Sunday, May 29, 2022

A united Europe in fragmented world?

In my previous post I said that "once Ukraine is helped to survive and to reconstruct, the likely impact is a strengthened and more integrated European Union, which mutualizes the cost of economic aid to Ukraine and sanctions to Russia." It would also be desirable to advance to a more integrated world that addresses global challenges in a mutualistic and coordinated way, with an active participation of a united Europe. By global challenges I refer to climate change, tax competition, sustainable improvement of standards of living and migrations. 

A more federal and integrated Europe is likely but is not guaranteed. A more coordinated world is desirable but is not likely. However, it is not enough to have a more integrated Europe if in the long run we want to have a better world, even if we want to guarantee a minimum level of welfare for European citizens.

With the Covid-19 pandemic we could see the contrast between determined common action in the Euroean Union, and costly lack of determination at the global level. While the EU managed to buy and distribute vaccines in an exemplary exercise of planned allocation of resources across borders, most of the world in developing and poor countries could not benefit from vaccines (much less from investment funds such as those of the Next Generation plan).

As a result, most of Europe was quickly emerging from the Covid crisis before the Ukraine war, while the rest of the world is now panicking because of a food crisis to which it doesn’t have the tools to react, as a result of high debt and low growth.

As David Wallace-Wells recently pointed out, we face similar risks with climate change. European and other rich societies may well make progress with green investments, but we may not manage to scale the Green transition to the whole planet. The risk is then that average temperatures rise to levels that are tolerable for Europe for a while (that is, such that we still have the resources to adapt), while developing and poor countries cannot adapt and face catastrophic crises in terms of food, floodings and other disasters. The rich world will be able to keep stable standards of living for some decades, but in the long run it will be absorbed by refugee and migrant waves at unprecedented scale.

A complicated world beyond the borders of rich countries is meanwhile a temptation for the supply side of politics. Donald Trump has made it openly clear that his priority is to give weapons to teachers before sending aid to Ukraine. Expect more of this sort of explicit blindness to problems that are presented as belonging to others, but that will affect us sooner rather than later.

Global market and community failures must be optimally addressed with global policies and institutions, at least with global cooperation between the largest jurisdictions. Sometimes, even local market failures must be fixed with actions that transcend the nation-state. The example of baby formula in the US is a case in point. The solution to the crisis in the supply of products for babies (which originated as a domestic supply problem) came from an exercise in government planning and international cooperation: sending military airplanes to Germany to overcome the shortage of supply.

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