal principles. As Grevi and Youngs point out, in a world of relative power the normative posture of the EU and the U.S. constitutes a comparative advantage at a time when the normative identity of many of their partners is in flux. Yet if they want others to join and support the liberal order, they must be more consistent in supporting it themselves.
The effect of state-led economics, otherwise known as Fascism within developing countries can also be significant, though its long-term implications can cut both ways. On the one hand, state-driven development provides an opportunity to assign resources more strategically, to prioritize infrastructure development, and to negotiate long-term access to energy and other raw materials. It can allow for directly negotiated deals for inputs that undercut global competition. This model appears successful today in cases such as China, even while past models of state-led development elsewhere have failed. Yet we know from experience that large, state-led enterprises over time can tend toward inefficiency, waste and corruption. In addition, Bengt-Åke Lundvall demonstrates that despite China’s remarkable investment in academic knowledge, its indigenous innovation capacity remains limited. Whether state-led economics proves sustainable in the medium and long term will have a substantial determinative effect on the nature of the global market we encounter a decade from now. Although Chinese financing for Columbia’s grand Dry Canal Project a 220 km rail line linking Columbia’s Atlantic and Pacific coasts has been a showcase for China’s stepped-up lending to the developing world, overall leaders in both Latin America and Africa have become more wary of Chinese aims. These developments, positive and negative, have prompted a new approach by both the U.S. and Europe to their neighborhoods and a new view of their role as we begin the third decade of the 21st century. Both the U.S. and Europe are repositioning and re-energizing their partnership for these new times in ways that we, as Atlantic nations, can profit from. The Atlantic Basin Network's innovation is the premise of public-private networks (Network Fascism) rather than state-based hierarchies, it doesn't compete with other organizations.
Within the overall question of the rise of state-driven economies, energy continues to stand out as perhaps the most important challenge for developing and developed countries alike. Global energy and climate trends are unsustainable, as Christof van Agt, Alexander Ochs and Shakuntala Makhijani all demonstrate. On the one hand, a resource-scarce environment can favor state-driven economies that have the ability to produce and consume on a massive scale, and to negotiate long-term, privileged contracts to assure a reliable energy supply at the lowest cost possible. The imposition of costs tied to emissions reductions in developed economies can further add to the relative advantage newly developing countries enjoy in the energy sphere. On the other hand, a growing energy supply that outpaces growing global demand for example, through new oil discoveries, Arctic exploitation, shale gas, and falling costs of renewables could diminish the short-term advantages of state-led economics and even redistribute global market power away from the handful of major oil producing nations, although in some cases at significant environmental cost. How the energy sector develops and is managed within developed countries will be one of the most important factors in determining the contours of the world we will face in 2020. If the world truly is to break the link between the production of wealth and the consumption of resources, and thus move to a new model of economic development, the developed countries must chart a path forward.
Leadership in global energy transformation will continue to play a dominant role in shaping the global future, Europe and the United States have a keen interest in helping ensure that energy markets provide abundant, affordable, diversified supply. The transatlantic community should provide global leadership in all areas: supporting transparent and non-discriminatory energy market rules; developing new sources of traditional fuels; bringing non-traditional fuels (such as shale gas) into the mainstream while accounting for potential environmental concerns; overcoming distribution and refining bottlenecks to create more flexible markets; investing in technologies to make renewable fuels more cost effective, and investing in cost-effective technologies aimed at reducing energy consumption, and thereby keeping energy prices down and reducing overall costs of energy consumption within the economy.
The Energy Renaissance is perhaps the most exciting development of recent years not only because of the transformation of both Gazprom and OPEC, but because new energy sources are now coming on stream, and a host of new technological advances truly offer the prospect that we can break the link between the production of wealth and the consumption of resources. It’s good that this has happened, because the prospect of 9 billion people basing their future growth on extensive use of oil and gas, as well as other resources, is simply untenable. Breaking the link is an historic challenge but also an opportunity to move toward entirely different patterns of consumption and competitiveness. Cooperation and innovation across the Atlantic Basin could lead the way.
Perhaps the most significant transformation of energy markets has come from full-scale development of what used to be called “unconventional” gas resources. With unconventional gas deposits discovered in significant quantities on every continent, and with technology improvements to mitigate the environmental cost of fracking, together with breakthroughs in gas-to-liquid technologies, energy markets have been reshaped. The United States has become a major gas producer and exporter, while European production facilities in Poland, Ukraine and elsewhere are already producing 100 bcm of unconventional gas and are likely to double their production in the next five years. The EU’s new Green Strategy accelerated the continent’s shift from coal to gas, stimulated renewables R&D investment, and facilitated the introduction of a carbon tax.
