17.11.2007
Funky Integration
№4 2007 October/December
Olga Butorina

Olga Butorina is a Doctor of Economics, professor, head of the European Integration Department, Advisor to the Director of the MGIMO University of the Russian Foreign Ministry, and a member of the Board of Advisors of Russia in Global Affairs.

The European
Union, together with its geography, institutions and mechanisms, is
changing. So is the regional integration philosophy per se. The
single vector movement is giving way to a variety of constantly
changing scenarios.

European
integration is usually compared to a train moving toward a single
destination that is known to all of its passengers. Today, however,
there is a metaphor that more aptly describes European integration:
a hypermarket with numerous shops, cafes, Internet outlets, beauty
parlors, Laundromats, and multiplex cinemas.

There are no more
railway cars where the passengers are reading the same morning
newspaper and looking at the same scene out the window. Nor is
there any sort of set schedule. But most importantly, there is no
destination as such.

Instead, there
are common working hours, parking lots, clean floors and toilets,
and functional escalators. There are also fountains, winter
gardens, and music that plays around the clock. There is plenty of
space here for everybody – civil servants, businessmen, senior
citizens, teenagers, and families with children. A person can
purchase a plasma TV set, a bunch of bananas, a can of coffee or an
investment share acquisition certificate – whatever he
prefers.

The metaphoric
train transformed into a hypermarket so quickly that neither the EU
member states nor their neighbors have appreciated the fact yet.
Thus, the frequent setbacks in EU integration plans, as well as
unprecedented tension in relations with third countries, including
Russia.

GLOBAL
RACE

What is regional
integration and why is it necessary? The European discourse
provides four definitions.

The first is
based on the EU’s own experience, primarily in the economic sphere:
integration as the merging of national economies. The three other
definitions are based on theoretical assumptions that belong to
specific political schools of thought.
 
Representatives
of European federalism, inspired by centuries-old dreams about the
unity of Europe, see the ultimate goal in the creation of a
superstate. From this perspective, the main hallmark of integration
is the existence of supra-national bodies, to which independent
states delegate a part of their national sovereignty.
 
Next, in the
so-called communication theory, integration is defined as a
close-knit community based on common values that ultimately lead to
a common identity. A distinguishing feature of integration under
this definition is the existence of closer ties between its
participants than with those outside of the community.

Finally, within
the framework of neo-functionalism, integration is seen as a
collective method of fulfilling practical tasks. National
authorities may delegate executive functions, but not sovereignty.
The public, seeing the practical utility of common institutions,
recognizes and embraces them.

These definitions
differ from one another appreciably, but they have two
shortcomings: they fail to answer the main question, which concerns
the strategic purpose of integration, and they blur the difference
between aims and means.

In accordance
with the federalist concept, which foresees the creation of strong
supra-national bodies, the EU has already passed most of the
distance toward the ultimate goal. However, the ultimate goal –
federation or confederation – is unlikely to be achieved any time
soon. Does this mean that the EU’s current activities are
pointless? Certainly not.

From the
perspective of the communication theory, the EU’s major success
story has been the consolidation of common values. But the EU’s
sense of identity is still extremely ambiguous, as its evolution is
being hampered not only by cultural differences but also by the
absence of a unified political system, as well as the priority of
national over pan-European citizenship.

The intensity of
regional economic relations is an even trickier issue. Trade
between EU member countries only grew at the initial stage of
integration. Since the 1970s, it has been about 60 percent. That is
hardly surprising: further economic rapprochement between the
partners would have disqualified them from international relations,
cutting them off from attractive markets and sources of raw
materials.

The central idea
of the pragmatic economists – i.e., the purpose of integration is
the formation of a single market and a single economy – has failed
the test of time. Although the EU’s internal market has on the
whole been operating since 1993, the “single price” law has been
applied haphazardly at best. Any well-traveled tourist knows that
prices in Sweden are high, moderate in Spain, and low in Bulgaria.
For many types of services, not least financial assets, convergence
of prices is impossible in principle; at best it can be regarded as
a goal for succeeding generations of Europeans.

