THE VIEW FROM A SMALLER STATE

It is not easy to take issue with Roger Scruton’s analysis: his arguments on the need of nations are supported by his vast knowledge of history, ideas, politics and ethics, and by his impressive experience gained in various parts of our world, including pre- and post-transition East Central Europe. His intellectual arsenal would intimidate anyone wanting to question what he has to say about this complex subject. Yet, it is easy to take a very different position from his, for his short analysis brilliantly exposes the inherent contradictions of the modern world, the conflicting arguments of great thinkers of late, and the uncertainties surrounding the concepts of Europe, state and nation.


It is not easy to find fault with his essay which renders a powerful critique of the recent cult of multiculturalism and of the mainstream unilinear concept of progress. In this part of the world, one cannot but agree with him on the significance of national sentiments as a force legitimising the state, and a source of energy to do great things in historic times. Yet, it is easy to find counter arguments concerning the assumed constructive role of national sentiments in this very part of the world where nation building exercises have sometimes degenerated into suppression or forced assimilation of ethnic minorities, and these sentiments have frequently been played against other values.


It is not easy at all to question his thesis on the importance of the nation state, particularly in our part of the world where regaining state sovereignty has been the ultimate national goal of generations – along with an equally strong desire to get readmission to the “European family”. In smaller states, this desire has been underpinned by a rational calculation of risks posed by powerful unfriendly nations and empires in the neighbourhood. It is however easy to take issue with the author who gets emotional about European integration and resorts to an un-British overstatement claiming that “In the current debt crisis the European elite – composed largely of the governing circles in France and Germany – has assumed the right to depose the elected governments of Greece and Italy, and to impose their own henchmen, chosen from the ranks of obedient apparatchiks”.

The above-mentioned governments that have recently resigned amidst financial, moral and political crises are far from convincing arguments for unlimited national sovereignty; Berlusconi is a case in point, now struggling more with law and order institutions of his country than with the “European elite”. But that is not the mainissue.WhereIfindmyselfdissentingfromRogerScruton’sargumentis the nature of the link between European integration and national sovereignty of smaller states.


Before revisiting the issue of sovereignty, let us reflect on the viability of small states. As context, it is worth having a look at the map of Europe in 1900 – this is how I generally start my course on regime change and post-transition challenges. Even without actually looking at a history map, you will remember from your school years that pre-war Europe consisted of a few entities only: Great Britain; France, another colonial global player; Spain and Portugal as colonial powers already long in decline; the German Reich, stretching from Alsace to Konigsberg, what later became known as Kaliningrad; the Austro-Hungarian Monarchy; the Ottoman empire; Tsarist Russia, Italy, and some smaller entities on the periphery. This was the map in existence when my grandfather was born. On this map, you could not find Poland or Ireland or what we now call the Baltic republics. There existed the Nordic kingdoms and some dependent smaller southern states such as Romania, Serbia and Bulgaria, the latter with shaky finances and uncertain borders.


In that era, the monetary regime of Europe was straightforward: a dozen sovereigns with few currencies, most being on the gold standard. The small number of sizable European empires plus the kingdoms of Northern and Southern Europe all had their distinct legal systems, railway networks, and later national airlines. The European economies functioned well with a limited set of distinct technical standards and measurement systems, and a handful of official languages. In the age of industrial capitalism, countrysizemattered: under the production and technological conditions of the era, it was hard for smaller entities to be independent and advanced at the same time – Switzerland was a glaring exception. This era may be called the age of nationalism; but this is also the age of mass production with its “economies of scale”. The viability of any entity with less than a dozen million of subjects was highly uncertain.


A hundred years later, in the year 2000, if you start reading the map of Europe west to east, it still looks pretty much the same, with some minor modifications of national borders, except for the emergence of independent Ireland. But look at Central and Eastern Europe! You will see a new geography: a series of new countries with new borders. The second map strikes you with a stark difference in respect of the number of the sovereigns in Europe: what was once only a province is now a sovereign republic. Ours is, in reality, the age of the nations!

