Postwar

decade—‘If I want to phone Europe, what number do I call?’—had lost none of its force.

But these limitations—the fact that in spite of its size and wealth the EU was not a state, much less a great power—paradoxically served to enhance its image, at home and abroad. In this respect at least the EU was indeed coming to resemble Switzerland, a repository of international agencies and cooperation, an exemplar of ‘post- national’ strategies for problem solving and social cohesion: not so much a network of institutions or a corpus of laws but rather a set of values—‘European values’—embodied in the new Charter of Fundamental Rights.

If the values and norms of this new Europe were under pressure at the end of the twentieth century it was not from the established nation-states against which the European idea had been traditionally but misleadingly juxtaposed. Instead, both the EU and its various member-states were now facing an unprecedented wave of economic and social challenges brought upon them by forces largely beyond their control, most of them associated in one way or another with what it was becoming customary to designate as globalization.

There was nothing especially mysterious about globalization. It wasn’t even unprecedented—the impact on the world economy of new and rapid networks of transport and communications at the end of the nineteenth century was at least as dramatic as the transformation wrought by the Internet and the deregulation and liberalization of financial markets a century later. Nor was there anything new about the unequal global distribution of the benefits of liberalized trade—particularly when, at the end of the twentieth century no less than in the years before 1914, international trade regimes were so consistently accommodating to the interests of the powerful and wealthy.

But from the European perspective the latest transformations in the world economy were distinctive in one important respect. At the end of the nineteenth century the European states were just beginning to expand their domestic reach: in time many of them would own, operate or regulate large sectors of the economy. Government expenditure—financed out of new, progressive taxes—would increase dramatically, partly to pay for wars but increasingly for the purpose of servicing social and welfare needs for which the state was now assuming responsibility.

The economic internationalization of the nineteen-nineties, however, followed closely in the wake of the first great wave of European privatizations and provided the impetus for more to come (see Chapter 17). The European state was now in retreat—first in Britain, then much of Western Europe and finally in the former-Communist East—a process further abetted by the implementation after 1987 of the Single European Act, with its provisions for open competition within and across borders. Through mergers, acquisitions and the internationalization of their operations, companies and corporations now operated on a global scale. The production and distribution of goods was often beyond the control of individual countries.

As for money, it was beginning to multiply and migrate in ways that would have been unthinkable a few years before. In 1980 the sum of all international bank lending was $324 billion a year; by 1991 that figure had grown to $7.5 trillion—a 2,000 percent increase in just over a decade. And this was just the beginning. Controls on the movement of capital—eliminated by most European states in the course of the early Eighties—now appeared as antiquated as food rationing. The ‘crash’ of September 1992—when first the UK and then Italy were forced out of the European Monetary System and obliged to devalue by private speculators and institutional investors whose activities they were powerless to prevent—was a highly symbolic moment.

The advantages of this revolution in the international economy were self-evident. Investment capital, no longer restrained by national frontiers, exchange-rate regimes or local currency regulation, flowed unchecked wherever it was needed (and could anticipate a profit)—by 1990 foreigners already held 34 percent of German debt. But there were disadvantages too: European manufacturers, their profit margins constrained by the high wages and overhead costs of employing skilled labor in Germany or France or Sweden, were now at liberty to seek out not only international investors but also a more malleable and inexpensive foreign workforce.

Instead of importing into Europe cheap workers from poor countries—as in the past—German or British or French firms now found it more efficient to export their factories instead, installing them in Brazil or Nigeria, Portugal or Romania and then directly selling the finished product to markets all over the world. This further accelerated the de-industrialization of Western Europe, adding to the already chronic unemployment in many regions—and increasing the burden on state-provided unemployment compensation and other social services.

When the last coalmine in France—at Creutzwald in the Moselle—closed in April 2004, no-one even pretended that the former miners would ever find regular work again. Unemployment in the Moselle district hovered around 10 percent of the active population; further north, in the former mining towns along the Belgian border, it was 15 percent. France as a whole had lost 1.5 million industrial jobs in the last three decades of the century, most of them since 1980. Spain, which very quickly lost any comparative advantage that accrued to it from being one of Western Europe’s more backward economies, shed 600,000 jobs in the twenty years following the transition to democracy. At the height of the recession of the mid- 1990s, 44 percent of the country’s under-25 workforce was unemployed.

Unemployment was not new. And given the generous welfare net available in most EU countries, the economic impact of joblessness on individuals and communities was in no way comparable to the devastation of the inter-war years (its psychological consequences are another matter). But what was distinctive about the social costs of economic disruption in the last years of the twentieth century was that they were taking place in a time of plenty. Privatization and the opening of the financial markets had created great wealth, albeit for a relative few; in certain places—London, say, or Barcelona—its consequences were strikingly visible. And thanks to the shrinking of distances and the increased speed of communications—via computers and the electronic media—information about the way other people lived was immediately and copiously available to all.

It was this sense of glaring contrasts between wealth and poverty, prosperity and insecurity, private affluence and public squalor, that drove a growing skepticism in Europe about the loudly touted virtues of unregulated markets and untrammeled globalization—even as many Europeans were themselves the indirect beneficiaries of the changes they deplored. In the past, such sentiments—added to pressure from organized labour and the self-interest of politicians—might have favoured a retreat to some form of limited protectionism.

But governments’ hands were now tied and organized labour, in the traditional sense, hardly existed anymore. Only in France did a unionized workforce succeed with the help of public opinion in temporarily blocking the sell-off of public companies: and even then only in special instances like Electricite de France, an icon of the post-war nationalized sector whose employees were among the few remaining members of the once-giant (Communist-led) Confederation Generale du Travail (CGT). In the last years of the century, even as the rest of the European energy market was deregulated, EdF remained in state ownership.

But the CGT, once the dominant blue-collar union in France, was a shadow of its former self—the French union movement as a whole had lost two-thirds of its members since 1980—and the workers it represented were no longer typical of the laboring population in France or elsewhere. Work itself had changed. What was emerging in many places was a novel, four-class system. At the top was the new professional stratum: metropolitan, cosmopolitan, affluent and educated—often attached to banks and other financial agencies, the primary beneficiaries of the new global economy. Then came a second tier, a protected core of traditional employees—in factories, service industries or the public sector—their jobs reasonably secure and many of their traditional benefits and guarantees still intact.

A third tier consisted of small businesses and services—corner-storekeepers, travel agents, tailors, electronic repairmen and the like—more often than not owned and staffed by immigrant communities or their descendants (Arabs in France, Turks or Kurds in Germany, South Asians in Britain). To these should be added the very sizeable and typically family-based ‘grey’ economy in Southern Europe. In Italy, where everything from shoes to textiles to machine parts was often produced and distributed below the radar of officialdom, it was estimated in 1997 that the ‘informal’ sector contributed at least one quarter of the country’s Gross Domestic Product. In Portugal the national figure—inevitably an estimate—was 22 percent; but in some regions—like the town of Braga in the far north of the country—‘unofficial’ workers constituted as much as 45 percent of the local labour force.

And then came the fourth tier—the fastest growing: people employed (if at all) in jobs that lacked both the long-term security of traditional skilled work and the benefits that had become standard in the boom years of the Fifties and Sixties. To be sure, unemployment figures in some countries—Britain, or the Netherlands—did eventually fall to gratifyingly low levels: proof, it was widely bruited, of the virtuous workings of the unhindered