<html><body>The End of Europe? March 1, 2004 Unedited transcript prepared from a tape recording <TABLE width="100%" border=0> <TBODY> <TR> <TD vAlign=top align=left width="17%"> 5:15 p.m.</TD> <TD vAlign=top align=left width="83%" colSpan=2> Registration</TD></TR> <TR> <TD vAlign=top align=left width="17%">5:30</TD> <TD vAlign=top align=left width="22%">Introduction:</TD> <TD vAlign=top align=left width="61%">Christopher DeMuth, AEI</TD></TR> <TR> <TD vAlign=top align=left width="17%">  </TD> <TD vAlign=top align=left width="22%">Lecture:</TD> <TD vAlign=top align=left width="61%">Niall Ferguson, New York University Leonard N. Stern School of Business</TD></TR> <TR> <TD vAlign=top align=left width="17%"> 6:30</TD> <TD vAlign=top align=left width="83%" colSpan=2> Adjournment and Reception</TD></TR></TBODY></TABLE> Proceedings MR. DeMUTH:  Ladies and gentlemen, can we come to order, please?  Welcome to the March Bradley Lecture at AEI. This is a monthly series, and after this evening there are two more remaining in this academic season. On Monday, April 12, Amity Shlaes will lecture on "Mr. Mellon and Mr. Schechter: The New Deal as Class Warfare," previewing a book that she wrote while a visiting fellow at AEI last year on leave of absence from the Financial Times. And in May, our own Gertrude Himmelfarb will lecture on "Three Paths to Modernity:  The British, American, and French Enlightenments." I'm delighted to welcome back to AEI Niall Ferguson. He debated Bob Kagan on the question of whether America is an empire in the traditional sense, here several months ago, and I'm delighted that this evening he has the podium all to himself. A graduate of Oxford, where he earned his Ph.D. in history and economic history, he has quite dramatically burst upon the scene, both the academic and popular scenes, in the past decade. In the past nine years, he has published six important works of history. One that received a great deal of popular recognition was the 1997 Virtual History: Alternatives and Counterfactuals, with essays on such subjects as World War I without Britain, Europe if Germany had won World War II, the '60s and '70s if JFK had survived, and others offered not as parlor speculation but as an illustration of the importance of events and people and the essential indeterminateness of political history. Other important recent works are The Pity of War, published in 1998, an important work about World War I; The Cash Nexus: Money and Power in the Modern World, 1700-2000; and his most recent book, selling very well in the United States and in Britain, Empire: The Rise and Demise of the British World Order and the Lessons for Global Power. He is currently a professor of financial history at the Stern School at NYU, and is also a senior research fellow at Jesus College, Oxford. This coming fall, as many people, I think, in the audience have heard, having been snatched away by Harvard, he will take a chair in the History Department at Harvard University. His lecture this evening is titled "The End of Europe?" Would you please give a warm welcome to Professor Niall Ferguson. [Applause.] MR. FERGUSON:  Well, thank you very much indeed, Chris, and thank you also to Lynde and Harry Bradley, whose generosity makes this series of lectures possible. And thank you also for turning off your cell phones. I want to speak this evening about what may seem a rather dramatic subject--the end of Europe, by which I don't mean its disappearance from the map, but a fundamental transformation in the political and economic institutions of the European Union. In order to illustrate my argument, I want to take you back very far in time. In fact, I want to take you back to the year 732. In Gibbon's Decline and Fall of the Roman Empire, in Chapter 52, Part 2, he describes what might have happened if the Muslim that had invaded across the Straits of Gibraltar and invaded Spain and then France in the year 711 had won what became known in the West as the Battle of Poitiers. So let me quote Gibbon, that much greater Oxford historian. "A victorious line of march had been prolonged above a thousand miles from the Rock of Gibraltar to the banks of the Loire; the repetition of an equal space would have carried the Saracens to the confines of Poland and the Highlands of Scotland; the Rhine is not more impassable than the Nile or Euphrates, and the Arabian fleet might have sailed without a naval combat into the mouth of the Thames. Perhaps"--and here is the quintessential Gibbon--"perhaps the interpretation of the Koran would now be taught in the schools of Oxford, and her pulpits might demonstrate to a circumcised people the sanctity and truth of the revelation of Mahomet." Some of you who know my work on empire may have anticipated that this evening I would talk about empire. Indeed, American empire is the subject of my forthcoming book. But I thought we'd done American empire last year in this very room. And so what I want to talk about instead is a different notion. It's a little neologism of my own. It's "impire," with an "i". It's about what happens when a political