Lecture 3: Advent of a Unipolar World: NATO and EU Expansion

– Today, we’re gonna be talking about the international architecture of what I’m calling the early post-Cold War world, and by early, I’m really focusing on the time from the collapse of communism until the financial crisis of 2008 because we’re gonna see that that ushered in pretty big structural changes, both within a lot of the countries we’re gonna be talking about and in international political economy and in international relations Our agenda, we’re gonna talk about NATO expansion after the Cold War, we’re gonna talk about the Washington Consensus and then we’re gonna talk about the European Union, its enlargement and its challenges So it’s a pretty big menu I do wanna take a minute to say something about three lenses for thinking about politics One of the problems with political science is that people tend not to say in words of one syllable what they can say in words of five syllables And so there’s an awful lot of terminology and jargon, and it’s my ambition to use as little of this as possible But I do want to alert you to three different ways of thinking about politics, that, to some extent, compete and, to some extent, are complementary The first is one that focuses on people’s interests You might think of Marxism as focusing on people’s economic interests but also former rational choice models of politics that use economic approaches to politic, focus on people’s individual interests It’s all interest-based And we think about just common folk wisdom about politics, people expect people to do things that are in their interest When we move into the realm of international relations, this interest-based way of looking at the world sometimes traffics under the title of realism, that, realists in international relations are people who say that countries follow their individual interests Now, not every interest-based theory of international politics is realist because there are some who say, well, yeah but you’ve gotta look at the domestic politics of countries and how that influences what they do internationally So they might still be interest-based but they’re not gonna take countries as their basic unit of analysis But the idea behind realism but trying to, all of these different schools I’ve just mentioned, is that if you want to understand what’s gonna happen in politics, look at the interests of the relevant actors Might have different theories about that but it’s all an interest-based This second basic lens that people bring to bear on politics is about institutions And here, in domestic politics, it might be people who think independent courts and the separation of powers are important, that they structure what happens Others think, no, it’s the kinds of political parties, but institutional arrangements are important When we think about the international system, institutionalists travel under various labels, again, they call them liberal institutionalists, some of them, but they have, sometimes they just call themselves institutionalists, plain and simple, but they look at international institutions, things like the United Nations NATO is a kind of institution, it’s an alliance, it’s not an international institution, it’s an alliance, but it it has an institutional presence So this second lens focuses on institutional arrangements which may or may not be consistent with the way people’s interests line up, right? So for instance, George Kennan, who I mentioned to you last time, thought the United Nations was a waste of time because countries always behave in their interests and if the UN told them to do something that wasn’t in their interest, they would ignore it So there, you can see possible tensions between institutionalists and interest-based accounts Rosa Luxemburg is famous for saying, the rivers of history run through the most finely meshed statute So again, it’s in a Marxist view that interests are gonna prevail and institutional stuff is irrelevant

And then the third, I’m putting under the heading of ideals, and this can be ideas, culture, norms, things other than interests and institutions that affect what actually happens in politics And again, people disagree a lot about, some hard boiled realist will say, norms and institutions are all beside the point Others think norms are very important and that they actually structure what happens Again, here, there’s lots of fancy terminology to capture this notion, there’s something called constructivism in international relations theory, it’s basically a theory of normative behavior, norms shaping outcomes And so, a lot of the squabbling in the academic journals and so on is among people who focus on interests, on institutions, or on ideas And my own view, just putting my cards on the table before we dig in to today, is that, to say, which is the right one, is the wrong question And it’s better to try and understand what are the conditions under which interests tend to prevail or institutions tend to prevail or norms can re-structure things And those conditions change And there’s often much more play, there’s sometimes much more play for norms, say, than at other times, like when the Cold War collapses and the institutional architecture’s up for grabs, then it might matter a lot what ideas are out there or not out there but in the middle of the Cold War, when everybody’s locked into positions that are highly, highly rigid, then ideas are probably largely gonna be beside the point So that’s the way I will tend to use these notions and you will see them coming up, obviously, today but throughout the course Okay So let’s think about the first post-Cold War international security crisis which was prompted by Saddam Hussein’s invasion of Kuwait in late 1990 – Just two hours ago, allied air forces began an attack on military targets in Iraq and Kuwait These attacks continue as I speak Ground forces are not engaged This conflict started August 2nd, when then dictator of Iraq invaded a small and helpless neighbor Kuwait, a member of the Arab League, and a member of the United Nations was crushed, its people brutalized Five months ago, Saddam Hussein started this cruel war against Kuwait Tonight, the battle has been joined This military action, taken in accord with United Nations resolutions and with the consent of the United States Congress, follows months of constant and virtually endless diplomatic activity on the part of the United Nations, the United States, and many, many other countries Arab leaders sought what became known as an Arab solution only to conclude that Saddam Hussein was unwilling to leave Kuwait Others traveled to Baghdad in a variety of efforts to restore peace and justice Our Secretary of State, James Baker, held an historic meeting in Geneva only to be totally rebuffed This past weekend, in a last ditch effort, the Secretary General of the United Nations went to the Middle East with peace in his heart, his second such mission, and he came back from Baghdad with no progress at all in getting Saddam Hussein to withdraw from Kuwait Now, the 28 countries with forces in the Gulf area have exhausted all reasonable efforts to reach a peaceful resolution, have no choice but to drive Saddam from Kuwait by force We will not fail As I report to you, air attacks are underway against military targets in Iraq We are determined to knock out Saddam Hussein’s nuclear bomb potential We will also destroy his chemical weapons facilities Our objectives are clear; Saddam Hussein’s forces will leave Kuwait, the legitimate government of Kuwait