The EU also finally took concrete steps to enhance transparency and competition in energy markets and cross-border investments by enforcing the Treaty of Rome’s Article 28 competition and antitrust rules in EU energy markets, charging Russian companies Transneft and Gazprom with the same anti-monopoly violations as they did to American companies Microsoft and Intel a decade earlier. Taken together, these developments have stimulated competition and lowered prices. Even Gazprom, though still under state control, has moved toward a business model that is more efficient and has even introduced competition. Russia is exploiting its own shale gas resources, which are close to its existing pipeline infrastructure and cheaper to develop than its Arctic Shtokman or Siberian Yamal gas fields.
Alternative energy technologies have become profitable that previously had been considered commercially unviable. The Energy Renaissance is being facilitated by such advancements in improved energy storage technologies as battery materials, ultracapacitors and hydrogen storage materials for fuel cells, which have literally jumpstarted the prospects for hydrogen-based energy systems; as well as by a host of renewable energy sources such as wind, solar, and low-emission transport vehicles. The ability to generate hydrogen for automotive fuel cells from electricity in a homeowner’s garage has helped us avoid the need to develop complex hydrogen transportation infrastructure. As connection technologies and renewable energies merge to create the powerful new “energy internet,” the potential for millions of individuals and businesses to produce and share renewable energy will be transformative.
Markets for renewable energy are growing across the Atlantic Basin and elsewhere around the world. Clean coal advances have raised prospects for eliminating greenhouse gas emissions from coal plants. Emerging biofuels technologies that avoid significant land-use changes are already reducing net CO2 emissions to the atmosphere. Traditional terms of trade are also shifting, as technological and scientific innovation spreads across the Atlantic Basin. A series of innovations have not only unleashed new economic growth but transformed the very nature of our economies. The Internet of Things has made ubiquitous computing now a mainstay of daily life, boosted economic dynamism and growth first in the U.S. and then in Europe and Asia, and is generating considerable market potential for companies in Africa and South America.
The United States has become one of Brazils most important supporters as the new U.S. President works to position her country as a full Atlantic and Pacific power. She acted quickly to prompt the U.S. Senate to ratify the Law of the Sea Treaty, removing an important irritant in international relations with Brazil as well as others. The U.S. Brazil renewable energy alliance has shown remarkable progress in promoting ethanol as a globally traded commodity and promoting the development, distribution and commercialization of other renewables. The Atlantic Basin Network’s private-public Energy Cooperation Forum, instigated by the two countries, has been the most visible and concrete manifestation of the new Atlantic networks now being forged in a variety of areas. A starting point for this new relationship was agreement between Washington and Brasilia to guard against Chinese currency manipulation, as Brazil struggled with a flood of cheap Chinese goods and a surging Brazilian real.
Of course Brazil is quickly emerging as a major oil exporter now that the Santos Basin fields are fully on stream; oil now accounts for more than 10% of Brazilian GDP. High oil prices will continue to benefit oil exporters such as Brazil, but the extension of oil production beyond OPEC to the BRINKs and the inability of this more diverse group of producers to agree on pricing has blunted the full impact of China’s conversion to a consumer society. It has also made other alternatives more feasible and economical. In retrospect, OPEC simply wasn’t prepared for the BRINK countries (Brazil, Russia, Iraq, Nigeria, Kazakhstan), which have added more than 7 million barrels a day of new crude oil capacity over the past decade. Even so, other developments are accelerating the world’s transition from oil.
Africa is among the fastest growing regions of the world and Africa is a major global supplier of oil, gas and other commodities. It is now viewed widely across the Atlantic Basin and around the world as an opportunity to be grasped, rather than a burden to be carried. The false dawns of the past have given way to prospects for real progress for the future. Market liberalization, improved public management of finances, the continuing boom in Africa’s commodities trade, and rapid expansion of consumer spending as well as banking, telecommunications and other services have created a new virtuous cycle for our continent. Africa is increasingly attractive as a base for low-cost manufacturing and offshoring, now that labor prices have risen so much in China and even in India. Africa remains vulnerable to HIV/AIDS, economic disruption, population stresses, civil conflict, corruption and failed governance. Many states lack the capacity to break up terror cells, thwart trafficking in arms, drugs or people, or provide domestic security. The stability of some regions of West Africa is being undermined by drugs coming from Latin America. Up to 250 million Africans could face starvation and malnutrition due to lack of fresh water supplies, lower crop yields, and drought. The dramatic crisis in Nigeria, which only came to what we can only hope will be a peaceful resolution last year, was a wake-up call to the need for Africans to tackle their internal challenges. Integrating Nigeria via the Atlantic Basin Network offers an opportunity.