entity, instead of expanding outwards towards its periphery, exporting power, implodes--when the energies come from outside into that entity. And I want to try and suggest to you that the face of Europe today and in the coming decades was unwittingly, or perhaps presciently, foreseen by Gibbon in that characteristically ironical passage. I want to try to suggest to you that the end of Europe is not merely an economic phenomenon but will in fact prove to be a cultural phenomenon. Europe will turn out to be not an empire in the sense that I think the United States is today--that is to say, an expansive geopolitical entity--not a rival or a competitor or a counterweight to the United States, but almost its antithesis, something that is drawing political energies into it, that is perhaps even being colonized by exogenous forces. So that's my argument. I think it's fair to say that Americans, if I dare to generalize, regard the European Union as a relatively serious institution. I think they see it as economically comparable, at least in scale, with the United States, with, after all, a combined gross domestic product that, by some measures at least, is very nearly equal to that of the United States. Indeed, given exchange rate movements at the moment, I suspect that when they work out the combined GDP of the EU for 2004 and compare it with that of the United States, it may come out slightly higher, even in current dollar terms. Americans see a strong European currency, belying the predictions of "Cassandras" that the euro would fail. They see, if they look closely, evidence that, at least by some measures, West European productivity is not far behind that of the United States. They see, perhaps above all, an equal in trade negotiations. Nor is it only as an economic counterweight that Americans take Europe seriously. In simple demographic terms, the European Union is a larger entity than the United States and will be larger still with the accession of May the 1st of this year of 10 new countries. With its population of 450 million people, the Europe of 25 will be one and a half times larger than the United States. Americans also detect in Europe a cultural challenge, perhaps even a cultural rival. It's not just that, like my sparring partner from last year, Robert Kagan, they detect in Europeans a kind of Venusian aversion to the exercise of military power as compared with the Martian--or martial--American preference for the use of force. They also see profoundly different attitudes towards, for example, the welfare state. And they detect--and I think with some reason--a certain hostility to the United States that has perhaps become more overt in the last few years than it was before. Americans also see a political process, a constitutional process going on in Europe, which, at least for a time last year, seemed to suggest the emergence of a genuine federal United States of Europe. And although that constitution has been put on the back burner, the draft treaty for a European constitution--to give it its proper name--is not, ladies and gentlemen, by any means a dead letter. Those who look closely at the way the European Union works will recognize that, at least in legal terms, it already is a federal system in the American sense; that the European Court is in every sense the equal of the Supreme Court in the United States. It is the highest legal instance in Europe. And then, if one looks at the small print of the draft constitution, one sees ways in which the federal or quasi-federal institutions of the EU are gaining in power. Were that draft treaty to be implemented, then the rules of qualified majority voting, which allow countries to have rules imposed upon them by a majority, would be extended to cover many more areas of European policy. Viewed from Washington, Europe seems strong in diplomatic terms, too. Who could mistake the reality that at least some European powers are currently able to exercise at least a kind of disruptive influence on American power? The world is not really unipolar so long as the European Union enjoys the unique distinction of having two permanent members of the United Nations Security Council. There are other respects in which I think Americans should take Europe seriously in the international sphere, and they're often underestimated. In recent years Europeans have contributed a great deal more in official aid to developing countries. They've contributed substantially more to peacekeeping missions organized by the United Nations. My future colleague Joseph Nye at Harvard talks about soft power, and detects a certain decline in the soft power of the United States. He might equally well, it seems to me, argue that the soft power of the European Union has been growing steadily and that as the world--if the Pew Global Attitude Survey is anything to go by--becomes more hostile to the United States, so, subtly and implicitly, it becomes more friendly to the European Union. So whether you read Robert Kagan or the very different work that's been produced by scholars like Sam Huntington, John Mearsheimer, Charles