Bela Balassa’s
theory that says integration passes through four stages of
development – from a free trade zone to a currency union – has now
lost its relevance. According to this logic, the EU has only one
goal left, namely, to expand the euro zone to 27 member countries
without wasting resources on a common defense identity or
scientific and technical policy.

In 2005, the
European Integration Department at the Moscow State Institute of
International Relations (MGIMO), following a series of seminars,
proposed a new definition of regional integration. It bases its
conclusions within the context of globalization, which has two
essential but opposing elements – unifying and divisive.

On the one hand,
globalization intensifies ties between countries and regions, but,
on the other, it divides them into strata, thereby establishing a
rigid hierarchy. Each stratum has its own level of wellbeing,
political, economic and cultural influence, access to resources and
information, the use of advanced technology, and so on.

Under these
conditions, the principal driving force of regional integration is
the striving of the member states to advance to a better stratum
(or otherwise to build a stronger stratum through concerted
efforts) than the one to which they belong (or would belong)
without integration. Not surprisingly, the unification of Europe
started after World War II. That was the time when colonial
empires, which had been calling the shots in the previous era,
began to fall apart, while the United States and the Soviet Union
emerged as the world’s main powers.

Therefore, the
following definition was proposed: regional integration
is a model of conscious and active participation by groups of
countries involved in the globalization-driven stratification of
the world
. As mentioned previously, the main goal is
to create the most successful stratum – i.e., strengthening the
group’s positions in those realms of activity that are the most
important for a given stage of globalization. The goal of each
individual country is to ensure the most favorable strategic
environment. Integration makes it possible to maximize the
advantages of globalization and minimize its negative
impact.

So, regional
integration is a model of collective behavior in the context of
global stratification. The creation of supra-national bodies, the
expansion of regional trade, and the introduction of a common
currency or citizenship – all of these are the instruments and
products of regional integration. If tomorrow it is decided that
global leadership will depend upon a country’s ability to grow
square tomatoes, the EU will immediately adopt a detailed plan of
action to that effect.

The most
important element of regional integration is the idea of a common
future of the EU nations. It is important to stress: a common
future, as opposed to a common past. Common histories and similar
cultures, as well as comparable political and economic systems, are
essential but not sufficient conditions for successful integration.
The invisible foundation of integration is constituted by a common
view of its present and future global identity. It is no accident
that the European Constitution opens with the following line:
Reflecting the will of the citizens and States of Europe to
build a common future, this Constitution establishes the European
Union…”
(Article 1.1).

Integration is
a shared dream about a bright future for oneself, one’s children
and grandchildren. And like any dream, it may or may not come true.
However, a dream, especially one backed up by viable plans, is
better than no dream at all. Therefore, integration is both a dream
and an ongoing project at the same time.
 
In this sense,
the EU today is indeed reminiscent of a hypermarket. To a well-off
individual, it is a place where he can resolve domestic problems
quickly and without hassles. To a provincial teenager, it is a
model for a better life. It is an exhibition of international
economic achievements that he can easily access – ride a glistening
escalator, listen to a CD of a favorite pop group, buy a cool
T-shirt or discuss the latest cell phone model with a sales
assistant. He can interact in the same venue as the customer who
arrives in an expensive car and uses credit cards to pay for his
purchases.
 
Herein lies the
EU’s greatest attraction.
 
BROKEN
UNIFORMITY

After the
Maastricht Treaty in 1992 permitted individual countries not to
adopt the euro, experts started talking about multi-speed
integration, and the EU-train metaphor arose once again. But is
integration simply a matter of speed?

