When the facts change, Mario Draghi changes his mind. He most certainly seems to have changed his mind on many of the policies favoured by the European Central Bank during the eurozone crisis, after having led the institution from 2011 to 2019.
In those years the instructions arriving from Frankfurt were that member states had to implement structural reforms and get their debt under control if they wanted to coexist with Germany in the eurozone. Greater competitiveness required lower relative salaries and less generous social benefits.
On 16 April, in a speech at a conference in Brussels, Draghi seemed to throw the whole disciplinary approach away. The world changed and caught us by surprise, he explained. The speech offered the first look into his highly anticipated report on the future of European competitiveness, scheduled for June, which is being billed as a new beginning for a declining European economy. There are many rumours in Brussels that Draghi intends to use the momentum created by the report to help propel him to the Europa building and the presidency of the European Council.
The changes and surprises Draghi alluded to in his speech can be summarised under one heading: the return of the state. The goal of structural reforms, back when the term was present everywhere, was not to make the Portuguese or Italian or Greek states competitive with their German counterpart. Competition was supposed to take place between firms and workers, within a single market defined by rules kept free of political interference. Reform, in fact, was about limiting the role of the state in both regulating economic actors and public spending. To be sure, things were not always that perfect in reality, but as an ideal it remained powerful. Not any more, at least for Draghi. The state is back.
In retrospect, there was something of the anarchist about the old Draghi, but that only brought him closer to the original ideas behind the European project, and perhaps even the spirit of European history as a whole. After all, by using Brussels to limit the power of the member states, without creating a real alternative in the form of a federal state, Europeans have seemingly realised the wildest dreams of 19th-century anarchists: the state has withered away, replaced by a system of automatic rules, almost entirely free of discretion or sovereign power. To adapt an old adage: how sweet it is to live without a state.
Typically, anarchist dreams end up being dashed on the reality of world politics. Life may be better without the intrusion of state power, but the problem is that states have survived elsewhere on the globe. How do you deal with those states without a state of your own? Europeans today are struggling with the problem in two distinct areas: economic competition and military defence.
In his speech, Draghi pointed out that other regions and other major political blocs are marshalling the power of a strong state to redirect investment towards their economies or to control supply chains. It is interesting that he chose to mention both China and the United States in this context. He goes so far as to accuse Washington of using protectionism to secure supply chains and “shut out competitors”. Perhaps this transatlantic anxiety will rally President Emmanuel Macron of France behind Draghi and help him clinch the leadership of the European Council so that he can attempt to implement his report from that perch.
Yet Draghi makes a common error. He seems convinced that Europeans simply lost their drive to compete and need to get it back. But laziness is not the issue. Take the case of Ukraine, the second source of European fragility. It is simply not the case that Europe is psychologically unable to think about military questions or too weak to create an army capable of facing the Russian threat. The problem is much more profound: Europeans fear and dislike the prospect of building a strong state and a strong army because their ideal is a society where order is no longer hierarchical but spontaneous. The old anarchic dream is still alive and that is what distinguishes Europeans from Americans or the Chinese. Draghi would do well not to forget about these vital questions of identity and civilisation.
Does that mean that there is no solution to the fundamental problem of global competition between strong states? Not at all. It just means that the European Union must use the tools of a strong state to limit the extent of state power, and to do so on a global scale. Anarchism is a utopia, liberalism a compromise to make anarchy work.
In order to achieve this, Europe should insist on a clear separation between politics and the economy. Instead of mimicking the strong Chinese or American state, we need to weaken them, at least in the way we organise our economic relations with these blocs. Instead of adopting the same subsidies, the EU should treat foreign subsidies the same way it treats state aid inside its border: block investment if firms benefit from subsidies, or impose fines on subsidised production. Make it clear that economic exchanges have to be organised on a European model if other states want access to the single market. And on defence, build the forces necessary to defeat imperial projects on our borders, but refuse to join the call for “great power politics” or a race to hegemony, ideas whose utter failure have already been proven.
State direction is not a logical necessity. In the past the error was not to believe in this separation but to think it would come about naturally and automatically. We now know that it needs to be brought about with the tools of geopolitical power, including an assertive economic statecraft – that, as Draghi says, is aimed at all economic blocs – and a renewed military capacity.
[See also: Europe’s hard right is deeply divided. Does it matter?]
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