eurealist.co.uk

Absolutely stunning article by Larry Elliott in The Guardian

Back in the mid-1980s a mighty war raged between Pepsi and Coke. Fearful that its supremacy in the global fizzy drink market was under threat, the Coca-Cola company changed its formula and came up with New Coke.

Coke was sure that this was precisely what the punters wanted. It was wrong. New Coke was a disaster. It bombed, and within three months had been withdrawn. Coca-Cola listened to its customers and acted fast, putting the old brand back on the shelves.
What it didn’t do was sit around pretending that the real problem was that customers simply did not understand just how much better New Coke was than Old Coke. This story is retold by Paul Ormerod in his new book, Why Most Things Fail*, and is especially pertinent in the light of the referendums being conducted in France and the Netherlands next week on the new European constitution.

Imagine for a moment that those masterminding the future of Europe had been running Coca-Cola in the 1980s. How would they have responded to the crisis caused by the public’s obvious lack of appetite for New Coke? Would they have picked up the glaringly obvious signals coming up from the marketplace or would they have carried on producing New Coke regardless, assuming that consumers would eventually get the message? The answer is pretty clear. As far as Europe’s elite is concerned, the customer is never right or at least not unless the customer wants what the producer is willing to provide. And that’s why Europe has a huge political as well as economic problem on its hands.
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Ormerod says, there is no iron law of success but there is an iron law of failure, and that law is pretty simple - adapt or die. Supporters of the new constitution say that this imperative is well understood and is the reason why there should be a ringing endorsement from two of the founder members of the European Union in a few days.

A Europe of 25 countries facing tough and growing competition from Asia cannot operate in the way it did when there were six countries operating in the more confined economic environment of the 1950s and 1960s. Europe, it is said, cannot stand still; it either has to go forwards or go backwards. Europe has been a bulwark against fascism, is a beacon of social democracy and a counter-balance to the hegemony of the US. All this success will be put at risk if the constitution is rejected.

One sign of success, certainly, is that more countries want to join. Nevertheless, it is considered bad form to state the blindingly obvious; that Europe exhibits more signs of failure than of success.
First, there is the constitution itself. Nobody is quite sure whether the new blueprint is an Anglo-Saxon Trojan horse or a device to enshrine high taxes and inflexibility across the continent. The lack of clarity suggests a dearth of vision and a surfeit of fudge.

Second, there is a reality gap between what people want, hope and expect Europe to deliver and what it is actually delivering. The acid test of social democracy is unemployment, because if you are out of work you are far more likely to be poor and marginalised. In the 1960s, unemployment in France and Germany was around 2% - half the US’s.

Today in the eurozone’s two biggest economies it is above 10%, while America’s unemployment rate is little changed. High and persistent levels of joblessness have proved fertile breeding grounds for the extreme right: fascism is now more evident in Europe than at any time since the second world war.

As for the argument that Europe will be a cuddlier, gentler superpower, that doesn’t appear to be the message from the one area where Brussels does punch at the same weight as Washington - trade. Despite all the pro-development rhetoric, Europe has the same self-interested, mercantilist view of the world as does the US.

Third, there’s the hard evidence of Europe’s recent past. The sequence goes something like this. Originally, there was a free-trade area, but that was not exciting enough a project. So, the idea for a single market was born. Once this was up and running (after a fashion because it is still not actually completed), it was decided that
Europe needed a single currency to make the single market work.

Now that Europe has a single currency, it needs greater political integration to make the euro work. This is very much the Gosplan approach to life; a group of central planners get together and decide what should happen. The comparison with the Soviet Union is not idle; at each stage of this process, the European Union has grown more slowly. The US has shown it a clean pair of heels in every year bar one since 1991.
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The single currency is Europe’s New Coke; it’s a failing brand. Unlike the Coca-Cola corporation, however, the pretence is that all is well and that no policy response is needed. Does this mean that the collapse of the European Union is inevitable? Not at all: nothing is inevitable. What is clear, however, is that the danger signs are flashing red. Some pro-Europeans have seen this coming for some time. Caroline Lucas, one of the UK’s green MPs has constantly warned of the dangers of building from the top down rather than from the bottom up.

Many people in Europe are voting with their feet. They are walking out of the store. If those running the joint conclude that the people are stupid and need to be re-educated they will be making a serious mistake. Perhaps even a fatal one.