Europe’s ongoing crisis, both within and without, will dominate the Munich Security Conference due to start later this week.
The pre-conference report not only examines how destructive forces have taken a wrecking ball to the international order that Europe relied on. It also includes a survey that shows that the population of the region increasingly believes that how they are governed will make future generations worse off.
The crisis is that the US under President Donald Trump is challenging Europe, not complementing and supporting it, leaving a gap in the strategic plan for its allies.
The same survey five years ago showed that a certain helplessness was common across Nato countries. Now, a majority in Germany, France, the UK and Canada actively distrust the US, saying clearly that it is an unreliable ally. The clear trend is that more and more people are regarding Washington as a threat.
Hence, the authors see the destruction of a system that is traditionally cherished at the annual gathering of the global security elite. But the danger here is a paralysing mindset of resentment.
A shift from a world built on universal rules and an orderly march to a more rational and respectful world is already a given. Instead, there is a prioritisation of the world of sovereignty where cross-cutting work is disdained as sapping that sovereignty.
Reacting to this, some experts have turned to the arguments of Joseph Schumpeter, a philosopher best known for the term “creative destruction”. If that is so, why not embrace it? Radical adaptation is surely possible. Some countries have risen in the world recently with an entrepreneurial attitude to relationships around the world and are navigating the shift.
Taking the opportunity to renegotiate one’s place in the world works for these nations. But with the notable exception of Poland, and perhaps Italy, there have been few takers around Europe.
“Be more like Brazil, Indonesia or the Gulf countries” is something that is being whispered in the corridors of power these days. Certainly, the full-scale American delegation expected in Munich this week will be happy to impose this version of the future on the meeting.
Even the conference organisers concede that there have been results for Mr Trump’s bulldozer diplomacy, such as raising the targets for Nato defence spending and pushing the Gaza ceasefire to the point where it has been sustained for months, despite Israel’s ceasefire violations.
Bank of England governor Andrew Bailey was speaking in Saudi Arabia at the weekend about this new world order.
While concerned with the financial system and not the security trends of the moment, Mr Bailey’s contribution did provide a useful reminder that the world was in a time of flux anyway, regardless of foreign policy decisions.
“To borrow from the economist Joseph Schumpeter’s phraseology, industrial development involves change that occurs in ‘discrete rushes’ but ‘separated by spans of comparative quiet’,” Mr Bailey said. “The key idea here is that innovation and diffusion are at the heart of the growth process known as creative destruction.
“Cumulative innovation matters, as do clear property rights, and there is a positive role for public policy and institutions to support innovation,” he added. “The destruction point is that new innovation makes former innovation obsolete. A key here is the nature of the innovation which comes in rushes – so-called General Purpose Technology.
“The essence of GPTs – think steam engines, electricity, ICT [information and communications technology] or the internet – is that they enable innovation very broadly across our economies.”
“However, there have also been longish periods between waves of innovation when growth has been slower – the late 19th century in the UK was such a period. I think for the last 15 years we have been in such a slower phase, as the growth effects of ICT and the internet matured.”
Mr Bailey’s point is that we are at the cusp of a new era. He says his best guess is that AI and robotics will prove to be the next general-purpose breakthrough. Another hoary reference in the world of the Munich Security Conference is the Italian communist Antonio Gramsci’s remark that “the old world is dying, and the new one is struggling to be born”.
The scale of departure cannot be overstated. As Mr Bailey also says, Schumpeter’s theory of creative destruction diverged from the classical economists such as Adam Smith who had proposed the trade-based model of growth. “Adam Smith set out how trade facilitated the division of labour which became a basis for supporting technological innovation and growth. A reversal of trade openness has negative growth effects,” he added.
Being part of a large bloc, the European economies have the most to lose from this tariff-walling process. That is why it is doubly important that seizing on to innovation in the economy as well as in security is the important message for this year.
Populism is thriving around the stagnant European economy. The Munich Security Conference’s own survey shows confidence in a turnaround has gone among greater numbers of its own people. And the security place it occupies globally can be best described as beleaguered.
The US, China and Russia are making parallel plays, and countries like India are manoeuvring between these competing pressures. Europe’s task is to clamber out of the destruction, not dwell on the loss.
