- Today, we're gonna be talking about the international architecture of what I'm calling the
early post-Cold War world, and by early, I'm really
focusing on the time from the collapse of communism
until the financial crisis of 2008 because we're gonna see that that ushered in pretty
big structural changes, both within a lot of the countries we're gonna be talking about and in international political economy and in international relations. Our agenda, we're gonna talk about NATO expansion after the Cold War, we're gonna talk about
the Washington Consensus and then we're gonna talk
about the European Union, its enlargement and its challenges. So it's a pretty big menu. I do wanna take a minute to say something about three lenses for
thinking about politics. One of the problems with political science is that people tend not to
say in words of one syllable what they can say in
words of five syllables. And so there's an awful lot of terminology and jargon, and it's my ambition to use as little of this as possible. But I do want to alert you
to three different ways of thinking about politics, that, to some extent, compete and, to some extent, are complementary. The first is one that focuses
on people's interests. You might think of Marxism as focusing on people's economic interests but also former rational
choice models of politics that use economic approaches to politic, focus on people's individual interests. It's all interest-based. And we think about just common
folk wisdom about politics, people expect people to do things that are in their interest. When we move into the realm
of international relations, this interest-based way of looking at the world sometimes traffics under the title of realism, that, realists in international relations are people who say that countries follow their individual interests. Now, not every interest-based theory of international politics is realist because there are some who say, well, yeah but you've gotta
look at the domestic politics of countries and how that influences what they do internationally. So they might still be interest-based but they're not gonna take countries as their basic unit of analysis. But the idea behind realism but trying to, all of these different
schools I've just mentioned, is that if you want to understand what's gonna happen in politics, look at the interests
of the relevant actors. Might have different theories about that but it's all an interest-based. This second basic lens
that people bring to bear on politics is about institutions. And here, in domestic politics, it might be people who
think independent courts and the separation of
powers are important, that they structure what happens. Others think, no, it's the
kinds of political parties, but institutional
arrangements are important. When we think about the
international system, institutionalists travel
under various labels, again, they call them
liberal institutionalists, some of them, but they have, sometimes they just call
themselves institutionalists, plain and simple, but they look at
international institutions, things like the United Nations. NATO is a kind of
institution, it's an alliance, it's not an international institution, it's an alliance, but it it
has an institutional presence. So this second lens focuses
on institutional arrangements which may or may not be consistent with the way people's
interests line up, right? So for instance, George Kennan, who I mentioned to you last time, thought the United Nations
was a waste of time because countries always
behave in their interests and if the UN told them to do something that wasn't in their interest,
they would ignore it. So there, you can see possible tensions between institutionalists
and interest-based accounts. Rosa Luxemburg is famous for saying, the rivers of history run through the most finely meshed statute. So again, it's in a
Marxist view that interests are gonna prevail and
institutional stuff is irrelevant. And then the third, I'm
putting under the heading of ideals, and this can
be ideas, culture, norms, things other than
interests and institutions that affect what actually
happens in politics. And again, people disagree a lot about, some hard boiled realist will say, norms and institutions
are all beside the point. Others think norms are very important and that they actually
structure what happens. Again, here, there's
lots of fancy terminology to capture this notion, there's something called constructivism in international relations theory, it's basically a theory
of normative behavior, norms shaping outcomes. And so, a lot of the squabbling
in the academic journals and so on is among people
who focus on interests, on institutions, or on ideas. And my own view, just putting my cards on the table before we dig in to today, is that, to say, which is the right one, is the wrong question. And it's better to try and understand what are the conditions
under which interests tend to prevail or institutions tend to prevail or norms can re-structure things. And those conditions change. And there's often much more play, there's sometimes much
more play for norms, say, than at other times, like when the Cold War collapses and the institutional
architecture's up for grabs, then it might matter a lot
what ideas are out there or not out there but in
the middle of the Cold War, when everybody's locked into positions that are highly, highly rigid, then ideas are probably largely
gonna be beside the point. So that's the way I will
tend to use these notions and you will see them coming up, obviously, today but
throughout the course. Okay. So let's think about
the first post-Cold War international security
crisis which was prompted by Saddam Hussein's invasion
of Kuwait in late 1990. - Just two hours ago, allied air forces began an
attack on military targets in Iraq and Kuwait. These attacks continue as I speak. Ground forces are not engaged. This conflict started August 2nd, when then dictator of Iraq invaded a small and helpless neighbor. Kuwait, a member of the Arab League, and a member of the United
Nations was crushed, its people brutalized. Five months ago, Saddam Hussein started this
cruel war against Kuwait. Tonight, the battle has been joined. This military action, taken in accord with
United Nations resolutions and with the consent of
the United States Congress, follows months of constant and virtually endless diplomatic activity on the part of the United Nations, the United States, and
many, many other countries. Arab leaders sought what became known as an Arab solution only to conclude that Saddam Hussein was
unwilling to leave Kuwait. Others traveled to Baghdad
in a variety of efforts to restore peace and justice. Our Secretary of State, James Baker, held an historic meeting in Geneva only to be totally rebuffed. This past weekend, in a last ditch effort, the Secretary General