Kupchan, it's clear that American thinkers take the European Union very seriously indeed. But what I want to do this evening is to suggest to you that they should not take it so seriously; that in fact the European Union--in all of these respects that I have just listed--is much less impressive on close inspection than it appears through a transatlantic telescope. When we look closely at the way in which the European Union is evolving and try to set its evolution in some kind of historical perspective, I believe it becomes apparent that, far from approaching a kind of parity with the United States, whether in economic and cultural and political or in international terms, in reality the European Union is an entity on the brink of decline and perhaps ultimately even of dissolution. Now, for the avoidance of doubt, I'm not saying that the European Union will disappear as an institution in our lifetimes. Institutions, in Europe particularly, tend not to disappear. They just decline in their power. Like, for example, today's Organization of Economic Cooperation and Development--once the prototype of a far larger post-Marshall Aid European union, today a harmless agency for gathering data and producing economic reports. And ladies and gentlemen, Europe is littered with such agencies, which once embodied grandiose plans--think, for example, of the Bank for International Settlements or the International Labor Organization. There's scarcely a European capital without the relic of some past plan for great greater European integration. My suggestion is not that the European Union will vanish, but simply that its institutions are in danger of atrophying and that it, too, may one day be no more than a humble data-gathering agency with expensive but impotent offices in the city of Brussels and elsewhere. Let me try to illustrate to you why I think this is. There are really three parts to my argument, one of which is quite obvious and I will deal with as swiftly as possible. And that is, essentially, to point out why so many of these signs of rapid integration and of approaching parity with the United States are false signs. The second and more interesting part of the argument has to do with a fundamental historical insight into the way that the European Union or, to be precise, the process of European integration, has always functioned from its very inception until the present. I want to draw on the work of recent scholars, not all of which will be known to you, to suggest that there is a key to understanding the process of European integration, and that key can be summed up in a single phrase: German gravy. Finally, having bored you near to unconsciousness with economics, I will soar away from such dry matter and offer a third cultural argument to the effect that Europe may not only experience a kind of institutional decline, but that its very culture is in itself authentically, and in the true sense of the word, decadent. So my conclusion will be as much cultural as economic. First, the economics. In every year of the last decade but one--that was 2001--the economy of the United States has grown in real terms faster than that of the European Union. In every year but two out of the last nine years, productivity has grown faster in the United States than in Europe. If you look at the average of unemployment--and these are the standardized measures of unemployment that the OECD uses--you can see that on average over the last decade unemployment in the European Union has been double what it has been in the United States. Why is this? I think there are two ways of explaining European economic under-performance in the past decade. One of them is that the labor market and indeed markets generally are less flexible than those of the United States. The other is simply that the monetary policy of the European Central Bank has been somewhat inept, or at least somewhat unbalanced, in the way that it has treated the different members of the euro zone. The key point about economic under-performance in Europe is that it is principally, or at least predominantly, a German story. It is richly ironic that only 20 years ago scholars were warning that Germany--along, of course, with Japan--was going to surpass the United States among the world s biggest economies. In truth, those of us who were living in Germany in the 1980s could see an impending economic crisis in that country, a crisis that German reunification temporarily postponed in an orgy of deficit finance and subsidized consumption. Now we see the reality. There is a profound problem in the German economy that would be there whether the Bundesbank was still in charge of monetary policy in that country or not. The problem is worsened by the fact that, under the ECB, interest rates in Germany are probably around 100 basis points higher than they should be. And given that the German economy is roughly a third of the economy of the euro zone, an unhealthy Germany is an unhealthy European economy. I want to add a little footnote to this story. If you look closely at man-hour statistics-comparing the productivity