Last week, in the UN Detention Unit in The Hague, Ratko Mladić died. The Bosnian Serb former general was 84. Two contradictory thoughts occur.
First, Europe embarrassed itself in the 1990s. Sensing that its “hour” had come — a Luxembourg foreign minister’s phrase — the continent was going to manage the break-up of Yugoslavia without America. Subsequent chaos, including the war crimes for which Mladić was convicted, falsified that boast.
Second, those were the good old days of European military seriousness. In 1990, Britain spent 4 per cent of national output on defence. France spent 2.8 and Germany 2.5. On the eve of the Ukraine war, those numbers had fallen to 2.1 per cent, 1.9 and 1.3. The number of armed personnel collapsed in all three countries over the period.
So, just to restore a bad position, in which Europe was powerless to stop local atrocities, its leading countries have to raise defence spending. How? Except for Germany, none of them can borrow much more. (Britain’s public sector net debt was around 30 per cent in the 1990s. It is three times that now.) None can tax much more, at least not without damping incentives in their already subdued economies. Take the cash out of welfare, and voters revolt. The one answer is GDP growth. In fact, every European politician of good conscience should have a flowchart as their smartphone wallpaper. Growth —> tax receipts —> defence expenditure.
Until now, the case for growth was that, without it, Europe would become a bit poorer over time. This was never enough for voters to accept the upfront pain of, say, welfare cuts and lighter job protections. The prospect of national economic decline was too far off, and the starting point too high. So, reform packages came to almost nought: before Mario Draghi’s proposals stalled in 2024, the Lisbon Agenda stalled in 2000. Reforms that were enacted often proved electorally unsurvivable. Gerhard Schröder knows.
Now, the case for growth is that, without it, Europe cannot deter its mortal enemies. The economic question has become an existential one. The politics might be lining up for pro-growth reform, as it hasn’t for almost half a century.
As regular readers know, I am doubtful that rich and mature democracies can make painful reforms, except in a crisis. I just always assumed the crisis must be economic. The precedents suggest so: Britain’s humiliating IMF loan of 1976, the stagflation that gave rise to Reaganism, the market revolt against François Mitterrand’s government in France, the Eurozone crisis that spurred change in Greece and Spain. There is nothing like a bond sell-off to make even a deluded government wake up. The system works.
But what if the crisis is geopolitical? What if the impetus for change is to survive as a nation, not just to recover lost affluence? In that case, the proper historical parallel is the Meiji Restoration, when Japan modernised at light speed to save itself from conquest or vassalage. Unthinkable reforms, such as industrialisation, took on the air of patriotic necessity.
That was an imperial regime. The question is whether Europeans with a free vote will make the same connection between growth and survival. Perhaps, to nudge them along, governments will have The Conversation. That is, the seriousness of the Russian threat, and the holes in the existing defences against it, will be spelt out as never before. (In much of the east and north of the continent, voters need no such instruction.)
The risk here is huge. For one thing, being candid about unpreparedness is itself a security liability. Also, far-right parties will make hay, accusing the elite of exaggerating a remote problem to foist change on people. The Alternative for Germany is perhaps the western populist movement most inclined to see things from the Kremlin’s angle. It could win the region of Saxony-Anhalt this weekend. In this atmosphere, it is a rash liberal who confronts voters with the “grow or perish” case.
Alternatively, politicians need say very little. Events will do all the work. According to the German government, Russia was behind a drone attack at Leipzig airport last month. At some point, a “grey zone” event, perhaps in Britain, will be all too black. If the threat is serious, then almost by definition the public will notice. An equivalent of Commodore Matthew Perry stalking Tokyo Bay will happen. At that point, the need for growth will not be lost on even the most obtuse. Vladimir Putin will have done what Draghi couldn’t.
Either way, how Europe arrives at its Meiji moment matters less than getting there, and soon. It must become axiomatic that all priorities are subordinate to growth, because all priorities are subordinate to security.
Looking back, the peace dividend that Europe started to take in the 1990s has a worse reputation than it deserves. Spending a reduced share of GDP on defence is not total folly if that GDP is growing at a fast rate. The importance of the denominator gets lost in the obsession with Nato targets. What has left Europe so mortally exposed is its economic performance, especially since the crash, and especially in the countries big enough to make a military difference. The way out is, or should be, obvious. Europeans who have long pushed for growth might find that a clinching argument is at last on hand, even if time isn’t.