of the United Nations went to the Middle East
with peace in his heart, his second such mission, and he came back from Baghdad
with no progress at all in getting Saddam Hussein
to withdraw from Kuwait. Now, the 28 countries with
forces in the Gulf area have exhausted all reasonable efforts to reach a peaceful resolution, have no choice but to drive
Saddam from Kuwait by force. We will not fail. As I report to you, air
attacks are underway against military targets in Iraq. We are determined to knock out Saddam Hussein's nuclear bomb potential. We will also destroy his
chemical weapons facilities. Our objectives are clear; Saddam Hussein's forces will leave Kuwait, the legitimate government of Kuwait will be restored to its rightful place, and Kuwait will once again be free. Iraq will eventually comply with all relevant United
Nations resolutions and then, when peace is restored, it is our hope that Iraq
will live as a peaceful and cooperative member
of the family of nations. I had hoped that when the
United States Congress, in historic debate, took
its resolute action, Saddam would realize he could not prevail and would move out of Kuwait in accord with the United Nation resolutions. He did not do that. Instead, he remained intransigent, certain that time was on his side. Saddam was warned over
and over again to comply with the will of the United Nations, leave Kuwait or be driven out. Saddam has arrogantly
rejected all warnings. Instead, he tried to make
this a dispute between Iraq and the United States of America. Well, he failed. Tonight, 28 nations, countries
from five continents, Europe and Asia, Africa
and the Arab League, have forces in the Gulf area, standing shoulder to shoulder
against Saddam Hussein. These countries had hoped the
use of force could be avoided. Regrettably, we now believe that only force will make him leave. - So that was the first Gulf War, so-called Operation Desert Storm, as President Bush said there, it was it was authorized. This is resolution 678 which I will post and you
can peruse at your leisure. I do wanna notice that, just
notice that it was authorized by the Security Council with
Cuba and Yemen voting against. They were temporary members
of the Security Council. The way the security council works is, any one of the five permanent
members can veto it, and China chose to abstain
but it didn't veto it, and the Soviet Union supported it. So... I wanna, I start with this 'cause I wanna point out several things about what Bush did. He certainly was, the US
was certainly not blameless in this whole affair, and I don't want to
sugar coat every aspect of what President Bush did in this regard. He was heavily criticized later for having apparently
signaled to Saddam Hussein that it would be okay with the
US if they went into Kuwait, he was also criticized for
encouraging a Shiite uprising in southern Kuwait and
then not supporting it after we left, so there there are grounds
for criticizing what we did but the things I wanna point out is, first of all, it was an
action of last resort, every effort, as he said in the video, had been made to end
this without an invasion. Secondly, it was proportional, stop the bully without becoming one. Bush took a lot of criticism for this. People said, you should go to Baghdad, you should knock off this regime, and he steadfastly refused to do it, partly because of the fact that he was not behaving unilaterally. As he indicated, there
was genuine coalition including every Arab
country except Jordan, was actually participating in this, and he knew that if he did
more than the UN mandate, the Security Council resolution mandated, the coalition would collapse. So it was a broad-based coalition with strong regional support to stop the bully
without becoming a bully, that is to say, this
aggression will not tolerated. And this, as I said, was the first international
security crisis of the post-Cold War world. And had that become the
template going forward, we would be in a very
different place today. Well, that's one of the
things I'm going to be arguing to you later in the course
because, as it turns out, it was one of the paths not taken to treat the way in which Saddam Hussein had been expelled from Kuwait as perhaps norm-setting
for the future handling of international security crises, it was a path not taken. Okay, let's talk about NATO. What, when, and why? So NATO is a creature of the Cold War. And I've already mentioned the United Nations several times today, and it's important to think about NATO and the origins of NATO
alongside the creation of the United Nations because
they were created both in the 1940's. After World War I, Woodrow Wilson had wanted to
create a League of Nations and that had failed, largely because the American Congress wouldn't go along with it and FDR had, during World War II, greatly invested in the idea that there must be an
institution of this general sort created after World War
II to prevent nations from going to war. And when President
Truman came into office, he made it his business to
make sure that that happened. And so here, you can see President Truman addressing the conference in
San Francisco in April of 1945 as they were drawing up
the charter of the UN. - There were many who
doubted that agreement could ever be reached
by these fifty countries differing so much in race and religion, in language and culture. But these differences were all forgotten in one unshakable unity of determination, to find a way to end wars. (audience applauding) If we had had this
charter a few years ago, and above all, the will to use it, millions now dead would be alive. If we should falter in the
future in our will to use it, millions now living will surely die. Well, there is a time for making plans, and there is a time for action. The time for action is here now! - And indeed, they did act, they did create the institutions, and just to elaborate
what he said later on in that speech, he said, "The essence of our problem here "is to provide sensible
machinery for the settlement "of disputes among nations. "Without this, peace cannot exist. "We can no longer permit any
nation, or group of nations, "to attempt to settle their arguments "with bombs and bayonets." So he was foursquare behind the creation as the US was, unlike after World War I, the creation of the United Nations. But time moves on and four years later, we were looking at a
very different reality. (triumphant music) - For us, war is not inevitable. We do not believe that
there are blind tides of history which sweep
men one way or another. In our own time, we've seen brave men overcome obstacles that seemed insurmountable and forces that seemed overwhelming. Men with courage and vision can still determine their own destiny. They can choose slavery
