Kirkhill said:
The Nation-States of Europe are a 19th Century Fiction imposed on the general populace by centralizing governments. The truer face of Europe is the loose confederation of City-States occasionally known as the Holy Roman Empire (or the Pragmatic Constantinian General Assembly).
France didn't become France until the cession of Nice to France in the 1860s. Germany didn't become Germany until 1989. Italy didn't become Italy until 1872. Britain didn't become Britain until 1707 (modified up until 1921 - apparently still a work in progress). Spain became Spain in 1492 but the Catalans, Basques and Castilians, amongst others, had very different understanding of their terms of association. Norway and Denmark split the sheets in 1905 and the Faeroe Islanders are still looking for a better deal from Denmark.
There is a biological theory (I hope I am remembering this correctly) that suggests that the reason Africa is such a harbourage of pestilence and so difficult to cure is that as a result of it being a point of origin for so many gene pools it is extraordinarily difficult to contain diseases before they jump to a neighbouring pool, adapt to those newer genes and morph into something different.
My sense is that Europe, with its myriad isolated but interconnected valleys, each identified by a genetic, linguistic and cultural preponderance, but never able to achieve a perfect quarantine from its neighbours, is to politics what Africa is to disease.
Ideas jump from locale to locale and morph into something different. Liberal is a case in point. Good or Bad. Fascist or Free. Wealthy or Greedy.
A very current aspect to this debate is the Merger/Takeover of EADS and BAE.
EADS = France + Germany. It is European as long as Europe is French. It is a Government held commercial enterprise.
BAE = UK. It is a privately held firm that had a virtual monopoly on UK defense spending but is branching out to support other governments, to include the US.
For a European Army you need a modern equivalent of the Arsenal of Venice, if you see the world in French terms.
For a British Army you need Hiram Maxim and Armstrong.
The two visions are irreconcilable.
France and Germany could come together with the Arsenal of Venice version of EADs, primarily because Germany's "War Guilt" wouldn't let her do anything else other than accede to French demands.
Germany and Britain could come together over a "privatized" BAE model of EADs for a host of financial, cultural and historical reasons.
But the deal won't happen as a Three-Way because France and Britain can not come together.
France insists that it wants a "privatized" entity but when Britain insists that no government can hold more than 10% of the shares in the enterprise France demands a higher initial allocation with the proviso that it can buy up all "unwanted" shares at its leisure.
This would effectively mean that by fiat France could declare itself the sole producer or weapons for Europe. A non-starter from the stand-point of the other nations both on economic and nationalist grounds. And a very unwise policy if innovation is desired.
However, Colbert would have approved, as would Louis XIV and Napoleon.
In the words of that fine Frankish phrase: "Ordnung Muss Sein".
The
Good Grey Globe's European business correspondent,
Eric Reguly, agrees with friend
Kirkhill in this column which is reproduced under the Fair Dealing provisions of the Copyright Act from the
Globe and Mail:
http://www.theglobeandmail.com/report-on-business/international-business/european-business/money-politics-and-fear-what-the-bae-eads-fiasco-says-about-europe/article4609492/
Money, politics and fear: What the BAE-EADS fiasco says about Europe
ERIC REGULY
ROME — The Globe and Mail
Published Friday, Oct. 12 2012
They do business differently in Europe.
Take the proposed €35-billion ($44-billion) merger of Britain’s BAE and the Franco-German EADS (owner of Airbus), a deal that would have created the world’s biggest defence and aerospace player.
There was some industrial logic to the merger – the launch of a formidable rival to America’s Boeing – even if the idea seemed a bit rushed.
But the merger was doomed the moment it was conceived and it was euthanized on Wednesday.
What went wrong?
Blame the political agenda in Paris, Berlin and London. The rights and independence of the executives and the shareholders were quickly buried under an avalanche of fears that the head office would be in the wrong country; there would be too much state control, or too little; jobs would disappear in one country and pop up in another; and industrial decision-making left entirely in the hands of management and owners risked damaging national agendas and the preservation of national corporate champions.
And so on. The whole affair descended into what’s-in-it-for-me political bedlam.
Now you know why it’s taking so long to fix the euro crisis. Based on the BAE-EADS fiasco, the euro zone will be extinct by Christmas.
Political interference is inevitable in any important industry in any country – note that Stephen Harper’s government killed BHP Billiton’s takeover of Potash Corp. of Saskatchewan two years ago and the Chinese were given the bum’s rush when they tried to buy Californian oil company Unocal (now part of Chevron) in 2005. But the degree of political interference in Europe is off the charts by North American standards and has reached the point where it is doing more harm than good. While governments see state influence or outright control as an agent of industrialization, the opposite is more likely the case as short-term political goals displace long-term strategy.