will be restored to its rightful place, and Kuwait will once again be free Iraq will eventually comply with all relevant United Nations resolutions and then, when peace is restored, it is our hope that Iraq will live as a peaceful and cooperative member of the family of nations I had hoped that when the United States Congress, in historic debate, took its resolute action, Saddam would realize he could not prevail and would move out of Kuwait in accord with the United Nation resolutions He did not do that Instead, he remained intransigent, certain that time was on his side Saddam was warned over and over again to comply with the will of the United Nations, leave Kuwait or be driven out Saddam has arrogantly rejected all warnings Instead, he tried to make this a dispute between Iraq and the United States of America Well, he failed Tonight, 28 nations, countries from five continents, Europe and Asia, Africa and the Arab League, have forces in the Gulf area, standing shoulder to shoulder against Saddam Hussein These countries had hoped the use of force could be avoided Regrettably, we now believe that only force will make him leave – So that was the first Gulf War, so-called Operation Desert Storm, as President Bush said there, it was it was authorized This is resolution 678 which I will post and you can peruse at your leisure I do wanna notice that, just notice that it was authorized by the Security Council with Cuba and Yemen voting against They were temporary members of the Security Council The way the security council works is, any one of the five permanent members can veto it, and China chose to abstain but it didn’t veto it, and the Soviet Union supported it So I wanna, I start with this ’cause I wanna point out several things about what Bush did He certainly was, the US was certainly not blameless in this whole affair, and I don’t want to sugar coat every aspect of what President Bush did in this regard He was heavily criticized later for having apparently signaled to Saddam Hussein that it would be okay with the US if they went into Kuwait, he was also criticized for encouraging a Shiite uprising in southern Kuwait and then not supporting it after we left, so there there are grounds for criticizing what we did but the things I wanna point out is, first of all, it was an action of last resort, every effort, as he said in the video, had been made to end this without an invasion Secondly, it was proportional, stop the bully without becoming one Bush took a lot of criticism for this People said, you should go to Baghdad, you should knock off this regime, and he steadfastly refused to do it, partly because of the fact that he was not behaving unilaterally As he indicated, there was genuine coalition including every Arab country except Jordan, was actually participating in this, and he knew that if he did more than the UN mandate, the Security Council resolution mandated, the coalition would collapse So it was a broad-based coalition with strong regional support to stop the bully without becoming a bully, that is to say, this aggression will not tolerated And this, as I said, was the first international security crisis of the post-Cold War world And had that become the template going forward, we would be in a very different place today Well, that’s one of the things I’m going to be arguing to you later in the course because, as it turns out, it was one of the paths not taken to treat the way in which Saddam Hussein had been expelled from Kuwait as perhaps norm-setting for the future handling of international security crises,

it was a path not taken Okay, let’s talk about NATO What, when, and why? So NATO is a creature of the Cold War And I’ve already mentioned the United Nations several times today, and it’s important to think about NATO and the origins of NATO alongside the creation of the United Nations because they were created both in the 1940’s After World War I, Woodrow Wilson had wanted to create a League of Nations and that had failed, largely because the American Congress wouldn’t go along with it and FDR had, during World War II, greatly invested in the idea that there must be an institution of this general sort created after World War II to prevent nations from going to war And when President Truman came into office, he made it his business to make sure that that happened And so here, you can see President Truman addressing the conference in San Francisco in April of 1945 as they were drawing up the charter of the UN – There were many who doubted that agreement could ever be reached by these fifty countries differing so much in race and religion, in language and culture But these differences were all forgotten in one unshakable unity of determination, to find a way to end wars (audience applauding) If we had had this charter a few years ago, and above all, the will to use it, millions now dead would be alive If we should falter in the future in our will to use it, millions now living will surely die Well, there is a time for making plans, and there is a time for action The time for action is here now! – And indeed, they did act, they did create the institutions, and just to elaborate what he said later on in that speech, he said, “The essence of our problem here “is to provide sensible machinery for the settlement “of disputes among nations “Without this, peace cannot exist “We can no longer permit any nation, or group of nations, “to attempt to settle their arguments “with bombs and bayonets.” So he was foursquare behind the creation as the US was, unlike after World War I, the creation of the United Nations But time moves on and four years later, we were looking at a very different reality (triumphant music) – For us, war is not inevitable We do not believe that there are blind tides of history which sweep men one way or another In our own time, we’ve seen brave men overcome obstacles that seemed insurmountable and forces that seemed overwhelming Men with courage and vision can still determine their own destiny They can choose slavery our freedom, war or peace I have no doubt which they will choose The treaty we are signing here today is evidence of the path they will follow If there is anything certain today, if there is anything inevitable in the future, it is the will of the people of the world for freedom and for peace – So there was the creation of NATO, an alliance to face down what was seen as the Soviet threat The previous month, just after the text of the proposed treaty had been released to the public, Secretary of State, Dean Acheson went on radio And I tried to, I was gonna play his radio speech for you but the sound was too bad But here, you can see him saying that, “The best deterrent to aggression is the certainty that immediate and effective countermeasures will be taken against those who violate the peace.” And then probably the most quoted line he ever uttered was that, “If the free nations do not stand together, “they will fall one by one.” So here, the US had moved

