The American Empire is Losing Money in Europe. Will It Abandon Europe?

Professor Glenn Diesen with The China Academy

Europe is failing to adjust its geoeconomic policies to a multipolar world and will consequently suffer greatly in terms of declining economic and political relevance.

Most of the world is adjusting to a multipolar international distribution of power by diversifying economic connectivity by increasing ties with the main economic centres of the world. This is a requirement to maximise economic efficiency and to strengthen political autonomy. In contrast, Europe is responding to the turbulence in the world by retreating under US protection and reducing its ties with indispensable centres of power such as Russia and China, while alienating friendly states such as India by pushing these states to choose between “us” or “them”. The predictable outcome from failing to pursue national interests is that Europe becomes weaker, internally divided, and more dependent on the US. While Europe elevates bloc loyalty above national interests, the US will shift its strategic focus and resources to Asia. How can we explain the policies of Europe?

Geoeconomics vs Liberal Economics

Political economy is excessively analysed through the prism of liberal theory in which it is assumed that economics and trade are solely a positive-sum game as both sides benefit, and the focus is therefore on absolute gain as a source of peace. This cosmopolitan interpretation of economics is simply not how states act.

In all relationships of economic interdependence (from the individual level to the international), there will always be one side that is more reliant than the other. Asymmetrical interdependence can be converted into political influence. States therefore seek to intervene in the economy to skew the symmetry of interdependence: to reduce one’s own dependence on others while concurrently increasing the dependence of others on one’s own economy. In an interdependent relationship, both sides lose some autonomy and gain some influence. Under asymmetrical interdependence, the more powerful and less dependent state can maximise both autonomy and influence. For example, the US and Mexico are interdependent, but the obvious asymmetrical economic interdependence ensures that the US will have great political influence over Mexico. Extreme economic asymmetries result in economic exploitation and political subordination. The weaker and more dependent states therefore have an interest in diversifying their economic partnerships to create a balance of dependence to ensure prosperity and political autonomy.

Under a hegemonic order, there is an illusion of transcending geoeconomics and replacing it with liberal economics. The dominant state has an interest in acting as a “benign hegemon” due to the self-interest in producing trust in an open liberal international economic system that integrates the rest of the world under the hegemon's mature industries, transportation corridors, banks and currency due to the economic efficiency. Weaponisation of economic dependency is sought to be reduced as it diminishes trust and creates a demand for alternatives. Furthermore, in a hegemonic system, the other states in the international system are under great pressure to accept excessive reliance on one centre of power for economic efficiency and as there is a lack of alternatives.

However, when a hegemon declines it will revert to openly neo-mercantilist policies and use its administrative control over the international economy to weaken adversaries and demand geoeconomic obedience from its allies. The more the US uses economic coercion, the more demand it creates for decoupling. Yet, in Europe there is an assumption that American geoeconomics is used to strengthen the entirety of the political West.

Other countries around the world, both friends and adversaries of the US, recognise that to prosper in a multipolar world there is a need to diversify economic connectivity to avoid excessive reliance on any one centre of power. Countries that previously had to be used as chess pieces by the great powers, are inclined to favour multipolarity as they can diversify and establish a “balance of dependence” as the condition for acting as an independent pole of power.

European loyalty to the declining US hegemony

The main exception is Europe, which is not adjusting to multipolarity. Retreating under US leadership during disruptions in the international system was to some extent a sensible solution during the bipolar and unipolar world order. However, the current disruptions and crises are caused by the transition to a multipolar world, and in a multipolar world the impulse of connecting only to one pole of power results in declining relevance. To be an independent pole of power in a multipolar world requires a diversification of foreign partnerships for technologies, energy, industries, transportation corridors, banks, currencies, payment systems etc.

The flawed assumption that the political West has identical interests results in Europe subordinating its interests to the US. Europe disconnects itself from cheap and reliable Russian energy and competitive Chinese technologies. European industries subsequently suffer from declining competitiveness, and the US exacerbates the problem with industrial policies that convince these European industries to move across the Atlantic. The failure of the Europeans to pursue fundamental national interests creates socio-economic and political instability, yet the increased dependence on the US ensures that the European political class do not pursue significant course correction.

The Europeans are gambling away their own house to support the status quo of American leadership in the world. Yet, that status quo is already gone and in a multipolar world the relevance of the US will decline and its strategic focus will shift away from Europe. A common trait in Europe is to act in accordance with how they believe the world should be, rather than adjusting to the new realities.

The US is responding to the emergence of new centres of power by pivoting to Asia, and America’s increasingly scarce resources and political priorities will gradually shift away from Europe. Trump frequently argues that allies should pay the US for the privilege of its protection and leadership. The demand for a higher return on investment for the US empire is becoming a bipartisan issue as the US struggles to remain competitive. The relationship between the US and Europe is therefore changing fast as the US will demand more geoeconomic loyalty but will be able to offer fewer benefits to its protectorate. This trend will only intensify as Europe’s relevance continues to decline.

The failure of the Europeans to reform the geoeconomic policies is also a result from the failure to reform the European security architecture. It is difficult for Europe to chart a new path as an independent pole of power as American leadership in Europe is considered to have been a source of stability for 80 years by mitigating in-fighting between the Europeans and defending the continent from external threats.

However, peacetime military alliances are very destabilising as their continued existence relies on perpetuating conflicts to preserve obedience from allies and to weaken adversaries. NATO was nonetheless a necessity during the Cold War due to the threat from the Soviet Union, and after the Cold War the military bloc was instrumental to advance collective hegemony in Europe and beyond. The Europeans could even aspire for an equal US-EU partnership as the two pillars of a collective hegemony.

Yet, in a multipolar world, NATO becomes an instrument to subordinate Europe to American interests. When peace broke out after the Cold War, the Europeans were no longer reliant on the US to provide security, and the Europeans subsequently aspired to act as an independent pole of power by increasing their “strategic autonomy” to assert “European sovereignty”. Redividing the European continent and militarising these dividing lines with NATO expansion predictably resulted in war and the diminished relevance of Europe. This was understood in 2008 when the Europeans attempted to resist NATO expansion to Ukraine, but today the European political class repeats the mantra of the Americans. Predictably, the increased security dependence on the US can be used to demand geoeconomic loyalty and the Europeans must forego their former ambitions to European sovereignty.

The US is currently bogged down in Europe and the Middle East in costly wars that prevent it from heading East. This will not last. While the Europeans are willing to subordinate their own national interests to preserve the political West, the US will soon pack its bags.

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I spoke with the China Academy on this topic: “The American Empire is Losing Money in Europe. Will It Abandon Europe?”

https://thechinaacademy.org/the-american-empire-is-losing-money-in-europe-will-it-abandon-europe/