of, say, a Frenchman in a single hour with that of his American counterpart--there is in fact nothing to choose between them. As a worker, a Frenchman is just as efficient as an American. It's less true in the case of a German worker, but the difference is not huge. One of the biggest differences in economic terms between Western Europe and the United States has been an astonishing divergence in working hours. In the past decade or so, Americans have steadily worked more hours per year. In fact, according to figures from the OECD, the average American in employment works nearly 2,000 hours a year--and hours a year are a good measure of just how much work people are doing. The average German, ladies and gentlemen, works fully 22 percent less of the year. Between 1979 and the present, the length of the working year grew in the United States. Or, if you want to put it in more conventional terms, the vacation shrank. Precisely the opposite happened in Europe. In Europe, working hours diminished, vacations grew. Labor participation also diminished. Fewer and fewer of the population actually entered the labor market altogether. And that in many ways explains that differential in GDP growth rates as well as anything I could suggest to you. It's a little hint of what I'm going to say in a minute, that this, I think, is more than just an economic phenomenon. In some ways it is a symptom of that cultural malaise in Europe that I want to see as a critical part of the end of Europe. To put it very crudely, it is the work ethic itself that has declined and fallen. And it is, I think, noteworthy that the decline in working hours is most pronounced in what were once distinctly Protestant countries of northwestern Europe. Once. I would, if time permitted, talk some more about the economic and political implications of European enlargement. I would, if time permitted, like to suggest to you that the acquisition of 10 new states, most of them in Central and Central Eastern Europe, does not necessarily portend great advantages either for those new member states or for the older member states of Western Europe. Let me merely point out that one respect in which Central European economies have coped with their relatively lower productivity compared with Western Europe since the ending of communist rule in those countries nearly 15 years ago has been by working longer hours. In fact, the Czechs are among the very few people in the world today who work more hours per year than the Americans. My question, and it is a rhetorical one, though it may invite further comment--not least from my good friend Radek Sikorski, a greater expert in these matters than I can ever claim to be--but my question is, really, whether East Europeans who have discovered the benefits of economic liberty since the fall of the Berlin Wall may not find that liberty circumscribed by the mass of regulations and rules that emanates daily from Brussels. I could also talk about the extent to which, despite the appearance of a greater European cultural identity, in reality, a certain fragmentation of European culture is still very evident in the many euro-barometer polls that have been conducted over the past years. It's clear that a sense of Europeanness, far from growing at the expense of national identity, has, if anything, suffered something of a decline in recent years. I could, if time permitted, dwell on why it is that the draft constitution for a European treaty has been grounded, or beached, perhaps even sunk by recent political events in Europe. Some of you will be familiar with these stories; others will be indifferent to them. I would rather proceed at speed to the second part of my argument. In other words, the conventional points that suggest an approaching European parity with the United States, be they economic, cultural, or political, are points which are at best arguable and, in my view, largely false. But now let me broaden my argument. Let me introduce a certain historical perspective. I'm not, as anybody who has read the book Virtual History will know, an economic determinist or any kind of determinist. I do not, in fact, regard economics as in some sense the driving force of human history. But there are exceptions to that rule. There are certain processes that are primarily economic in their character. And I think it's true to say that European integration is one of those processes. There's been some very good work on the history of European integration done recently. It hasn't been, I think, widely enough understood or received. Perhaps the most interesting work has been produced by the venerable British economic historian Alan Milward, but it's also been complemented by the young Harvard historian Andrew Moravcsik. Between them, working independently, they've arrived at a new interpretation--and I think it deserves to be called a new interpretation--of why European integration happened at all after the Second World War. Instead of the conventional view that a few saintly figures, like Jean Monnet, realized a vision of European integration to prevent the recurrence of