American History Lessons for the Eurozone

July 5, 2012 |
The irrelevance of American federalism to the EU’s crisis does not mean that Europeans cannot learn anything from the American experience.
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Can European leaders learn from the example of Alexander Hamilton? The nation-building efforts of America’s first Treasury secretary are frequently held up as a model for European integration more than two centuries later. The crisis of the eurozone has led many to argue that Europe can learn from Hamilton and other 18th-century American founders about how to structure a continental union. However, this line of reasoning is based on a mistaken analogy and attempts to base policy on it are likely to fail.
 
The US is a federal nation state, not a federation of nations like the EU. A nation state is a country in which the majority shares, if not necessarily common ancestry and religion, at least a common language and culture. Unlike the EU, and like modern Germany and modern Italy, the US is a federal nation state whose political unification and preservation in the civil war was enabled by a pre-existing, extra-political national identity.
 
Proponents of deeper European integration sometimes seek a precedent in the Federalist Papers, written in 1787-8 by Hamilton, John Day and James Madison to encourage the adoption of the US federal constitution. But Federalist number two, written by Jay, in effect begins the series by claiming Americans for the most part were “one united people – a people descended from the same ancestors, speaking the same language, professing the same religion, attached to the same principles of government, very similar in their manners and customs ... ”. It never occurred to the founders to propose a merger of the former British colonies with the Spanish and French colonies of the Americas to form a polyglot United States of the Western Hemisphere.
 
In the 1790s Hamilton, as President George Washington’s Treasury secretary, promoted continental union by means of a central bank, federal infrastructure investments and federal promotion of manufacturing. However, Hamilton probably would have scoffed at the idea that federal institutions devised to unite Massachusetts, Virginia and New York could unite Germany, Greece and Poland. In 1802 he wrote: “The safety of a republic depends essentially on the energy of a common national sentiment; on a uniformity of principles and habits; on the exemption of the citizens from foreign bias, and prejudices; and on that love of country which almost invariably be found to be closely connected with birth, education and family.” Hamilton argued that “hardly any thing contributed more to the downfall of Rome than her precipitate communication of the privileges of citizenship to the inhabitants of Italy at large”.
 
The irrelevance of American federalism to the EU’s crisis does not mean that Europeans cannot learn anything from the American experience. The US is not only a federal nation state but also the military and economic hegemon of North America. In addition to frequently engaging in clumsy gunboat diplomacy, the US has also acted occasionally as a responsible hegemon – for example, when the Clinton administration rescued Mexico’s finances in 1994.
 
The American example shows that these hegemonic functions can be carried out effectively in the absence of formal, supranational, regional institutions. Efforts to turn the association that signed the North American Free Trade Agreement into a true continental union like the EU have been thwarted by popular opposition in the US and its neighbours alike. But that has not prevented the US from acting in the interest of the regional economy, when necessary, using any bilateral or multilateral institutions at hand – “coalitions of the willing” in international economic policy.
 
The parallel is not exact. By itself, Germany, the largest country in the EU, does not have anything like the weight of the US in North America. But the American example suggests that, by concerted action, the two or three largest European economies might function as a responsible regional hegemon, acting as both lender and consumer of last resort.
 
The US can indeed teach the leading nations of Europe lessons – not about formal federalism but about informal hegemony. If regional economic hegemons exercise responsible leadership, formal regional institutions are unnecessary. And if regional hegemons refuse to play constructive roles, formal regional institutions will be useless.
 
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