To answer this
question, this author, using data from the World Bank, conducted a
targeted analysis of socio-economic indicators of 34 European
countries, as well as Cyprus and Turkey. The survey did not include
states with a population of less than one million, since such data
are subject to deviation. These countries were classified according
to their level of wealth, as represented by per capita Gross
National Income (GNI) in 2004 (Graph 1).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

As shown in the
graph, there are five groups of nations, each categorized according
to their relative wealth. The first group, which is made up of the
least prosperous members, comprised 10 countries – six in Southern
Europe (Romania, Bulgaria, Serbia and Montenegro, Macedonia,
Albania, and Bosnia and Herzegovina), three in the CIS (Belarus,
Ukraine, and Moldova), and Turkey. The second group includes seven
new EU members from Central Europe (the Czech Republic, Hungary,
Estonia, Slovakia, Poland, Lithuania and Latvia) and Croatia. The
third group is comprised of three backward member countries of the
EU-15 (Spain, Greece, and Portugal) and two successful newcomers
(Cyprus and Slovenia). The fourth group consists of 11 of the
strongest West European EU members. The fifth are the two richest
outsiders – Switzerland and Norway.

Next, per
capita GNI was calculated for each group (arithmetic mean of these
indicators for each country in a given group. In Group 1, the
average GNI was $2,077; Group 2, $6,913; Group 3, $16,752; Group 4,
$32,767, and in the last group, $50,705). Needless to say, this
method is not absolute and has its limitations. One problem is that
Group 5 is so small, while Group 3 is mainly comprised of
Mediterranean countries. At the same time, this procedure is simple
and provides clear results that are easy to interpret. Its
important advantage is the absence of time frames, which seriously
complicate the identification of trends due to uneven inflation
rates and structural changes. The resultant data provide an instant
picture of Europe’s economic condition in 2004. They point to
changes that occur in society as per capita income grows and, just
like a family picture, provide some idea about the age
distribution.
 
Human resources. In terms of life
expectancy, the difference between Group 1 and Group 5 is 16 years
– 65 and 81 years, respectively (Graph 2). Remarkably, the first
step – transition from Group 1 to Group 2 – accounts for one-half
of the total increase, i.e., eight years. The next step adds five
more years. So in Group 3, life expectancy actually approaches
Europe’s (and the world’s) highest level. 
 

In the poorest
countries (except Bulgaria), secondary education was not available
to all adults. However, that problem was effectively resolved
already in Group 2, while in Group 4, one person in five has a
second secondary education. The incidence of higher education
largely depends on the national model. The highest proportion of
people with university degrees is in the Scandinavian countries –
Norway, Sweden and Finland (80-87 percent of the adult population).
In highly developed states of Western Europe, this indicator is on
average 62 percent (including in Austria 49 percent and in Germany
50 percent). In the poorest countries of Southern Europe and
Turkey, only 31 percent of adults have a higher education, while in
the Central European countries the level is 53 percent. As in the
case of life expectancy, the most substantial difference is between
Groups 1 and 2.

The same
pattern is observed in the instance of infant mortality (Graph 3).
In Group 3, with a per capita income of at least $14,000, not more
than nine out of 1,000 newborns die before age five. In Group 1,
the coefficient is almost double that. The situation is especially
bad in Turkey, where 60 out of 1,000 children die before age five.
In Poland, the coefficient is 15, in Germany 9, in Finland 7, and
in Switzerland 10.
 
 
The number of
births per woman (fertility coefficient) provides some interesting
statistics. There are two different models in Group 1. The first
model is characteristic of former socialist states – Bulgaria,
Romania, Ukraine, Moldova and Belarus – where the average number of
births per woman varies between 1.2 and 1.4. In Turkey and Albania
(where Muslim traditions are strong), the coefficient is 2.2 (in
Macedonia, Serbia and Montenegro, the figure is 1.7). On the other
hand, Groups 2 and 3 are extremely homogeneous with 1.2 to 1.4
births per woman.

A marked increase
in the birth coefficient occurs in Group 4. That refutes the common
belief that there is an inverse proportion between income growth
and the birth rate. In the Netherlands and Finland, birth rates are
higher than in Spain and Greece. It is possible that higher birth
rates in more prosperous states are due to an inflow of immigrants
from the Third World, as well as the social model (especially in
Scandinavia), and family support programs. Whatever the case may
be, in rich European countries (except Germany and Italy) the
population is aging more slowly than in the relatively poor
countries.