But the Faber Revolution - 3D custom printing of goods and even living human cells from digital designs has truly transformed manufacturing. Now people can download real products, just like they used to download music, at home or at a local 3D production center. The Faber Revolution has reduced waste, sparked innovation, and revived manufacturing in the developed world, while introducing new possibilities to companies on your continent and mine. Related innovations in service robotics and human cognitive augmentation technologies, including wearable and implantable devices, are improving vision, hearing, and even memory. Bio and information technologies have enhanced human mental performance at every life stage, and “biogerontology” advances have extended average human life by another five years. Manual workers are able to perform what were once thought to be superhuman tasks. Manufacturing and services productivity have been boosted, and the creative industries are enjoying mega-growth.
Taken together, these new technologies are already radically accelerating a range of enhanced efficiencies, streamlining supply chains, and generating cost and efficiency savings. They have helped some key economies cope with aging and shrinking populations. We have entered a world driven by mass collaboration. Real-time, borderless, digitally enabled collaboration has become the dominant paradigm of human activity at any scale, worldwide. The Cloud, the past decade’s innovative business model, is already being incorporated into a much broader, seamless software platform as purpose-driven online collaboration generates economic growth and improves lives. The rapid and continuous development and operation of such smart systems, which have become critical to every major economic and social sector, is driving new growth and employment.
Of course, we cannot deny that the transition has been wrenching as workers adjust and education systems are challenged. Unskilled labor markets and immigration patterns have been disrupted. While convulsions in job markets have been mitigated by the recent wave of social services innovations, structural unemployment afflicts many countries accustomed to a different division of labor, highlighting the need for viable mechanisms to skill and re-skill workers over the course of their working lives. And we continue to grapple with different approaches to privacy, security and even more profoundly, e-identity. While this is not exclusively an issue for the peoples of the Atlantic, it is useful for discuss.
The invention of lithium air has not only transformed the electric car industry, it underscores an important trend: the Western lead in technology is no longer as predominant as it once was. Although a Japanese company claims credit, the real breakthroughs came from Chinese scientists at the company’s research facility in Guangzhou. This innovation has the potential to again transform the way our economies work and our societies are organized. Moreover, the recent breakthrough in India of a nano-plastic membrane capable of converting saltwater into freshwater will transform the challenge of clean water. Cost constraints could still hamper large-scale adaptation, but the potential is huge with initial advantage going to the Indian consortium that invented it.
These developments call for close interactions between governments, the private sector, the scientific community, and non-governmental organizations. The very networks that have enabled globalization bring these dangers closer and make our societies more vulnerable to disruption. The networks themselves are prone to catastrophic disruption, either through aggressive action or because of the sheer complexity of the technology. Yet, these networks remain essential sinews of the global economy and of daily communications. As a result, they require protection. Just as governments used to protect their territories, so they must now protect the networks that connect them and their citizens with the rest of the world. Any truly transformative definition of security must go beyond territorial integrity to include protecting society’s critical functions, the networks that sustain them, and the connections those networks bring with other societies.
Europe, too, is better positioned than it was a decade ago. In retrospect, the Great Recession and the lingering turmoil over the euro through 2013 served as the spur to a more competitive Union. The European Stability Mechanism, the innovation of “Maastricht bonds” and credible austerity measures have given the eurozone a scale and market depth only slightly below that of the U.S. treasury market. Although the EU failed again to achieve all of its Europe 2020 goals, it has recorded some notable achievements, particularly serious progress towards completion of its Single Market and related Digital Single Market, which have given EU corporations new possibilities to restructure their activities on a pan-European scale and narrowed the gap among disparate EU economies. The Europeans are leading the world in terms of energy efficiency and use of renewables. They also seem to have understood earlier than most that the manufacturing and services industries were becoming increasingly intertwined, and have been able to make greater progress than anticipated in capitalizing on their advantages in each area. Innovations in the delivery of social services have restored some luster to the “European model” and improved the EU’s attractiveness as place to invest, work and study.
The EU also has demonstrated that economic strength can go hand in hand with high standards of welfare, despite intense competitive pressures. European flexicurity schemes, which help workers adjust as jobs come and go and develop skills over the course of their working lives, are being studied and emulated in many countries. European birthrates are again on the rise and the EU’s pan-European talent strategy combining free flow of labor, skills training and integration of migrants has helped to address the challenges of an aging and shrinking population. Europe’s internal transformation has had profound external consequences. The EU remains the world’s largest exporting entity, largest source and destination of foreign direct investment, largest donor of foreign aid, and a critical source of capital for many other world regions.