from backing an international institution for solving conflicts to forming an alliance And just what was this alliance? The most famous part of the NATO Charter is Article 5 which says that the parties agree that an armed attack on one of them in Europe or North America shall be considered an attack against all of them and consequently, that if such an armed attack occurs, each of them, in the exercise of the right of individual collective self-defense, recognized by Article 51 of the UN Charter, will assist the party or parties so attacked by taking forthwith, individually and in concert with other parties, such action as it deems necessary, including the use of armed force to restore and maintain the security of the North Atlantic area And any such armed attack and all measures taken as a result thereof shall immediately be reported to the Security Council And, this is an important kicker, such measures shall be terminated when the Security Council has taken the measures necessary to restore and maintain international peace and security So here is an alliance created that says an attack on one is an attack on all We are entitled to protect any member of that alliance as though we had been attacked, we will report it to the Security Council but we will not cease and desist until the Security Council has taken the measures necessary, essentially, to eliminate the threat So not only had the US created this new alliance, but it clearly said that the UN, a realist might say this is exactly what you should expect, a realist would say that the UN is subordinate to the interest of NATO Now, it tells you how hard boiled the realist, Kennan, was that he was also against NATO for two reasons One is that he thought it would unnecessarily militarize the standoff with the Soviets, they would create a similar alliance which they indeed did a few years later, that’s where the Warsaw Pact came from, was the Soviet response to NATO, but he also said it’s stupid, because when the chips are down, countries follow their own interests, they’re no more gonna be guided by membership of an alliance then they are gonna be guided by UN resolutions Nonetheless, the US created NATO The first thing to say about NATO is it’s a historically unprecedented, highly unusual alliance If you think about George Washington’s Farewell Address to Congress in 1796, he said, and this was seen as a warning for the future, “It is our true policy to steer clear “of permanent alliance with any portion “of the foreign world.” If you Google up things like international encumbrances, you can find American president after American presidents saying we will not commit ourselves to any encumbrance on a long term or permanent basis And they all echo this philosophy that was once attributed to Lord Palmerston from a famous speech he made in the House of Commons in 1846 when he said, “We have no eternal allies, “we have no perpetual enemies “Our interests,” another hard boiled realist, “are eternal and perpetual, “and those interest it is our duty to follow.” So American presidents have been guided, American administrations had ever formed any kind of permanent alliance, that essentially followed the Palmerston Washington view And here, we have the creation of an alliance among the western powers, dedicated to protecting one another in perpetuity with armed force, if necessary, and subordinating international institutions to that purpose Now, a lotta debate about whether NATO was successful during the Cold War You could say, well, the US won the Cold War and some people say, you could say that we wouldn’t have won it without NATO

