In that rare thing, an Angela Merkel statement that aged well, the long-serving German chancellor worried that Europe accounted for 7 per cent of the world’s population, a quarter of its economic output and half of its social spending. Those numbers have modulated somewhat in the subsequent 13 years, but the gist of her point holds.
More than that, it has gained a new urgency. The reason Merkel wanted some welfare trimmings was to preserve Europe’s “way of life”. The mission now is to defend Europe’s lives. How, if not through a smaller welfare state, is a better-armed continent to be funded?
Borrowing? Britain and France have had tense moments with bond investors of late. Public debt nears or exceeds national output in both countries, as it does in Italy. One way around this might be some Europeanisation of debt. Imagine a pact in which, in effect, Germany borrows more to defray the costs of military build-up in other countries, which in turn can do things — build nuclear weapons, post troops near Russia — that might be too taboo for Berlin to do itself. The trouble is that just describing this grand bargain in words makes one wince at the profound unlikelihood of it, at least in the short term. (Which, given the incentive Russia has to act on its territorial ambitions before Europe re-arms, is the term that matters.)
The other option is to raise taxes. At the margins, this could happen. But big rises? In an already undynamic continent? It would show that Europe has learnt nothing from decades of economic torpor, or from endless competitiveness reports, or from America. It isn’t even clear that tax increases are more saleable to the electorate than spending cuts. In Britain, a government with a huge mandate hasn’t entirely recovered from autumn’s tax-raising Budget, even though its brunt fell mostly on business. Twice, Emmanuel Macron has incurred protests that shook the French state. The first was against a tax rise.
Anyone under 80 who has spent their life in Europe can be excused for regarding a giant welfare state as the natural way of things. In truth, it was the product of strange historical circumstances, which prevailed in the second half of the 20th century and no longer do. One was the implicit American subsidy through Nato, which allowed European governments to spend a certain amount on butter that might otherwise have gone on guns. (Though plenty was spent on both.) Another was the fact that, during the welfarist golden age, Europe had little competition from China or even India, which didn’t really plug into the world economy until the 1990s. The “social market” was nurtured in a cocoon.
Yet a third helpful factor was a youngish population — 13 per cent of Brits were over 65 in 1972. Now around a fifth are. The numbers for France are similar, and Germany’s a tad higher, with all three countries projected to age a lot more as the century wears on. These pension and healthcare liabilities were going to be hard enough for the working population to meet even before the current defence shock. Now, they are scarcely plausible, to say nothing of the moral spectacle of the young being asked to bear arms and keep the old in a certain style. This is more than even Lord Kitchener asked. Governments will have to be stingier with the old. Or, if that is unthinkable given their voting weight, the blade will have to fall on more productive areas of spending.
Either way, the welfare state as we have known it must retreat somewhat: not enough that we will no longer call it by that name, but enough to hurt. It was never designed for a world in which living to 100 is banal. It was never meant to enable such things as Britain’s current out-of-work benefits bill. The rise in social spending over the past century has been uncannily global — encompassing Japan, the US, Australia, Canada — but the absolute levels are highest in Europe. As the most militarily exposed of those places, this isn’t tenable.
The question is whether the public agrees. I have come to doubt whether rich, democratic societies can make difficult reforms — except in a crisis. Chronic discomfort isn’t enough. An element of real fear has to come in, as perhaps it has now. There is another reason to believe that spending cuts are easier to sell on behalf of defence than on behalf of a generalised notion of efficiency. Defence itself has welfarist properties. The US military doubles up as a vocational trainer, college degree sponsor and above all employer, quite often in less gilded states such as Kansas and Kentucky, which host army bases. If European defence budgets edge towards 4 per cent of GDP, the potential for their social function to grow with it isn’t trifling.
Still, that isn’t the purpose of defence, and politicians must insist on this point. The purpose is survival. Europe must never again find itself in a position where the likes of US vice-president JD Vance have life-and-death power over it. All other priorities are secondary.
By now, quick-minded readers will have registered what a more militarised, less welfarist continent would evoke: the superpower that is turning from it. As a result of their geopolitical estrangement, Europe and America could end up looking much more like each other than they ever did as two blocks of a cohesive “west”. Whether this is an irony or a paradox or something else, it would be enough to raise half a smile, were the circumstances less desperate.
janan.ganesh@ft.com