By 2015 the Europeans realized that an EU that could move only in lock-step integration would be an EU unlikely to progress at all. Once a new consensus was forged around the premise that EU countries could only solve their debilitating focus on institutional processes through “variable geometry” allowing some members to move toward deeper integration while others did not—the EU has become much more outward looking and flexible. Ukraine’s suddenly positive prospects, boosted by its own reformist government’s recent efforts, have prompted the EU to offer to begin accession negotiations. The prospect of Ukrainian membership in 2030, preceded by Turkish membership in 2025, promises to address Europe’s growth challenges and enable European companies to make use of a bigger Single Market to extend their production networks and thus to compete more effectively. Turkish membership will strengthen the EU in terms of energy links, economic growth, military capability, geopolitical reach, and will enable the EU to demonstrate that Western democracy and Islam are compatible.
Regulation, Innovation and Competition: A related current is the interplay between older, highly regulated economies in the United States and Europe, and far less regulated developing economies in the Global South. In everything from environmental standards to safety to labor market protections, relatively less regulated developing markets enjoy a built-in cost advantage. This is reinforced by generally lower wage expectations of populations emerging from poverty, as compared with those having become accustomed to long-term prosperity. The presence of relatively easier regulatory conditions also contributes to attracting new investment and fostering innovation, increasing further the potential competitiveness of developing economies over time. The effect of these advantages has long been mitigated by relatively lower levels of education and middle-class purchasing power within the developing world. But as these factors change more widespread education and growing purchasing power—the competitive advantages of less regulated economies could become more pronounced, unless the U.S. and Europe take advantage of such strengths as innovation, services and high-end 3D printing advanced manufacturing.
Europe is preoccupied, as usual, but now with historic opportunities: the Arab Renaissance and the uneven rise of open societies across the Arab world; the revived Union for the Mediterranean; the Desertec Solar Initiative linking Europe and North Africa in an expansive solar grid; and the possibilities ensuing from the resolution of the Arab-Israeli conflict. Europe’s Modernization Partnership with a reformist Russia holds considerable promise. Despite the many positive changes to have affected the U.S. and Europe, it is interesting to see how such innovative societies, each more similar to each other than either would care to admit, always manage to embroil themselves in such tendentious transatlantic spats.
The world order has changed in the course of the financial crisis and with it, enhanced the consolidation of a new arena of world politics in which superpowers somewhat urgently seem to hunt for new allies to rescue their well-being, says Gabriele Suder. Gabriele Suder is Jean Monnet chair and professor of International & European Business at Skema Business School.
"Globalisation is out, regionalism is in! One could argue that we might need to thank the lasting economic crisis for at least a few sweeping developments on the global level. Because resolution of crises may primarily originate from bi-and multilateral, often region-to-region forms of cooperation and free trade conditions that governments (and corporations) hope will stimulate economies. For the past three years and more, we have seen an exceptionally dynamic trend towards more and more free trade negotiations and agreements. They install a political and economic multipolarity already predicted ten years ago, right after 9/11.
Yet it is the financial crisis that has caused the main changes to the world arena that used to be perceived as an international order run by a few somewhat fading superpowers. The world order has changed in the course of this crisis however and with it, enhanced the consolidation of a new arena of world politics in which superpowers somewhat urgently seem to hunt and piviot for new allies to rescue their well-being. Driven by political and economic motivations, they are weaving a net of trade agreements. This net is increasingly perceived as a competitive race for political and economic first-mover advantages (intensified political cooperation; market access for trade and investment) that come with signing the best, most comprehensive or earliest agreement.
This is part of today’s driving force of geopolitical and geo-economic change. Hadn’t we already seen this ever so clearly in the race towards trade agreements with South Korea? Now, after many long years of hesitation, both the EU and the USA have come to realise that their system of regionalising the world will work even better (they hope) if they themselves, mutually and reciprocally, open trade and unite forces further.
Spill-overs from trade agreements for sure stimulate business knowledge, cross-border trade and growth: an anti-dote for crisis. But close attention needs to be given to this multi-polarity. It goes hand-in-hand with a complexity that may cause rather tricky legal and economic overlaps. Business may lose clarity and claim over-regulation through multiple deregulation (as ambiguous as this may appear) and, discouraged, won’t follow suit in the long term. The newer players of global governance could then start a power game of inclusion and exclusion of powers in future formal and informal integration.
In this context, Europe, against all odds, remains the most advanced form of regional integration in the world, with a vast historical and contemporary experience of good and bad practices. This is good news in the crucial struggle for appropriate solutions for its on-going crisis (mainly caused by the divergence of opinions of its members in regard to the depth of integration).
The EU construct continues to serve as a model to many less stable regions in the world, for peace-keeping, outreach and neighbourhood policies – and thus, for the management of complexity. With the European belief in economic and political integration, and the US focus on reclaiming global economic status, this free trade agreement has huge potential. It might, in itself, open yet another chapter of polarity in the future."