That’s one of the, we can’t run the counterfactual, so it really is something of an imponderable, whether we could have won the Cold War without NATO It is also worth noticing that NATO, during the Cold War, never actually went into battle The first time a NATO operation occurred, which I’m gonna talk more about later in the course, was in Kosovo in 1999, after the Cold War over And by the way, when Article 5 was not created because no NATO country was threatened And that same thing is true with subsequent NATO actions in the post-Cold War period, such as the invasion of Libya in 2012, about which we’ll also be spending time later The partial exception was 9/11, although even then, the US, essentially, went to war more or less immediately after the attacks and NATO allies participated but NATO didn’t assume full operational control in Afghanistan until several years later So NATO after the Cold War Some people such as French President Francois Mitterrand said, well, it’s done its job, we should get rid of it, and was there to protect these countries against the Soviet Union, and it’s now an alliance without a purpose That was a difficult thing to do right at the end of the Cold War because of East Germany And the thing about East Germany was it rapidly became clear after the wall came down that Germany was gonna be reunited, and it was just, unstoppable force to reunite Germany And reuniting Germany made a lot of people nervous Many people remembered World War II and some, not that few, also remembered World War I, and the idea of an independent Germany, outside of NATO, made a lot of Europeans nervous And so the impetus to say the reunified Germany would be part of NATO came from the other European powers And the Russians didn’t like it They, too, said, what’s going on here, why is NATO starting to expand? And George Herbert Walker Bush and Helmut Kohl, who was then the German Chancellor, promised Gorbachev that NATO would not expand beyond including Germany and that’d been an artifact of the reunification Gorbachev was less than impressed by their reasoning (speaking in foreign language) – [Translator] And I’m not persuaded by the assurances that we hear, that Russia has nothing to worry about You may not humiliate a nation, a people, and think that it’ll have no consequences So my question is, is this a new strategy? I feel that if the same kind of games continue to be played, if one country plays some card against the other country, then all of those problems, all of those issues that we’ve been mentioning today will be very difficult to resolve Glasnost, free elections, political pluralism, the problems of concern to you – So he was skeptical He thought that this is not likely to be how things are gonna play out but he did, he saw this, as he says in that clip, he saw this as a humiliation of Russia, that was still the Soviet Union at that time He saw this as a humiliation of the Soviet Union and was adamantly opposed to it But history played out differently So let me just give you a sense of what was coming now (camera shutters clicking) (applauding) – Today, we welcome Hungary, Poland, the Czech Republic,

finally erasing the boundary line the Cold War artificially imposed on the continent of Europe Strengthening an alliance that now, clearly, is better preserved the keep the peace and preserve our security into the 21st century For the 16 of us already in NATO, enlarging our alliance, our goal is to help to build a Europe that is undivided, free, democratic, at peace, and secure – So there you have it The first three east European countries included in NATO in 1999, and that, as you can see, is the first edition of countries besides, Germany’s not on this list, since the end of the Cold War So this didn’t go down very well in Russia As Gorbachev had predicted, it produced a sense of outrage and humiliation So here, again, just to give you some, a couple of, a little flavor of it (chanting in foreign language) (speaking in foreign language) – So a couple of comments about that clip So one is, on the signs, one of the things that they’re demonstrating about is that president Clinton had bombed Iraq for violating the no-fly zones, and they’re saying, basically, only an idiot or worse would be bombing Iraq, the no-fly zones that had been set up following Saddam Hussein’s invasion from Kuwait This gentleman at the end of the clip is somebody by the name of Sergey Baburin He was a Soviet Russian politician and subsequently became one of the leaders of a far right populist movement, and what he’s saying at the end of that clip, is he’s basically saying, we made a mistake once but the next generation are not gonna be making the same mistakes And it’s interesting that he said this in response to them demonstrating against the American bombing of Iraq, partly because, as I noticed in 1991 when I was in Moscow and I just told you about in an early lecture, the US Desert Storm Operation was hugely popular among Russians in 1991 In 1991, the US could do no wrong In fact, in Moscow in 1991, in March of 1991, there were actually commercials for selling Desert Storm condoms (audience laughing) Go figure (professor laughing) I never quite could understand what it was trying to communicate but There had been no resistance to the idea that Bush Sr. had gone in but, you know, seven years later, when these east European countries were starting to join in, to join NATO, things played out very differently And it didn’t stop there, it continued (applauding) – [Woman] Yeah! – Thank you, all – [Man] Thank you Mr. President! – You’re welcome Thank you all Thank you all, good afternoon, and welcome to the White House Today we proudly welcome Bulgaria,

(audience cheering) Estonia, (audience cheering) Latvia, (audience cheering) Lithuania, (audience cheering) Romania, (audience cheering) Slovakia, and Slovenia (audience cheering) We welcome them into the ranks of the North Atlantic Treaty Organization (applauding) When NATO was founded, the people of these seven nations were captives to an empire They endured bitter tyranny They struggled for independence They earned their freedom through courage and perseverance And today, they stand with us as full and equal partners in this great alliance (applauding) (pen thudding) (laughing) (applauding) This is a special moment in the hopeful story of human liberty as America formally declares its support for Albania and Croatia’s entry into NATO We strengthen America’s partnership with nations that once found themselves in the shackles of communism We rejoice in taking a major step toward welcoming the people of Albania and Croatia into the greatest alliance for freedom the world has ever known – And I want to reaffirm as strongly as I can, the United States’ commitment to honor Article 5 of the NATO treaty No ally or adversary should ever question our determination on this point It is the bedrock of the alliance, and an obligation that time will not erode The NATO membership process, which requires applicants to make reforms across their political, economic, and defense sectors, has helped create the stable democratic Europe we see today We were glad to see the alliance welcome Albania and Croatia last year, and there can be no question that NATO will continue to keep its door open to new members – Montenegro’s accession is good for Montenegro, it’s good for NATO, it’s good for the stability of the western Balkans, and it’s good for international peace and security Today is a historic day So, President Vujanovic, welcome so much to NATO, it’s a great honor to have you here, welcome – With NATO membership, our future will be stable, secure and prosperous, and we will make decisions about the most important issues within the strongest, the most organized, and most efficient alliance in the history of mankind – So as you can see, this had been a bipartisan story on the US side Democrats and Republicans alike have led the expansion of NATO to include all of the former members of the Warsaw Pact except for Russia And this actually doesn’t tell the whole story because there were others who wanted to join NATO as well So in 2008, for example, NATO announced that it would welcome the addition of Georgia and Ukraine to NATO And that is part of what prompted the Russian incursion into Georgia in 2008, and also had a big impact in Ukrainian politics that contributed to the way things would play out in 2014 A couple of other things to notice about this accession, you might wonder why, in 2004, we added all of these countries to NATO Why do you think, anyone have a thought? Why would the Bush administration, many east European countries wanted to join NATO from very early on but there had been resistance I mean, after all, you know, you’re committing yourself to go to war if one of these countries is attacked That’s not a light thing, right? You’re actually, it’s not like saying, well, let them join the European Union, if they don’t like it, we’ll kick ’em out, or they can leave

