Why Europe Needs A New Marshall Plan

So here we are in referendum mode… again. No doubt the framers of the Irish constitution had many things in mind in its drafting. But one very much doubts that their aims included Swissification – that is, a scenario where myriad issues would be resolved only by a referendum. That, increasingly, seems to be what’s happening.

Our relationship with the Constitution has changed over the last two decades. There are three drivers of this process.
The first is the trench warfare waged by anti-Europe campaigners who have continually, and often successfully, used it to challenge changes accruing from European treaties.
The second is the rise of a largely unheralded movement for participatory (as distinct from representative) democracy.
The third is the broad suspicion of authority amongst Irish people, and a general attitude that we’re all mad as hell and not going to take it anymore, whatever ‘it’ might be, including water charges, property taxes, oil pipelines, electricity pylons, phone masts, windmills, motorways – you-name-it, we’re agin it…
You might argue that these are part and parcel of the democratic process and so they are. But they also make it very difficult to get on with things and to initiate and manage necessary change. Like, for sure we know our rights under the Constitution… but what does it, or should it, say about our responsibilities?
It all fits into the present campaign, in which everything but the kitchen sink will be flung into the mix to win over the floating third – that is, the 30% or so of voters who are never sure which way they’ll go and who generally herd in a particular direction late in the day.
These are the people who gave Bertie his second and third election victories. They swung for Sean Gallagher in the presidential election (when it started to look like he was the man to beat) and then against him after the infamous tweet. They voted against Lisbon, and then for. You know who you are…
The kitchen sink of likely weapons of persuasion includes the election results in France and Greece. What do they mean? Both sides are extracting meanings to suit their cases. Right now, it looks as though Greece will do what (apparently) some opponents of the Treaty want Ireland to do, that is to default, go it alone, face down Europe, the markets, the whole jing-bang lot of them.
It is entirely unpredictable what events that strategy, if it can be called a strategy, might trigger. At face value, it looks like the Greeks may be about to jump across a very deep ravine without a safety rope or net. But maybe I’m misreading things.
As regards France, there was a lot of noise on the anti side about Hollande’s victory which was seen as anti-austerity. His announcement that France’s finances are in worse shape than was thought and that there will have to be deeper cutbacks than thought has softened coughs a bit (though only a bit).
What he’s saying is that you have to balance the books. And if the money isn’t there, you have to trim spending. Call that austerity if you want, it doesn’t change the fundamental facts. In Ireland, apart from the banks, we have a public expenditure problem. For much of the Ahern era there was an exponential growth in this and, crucially, much was in unproductive administrative areas. Look at the HSE…
What the Stability Treaty sets out to do is embed a commitment to balancing the books in the State’s governance. That done, everyone seems to agree that fiscal probity needs to be balanced by a growth strategy.
As an example, we might look back 65 years to 1947. In the immediate aftermath of the war, Europe was devastated. Things might have worked differently, but World War II marked the end of (in particular) France and Germany’s catastrophic war-waging, which had taken the lives of millions from the 16th to the 20th century.
A rescue package was needed and in a speech on June 5 1947, the US Secretary of State George Marshall announced the European Recovery Program (ERP), known more widely as the Marshall Plan. Its purpose was to rebuild the economies and the morale, primarily of western Europe.
It was Marshall’s view that the key to restoration of political stability lay in the revitalisation of national economies. That’s as true today as it was then.
Sixteen countries benefitted from the Plan, including Germany. In total, these countries received nearly $13 billion in aid. That’s equivalent to €130 billion today. They started with shipments of food, staples, fuel and machinery from the United States but later it was turned to investment in industrial capacity in Europe.
The result? From 1948 to 1952, European economies grew at an unprecedented rate. Trade relations led to the formation of the North Atlantic alliance and in time to the European Union.
Of course, it’s not a war we’re coming out of, nor a natural disaster, but it’s been a catastrophe nonetheless. Ireland (among others) has huge debts. A cynic might even call them reparations – in which light, it would do Angela Merkel no harm at all to remember the resentment in her country at being saddled with reparations after World War I. Notably, Germany wasn’t similarly freighted down after World War II, even though the case for doing so would have been far more compelling.
When people talk of debt forgiveness and economic stimulus, these are the considerations in play. To really understand the impact of the Marshall Plan you just have to compare the economic trajectories of West and East Germany 1947-1987.
We need another in 2012. You could even call it the Merkel Plan. But whatever it’s called, it’s the second pillar of recovery.
It really needs to happen fast.