Eutopia Is Dead. What Now?

LUCCA, Italy--Don't let the dateline fool you. I'm not on holiday. On Wednesday, Dutch voters finished off the unwieldy and absurd EU constitution. That afternoon I got a hasty phone call from the organizers of a conference here in Tuscany. I had just published an article arguing that the defeat of the constitution was in fact a good thing for both Europeans and Americans--could I please fly over the next day to repeat the message to a roomful of anxious Italian politicians and journalists?

"Don't panic" is not a very complicated message, but it's one that Europeans suddenly seemed to need to hear. Within hours of the Dutch vote, the European airwaves filled with noisy predictions of disaster. Without the constitution, the Euro currency would collapse, the European Union would break apart, the whole continent would soon tumble from unity into chaos.

But look: The European constitution failed because Europeans did not want it. The document was a poorly drafted mess that injured European democracy by transferring powers from national legislatures to the unelected and high-handed European Commission and the unelected and even more high-handed European Court of Justice.

By contrast, Europeans do want the Euro and the European Union. Neither is going anywhere. On the contrary, the defeat of the ill-conceived European constitution offers Europe its best chance in years to solve real problems that affect real people.

Since the early 1990s, European leaders have been consumed with the (to them) fascinating job of building European institutions. Europe now has a flag, a national anthem, a song contest, and a charter of rights. European officials set policies on issues that range far and wide from the organization's original economic purposes. They have banned the death penalty even for countries that favor it, imposed homosexual rights on countries that oppose them, and fought a global struggle to suppress genetically modified foods.

What EU officials have by and large failed to do, however, is build effective economic policies. French unemployment has hit 11% and youth unemployment surges even higher. Five million Germans are out of work. Italy has slipped into outright recession.

France and Germany ignore the debt limits they accepted as part of the deal to create the Euro currency. Their feeble efforts to reform their out-of-control welfare states have failed: This spring, a wave of strikes forced French prime minister Jacques Raffarin to abandon his proposal to end the national paid holiday for Whit Monday, a festival English-speakers may vaguely remember from the pages of Ivanhoe.

It's not hard to describe what Europe must do to keep pace with the United States and remain ahead of China and India.

It must invest more, and so it must cut taxes.

It must raise its skill and technology level, and so it must free its universities from state control.

It must encourage its citizens to work harder, and so it must cut back on lavish pension and unemployment systems.

It must make it easier for citizens to move to seek work, and so it must eliminate obstacles to mobility, such as Germany's crushing taxes on the sale and purchase of housing.

This agenda is easy to describe, but hard to carry out. The EU constitution was at best a time-wasting irrelevancy to this work of reform; at worst, it would have functioned as an outright impediment.

True, some reform-minded Europeans may have held quiet hopes that the unelected European Commission might somehow force reforms from which cowardly politicians recoiled. At its best, the commission has been a force for freer trade and more rational economic policies.

But the commission has bad days as well as good days, and it seems as often interested in forcing Estonia and Slovakia to push their taxes up as in persuading France and Germany to bring their taxes down.

Europe needs broad and deep institutional changes, and no unelected commissioner aware of the limits of his or her democratic legitimacy will ever dare impose such changes. Democratic societies must be persuaded to change, not forced, and it is through democratic politics that the work of persuasion must be done.

And when societies must change, the strongest motive for encouraging change is nationalism. When Margaret Thatcher advocated reform in Britain, she did not just say that Britain was falling short of its potential and must open its markets to optimize its performance. She said that Britain was falling behind its neighbors and traditional rivals, France and Germany, and that Britain must change in order to remain truly great.

Likewise, the small Eastern European countries that have most adopted the boldest market-oriented reforms were not persuaded by purely economistic welfare-maximizing arguments. Their leaders appealed to their national pride, to the desire of newly liberated lands to catch up, to stand equal, to cease being poor and backward and marginal.

Nationalism has often been exploited to justify destructive economic policies, as Canadians know all too well. But in other places and at other times, the desire to overcome national weakness, to enhance one's nation's importance in the world, has prodded reluctant societies to choose wise policies over short-sighted and self-indulgent ones. People have died for France--but who would accept a higher dental co-pay for the sake of united Europe?

Last week's vote puts an end to the bizarre fantasy of one united Eutopia--and creates an opportunity for a new generation of leaders to do what their nations need to grow and thrive. So again: Don't panic. Europe's leaders have tried and failed to evade their responsibilities. Now they have no choice but to accept them--and go to work.