This is really committing you to defend these countries Why would the US, anyone? (student mumbling) Pardon? – Deflection (mumbles) Suppression in the Middle East – It was related to what he was doing in the Middle East but it was not deflection What had we just done in the Middle East in 2004? Yeah – [Student] We had just invaded Iraq and then the former (mumbling) were not supportive (mumbling) – Bingo, exactly right So what had happened was, after, and this is something we will return to later in the course, but once the Bush Jr., George W. Bush, had decided to invade Iraq in 2003, unlike what his father had done, he couldn’t get Security Council resolution to authorize it and he had a lot of trouble putting together a coalition because all the Middle Eastern countries were not in favor of it and he needed the fig leaf of an international coalition to create, he thought, legitimacy for this action And so if you look at all of these countries, except Slovenia, every one of these countries joined the coalition, nominally at least, and sent troops to Iraq as part of the US-led coalition of the willing They joined the coalition of the willing and the quid for the quo was that he supported their accession to NATO the following year Interestingly though, they all got rid of the draft in the meantime Clearly, they were worried about the domestic politics of committing their youth to fighting in wars to defend NATO countries So here, you see that geopolitics playing itself out in this way, that this is very much an interest-based story, that Bush is looking to get legitimation for his invasion, and so that became the impetus for getting these countries to join It’s also, one might think it’s something of an anomaly, given the Trump administration’s hostility to NATO in general, why they allowed the Montenegro thing to go forward Of course, it’d been started much earlier but I think, as far as Trump is concerned, it doesn’t really matter who’s in NATO Nonetheless, the question that Trump asks about NATO is not a crazy question, right? And it’s the same question Francois Mitterrand was asking, what is this alliance there actually for? So there’s some enduring questions about post-Cold War NATO which are gonna come back later in the course One is, was Mitterrand right? Was there a missed opportunity at the end of the Cold War? Was Gorbachev right? Did NATO expansion make it more likely that someone like Putin would come to power in Russia? Gorbachev had said, humiliate people and there will be consequences And certainly, the steady inclusion of NATO into the former, not only Eastern Europe, but as I said, they were running up trial balloons about incorporating the Ukraine and Georgia in 2008 There’s a colorable case that this might have bolstered the nationalism of a figure like Putin We’ll come back to that, too And what are the advantages and costs of having a permanent military alliance that now lacks any clear motivating purpose? It’s led by the most powerful military on Earth, it’s not clear what its goal is or is not We will see later in the course that, when it has become active, it has had nothing to do with Article 5 of the NATO treaty, but it’s rather taken on new missions and new rationales, mostly ad hoc, dreamed up on the fly, to suit the interests