But will small states remain viable in economic terms? Does it make economic sense to try to establish a sovereign state with only a couple of million subjects? The same issue is relevant on a European level: can a continent consisting of so many minor entities manage to stay competitive in face of lower cost challengers and high-tech competitors?


Imagine the absence of any form of European integration: all states, new and old, would have the right to their own currencies, health and industry standards, legal procedures and tax regulations. National parliaments could determine national voltage and rail gauge of their own. This vision – shared probably by a tenth of Europe’s citizenry – would, if put into reality, lead to absurd consequences.


A look at the map of contemporary Europe, thus, makes most of us understand the objective necessity for sweeping harmonisation of rules, institutes and norms if new (and also older) member states desire to prosper. Small size of a national economy necessitates cross border trade of goods and services. Let us take Estonia as a case: its economy is smaller in terms of value generated than the economy of Lübeck, a German city; it would be absurd for the 1.3 million Estonians to attempt anything close to self-reliance. Economic and financial openness is a must for all new member states, even if having national borders and other requisites of national sovereignty is dear to the citizens and the elites of these states.


The new EU member states depend intensively on capital inflows. It must be so if they aspire to catch up with more advanced neighbours. And they all do aspire, very much. Market driven flows are sensitive to country risks as well as currency risks. That raises the obvious European issue of having national currencies. Does it make sense for every smallish state to print its own currency – what an American economist called “funny money”? A variety of national currencies would obviously lead to excessively high transaction costs in Europe; the existence of numerous monetary regimes increases uncertainties in financial matters. Conclusion: for economic prosperity, some sort of currency agreements – or a common currency – has to be created. I had once my signature as central bank governor on the Hungarian bank notes – which gives you a very special feeling when you pay in cash; so you can trust that I like Hungarian forint. Still my conviction is that we would have been better off with the euro. Now we are stuck with HUF and exchange rate volatility and external exposure to faceless markets.


The euro is admittedly a disputed issue. In the Europe of the pre-war era, the gold standard provided an adequate platform for free trade and smooth flow of capital; in today’s Europe, which is made up of small to medium sized nations, international monetary and trade arrangements are more important than ever. You are right to object to the excesses of supranationality of the European integration process – but let us also admit: the very existence of a number of European sovereign states is in no small measure due to Europe-wide harmonisation in legal, technological, institutional, financial and political matters.


So far I have touched upon money matters but one could equally take the issue of culture and language: small, and not that small, nations find some protection in the European project against the negative externalities emanating from what became known as globalisation. Think of the prospect of national film industries without legal and financial support of the EU, or the use of smaller languages. Mind you, all nations on the European continent can be regarded small in certain respects.


To cut my counterarguments short: sovereignty and interdependence are not mutually exclusive concepts. Nation state and limited sovereignty (member state) sound contradicting concepts but in real life you can sustain a workable modus vivendi. Being a patriot and being a European is also a duality that is not easy – but not impossible – to live with. Ask politicians on the periphery, and some will noisily complain in public, but talk to business people, artists, pensioners and students – and you will get mixed signals from the public. The young look at things differently: even football club loyalty, once a local and/or national issue, has been transformed into something new, as can be seen by the transnational fan bases of Barcelona, Milan, MU or Bayern. Polls indicate that this duality is less of a problem in good times and more when life is harder – and at present, we are experiencing rough times, mostly for economic and financial reasons.


The eurozone is certainly having deep problems – less the euro which is a remarkable noninflationary currency. You have read obituaries of the euro in British and American papers but the report of its death has been greatly exaggerated. Some of the eurozone’s problems are caused by inner regulatory mistakes, others are due to serious mismanagement in some member states. National elites tend to blame “Brussels” for rules that governments of member states have set unitis viribus – and some countries have failed to keep. But that is politicking. Deeper down there are trends that create and recreate modalities to resolve the perennial contradiction between local and universal, national and European. Muddling through, yes – this is the best the continent seems to offer as crisis strategy. But it is still better than getting stuck in oriental mud.

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