war in Europe and generally make everybody happier and better off, they argue that, beginning with the negotiations that produced the European Coal and Steel Community, the nation states of Western Europe made very limited concessions of sovereignty in the pursuit of the national economic interest---or, to be quite specific, in pursuit of the interests of well represented economic groups within their societies, principally heavy industry and small agriculture. If one understands the process of European integration in these terms--essentially an economically driven set of deals between still largely sovereign nation states--one thing becomes abundantly clear. And that is, ladies and gentlemen, that from the very outset this process relied on what I rather crudely called a moment ago "German gravy." It was the Germans who, from the very word go, were prepared to subsidize the other parties in the process of European integration. To give you just one example: The fundamental bottom line of the coal and steel community was that German taxpayers would prop up the inefficient coal mines of Belgium at the cost of hundreds of thousands of marks. In the same way, it was German taxpayers who paid the development aid to the French colonial empire, aid that was an integral part of the Treaty of Rome. It's often forgotten that where the British saw a choice between empire and Europe, and dithered and hesitated about that choice, the French did what I always do whenever I see a choice. They said, "We'll have both, please." Not only did the French seek to retain their African empire and what was left of their Asian empire within the structures of the emerging European community, but, with a brilliant stroke of diplomacy, they insisted that the other five members that signed the Treaty of Rome should subsidize their colonies. And so it was that, in an extraordinary deal, Konrad Adenauer agreed to payments to French colonies that came very largely from German taxpayers. Likewise, the Common Agricultural Policy, which became the single largest item in the budget of the European community, was from its very inception underwritten by net contributions from German taxpayers. That was how it worked. If you add up all the--to use the technical term--unrequited transfers that Germany has paid through the European budget since its inception, one of the most striking facts that I can offer you is that the total exceeds the amount that Germany was asked to pay in reparations after the First World War. It is more than 132 billion marks, the sum that the Germans in the 1920s insisted would bankrupt them if they paid it. Well, they finally did pay it. They paid it not as reparations, but as net contributions to the European budget. And that, I think, explains one of the more striking findings of recent European survey data. Euro-barometer surveys show that there's a real discrepancy between what people think about the European Union relative, as it were, to the general good and what they think about the European Union relative to their own national good. And it's an almost perfect correlation. Countries that are net gainers, net recipients from the European budget, think that the European Union is quite good, but they think it's even better for their own country. Countries that are net donors to the European budget--and that principally means Germany, but also in some measure Britain--think that the European Union is okay for their country but is very good generally. And this, it seems to me, takes us to the very heart of the political economy of European integration Let me tell you some simple percentages about the way the European Union works, to illuminate the fundamental imbalance between representation and taxation which is at the heart of the story of European integration. Today, Germany accounts for around a quarter, a little under a quarter, of the combined gross domestic product of the entire European Union. It accounts for just over a fifth, 22 percent, of its population. It accounts for 16 percent of the seats in the European Parliament, and around about 11 percent of votes on the Council of Ministers, though that process of voting is, of course, under a process of reform. (In fact, if the draft treaty isn't enacted after enlargement, Germany's share of votes in the Council of Ministers will fall to 8 percent.) But if you look at net contributions to the European budget in the years 1995 to 2001, Germany contributed 67 percent. So the Germans get between 8 and 11 percent of the decisive votes in the Council of Ministers, that is, the key decision making body of the European Union, but they contribute two-thirds towards the combined budget. Now, that's all very well, ladies and gentlemen, if Germany is the fastest growing economy in Europe. But as I've already pointed out to you, it is today the slowest growing economy in Europe. It is, in fact, the sick man of Europe. And although the German economy is very large, it is far from clear why, when it has not grown at all in the past six quarters, that economy should continue to subsidize the economies of