of different players at different times Let’s turn to the Washington Consensus, or what I’ll say, taking neo-liberalism global And I’ll talk somewhat briefly about this ’cause I want to spend most of the rest of the time talking about the European Union So the Washington Consensus, again, and what I call the Washington Consensus is essentially, a global version of what often gets called neo-liberalism And I think of it, again, distilling it down and getting rid of all the jargon that plagues these discussions, as having three main features One is deregulation, the second is free trade or trade agreements, and the third is privatization of state assets, previously held, state-held assets Within countries, that tends to be called neo-liberalism When the World Bank or the IMF or the Americans try to get other countries, as they did particularly up until the financial crisis, when the Washington Consensus, we’ll see, started to lose some of its ideological power in the world, the core elements of the diet on which they would insist for countries to get US aid or aid from institutions controlled by the World Bank or the IMF And it’s difficult to overstate the confidence, the hubris, we might say in retrospect, the confidence with which this was viewed as the one size fits all approach to economic development In 2004, in a speech to the the New York Fed, I think it was to the New York Fed, Ben Bernanke, who was then Chairman of the Federal Reserve, made a speech that you could, if you Google up his great moderation so-called speech, it’s a speech in which he says, essentially, the technocrats running the fed are now sufficiently competent that we’ve, well, he didn’t actually say this but this is what it’s come to be interpreted as his having said What he actually said was somewhat more nuanced but the takeaway lines from the speech are, to the effect that the fed has basically managed to, if not abolish the business cycle, manage it so successfully that the peaks and troughs could not be too damaging and we can, largely, have no inflation, full employment, and let the technocrats run it As I said, what he actually said, if you go and read the whole speech, was a little more nuanced than that But it became emblematic of the idea that this diet of economic deregulation, free trade, and privatization, informing all public policy, was the way to go, and that the world would be hunky-dory thereafter Deregulation of Wall Street after the repeal of Glass-Steagal in 1999 So here, the Glass-Steagal Act had been enacted in the 1930’s in the wake of the Depression to stop trading, to stop investment banks from engaging in investments on their own accounts with depositor’s money You either had to be an investment bank or a commercial bank The banks didn’t like it, they lobbied against it for decades and actually, by the time it was repealed in 1999, there wasn’t much of it left Read Ron Chernow’s “The House of Morgan” if you want the blow-by-blow of the lobbying about that Brilliant book among his many brilliant books And so, this great debate now, about how much actually getting rid of Glass-Steagal contributed to the financial crisis, some say not at all, some say it was really all about real estate markets and had nothing to do with that, and some say a lot But my point in mentioning it here is not whether repealing Glass-Steagal contributed to the financial crisis, I tend to think probably not, but it was emblematic of and ushered in a whole other set of steps of deregulation

So, for instance, in 2004 Hank Paulson, who was then Chairman of Goldman Sachs, led a group of the five biggest banks to Washington to lobby Christopher Cox, who was then the head of the SEC, not the sharpest knife in congress, to lobby him on the grounds that if a bank was sufficiently big, if it had five billion dollars in assets, it should be exempted from capital requirements or have reduced capital requirements because they were big enough to self-insure The thought that because they were so big is maybe why they should have the capital requirements didn’t seem to occur to him And so the ones that were too big to fail were the ones that were subjected to less in the way of capital requirements And we might say, go figure, how could anybody be so foolish? The quid for the quo, by the way, they said, we’ll open our books to you But the SEC at that time had a tiny office with, I think it was seven people working in it, ostensibly, to keep track of four trillion dollars worth of assets So they weren’t gonna be able to do this in any serious way, monitor the books of these companies And indeed, months before the financial crisis, literally, two or three months before the financial crisis, Cox was reassuring congress that the big banks were fundamentally sound and then, turned around and Lehman Brothers went belly-up But I’m not giving you as story about the causes of the financial crisis, but I’m giving you a story about the confidence people had in this deregulatory enterprise, that, just leave it all to the Fed, get rid of all the regulations, and everything will be fine And so this was the new-liberal game at home and it was the Washington Consensus taken abroad There was much more resistance to it in what we might think if as the Global South This is just one of endless numbers of cartoons one could pick up put out, indicating that it was perceived as a kind of imperialist venture from the point of view of, particularly, developing countries that were having this diet imposed upon them But in the second and first worlds, the hegemony of this idea was, it’s hard to overstate And if you, I always talking about Russia last time, if you look at US aid to Russia, it gives you some sense also, I think, as a kind of proxy for American influence over Russia You can see that at the collapse of the Soviet Union in ’92, ’93, that you get huge amounts of US assistance to Russia And then it goes down and then, in 1998, when they default, this is run Russia defaulted on its debt, I talked about that last time, and just bailed out by the IMF, you see it increase again and then, in the early 2000’s, it goes down after the crisis wanes and then, here, and this is the period when Putin is basically implementing the Washington Consensus diet This is when he’s reforming the tax system, it’s when he bringing tax rates down to 13% flat rate, balancing the books, building up a massive sovereign wealth fund or a rainy day fund And so he’s essentially getting rewarded for following what many would have regarded as pretty orthodox, pretty orthodox Washington Consensus policies and the best book about this is by a man by the name of Christopher Miller which I put on the suggested reading list, called “Putinomics” But then you can see, and this is for later in the course, what happens after the financial crisis Not only does US aid go south, but so does US influence, and we’ll talk more about that later So let’s talk about the European Union and its challenges