our freedom, war or peace. I have no doubt which they will choose. The treaty we are signing here today is evidence of the path they will follow. If there is anything certain today, if there is anything
inevitable in the future, it is the will of the people of the world for freedom and for peace. - So there was the creation of NATO, an alliance to face down what
was seen as the Soviet threat. The previous month, just after the text of the proposed treaty had
been released to the public, Secretary of State, Dean
Acheson went on radio. And I tried to, I was gonna
play his radio speech for you but the sound was too bad. But here, you can see him saying that, "The best deterrent to
aggression is the certainty that immediate and
effective countermeasures will be taken against those
who violate the peace." And then probably the most
quoted line he ever uttered was that, "If the free
nations do not stand together, "they will fall one by one." So here, the US had moved from backing an international institution for solving conflicts
to forming an alliance. And just what was this alliance? The most famous part of the
NATO Charter is Article 5 which says that the parties
agree that an armed attack on one of them in Europe or North America shall be considered an
attack against all of them and consequently, that if
such an armed attack occurs, each of them, in the exercise of the right of individual collective self-defense, recognized by Article
51 of the UN Charter, will assist the party
or parties so attacked by taking forthwith, individually and in
concert with other parties, such action as it deems necessary, including the use of
armed force to restore and maintain the security
of the North Atlantic area. And any such armed attack
and all measures taken as a result thereof shall
immediately be reported to the Security Council. And, this is an important kicker, such measures shall be terminated when the Security Council has
taken the measures necessary to restore and maintain
international peace and security. So here is an alliance created that says an attack on
one is an attack on all. We are entitled to protect any member of that alliance as though
we had been attacked, we will report it to the Security Council but we will not cease and desist
until the Security Council has taken the measures necessary, essentially, to eliminate the threat. So not only had the US
created this new alliance, but it clearly said that the UN, a realist might say this is
exactly what you should expect, a realist would say that
the UN is subordinate to the interest of NATO. Now, it tells you how
hard boiled the realist, Kennan, was that he was also
against NATO for two reasons. One is that he thought it
would unnecessarily militarize the standoff with the Soviets, they would create a similar alliance which they indeed did a few years later, that's where the Warsaw Pact came from, was the Soviet response to NATO, but he also said it's stupid, because when the chips are down, countries follow their own interests, they're no more gonna be guided
by membership of an alliance then they are gonna be
guided by UN resolutions. Nonetheless, the US created NATO. The first thing to say about NATO is it's a historically unprecedented, highly unusual alliance. If you think about George
Washington's Farewell Address to Congress in 1796, he said, and this was seen as a
warning for the future, "It is our true policy to steer clear "of permanent alliance with any portion "of the foreign world." If you Google up things like
international encumbrances, you can find American president
after American presidents saying we will not commit
ourselves to any encumbrance on a long term or permanent basis. And they all echo this philosophy that was once attributed
to Lord Palmerston from a famous speech he made
in the House of Commons in 1846 when he said, "We have no eternal allies, "we have no perpetual enemies. "Our interests," another
hard boiled realist, "are eternal and perpetual, "and those interest it
is our duty to follow." So American presidents have been guided, American administrations
had ever formed any kind of permanent alliance, that essentially followed the
Palmerston Washington view. And here, we have the creation of an alliance among the western powers, dedicated to protecting
one another in perpetuity with armed force, if necessary, and subordinating
international institutions to that purpose. Now, a lotta debate about whether NATO was successful during the Cold War. You could say, well,
the US won the Cold War and some people say, you could say that we wouldn't have won it without NATO. That's one of the, we can't
run the counterfactual, so it really is something
of an imponderable, whether we could have won
the Cold War without NATO. It is also worth noticing that NATO, during the Cold War, never
actually went into battle. The first time a NATO operation occurred, which I'm gonna talk more
about later in the course, was in Kosovo in 1999,
after the Cold War over. And by the way, when
Article 5 was not created because no NATO country was threatened. And that same thing is true
with subsequent NATO actions in the post-Cold War period, such as the invasion of Libya in 2012, about which we'll also
be spending time later. The partial exception was 9/11, although even then, the US, essentially, went to war more or less
immediately after the attacks and NATO allies participated but NATO didn't assume
full operational control in Afghanistan until several years later. So NATO after the Cold War. Some people such as French
President Francois Mitterrand said, well, it's done its
job, we should get rid of it, and was there to protect these countries against the Soviet Union, and it's now an alliance
without a purpose. That was a difficult thing to do right at the end of the Cold War
because of East Germany. And the thing about East Germany was it rapidly became clear
after the wall came down that Germany was gonna be reunited, and it was just, unstoppable
force to reunite Germany. And reuniting Germany made
a lot of people nervous. Many people remembered World War II and some, not that few,
also remembered World War I, and the idea of an independent Germany, outside of NATO, made a
lot of Europeans nervous. And so the impetus to
say the reunified Germany would be part of NATO came
from the other European powers. And the Russians didn't like it. They, too, said, what's going on here, why is NATO starting to expand? And George Herbert Walker
Bush and Helmut Kohl, who was then the German Chancellor, promised Gorbachev that
NATO would not expand beyond including Germany
and that'd been an artifact of the reunification. Gorbachev was less than
impressed by their reasoning. (speaking in foreign language) - [Translator] And I'm not
persuaded by the assurances that we hear, that Russia
has nothing to worry about. You may not humiliate a nation, a people, and think that it'll have no consequences. So my question is, is this a new strategy? I feel that if the same kind