Modernization and new technology.
In the less developed countries, agriculture generates between 11
and 21 percent of GDP, as compared to 1-3 percent in the most
developed countries (Graph 4). But can such a low share of the
agrarian sector in West European GDP be attributed to its
large-scale services industry? To exclude this factor, the share of
industry in material production was calculated for each country.
The results show convincingly that economic development goes hand
in hand with steady industrialization. Thus, in Bulgaria, industry
accounts for 74 percent of material production, as compared to 87
percent and 92 percent in Portugal and France,
respectively.

The substantial
gap reflects a global move toward specialization. High-tech
products in the total export of the manufacturing industry are 3
percent in Group 1, 11 percent in Groups 2 and 3, and 19 percent in
Group 4. It is noteworthy that the high-tech export curve is a
mirror-like reflection of the share of agriculture in
GDP.

Telephone and
Internet penetration rates in the EU’s leading states are three to
four times higher than in the weaker states (Graph 5). As per
capita income grows, the number of fixed line telephone networks
and cell phone subscribers increases more evenly than, for example,
does life expectancy or the spread of higher education. Although
even here, the rates appear to be slowing. 
 
 

The unusual form
of the graphs reflecting the process of industrialization (Graph 4)
and Internet penetration (Graph 5) – i.e., the equality of Group 2
and Group 3 indicators – may have the following explanation. Group
3 is comprised of states that are the largest agricultural
producers in the Mediterranean. Agriculture there has deep
historical and cultural roots. By contrast, Group 2 includes former
socialist countries, which (during the COMECON period) pursued an
active export-oriented industrialization policy. For example, in
Hungary, high-tech products account for 29 percent of industrial
exports: it ranks second in Europe by this indicator, together with
Germany.

Financial
markets present an entirely different picture. Unlike the majority
of the aforementioned indicators, stock market capitalization
increases not along a horizontal parabola but an exponential curve
(upward). The value of stocks and bonds circulating in the country
in relation to GDP increases 11 percentage points from Group 1 to
Group 2, 23 points from Group 2 to Group 3, 40 points from Group 3
to Group 4, and 53 points from Group 4 to Group 5.

Cluster strategies. Analysis
shows that different groups of countries in the EU are moving
toward integration not only at a different pace. They each have
their own priorities.

Bulgaria,
Romania, and aspiring states have yet to complete the process of
industrialization, modernize education and healthcare systems, and
build up their infrastructures. They need to restructure the
agricultural sector, diversify and strengthen its specialization
techniques, and ultimately enhance its profitability. Prospects for
industrial growth also require a clear prioritization of goals, as
well as foreign investment and technology. In the next 10 to 15
years, these countries will be unable to appreciably upgrade their
industry and increase the export of high-tech
products.

It is also
critical for the Central European states to develop their
healthcare and higher education systems. With a balanced economic
policy, they have a good chance of catching up with the EU leaders
in terms of life expectancy and child mortality rates. But
according to EC forecasts, before 2050, the population of these
central states will continue to age. Poland, the Czech Republic,
Hungary, Slovakia and the Baltic States have effectively completed
their industrialization programs, but they will work many more
years to modernize their industry. However, their ability to
implement large-scale, investment-intensive R&D programs will
remain limited in the foreseeable future.

In Spain,
Portugal, Greece, Slovenia, and Cyprus, the categories of life
expectancy, infant mortality, and secondary and higher education
effectively correspond to the level of the EU’s leading nations.
The priority here is to complete the retooling of industry and
sharply increase the share of cutting-edge, research-intensive
production. Judging by Ireland’s experience, that goal is quite
feasible. Spain, Portugal and Slovenia, for example, have set the
stage for a new breakthrough in the pursuit of national R&D
programs, as well as modern information society.

The eleven most
developed EU countries are destined to play a special mission here.
Due to their economic and political weight, they set priorities and
define the type and pace of integration. They also bear the utmost
responsibility for the Union’s future. The most important goal is
to retain the positions that have already been attained:
maintaining the present social standards, ensuring stable (albeit
not very high) economic growth rates, and being globally
competitive. Strategic considerations are connected with the
development of the “knowledge society”: improving the quality of
education, developing high technology, upgrading IT systems, and
enhancing the liquidity of financial markets.