It’s been around since early 1950’s The European Coal and Steel Community came into being as a byproduct of the Treaty of Paris signed by the original six; France, Italy, the Netherlands, West Germany, Belgium and Luxembourg It became the European Economic Community as a result of the Rome Treaty of 1957 A much more ambitious treaty was enacted in 1992, the so-called Maastricht Treaty And the most recent piece of legal architecture, which I ‘ll talk a little bit more about in a minute, was the the Lisbon Treaty of 2007 I’m not gonna give you the blow-by-blow of how all the 28 countries, how they got from six to 28, but you can Google it up for yourself and see when the different ones joined What I want us to do is focus more on, what was the point of this? Why was a European Union thought to be necessary? What purpose would it serve? Yeah – [Student] Economic and political union between European countries could stave off, like, war in the future – To stave off war So there were multiple motives but it’s good that you’re clairvoyant and got the first item on my slide ’cause what if you had come up with the third item on my slide? I would’ve been crossed off but you came out with the first item, so that’s fantastic So part of the impetus was, particularly people were worried about France and Germany going to war again Not only the French and the Germans, Churchill, for example, was a big fan of the European Coal and Steel Community and he didn’t want Britain to join but he wanted the Europeans to join, partly for that reason So that was a beginning part of the initial impetus This is for the political philosophers in the room, this is Montesquieu’s idea of (speaks in foreign language), that if you have commercial interchange with a country, it’s gonna be peace-generating, right? So that was one Other reasons why people might have favored the creation? Yeah – To reduce the pressure from the Soviet Union and (mumbles) – To reduce the pressure from the Soviet Union and? – America – Okay so let’s start, let’s take the second, that this is less about the Soviet Union and more about US ’cause I want to keep you on my slide, here (audience laughing) This was the big French motive de Gaulle, for example, was a big proponent of the idea that what the Europeans needed to do was to band together to be a comparable force in the world to the US, right? Now, de Gaulle, I’m sure, as you all know, was a staunch nationalist, right? Staunch French nationalist, so he did not want a political union that could in any way erode French national sovereignty He would be, I think, chuckling at the Brexit fight that’s going on at the moment But the way in which de Gaulle thought you could both have a strong, united Europe and protect the national sovereignty of France, which they guarded very jealously, they kicked NATO troops out of France, they bought their own, independent nuclear deterrent, they had a very jealous conception of their independence and sovereignty and they were not gonna be pushed around by the Americans So they came up with the idea that any important changes in the union would have to be resolved by unanimity rule, and of course unanimity rule is a dictatorship of one, right? If you have unanimity rule, if you don’t like the proposed change, you can stop it and block it So de Gaulle was a strong proponent of unanimity rule and so this was this was the idea of a big block that could be of comparable economic clout in the world to the US Any other reasons why people might have thought it important to have a big economic union

of countries, European countries? – [Student] Trade – Trade You guys are amazing (audience laughing) Wow, okay Yes, so but here’s the thing, it’s complicated because it’s, and this is part of, again, Trump administration’s beef about the EU, it’s an internal free-trade zone but it’s externally protectionist, right, in many respects You go and talk to African farmers about the tariffs that they experience trying to sell their goods in Europe So in this sense, and this is one of the reasons Britain had such a difficult time before Britain finally joined under Edward Heath in the 1970’s, they had been rejected twice because Britain wanted to preserve its imperial preference before they realized there was no empire left to prefer But they had essentially had, they had had trading arrangements with members of the empire and then, when they created the Commonwealth, they wanted to have preferential treatment for trade from the Commonwealth and the European Union said, no, they couldn’t have that and so the French, actually, de Gaulle was flatly against Britain joining the European Union and vetoed it and they didn’t join until after he left power in 1969 So it was an internally free trade but externally, it was a protectionist trading block and that incidentally, we can fast forward, it’s the story of TPP, that what the Trump administration failed to understand or at least to articulate if they did understand it, was that the TPP was not just a free-trade deal, it was about containing China from developing its influence in the Far East and it was largely motivated, actually, by a political agenda because China, for reasons we’re gonna talk about later, had become much more muscular in the South China Sea and elsewhere during the course of the Obama administration So the EU, we could say, is internal free-trade zone, externally protectionist But actually, that’s too simple because the sense in which it was internally a free-trade area is complicated because, as I put up here, there was a first mover advantage And so if you think back to what I just said about de Gaulle insisting on unanimity rule, that meant that the things you could put in place early on would be very difficult to change because you would have a veto power And so the French didn’t agree to the British joining until they had put in the Common Agricultural Policy and the Common Fisheries Policies And particularly, the Common Agricultural Policy was massive protection for French farmers, and was operated to the great disadvantage of British farmers And so it was a free-trade zone with a difference And an interesting irony of history here is that, when Britain joined the European Union in the ’70’s, the British parties were a polar opposite of what they are today about Europe At that time, the Labor Party was badly divided over Europe and the Conservatives were largely in favor of Europe because Europe, the Tories thought, would be an instrument for disempowering British unions and deregulating the economy and making it function more efficiently Margaret Thatcher, a lot of people don’t know this, Margaret Thatcher was one of Ted Heath’s most aggressive lieutenants in getting Britain into the European Union She only became a Euro-skeptic later Not only that, later, about halfway through her administration, Margaret Thatcher was the person who pushed the European Union