of games continue to be played, if one country plays some card
against the other country, then all of those problems, all of those issues that
we've been mentioning today will be very difficult to resolve. Glasnost, free elections,
political pluralism, the problems of concern to you. - So he was skeptical. He thought that this is
not likely to be how things are gonna play out but he did, he saw this, as he says in that clip, he saw this as a humiliation of Russia, that was still the Soviet
Union at that time. He saw this as a humiliation
of the Soviet Union and was adamantly opposed to it. But history played out differently. So let me just give you a
sense of what was coming now. (camera shutters clicking) (applauding) - Today, we welcome Hungary,
Poland, the Czech Republic, finally erasing the
boundary line the Cold War artificially imposed on
the continent of Europe. Strengthening an alliance that now, clearly, is better
preserved the keep the peace and preserve our security
into the 21st century. For the 16 of us already in
NATO, enlarging our alliance, our goal is to help to build a Europe that is undivided, free,
democratic, at peace, and secure. - So there you have it. The first three east European countries included in NATO in 1999, and that, as you can see, is the first edition of countries besides, Germany's not on this list, since the end of the Cold War. So this didn't go down
very well in Russia. As Gorbachev had predicted, it produced a sense of
outrage and humiliation. So here, again, just to
give you some, a couple of, a little flavor of it. (chanting in foreign language) (speaking in foreign language) - So a couple of comments about that clip. So one is, on the signs, one of the things that they're demonstrating
about is that president Clinton had bombed Iraq for
violating the no-fly zones, and they're saying, basically, only an idiot or worse
would be bombing Iraq, the no-fly zones that had been set up following Saddam Hussein's
invasion from Kuwait. This gentleman at the end
of the clip is somebody by the name of Sergey Baburin. He was a Soviet Russian politician and subsequently became one of the leaders of a far right populist movement, and what he's saying at
the end of that clip, is he's basically saying, we made a mistake once
but the next generation are not gonna be making the same mistakes. And it's interesting that he said this in response to them demonstrating against the American bombing of Iraq, partly because, as I noticed in 1991 when I was in Moscow and
I just told you about in an early lecture, the
US Desert Storm Operation was hugely popular among Russians in 1991. In 1991, the US could do no wrong. In fact, in Moscow in 1991, in March of 1991, there were actually commercials for selling Desert Storm condoms. (audience laughing) Go figure. (professor laughing) I never quite could understand what it was trying to communicate but. There had been no resistance to the idea that Bush Sr. had gone in but, you know, seven years later, when
these east European countries were starting to join in, to join NATO, things played out very differently. And it didn't stop there, it continued. (applauding) - [Woman] Yeah! - Thank you, all. - [Man] Thank you Mr. President! - You're welcome. Thank you all. Thank you all, good afternoon, and welcome to the White House. Today we proudly welcome Bulgaria, (audience cheering) Estonia, (audience cheering) Latvia, (audience cheering) Lithuania, (audience cheering) Romania, (audience cheering) Slovakia, and Slovenia. (audience cheering) We welcome them into the ranks of the North Atlantic Treaty Organization. (applauding) When NATO was founded, the
people of these seven nations were captives to an empire. They endured bitter tyranny. They struggled for independence. They earned their freedom
through courage and perseverance. And today, they stand with
us as full and equal partners in this great alliance. (applauding) (pen thudding) (laughing) (applauding) This is a special moment in the hopeful story of human liberty as America formally declares its support for Albania and Croatia's entry into NATO. We strengthen America's
partnership with nations that once found themselves
in the shackles of communism. We rejoice in taking a major step toward welcoming the people
of Albania and Croatia into the greatest alliance for freedom the world has ever known. - And I want to reaffirm
as strongly as I can, the United States'
commitment to honor Article 5 of the NATO treaty. No ally or adversary should
ever question our determination on this point. It is the bedrock of the alliance, and an obligation that
time will not erode. The NATO membership process, which requires applicants to make reforms across their political,
economic, and defense sectors, has helped create the stable
democratic Europe we see today. We were glad to see the
alliance welcome Albania and Croatia last year, and there can be no question
that NATO will continue to keep its door open to new members. - Montenegro's accession
is good for Montenegro, it's good for NATO, it's
good for the stability of the western Balkans, and it's good for international
peace and security. Today is a historic day. So, President Vujanovic,
welcome so much to NATO, it's a great honor to
have you here, welcome. - With NATO membership,
our future will be stable, secure and prosperous,
and we will make decisions about the most important
issues within the strongest, the most organized, and
most efficient alliance in the history of mankind. - So as you can see, this had been a bipartisan
story on the US side. Democrats and Republicans
alike have led the expansion of NATO to include all
of the former members of the Warsaw Pact except for Russia. And this actually doesn't
tell the whole story because there were others who
wanted to join NATO as well. So in 2008, for example, NATO announced that it
would welcome the addition of Georgia and Ukraine to NATO. And that is part of what
prompted the Russian incursion into Georgia in 2008, and also had a big impact
in Ukrainian politics that contributed to the way
things would play out in 2014. A couple of other things to
notice about this accession, you might wonder why, in 2004, we added all of these countries to NATO. Why do you think, anyone have a thought? Why would the Bush administration, many east European countries
wanted to join NATO from very early on but
there had been resistance. I mean, after all, you know,
you're committing yourself to go to war if one of
these countries is attacked. That's not a light thing, right? You're actually, it's not like saying, well, let them join the European Union, if they don't like it, we'll kick 'em out, or they can leave. This is really committing you to defend these countries. Why would the US, anyone? (student mumbling) Pardon?