Therefore,
stratification occurs not only worldwide, but also within the EU as
a result of global competition and the growing differentiation of
the EU countries. In the European “hypermarket,” some stock up on
economy-class detergent, others rejoice at the sight of 50
different brands of ice cream, while still others pick and choose
from a variety of sea products. One should not, however, get the
impression that the first group experiences great difficulties
whereas the third group has an easy life. It is important to
understand that a hypermarket is not a train that will deliver its
passengers to their destination as soon as possible. A hypermarket
is a product of globalization. It offers buyers goods from all over
the world, goods that meet international standards of quality.
Unlike the train, where the choice is made only once, the burden of
freedom in the hypermarket is constant. Everyone has to make a
decision every minute as to how to spend his money and
time.

THE POWER OF
EMOTION

The 60 years of
peace and the end of the Cold War have affected European policy
just as the great diversity of goods has affected consumer
behavior. Today, when a person buys a leather or cashmere jacket,
he is less concerned about keeping warm than creating his own
identity. By buying a certain product, he makes a policy statement,
declaring his affiliation with a certain social group whose values
he shares. Whereas in the past, the main issue on the political
agenda was the issue of war (real or imaginary), today the problem
of identity and the related feelings and emotions has taken center
stage.

At the beginning
of this century, the extremely complex goal of building a common
European identity became one of primary importance.

First, the EU has become highly
heterogeneous. A huge influx of immigrants has changed the cultural
and religious landscape in many EU countries. The admission of new
members not only increased the number of EU official languages but
also greatly deepened economic inequality. In 1950, when the
European Coal and Steel Community Treaty was signed, GDP per capita
in Belgium (at the current exchange rate) was 130 percent higher
than in Italy. Today, the gap between the richest and the poorest
EU countries (Denmark and Bulgaria) has reached 1,400 percent.
Incidentally, Graph 1 shows that the EEC founding members are still
a remarkably close-knit group in terms of their levels of
prosperity.

Second, following the breakup of the
Soviet bloc, the EU no longer had an ideological adversary, whose
existence helped European nations – so different and not always
amenable toward one another – to share something of a common
identity. It has to be said that the Soviet Union was an ideal
opponent for Western Europe, and today it cannot be replaced either
by the United States or by other global forces or
regions.

Third, EU mechanisms have become so
complex that the majority of the population cannot understand them.
But broad public support is critical for integration and the
evolution of a common European identity.

The sharp
alteration in the global system of orientations has produced two
conflicting sentiments among the West Europeans. On the one hand,
there is a sense of pride, which oftentimes reaches the point of
conceit, with the market system and its historical vindication. On
the other, there is a sense of confusion and anxiety about the
future. It is important to understand that it is psychologically
more difficult for Western Europe to adapt to a new stage of
globalization than it is for any other part of the world. European
civilization is based on sheer rationalism, aspiration for optimal
calculations of action, and a sense of morality. Meanwhile,
globalization is destroying stereotypes, requiring unconventional
solutions and demanding creativity. The majority of average
Europeans feel extremely uncomfortable about this new
scenario.

The need to
consolidate the sense of security and form a positive European
identity compelled the EU to prioritize values. In 1993, Copenhagen
Criteria – the rules that define whether a country is eligible to
join the EU – were laid down. These requirements include democracy,
the rule of law, human rights and respect for, and protection of,
minorities, and the existence of a functioning market economy. That
system of values provided yet another important means of global
stratification, namely the right to require others to comply with
these norms (as defined by Brussels).
 
The need to
consolidate an all-European identity had a substantial impact on
daily practices, and not all of them positive. General statements
by EU leaders and documents of EU executive bodies are looking
increasingly bland. Open debate, which brought glory to European
culture, is giving way to mere political rhetoric. The goal of EU
functionaries is to ensure that the average people do not have
negative emotions, and they are quite skillful at
that.

