June 19, 2012 · 0 Comments
By Matthew Stevenson:
Instead of spending all that quality time with his Islamic hit lists, President Barack Obama might find it more expedient to deal with the obvious: As Europe goes, so goes the U.S. economy — and probably his reelection chances.
The presidential election has a good chance of turning on issues surrounding European bad debts, should the current quick fixes of the Greek coalition government or the Spanish bank bailout come unstuck.
The last presidential election decided by the question of European economics was 1920, when Warren Harding campaigned against ratification of the World War I Treaty of Versailles — notably clauses that would have forgiven some debts that the Allied powers drew down to prosecute the world war.
One reason the European economy could force its way into the Electoral College is that the United States has no seat at the negotiation tables deciding whether Greece quits the common currency or if European banks are worthy of more bailouts. Why? The U.S. position on Europe’s problems is: “Include me out.” The Obama administration remains emotionally and financially distant from the continental drift.
To counter this perception, and drawing on the leaked whispers of White House chamberlains, The New York Times recently published a long, worshipful profile on the enduring friendship between Obama and Chancellor Angela Merkel — making the point that the German leader respects the president’s diplomatic savvy and economic breadth.
Nonetheless, at the many G summits in recent weeks, Obama has issued statements on how Europe needs to switch gears from austerity to growth — as though the economic stimulus was as easy to flood into the financial system as, say, the Stuxnet computer virus.
Unstated in U.S. pronouncements about the wobbly European economy is the entrenched belief, probably shared by Democrats and Republicans, that EU countries brought on their own economic ruin with cradle-to-grave social policies, early retirements, annual six-week vacations, bike lanes and left-wing governments.
Former Massachusetts Gov. Mitt Romney, in his campaign rhetoric, uses the specter of European socialism as a prediction for what will happen to the U.S. if Obama wins reelection and remains in office to pursue policies seemingly designed to please French syndicalists, Swedish land reformers or the Greek civil service.
Nor is the Obama administration any closer to Europe, despite sharing a war in Afghanistan and occasional pub lunches with Prime Minister David Cameron.
As a presidential candidate in 2008, Obama made a triumphant tour across Europe, much the way President Woodrow Wilson filled the streets of Paris in 1918. Both men were hailed as saviors of the European alliance, and both walked away from their adoring multitudes as if they had been a summer romance on the Côte d’Azur.
The peace that Wilson constructed at Versailles left Europe with a mountain of debts that no country could repay, enough ethnic and border disputes to cause several wars and a system of collective security whose only weapon was the strongly worded press release.
For all that candidate Obama barnstormed across Europe (Berlin speech: “America has no better partner than Europe”), the president’s attitude toward the continent sounds like that of Prime Minister Neville Chamberlain in Munich in 1938. “How horrible, fantastic, incredible it is,” Chamberlain said, “that we should be digging trenches and trying on gas masks here because of a quarrel in a faraway country between people of whom we know nothing.”
Despite the Grand Hotel stickers plastering Obama’s luggage, the president now has few friends in Europe. Russian President Vladimir Putin voted with his feet against attending the recent Chicago G-8 summit; the French want out of Afghanistan; Germany doesn’t need or want another lecture about its misguided faith in thrift and hard work; the Swiss are tired of being used as a punching bag; the Italian, Spanish and Greek governments see no financial help coming from Washington, and the British feel that they have paid for their special relationship with blood in Iraq and Afghanistan, and now a recession at home.
Economically, the U.S. has squeezed Europe in recent years by depreciating the dollar against the euro — raising prices on European exports by about 25 percent — although, the dollar has recently rallied. The U.S. denounces China for currency manipulation but uses the same practices against the EU, another reason for the continent’s prolonged recession. As President Richard Nixon was heard to say on the White House tapes: “I don’t give a sh— about the lira.”
Since Washington has so much at stake in a healthy outcome to the European crisis, you might think that the U.S. would want to join forces with the EU, Russia and China to address a fundamental disequilibrium of the global economy: Namely, the large surpluses in Asia and the persistent deficits in the West.
The renminbi is undervalued, and the euro is overvalued. A Big Mac in the eurozone is $4.43; in China, $2.44. There’s the beef.
The U.S., however, has instead chosen this moment in economic history to treat Putin as a czarist pretender and the Chinese government as insensitive to the feelings of its dissidents.
One way to look at Europe’s lingering recession is to understand the deficits as accounts payable from the Cold War. Much of the nonperforming debt on European balance sheets has been created to fund the absorption of Iron Curtain countries into the community of European nations — fulfilling a core U.S. foreign policy goal.
Germany has had to pay the major expenses of the integration of East Germany. Even Greece has had many costs associated with Romanian, Bulgarian and former Yugoslavian immigrants who have shown up in Athens. Spanish and Italian manufacturers, as well, are competing with lower-cost, subsidized producers in the East.
Giving up on Europe invites comparison to the U.S. isolation of the 1920s and ’30s — when it demanded repayment of its war loans (as President Calvin Coolidge said, in one of his rare quotes, “Well, they hired the money, didn’t they?”) and stayed aloof from the continent’s political disintegration.
The Obama administration would like Europe to solve its problems based on an American blueprint (“I can’t be overdrawn; I still have checks.”), but without U.S. capital (“We gave at the Marshall Plan.”)
Europe-bashing is attractive to both Democrats and Republicans. In 1920, even for the vacuous Harding, it paid off handsomely at the polls. Twelve years later, President Herbert Hoover learned a different lesson from turning his back on European economic turmoil.
Matthew Stevenson, a contributing editor of Harper’s Magazine, is author of “Remembering the Twentieth Century Limited,” a collection of historical travel essays. His next book is “Whistle-Stopping America.”