- Deflection. (mumbles) Suppression in the Middle East. - It was related to what he was doing in the Middle East but
it was not deflection. What had we just done in
the Middle East in 2004? Yeah. - [Student] We had just invaded Iraq and then the former (mumbling) were not supportive (mumbling). - Bingo, exactly right. So what had happened was, after, and this is something we will
return to later in the course, but once the Bush Jr., George W. Bush, had decided to invade Iraq in 2003, unlike what his father had done, he couldn't get Security Council
resolution to authorize it and he had a lot of trouble
putting together a coalition because all the Middle Eastern
countries were not in favor of it and he needed the fig leaf of an international coalition to create, he thought, legitimacy for this action. And so if you look at
all of these countries, except Slovenia, every
one of these countries joined the coalition, nominally at least, and sent troops to Iraq as part of the US-led coalition of the willing. They joined the coalition of the willing and the quid for the quo was that he supported their accession to NATO the following year. Interestingly though, they all got rid of the draft in the meantime. Clearly, they were worried
about the domestic politics of committing their
youth to fighting in wars to defend NATO countries. So here, you see that
geopolitics playing itself out in this way, that this is very much an interest-based story, that Bush is looking to get legitimation for his invasion, and so
that became the impetus for getting these countries to join. It's also, one might think
it's something of an anomaly, given the Trump administration's hostility to NATO in general, why they allowed the
Montenegro thing to go forward. Of course, it'd been started much earlier but I think, as far as Trump is concerned, it doesn't really matter who's in NATO. Nonetheless, the question
that Trump asks about NATO is not a crazy question, right? And it's the same question
Francois Mitterrand was asking, what is this
alliance there actually for? So there's some enduring questions about post-Cold War NATO which are gonna come
back later in the course. One is, was Mitterrand right? Was there a missed opportunity
at the end of the Cold War? Was Gorbachev right? Did NATO expansion make it more likely that someone like Putin would
come to power in Russia? Gorbachev had said, humiliate people and there
will be consequences. And certainly, the steady inclusion of NATO into the former, not only Eastern Europe, but as I said, they were
running up trial balloons about incorporating the
Ukraine and Georgia in 2008. There's a colorable case that this might have
bolstered the nationalism of a figure like Putin. We'll come back to that, too. And what are the advantages and costs of having a permanent military alliance that now lacks any clear
motivating purpose? It's led by the most
powerful military on Earth, it's not clear what its goal is or is not. We will see later in the course that, when it has become active, it has had nothing to do with
Article 5 of the NATO treaty, but it's rather taken on new missions and new rationales, mostly ad hoc, dreamed up on the fly,
to suit the interests of different players at different times. Let's turn to the Washington Consensus, or what I'll say, taking
neo-liberalism global. And I'll talk somewhat briefly about this 'cause I want to spend most of the rest of the time talking
about the European Union. So the Washington Consensus, again, and what I call the Washington
Consensus is essentially, a global version of what often
gets called neo-liberalism. And I think of it, again, distilling it down and getting rid of all the jargon that
plagues these discussions, as having three main features. One is deregulation, the second is free trade
or trade agreements, and the third is
privatization of state assets, previously held, state-held assets. Within countries, that tends
to be called neo-liberalism. When the World Bank or the IMF or the Americans try
to get other countries, as they did particularly up
until the financial crisis, when the Washington Consensus, we'll see, started to lose some of its
ideological power in the world, the core elements of the diet on which they would insist for countries to get US aid or aid from
institutions controlled by the World Bank or the IMF. And it's difficult to
overstate the confidence, the hubris, we might say in retrospect, the confidence with which this was viewed as the one size fits all approach to economic development. In 2004, in a speech to
the the New York Fed, I think it was to the New York Fed, Ben Bernanke, who was then
Chairman of the Federal Reserve, made a speech that you could, if you Google up his great
moderation so-called speech, it's a speech in which he says, essentially, the
technocrats running the fed are now sufficiently competent that we've, well, he didn't actually say this but this is what it's
come to be interpreted as his having said. What he actually said
was somewhat more nuanced but the takeaway lines
from the speech are, to the effect that the fed
has basically managed to, if not abolish the business cycle, manage it so successfully
that the peaks and troughs could not be too damaging and we can, largely, have no
inflation, full employment, and let the technocrats run it. As I said, what he actually said, if you go and read the whole speech, was a little more nuanced than that. But it became emblematic of the idea that this diet of economic deregulation, free trade, and privatization,
informing all public policy, was the way to go, and that the world would
be hunky-dory thereafter. Deregulation of Wall Street after the repeal of Glass-Steagal in 1999. So here, the Glass-Steagal
Act had been enacted in the 1930's in the wake of
the Depression to stop trading, to stop investment banks
from engaging in investments on their own accounts
with depositor's money. You either had to be an investment bank or a commercial bank. The banks didn't like it, they lobbied against it for decades and actually, by the time
