Throughout history, states have generally sought to get larger, usually through the use of force. In the 1970s and 1980s, however, countervailing trends briefly held sway. Smaller countries, such as
But eventually the trading-state model ran into unexpected problems. Japanese growth stalled during the 1990s as U.S. growth and productivity surged. Many trading states were rocked by the Asian financial crisis of 1997-98, during which international investors took their money and went home. Because
Small trading states failed because the assumptions on which they operated did not hold. To succeed, they needed an open international economy into which they could sell easily and from which they could borrow easily. But when trouble hit, the large markets of the developed world were not sufficiently open to absorb the trading states' goods. The beleaguered victims in 1998 could not redeem their positions by quick sales abroad, nor could they borrow on easy terms. Rather, they had to kneel at the altar of international finance and accept dictation from the
In the aftermath of the crisis, the small trading states vowed never to put themselves in a similar position again, and so they increased their access to foreign exchange through exports. Lately, they have proposed forming regional trade groups to get larger economically, by negotiating a preferential tariff zone in which to sell their goods and perhaps a currency zone in which to borrow cash.
CHALLENGE AND RESPONSE
Global markets have grown dramatically in recent decades. The international consulting firm
During the recent global economic crisis, moreover, even the largest economies confronted huge losses as foreign and domestic investors removed funds or sold their holdings. From 2007 to 2008, stock markets worldwide depreciated by 50 percent. U.S. interest rates remained low only because
The world market, of course, has always been larger than its component parts, and it was in part to protect themselves from economic vulnerability that the great powers of the past sought to increase their size and strength. By 1897, the
The Great Depression and World War II forced even the major powers to recognize the limits of their individual capabilities. In the aftermath of these traumas,
The 27 states that now compose the
Something similar, if more gradual, has been occurring on the other side of the Atlantic as well, with the formation, in 1988, of the free-trade area between
Finally, in 2006, German Chancellor
Before the twentieth century, states usually increased their power by attacking and absorbing others. In 1500, there were about 500 political units in Europe; by 1900, there were just 25 -- a consolidation brought about partly through marriage and dynastic expansion but largely through force.
In 1914, many statesmen thought that the Great War would consolidate the world even further, both within Europe and outside of it. Instead, the conflict led to the breakup of the Austro-Hungarian, Ottoman, and Russian empires and dealt their British and French counterparts a serious blow. Military force remained a successful means of territorial expansion outside Europe, however, and in the 1930s,
This splintering of global politics into more and smaller pieces, however, was inconsistent with the functional demands of global economics, which put a premium on size. The question of the late twentieth century, therefore, was how to construct larger economic units despite the discrediting of military expansion. Economic growth seemed a good bet, having worked for various powers in the past, and during the postwar era, the trading states had their heyday. But with that model having recently run into trouble as well, negotiated economic integration is becoming increasingly attractive.
Although the results of negotiated amalgamation are not the same as those of military conquest, they are likely to be more satisfactory and longer lasting. To be sure, an agglomeration of markets within a tariff zone does not guarantee political unity: as the EU shows, political disagreements still intrude, and participants often disagree on external policy. Yet the error is likely to be too much quietude, not aggression.
In the 1950s, the political scientist
Although the continent has no single decision-making center, its network has multiple nodes that hold the total complex together. The
Europe has fashioned a cost-effective response to the need for size that avoids the mistakes of yesteryear. The EU's total GDP is higher than that of the United States and will remain so. And in addition to its internal growth, Europe can continue to expand geographically.
RESISTANCE IS FUTILE
the United States cannot ignore the need for size and the new means of attaining it and should recognize the developmental stimulus that would come from joining forces with Europe, the strongest economic power on earth.
A transatlantic economic association would not involve a political union. Nor would it mean a gathering of the world's democracies, which do not necessarily have overlapping economic interests. Rather, it would mean combining the two most powerful economic regions of the globe, so that they could prosper more together than they would separately.
There are many theorists who still argue that geographic economic blocs are disadvantageous and potentially dangerous, providing little help for their members while increasing the risks of conflicts like those of the 1930s. Rather than paving the way for broader trade and political accords, these critics argue, such blocs hinder progress as they jockey for position with one another. Critics are right that the British, German, Japanese, and U.S. blocs did not cohere in the 1930s. But there was little foreign direct investment between them, nor production chains of the sort that join great economic powers today. Then, major countries sought to find and monopolize new sources of energy and raw materials, often following a mercantilist path in order to escape the constraining effects of foreign trade. The authoritarian powers also used violence as a tool for achieving economic and territorial gain.
But no great power today would think of solving its economic problems by military expansion. It could occupy neighboring areas but not assimilate large ones. It definitely could not guarantee extracting their raw materials, oil, or other natural resources, as such attempts would be vulnerable to local subversion. Military expansion, in other words, poses difficulties today that it did not 75 years ago, making the potential dangers of regional economic blocs less of a concern today.
The peaceful expansion of trade blocs today, moreover, is likely to bring outsiders in rather than keep them out. It has done so in Europe and to some degree in
What all this means is that the patterns of global politics and economics that have prevailed for the last half millennium are increasingly outmoded. During that period, eight out of the 11 instances of a new great power's rise led to a "hegemonic war." With a potential Chinese challenge looming in the 2020s, the odds would seem stacked in favor of conflict once again, and in other eras it would have made sense to bet on it.
Yet military conflict is not likely to occur this time around, because even if political power sometimes repels, today economic power attracts. the United States does not need to fight rising challengers such as
During the Cold War, the economic force of the West eventually surpassed and subverted even the heavy industrial growth of the Soviet economy. In the 1980s, the attractions of North Atlantic, Japanese, and even South Korean capitalism were a critical factor in Soviet leader Mikhail Gorbachev's decision to renew his country's economic and political system -- and end the Cold War. They also helped stimulate
Now that the formula for capitalist economic success has become widely understood and been replicated, Western economic magnetism will stem not just from the triumphs of individual economies but from their development as an increasingly integrated group. The expansion and agglomeration of economies in Europe -- and perhaps also across the Atlantic -- will serve as a beacon for isolated successes such as those in
The need for a transatlantic economic union will become clearer should the U.S. economic recovery begin to flag. At some point, U.S. policymakers will recognize -- and find a way to convince the country at large -- that trade agreements with other nations are not a means of transferring U.S. production overseas but rather part of a robust recovery strategy to gain greater markets abroad. The crucial factor may be a recognition that such markets will not continue to open up without dramatic action. The failure of the Doha Round will become apparent, as will the fact that the only realistic response to that failure is to accept the EU's invitation to form a transatlantic free-trade area and essentially extend the U.S. market by almost half a billion people.
Such a move would be in keeping with broad and deep historical trends. The great French historian Fernand Braudel attributed countries' success in the Commercial Revolution of the sixteenth and seventeenth centuries to the size of their national markets.
Military conquest lost its attraction following the two world wars, and for a period thereafter it seemed that trading states were charting a new path forward. But small was not beautiful, and as the world market continued to grow, trading states could not master it. Even great powers found themselves needing to negotiate larger markets through economic associations with others.
Given the failure of a truly global attempt at international commercial openness, the way to extend the range and vitality of the U.S. economy is through new customs unions and currency arrangements. These are important not only to overcome the recession's enduring effects but also to match the growth of rising powers. Combining forces economically increases growth for the countries involved, and in the twenty-first century, that can be done without the risk of economic fragmentation or geopolitical conflict. A transatlantic free-trade agreement would provide its members the economic scale they need now and attract others in the future.
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