“Consumer tuning”
of EU programs and institutions has become a separate genre. Thus,
the campaign in favor of a currency union was built on the
assumption that people will save up on exchange costs and that new
jobs will be created in Europe. The former belief was a proven
truth, while the latter proved to be a bit of an exaggeration;
however, neither goal has really anything to do with the real
purposes of the project. The main goal of integration is to ensure
Europe new global advantages and accelerate economic modernization
by invigorating market forces. But that is not enough to convince
the people of the importance of the project. Every time the
European Central Bank raises the refinancing rate, it cites the
threat of rising prices. In reality, however, the real reason is
either the declining rate of the euro or a change of interest rates
in the United States. But the public must believe that the ECB
safeguards its interests.

Another case in
point is the EU’s financial policy in 2007 through 2013. Its top
priority is presumably sustainable growth, in accordance with which
there are two budgetary lines: competition in the interest of
growth and employment and consolidation in the interest of growth
and employment.

A mere nine
percent of the EU budget has been earmarked for the first category,
including scientific and technical policy and innovation,
education, trans-European networks, social policy and a functioning
market economy. The second line, aimed at providing assistance to
backward regions, will consume a whopping 36 percent of the budget.
Thus the EU’s traditional regional policy has ended up under the
respectable slogan of sustainable growth. The second priority is
far more disingenuous: “preservation and management of natural
resources” is used as a cover for agricultural policy, which has
long been out of tune with the times, and is also an unbearable
burden for the EU (43 percent of the entire budget).

Yet another
source of intense passion is the EU’s eastward expansion. Many West
Europeans were skeptical about it: they were concerned – and for
good reason, too – about the redistribution of budgetary resources
in favor of poorer regions. The Central Europeans were inspired by
the prospects of joining the EU. They had high hopes, not least for
better living standards. Membership in the club of prosperous
nations was also a matter of prestige, a source of national pride,
and a means of overcoming the ‘little brother’ inferiority
complex.

At the same time,
the philosophy of the Copenhagen Criteria and the condemnation of
everything that had existed in the Soviet bloc contributed to the
inferiority complex. Aspiring countries, as represented by their
leaders and elites, worked hard to prove to the West that they had
always been 100 percent Europeans. Some countries were resentful of
their new partners. Problems dating back to World War II and the
postwar world order quickly came to the fore.

Many people in
Central Europe proved unable to accept their own history. That fed
the illusion about ‘the good old days.’ Since many of those
countries appeared on the map after World War I, their nostalgia
focused on the period in between the two wars, one full of
nationalism and brutality. Those considerations were used as a
sedative for the subsequent resentment. For example, The Estonia
Passport, an official publication, asserted that more than 60
countries boycotted the 1980 Olympic Regatta in Tallinn as a token
of solidarity with the occupation of the Estonian
Republic.

Whatever the
case, Brussels is making a serious mistake by withdrawing the
history of the socialist era from public discourse. Serious
analysis of this subject is, as a rule, replaced by an ideological
caricature. Essentially, the life of two or three generations of
Czechs, Poles and Hungarians is surrounded by a conspiracy of
silence and sheer condemnation. But without respect for one’s
predecessors, or the history of one’s country, a nation cannot
really have a sense of dignity or self-respect, which enables it to
make vitally important decisions.

It is
understandable why the EU avoids this issue. Debate about the
Soviet past would blur its present values and identity. Brussels is
also reluctant to officially state its position, seeking to avoid
public discord and yet another adjustment of relations with the
United States, Russia and the CIS.

But the danger of
this practice is not only that Europe is jeopardizing its most
valuable assets – democracy and common sense. It could eventually
give the Central European countries a sense of inferiority with
respect to other EU members, as a result of which they will be
unable to embrace its common goals and assume responsibility for
its future. This author has often asked her colleagues from Central
Europe about the type of contribution they would be ready to make
to attain the EU’s common goals. Invariably, this question caused
incomprehension, surprise or confusion.

Lack of
initiative, the reluctance to forge one’s future with one’s own
hands, and the inability to creatively appraise the ongoing
developments are the greatest sins of the globalization era. Its
principal assets are the assertion of the finest global standards,
innovation, a multidimensional view of reality, and tolerance
toward others. That applies both to the EU as a whole, and to its
individual member states.

The new model of
European integration responds to the needs of globalization better
than the previous model, but it is far more difficult to manage and
control it.