it was repealed in 1999, there wasn't much of it left. Read Ron Chernow's "The House of Morgan" if you want the blow-by-blow
of the lobbying about that. Brilliant book among his
many brilliant books. And so, this great debate now, about how much actually getting rid of Glass-Steagal contributed
to the financial crisis, some say not at all, some say it was really all
about real estate markets and had nothing to do with that, and some say a lot. But my point in mentioning it here is not whether repealing
Glass-Steagal contributed to the financial crisis, I tend to think probably not, but it was emblematic of and
ushered in a whole other set of steps of deregulation. So, for instance, in 2004 Hank Paulson, who was then Chairman of Goldman Sachs, led a group of the five
biggest banks to Washington to lobby Christopher Cox, who was then the head of the SEC, not the sharpest knife in congress, to lobby him on the grounds that if a bank was sufficiently big, if it had five billion dollars in assets, it should be exempted
from capital requirements or have reduced capital requirements because they were big
enough to self-insure. The thought that because they were so big is maybe why they should
have the capital requirements didn't seem to occur to him. And so the ones that were too big to fail were the ones that were subjected to less in the way of capital requirements. And we might say, go figure, how could anybody be so foolish? The quid for the quo, by the way, they said, we'll open our books to you. But the SEC at that time
had a tiny office with, I think it was seven people working in it, ostensibly, to keep track of four trillion dollars worth of assets. So they weren't gonna be able to do this in any serious way, monitor the books of these companies. And indeed, months before
the financial crisis, literally, two or three months
before the financial crisis, Cox was reassuring
congress that the big banks were fundamentally sound and then, turned around and Lehman
Brothers went belly-up. But I'm not giving you as story about the causes of the financial crisis, but I'm giving you a story
about the confidence people had in this deregulatory enterprise, that, just leave it all to the Fed, get rid of all the regulations,
and everything will be fine. And so this was the
new-liberal game at home and it was the Washington
Consensus taken abroad. There was much more resistance to it in what we might think
if as the Global South. This is just one of endless numbers of cartoons one could pick up put out, indicating that it was perceived as a kind of imperialist venture
from the point of view of, particularly, developing countries that were having this
diet imposed upon them. But in the second and first worlds, the hegemony of this idea
was, it's hard to overstate. And if you, I always talking
about Russia last time, if you look at US aid to Russia, it gives you some sense also, I think, as a kind of proxy for
American influence over Russia. You can see that at the collapse of the Soviet Union in '92, '93, that you get huge amounts
of US assistance to Russia. And then it goes down and then, in 1998, when they default, this is run
Russia defaulted on its debt, I talked about that last time, and just bailed out by the IMF, you see it increase again and then, in the early 2000's, it goes
down after the crisis wanes and then, here, and this
is the period when Putin is basically implementing the
Washington Consensus diet. This is when he's
reforming the tax system, it's when he bringing tax rates down to 13% flat rate,
balancing the books, building up a massive
sovereign wealth fund or a rainy day fund. And so he's essentially
getting rewarded for following what many would have
regarded as pretty orthodox, pretty orthodox Washington
Consensus policies and the best book about
this is by a man by the name of Christopher Miller which
I put on the suggested reading list, called "Putinomics". But then you can see, and this
is for later in the course, what happens after the financial crisis. Not only does US aid go south, but so does US influence, and we'll talk more about that later. So let's talk about the European
Union and its challenges. It's been around since early 1950's. The European Coal and Steel
Community came into being as a byproduct of the Treaty of Paris signed by the original six; France, Italy, the
Netherlands, West Germany, Belgium and Luxembourg. It became the European Economic Community as a result of the Rome Treaty of 1957. A much more ambitious
treaty was enacted in 1992, the so-called Maastricht Treaty. And the most recent piece
of legal architecture, which I 'll talk a little
bit more about in a minute, was the the Lisbon Treaty of 2007. I'm not gonna give you the blow-by-blow of how all the 28 countries, how they got from six to 28, but you can Google it
up for yourself and see when the different ones joined. What I want us to do is focus more on, what was the point of this? Why was a European Union
thought to be necessary? What purpose would it serve? Yeah. - [Student] Economic and political union between European countries
could stave off, like, war in the future. - To stave off war. So there were multiple motives but it's good that you're clairvoyant and got the first item on my slide 'cause what if you had come up with the third item on my slide? I would've been crossed off but you came out with the first item, so that's fantastic. So part of the impetus was, particularly people were worried about France and Germany
going to war again. Not only the French and the Germans, Churchill, for example, was a big fan of the European Coal and Steel Community and he didn't want Britain to join but he wanted the Europeans to join, partly for that reason. So that was a beginning
part of the initial impetus. This is for the political
philosophers in the room, this is Montesquieu's idea of
(speaks in foreign language), that if you have commercial
interchange with a country, it's gonna be peace-generating, right? So that was one. Other reasons why people might
have favored the creation? Yeah.