the smaller, poorer countries of Southern and now also Central Europe. My estimation, ladies and gentlemen, is that the train is still running, but there ain't no gravy anymore. And as that reality gradually dawns, the process of European integration, which I believe has depended from its very inception on German gravy, is bound to come to a halt. Who, after all--who is going to pay for those, and I quote, "maximum enlargement-related commitments," to the 10 new member states which have been capped at 40 billion euros? The general assumption appears still to be that the German taxpayer will pay that money. I see no reason whatsoever why that should be the case. Indeed, the very smallness of the sum that has been agreed illustrates the way the German purse-strings are tightening. But ladies and gentlemen, I didn't come here this evening to make a purely economic argument. What I've said I think is in fact a sufficient argument to explain the end of the process of European integration as we have known it up until this point. But I have one last argument to make that is not, in the end, an economic argument at all. The fundamental problem that Europe faces, more serious than anything I've mentioned so far, is senescence. It's a problem that we all face as individuals to varying degrees, but from society to society the problem of senescence, of growing old, varies hugely. In the year 2050, which is less remote than it may at first sound, current projections by the United Nations suggest that the median age of the European Union countries, the EU 15, will rise from 38 to 49. The median age will rise in the United States, too, though less sharply. (I wish I had time to tell you about the problems that you are going to face, because then it would stop you feeling the complacency that you may have begun to feel this evening.) The situation in the United States is not great at all in this respect, but it is--and I believe this is the most one can say--better than the situation of the European Union. The German population is projected to decline absolutely from 82 to 67 million between now and 2050. Falling populations will be a characteristic feature of the once globally dominant societies of Western Europe. An increase in retirement ages would help only slightly, but it is not an adequate answer to the problems that already beset the social security systems of Western Europe. The implicit liabilities of the German social security system at the moment are currently around about 270 percent of German GDP. There are problems with the social security and Medicare systems in this country--very serious problems indeed. But the problems in Europe are much worse, and they will bite politically much sooner. There is only one way out for this continent, and that is immigration. There is an obvious source of youthful workers who aspire to a better standard of living. All around Europe there are countries whose birth rate is more than twice the European average, indeed, significantly more than twice. The trouble is that nearly all these countries are predominantly Muslim. Not only that, but there is, right next door to the European Union, in fact between the European Union and Iraq, a country that now has a very plausible claim to European Union membership. And that country is Turkey. Turkey's per capita income is in fact, by some measures, higher than that of Hungary, Latvia, and Lithuania, all of which are about to enter the European Union--certainly higher than those Balkan economies that hope to be in the next, or next but one, wave. The arguments against Turkish membership--and the Turks have been pressing for some form of membership since the 1980s--are getting weaker and weaker. And you know the only one that is left? It's one most often heard among German conservatives, but occasionally it slips out of a French mouth, too. That argument is a cultural argument. It is the argument that Europe is fundamentally a Christian entity; that the European Union is a kind of latter day secular version of Christendom. Ladies and gentlemen, I only wish that were true. The reality is--and it is perhaps the most striking cultural phenomenon of our times--that Western and Eastern Europe are no longer in any meaningful sense Christian societies. They are quite clearly post-Christian--indeed, in many respects, post-religious--societies. In the Netherlands, Britain, Germany, Sweden, and Denmark, less than 1 in 10 of the population attends church even once a month. A clear majority do not attend church at all. There are now more Muslims in England than Anglican communicants. More Muslims attend mosque on a weekly basis than Anglicans attend church. In the recent Gallup Millennium Survey of Religious Attitudes conducted just a couple of years ago, more than half of all Scandinavians said that God did not matter to them at all. This, it seems to me, makes the claim to a fundamental Christian inheritance not only implausible but also downright bogus in Europe. The reality is that Europeans inhabit a post-Christian society that is economically, demographically, but, in my