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Europe, America and the leadership question

by Robert Teitelman | Published December 5, 2011 at 12:20 PM

In today's Financial Times, Edward Luce bemoans the lack of leadership by America in the euro-zone crisis. He joins a more general chorus bewailing lack of leadership nearly everywhere: among politicians around the globe, European technocrats, by the White House and particularly President Obama, on matters large, small and absurd. A deficit of leadership has become an all-purpose complaint in this troubled season of crisis and contention, similar in its haziness to recurrent demands for apologies. What does it mean? More specifically, what does it mean in a democracy?

Luce argues that the fact that Washington seems to have no influence on the unfolding euro crisis "has offered the U.S. a sobering lesson in the changing ways of the world. To put it bluntly, American advice comes at a deep discount nowadays -- even if, ironically, Washington's strictures have been on target about fixing the euro zone morass." Well, there's a lot to ponder in those two sentences. First, I'm not sure anyone that's not deep inside the administration or the Federal Reserve really knows what conversations have occurred between economic mandarins in Washington and their counterparts in Europe. There may be very few; the advice may even come at a "deep discount" -- although how you measure these things is beyond me. What Luce offers as evidence bobs along the frothy public surface: the European dismissal of Timothy Geithner's public admonitions a few weeks ago and "conversations" in Washington over the past few months that "begin or end with the observation: That depends on what happens in Europe." Not exactly inside stuff. Luce contrasts that with what he seems to believe is the old, swaggering tone of American policy makers and pols, as in the Washington Consensus '90s, when Washington offered advice to everyone and, seemingly, everyone took it. Luce, by the way, spent some time back then writing speeches for Larry Summers.

Are we seeing evidence of waning American power and leadership? Perhaps. Or perhaps not. (Luce himself recently wrote about America's new age of energy plenty.) It seems to me a very long time since Europeans automatically kowtowed to American desires -- and least back to the Cold War when Europe still needed the U.S. to deter Soviet encroachment. George W. Bush couldn't herd the Europeans, led by the French, into his Iraqi adventure; and generally Europeans have resisted the appearance of following the American line, even if they sometimes quietly went along. The U.S. had little to do with the creation of the euro zone in the first place. Indeed, for all the power of the Washington Consensus, Bob Rubin, Larry Summers and Alan Greenspan didn't have a hell of a lot of success convincing Japan to make reforms necessary to pull out of its long, post-bubble malaise in the '90s. And the IMF played the bogeyman role during the Asia Crisis and almost blew itself up. You can say, well, the IMF is an American proxy, but a European has long run it and it's situated strategically to play a major role in whatever happens in Europe. Lastly, and politically, the U.S. may have less clout today in Europe not only because of its "waning" power, but because it a) has long been associated with a free market, free trade, no-holds-barred Washington Consensus capitalism that's largely blamed for the crisis (no matter the euro zone's own structural problems) and b) the legacy of the George W. Bush administration, with its Iraq disaster, its embrace of torture and its condescension toward Europe -- a legacy that can be repaired, but only over time.

Besides, it's pretty clear that the euro-zone problem is very, very difficult. Luce seems to believe U.S. technocrats have the answers, although he doesn't elaborate how the U.S. would resolve the political and financial contradictions built within the current structure. American officials have boasted of their "success" in keeping the financial system and banks afloat after Lehman Brothers collapsed through a raft of liquidity measures and bailouts. But those steps, for all their undoubted success in avoiding meltdown, have helped spawn the polarizing politics of today. The American system, of course, is very different from the euro zone. Are we to say to Europe, what Germans demand of Greeks? Be just like us! The real problem of the euro zone is political and involves shifting sovereignties from national to euro-zone entities, remedying imbalances, dealing with national and cultural differences -- a subject Wolfgang Munchau goes into convincing (if frightening) detail today in the FT. This isn't Berlin in 1949 or the Marshall Plan. Europe is not a starving, smoldering wreck. A U.S. president can't suggest that individual European nations surrender control over fiscal powers without undermining the delicate politics of all of this. These are democracies, and this is a problem of democracy. European democracy. Obama is smart enough to see this.

The real problem here is not that American power is necessarily waning -- Obama can give a speech in Cairo and get blamed (or credited) for kicking off the Arab Spring, although it's more complicated than that -- but that a very particular set of ideas has lost its power to convince. The financial crisis undermined the authority of a variety of groups and institutions and ideas, from regulators to politicians to central bankers to economic technocrats to, of course, financiers and traders. It has eroded the always-controversial belief (particularly in Europe) in the wisdom of rational markets, and of the ascension of markets above politics and social policy. And yes, it has diminished the clout of American policy makers, who have long been identified with those ideas. But ask yourself this: If China wanted, could it lecture Europe and force it to act in any particular way? Undoubtedly not.

The other problem here, particularly from a Washington perch, is that Americans currently do not give a crap about Europe (perhaps they never have unless some existential threat emerges, like Nazi Germany or the Soviet Union). You hear nary a word from Republican presidential candidates about Europe, and I've never seen anything resembling a GOP policy about the Continent beyond the notion that they're a bunch of socialist wimps who should do as we say. Americans overwhelmingly either don't understand what's going on in the euro zone, or don't care. This, of course, is an American failing, but one we've had for many decades. Obama and the gang not only lack the political clout to shape a European outcome, but they lack the will of the American people to try very hard. If all hell does break lose in Europe, Democrats will roll their eyes at feckless Europeans while the Republicans will try to accentuate Obama's European (or cosmopolitan) tendencies.

How do you generate leadership in a democracy when voters do not care? You speak quietly and work the back channels. Many thought Franklin Roosevelt in the late '30s was terribly weak in responding to the unfolding European nightmare. But he lacked answers, power and support for more aggressive actions. He could only quietly begin to prepare to aid Britain and rebuild the U.S. military. He had to play a longer game and to eschew the demands of the pundits for "leadership." Funny how views change. - Robert Teitelman

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