- To reduce the pressure from the Soviet Union and (mumbles). - To reduce the pressure
from the Soviet Union and? - America. - Okay so let's start,
let's take the second, that this is less about the Soviet Union and more about US 'cause
I want to keep you on my slide, here. (audience laughing) This was the big French motive. de Gaulle, for example, was
a big proponent of the idea that what the Europeans needed to do was to band together to be a
comparable force in the world to the US, right? Now, de Gaulle, I'm sure, as you all know, was a staunch nationalist, right? Staunch French nationalist, so he did not want a political union that could in any way erode
French national sovereignty. He would be, I think,
chuckling at the Brexit fight that's going on at the moment. But the way in which de Gaulle thought you could both have a strong, united Europe and protect
the national sovereignty of France, which they
guarded very jealously, they kicked NATO troops out of France, they bought their own,
independent nuclear deterrent, they had a very jealous conception of their independence and sovereignty and they were not gonna be
pushed around by the Americans. So they came up with the idea that any important changes in the union would have to be resolved
by unanimity rule, and of course unanimity rule is a dictatorship of one, right? If you have unanimity rule, if you don't like the proposed change, you can stop it and block it. So de Gaulle was a strong proponent of unanimity rule and so
this was this was the idea of a big block that could be
of comparable economic clout in the world to the US. Any other reasons why people
might have thought it important to have a big economic union of countries, European countries? - [Student] Trade. - Trade. You guys are amazing. (audience laughing) Wow, okay. Yes, so but here's the
thing, it's complicated because it's, and this is part of, again, Trump administration's
beef about the EU, it's an internal free-trade zone but it's externally protectionist, right, in many respects. You go and talk to African farmers about the tariffs that
they experience trying to sell their goods in Europe. So in this sense, and this
is one of the reasons Britain had such a difficult time
before Britain finally joined under Edward Heath in the 1970's, they had been rejected
twice because Britain wanted to preserve its imperial preference before they realized there
was no empire left to prefer. But they had essentially had, they had had trading arrangements
with members of the empire and then, when they
created the Commonwealth, they wanted to have preferential treatment for trade from the Commonwealth and the European Union said,
no, they couldn't have that and so the French, actually, de Gaulle was flatly against Britain joining the European Union and vetoed it and they didn't join until
after he left power in 1969. So it was an internally free trade but externally, it was a
protectionist trading block and that incidentally,
we can fast forward, it's the story of TPP, that what the Trump administration
failed to understand or at least to articulate
if they did understand it, was that the TPP was not
just a free-trade deal, it was about containing China
from developing its influence in the Far East and it
was largely motivated, actually, by a political
agenda because China, for reasons we're gonna talk about later, had become much more muscular
in the South China Sea and elsewhere during the course
of the Obama administration. So the EU, we could say, is internal free-trade zone,
externally protectionist. But actually, that's too
simple because the sense in which it was internally
a free-trade area is complicated because, as I put up here, there was a first mover advantage. And so if you think
back to what I just said about de Gaulle insisting
on unanimity rule, that meant that the things you
could put in place early on would be very difficult to change because you would have a veto power. And so the French didn't
agree to the British joining until they had put in the
Common Agricultural Policy and the Common Fisheries Policies. And particularly, the
Common Agricultural Policy was massive protection for French farmers, and was operated to the great disadvantage of British farmers. And so it was a free-trade
zone with a difference. And an interesting irony
of history here is that, when Britain joined the
European Union in the '70's, the British parties were a polar opposite of what they are today about Europe. At that time, the Labor Party
was badly divided over Europe and the Conservatives were
largely in favor of Europe because Europe, the Tories thought, would be an instrument for
disempowering British unions and deregulating the economy and making it function more efficiently. Margaret Thatcher, a lot
of people don't know this, Margaret Thatcher was one of Ted Heath's most aggressive lieutenants in getting Britain into
the European Union. She only became a Euro-skeptic later. Not only that, later, about halfway through her administration, Margaret Thatcher was the person who pushed the European Union toward qualified majority voting on things like reducing
non-tariff barriers to trade because she could see. She had, earlier than before she did that, she had negotiated big rebates for Britain because of the unfairness of
the Common Agricultural Policy and so on, so Britain was getting rebates but she wanted, in her privatizing agenda, which we're gonna be
concerned with in a couple of weeks from now, she wanted more, what we
call, neo-liberal policies, she wanted the reduction
of non-tariff barriers to trade in Europe. It was completely obvious
you couldn't get that with unanimity rule in the union because whoever stood