The BAE-EADS merger attempt shows that state capitalism is alive and well in Europe, especially in France and Germany, whose governments were lobbying for a collective 27 per cent stake in the enlarged group while Britain was lobbying for those same stakes to be eliminated. It has always been thus and for many decades, it more or less worked. After the Second World War, governments from Britain to Italy used state-controlled companies and national projects – from building the world’s best highways and nuclear reactors to wet-nursing the auto makers and aerospace companies – to revive the destroyed continent.
Along the way, there were spasms of state sell-offs, notably in Britain under the privatization-mad Maggie Thatcher, and there is no doubt the role of the state has declined throughout Europe since the 1990s. But it has far from disappeared. France remains the biggest advocate of using equity stakes, proxies and yes men to influence entire industries. It still has a minority stake in Air France-KLM, one of the world’s biggest airlines, controls the nuclear industry (in good part through Areva) and has a 15-per- cent stake in EADS and wanted no less than 13.5 per cent in the enlarged company if the merger had gone ahead. It is the biggest shareholder in GDF-Suez, the electricity utility and power generator with more than 230,000 employees.
State influence in big industries seems to have done France no favours in recent years. The ailing auto industry is one sorry example. French auto maker Renault was controlled by the government until 1996, when it was privatized. But the government could not resist hanging on to a 15-per-cent stake, presumably to protect France’s national interests in a high-value-added industry. Renault has lost almost 70 per cent of its value in the last five years. So much for protecting the taxpayer.
Renault’s rival, Peugeot Citroën, has no government ownership. Still, Paris delights in telling it what to do. French President François Hollande and his ministers were enraged when Peugeot announced it would shutter its Aulnay factory near Paris at a cost of 6,000 jobs. Mr. Hollande described the closing as “unacceptable” (though it is now going ahead). Peugeot has lost 90 per cent of its value in five years.
Car production in France, meanwhile, is in free fall. In 2005, it peaked at 3.5 million; last year, it was 2.3 million.
Air France is in trouble too. It lost €895-million in the three months to June, partly because it has lagged its rivals in cutting labour costs. The state influence over the company no doubt has something to do with this. Meanwhile, the airline has come under pressure from the French parliament to order planes from EADS-owned Airbus instead of rival Boeing. Air France has lost 80 per cent of its value in five years.
While a huge variety of factors have conspired to push down the values of these French companies, state control or meddling has not worked in their best interests. BAE and EADS might well survive, even thrive, on their own. Or they may not. Turning Boeing into a diversified military and civil aviation company worked wonders for the U.S. giant. Politics denied BAE and EADS the right to try the same thing. Short-term strategies usually work against long-term interests, as any good investor knows.
"State capitalism" is a myth. The state is involved in
capitalism, it builds goods (e.g. roads and schools) and services (e.g. tariff and tax collecting) which, in their turn, are broadly productive, but the idea that "state owned enterprises" are in some way "capitalist" is wrong-headed. Some state owned enterprises are successful - this is, in all cases, more a matter of good luck and circumstances than good management. As a general rule each and every state owned enterprise, of any and all kinds, is inefficient. That even applies to things which
ought to be, for the very best public policy reasons, state monopolies (the armed forces, for example). Put generally: any private enterprise can do anything - saving lives in hospitals or taking lives on a battlefield - better than any government agency. And that applies without regard to race, creed or culture ~ a private hospital in Kuala Lumpur Malaysia is more efficient than a public hospital in Kingston, Ontario. the reason is simple:
management. Any private enterprise is immune to the political consideration which
must drive even, for example, military decisions. Thus
public decision making is, always and everywhere, hobbled by factors which guarantee inefficiency, ineptitude and corruption. That is not to say that
some private enterprise are not inefficient, inept and corrupt but the market is able, very quickly and cleanly, to remove them from the equation - so long as governments do not intrude to "champion" inefficient, inept and corrupt favourites, e.g.
BAE,
Boeing,
EADS or
Locheed Martin, none of which could compete in a free market without massive government supports.
But, "state capitalism," real or not, is very, very popular in most
illiberal societies, of which France is a prime example. State capitalism is also popular is some
conservative societies - consider Hong Kong's and Singapore's very large ($200± Billion (US)) sovereign wealth funds, and even in some
liberal ones - one Canadian province (Alberta) and several US states, including Alaska and Texas, have sovereign wealth funds.