toward qualified majority voting on things like reducing non-tariff barriers to trade because she could see She had, earlier than before she did that, she had negotiated big rebates for Britain because of the unfairness of the Common Agricultural Policy and so on, so Britain was getting rebates but she wanted, in her privatizing agenda, which we’re gonna be concerned with in a couple of weeks from now, she wanted more, what we call, neo-liberal policies, she wanted the reduction of non-tariff barriers to trade in Europe It was completely obvious you couldn’t get that with unanimity rule in the union because whoever stood to lose by getting rid of these barriers to trade would veto So they went to qualified majority voting to make decisions in the European Union at the behest of Margaret Thatcher So that’s another reason that the European Union was created, there was this internal free-trade zone but with these wrinkles to it A fourth reason, which is much less intuitively obvious, is that saw people saw this as a counterweight to some of the pressures of their own domestic politics And I can give you a dramatic example of this that I ran into at a conference in Portugal about three years ago, when the rolling Euro crisis was going on and the southern European countries were in extremis And a left wing German intellectual, sort of neo-Marxist by the name of Klaus Hoffa stood up, this was in Portugal, and he gave a speech in which he said, “You know, we Germans are really screwing “you southern Europeans “You should insist on being “let out of the Euro because we’re just forcing, “you should be able to devalue your currencies “and re-equilibrate your economies to get yourselves out “of this crisis and you can’t because of us nasty Germans.” So he thought he would get huge applause And this Portuguese politician, I don’t speak portuguese, she stood up and screamed at him And evidently, he understood enough Portuguese to get the sense that she was angry with him, but not what he was saying So he said, “I think you’ve misunderstood what I’m saying.” And he said it again and she screamed at him even more So then, we went for lunch and I was with a bunch of economists and lawyers and I said, “What was that about?” And the economists all said, well, the Portuguese government knows that, but for these constraints, the Portuguese government would be printing money hand over fist and would have massive hyperinflation And the lawyers all said, you don’t seem to understand Portugal has never been able to be a democracy outside of the European Union, right? So these people saw it, actually, the fact that this was a constraint on Portugal was a good thing And in a less dramatic fashion, even the Germans like some of the constraints And then finally, of course, there was the idea of a federal European state This is the idea most famously associated with Jacques Delors, of an ever closer union, it actually comes from a declaration in Stuttgart, signed in 1983, including by the British, by the way The heads of state or government on the basis of an awareness of the common destiny and the wish to affirm the European identity, confirm their commitment to progress toward an ever closer union among the peoples and member states of the community So five motivations there What do they all share in common? What’s common, I mean, it’s a disparate list but there’s one thing in common Yeah – [Student] They have focus on Europe – Their focus on Europe What’s another thing in common? – [Student] A power in numbers? – Power in numbers, what’s another thing? So they’re all examples, there all from above, they’re an elite project, if you think about it They are the views of what elites think should happen in Europe and a symptom of that happens in 2005

when the Maastricht had created a constitution that was gonna integrate Europe even more, a much more close, ever closer union, and as you can see, France and the Netherlands held referendums in which it was voted down by the populations, the European constitution that had come out of Maastricht And that quickly led the Czechs, the Danes, the Irish, the Polish, the Portuguese, and the UK governments all to cancel their referendums And actually, the Lisbon Treaty is a step back from Maastricht because Maastricht was really trying to create a federal state and the Lisbon Treaty steps back to making it an intergovernment arrangement Very much a top-down enterprise And so the implications of this are one, and this is, the chapter and verse of this is in Tony Judt’s book, “Postwar”, which he published in 2005 He died shortly thereafter so he had a ready finished it before these referendums but the basic message of that book about Europe is look out when the first crisis hits because there’s no grassroots support for this institution And what happened when the first crisis did hit? We’ll talk about later but the chapter and verse of that is in Adam Tooze’s book, “Crashed”, which is mainly a book about the Eurozone crisis and why the European governments have been unable to resolve it And again, it’s to do with the fact that this was an elite project, although he plays out the conflicts of interest within the elites And then there’s one final thing I will mention before we close, and to bring why have I been talking about NATO and the European Union So NATO is actually a source of the obstacle to a Pan-European identity because they contract out their national security If you think back to the beginning of the US, that we almost lost the War of Independence because the states wouldn’t ante up soldiers and funds to fight the war And the reason we created the Federal Constitution was to enable Washington to raise an army so that he could defend itself and pay its national debts Because Europe contracts out, essentially, its national security to NATO there’s no European army, there’s no sense that Europeans might have to go and die for Europe in a way that, as a result of the transition from the Confederation to the United States of America, we have created a national entity with people actually identify So there’s an irony there that, actually, the strength of NATO can be an obstacle to the formation of a Pan-European identity Okay, we’re out of time and next, we will be talking about fusing capitalist economics with communist politics in China and Vietnam (gentle music)