to lose by getting rid of these barriers to trade would veto. So they went to qualified majority voting to make decisions in the European Union at the behest of Margaret Thatcher. So that's another reason that the European Union was created, there was this internal free-trade zone but with these wrinkles to it. A fourth reason, which is
much less intuitively obvious, is that saw people saw
this as a counterweight to some of the pressures of
their own domestic politics. And I can give you a dramatic example of this that I ran into at
a conference in Portugal about three years ago, when the rolling Euro crisis was going on and the southern European
countries were in extremis. And a left wing German intellectual, sort of neo-Marxist by the
name of Klaus Hoffa stood up, this was in Portugal, and he gave a speech in which he said, "You know, we Germans are really screwing "you southern Europeans. "You should insist on being "let out of the Euro
because we're just forcing, "you should be able to
devalue your currencies "and re-equilibrate your
economies to get yourselves out "of this crisis and you can't
because of us nasty Germans." So he thought he would get huge applause. And this Portuguese politician,
I don't speak portuguese, she stood up and screamed at him. And evidently, he
understood enough Portuguese to get the sense that
she was angry with him, but not what he was saying. So he said, "I think you've
misunderstood what I'm saying." And he said it again and she
screamed at him even more. So then, we went for lunch
and I was with a bunch of economists and lawyers and I said, "What was that about?" And the economists all said, well, the Portuguese government knows that, but for these constraints, the Portuguese government would be printing money hand over fist and would have massive hyperinflation. And the lawyers all said, you don't seem to understand. Portugal has never been
able to be a democracy outside of the European Union, right? So these people saw it, actually, the fact that this was a constraint on Portugal was a good thing. And in a less dramatic fashion, even the Germans like
some of the constraints. And then finally, of course, there was the idea of a
federal European state. This is the idea most famously associated with Jacques Delors, of
an ever closer union, it actually comes from a
declaration in Stuttgart, signed in 1983, including
by the British, by the way. The heads of state or
government on the basis of an awareness of the common destiny and the wish to affirm
the European identity, confirm their commitment to progress toward an ever closer
union among the peoples and member states of the community. So five motivations there. What do they all share in common? What's common, I mean,
it's a disparate list but there's one thing in common. Yeah. - [Student] They have focus on Europe. - Their focus on Europe. What's another thing in common? - [Student] A power in numbers? - Power in numbers, what's another thing? So they're all examples,
there all from above, they're an elite project,
if you think about it. They are the views of what
elites think should happen in Europe and a symptom
of that happens in 2005 when the Maastricht had
created a constitution that was gonna integrate Europe even more, a much more close, ever closer union, and as you can see,
France and the Netherlands held referendums in
which it was voted down by the populations, the
European constitution that had come out of Maastricht. And that quickly led
the Czechs, the Danes, the Irish, the Polish, the Portuguese, and the UK governments all
to cancel their referendums. And actually, the Lisbon
Treaty is a step back from Maastricht because
Maastricht was really trying to create a federal state
and the Lisbon Treaty steps back to making it an
intergovernment arrangement. Very much a top-down enterprise. And so the implications of this are one, and this is, the chapter and verse of this is in Tony Judt's book, "Postwar", which he published in 2005. He died shortly thereafter
so he had a ready finished it before these referendums
but the basic message of that book about Europe is look out when the first crisis hits because there's no grassroots
support for this institution. And what happened when
the first crisis did hit? We'll talk about later
but the chapter and verse of that is in Adam
Tooze's book, "Crashed", which is mainly a book
about the Eurozone crisis and why the European governments have been unable to resolve it. And again, it's to do with the fact that this was an elite project, although he plays out the conflicts of interest within the elites. And then there's one
final thing I will mention before we close, and to
bring why have I been talking about NATO and the European Union. So NATO is actually a
source of the obstacle to a Pan-European identity because they contract out
their national security. If you think back to
the beginning of the US, that we almost lost
the War of Independence because the states
wouldn't ante up soldiers and funds to fight the war. And the reason we created
the Federal Constitution was to enable Washington to raise an army so that he could defend itself and pay its national debts. Because Europe contracts out, essentially, its national security to NATO there's no European army, there's no sense that Europeans might have to go and die for
Europe in a way that, as a result of the transition
from the Confederation to the United States of America, we have created a national entity with people actually identify. So there's an irony there that, actually, the strength of NATO can be an obstacle to the formation of a Pan-European identity. Okay, we're out of time and next, we will be talking about
fusing capitalist economics with communist politics
in China and Vietnam. (gentle music)