view, above all culturally a decadent society. They cannot, though they will try, resist forever the migration that must inevitably occur from south and from east. They will try. Indeed, they try even now to resist the migration that really ought legally to be permissible from the new member states to the old member states after May the 1st. Even that has become contentious. Increasingly, European politics is dominated by a kind of dance of death as politicians and voters try desperately and vainly to prop up the moribund welfare states of the post-Second World War era, but above all to prop up what little remains of their traditional cultures. I understand Samuel Huntington is worried that Mexican culture is taking a firm root in this country and shows no sign of being dissolved into the traditional American melting pot. I read an alarmist article by him in Foreign Policy this week. Well, I have good news for him. Long before the mariachis play in Harvard Yard, long before that, there will be minarets, as Gibbon foretold, in Oxford. Indeed, ladies and gentlemen, there already is one. The Center for Islamic Studies is currently building in my old university a new center for Islamic studies. I quote: "Along the lines of a traditional Oxford college around a central cloistered quadrangle, the building will feature a prayer hall with traditional dome and minaret tower." It will open next year. I wonder what Gibbon would have said. Thank you very much. [Applause.] MR. FERGUSON:  I think in a weak moment I agreed I would take some questions.  And those of you who are not eager to get back to work-- [Laughter.] MR. FERGUSON:  This is work.  Relax.  You may wish to ask a question.  I don't know whether it's your privilege to ask the first question, but if the lady at the back would be patient, I think I probably should hand over to Chris. MR. DeMUTH:  She'll be second.  I want to ask you a little bit more about the numbers you've cited about Germans' disproportionate contributions.  Almost all alliance feature a vast disproportion of contributions.  And there's a lot of economics on that, and we know why it's the case.  And the United States is a vast, disproportionate contributor to many institutions, some of them more like the United Nations, but not all of them.  If we did a calculation of the costs of Operation Iraqi Freedom and the benefits, including to nations that not only sat it out but were opposed to it, we would find a disproportion far greater than what you quoted for Germany. So it seems to me to tie this to Europe's decline, you've got to go beyond the fact that Germany is simply a disproportionate contributor.  Maybe the Germans feel that the European Union benefits everybody, and since they're the biggest, it will benefit them as well. So I wonder if you could tell us a little bit more about the relationship that you see, or maybe that Muravchik and some of these other people have seen, from the choices that they have made to the decline of notions of sovereignty and the economic malaise of the past decade. MR. FERGUSON:  Yes, I think that is an excellent question.  Of course, what I said begged a slightly different question, which was, well, why did the Germans ever do this?  Why were they ever willing to subsidize the process of European integration as generously as they did?  And I think the obvious answer to that is that from Adenauer onwards, and certainly until Kohl, there were obvious political gains for post-war Germany to be had from the process of European integration. The question is, of course, whether that is still the case; whether, if you like, the political legitimacy of bankrolling European integration still exists in the minds of voters in the Federal Republic.  And I think that's far from clear.  One of the key differences between American subsidies, whether it be through institutions like NATO or in the form of direct though largely under-appreciated contributions to global security, and the way in which Germany has subsidized European integration is that the very nature of the transactions is profoundly different. It seems to me that one of the interesting features of what people here prefer to call American hegemony is the fundamental self-confidence of the United States in its own vision of a world order in which it is the dominant player, though not, as it were, in an imperial sense.  The altruistic rationale behind so much American power politics--and I think that's true even of those people who think of themselves as realists--is in very marked contrast to the kind of calculations of national self-interest which were at work in the process of European integration. Having said that, I think it's worth bearing in mind that the fiscal problems I described earlier as having a bearing on the United States apply here, too.  After all, what will be squeezed in the United States budget as the costs of Medicare and Social Security mount inexorably over the coming decades, it almost certainly will be discretionary expenditure on defense and international policy of all sorts.  I mean, in that sense, one has to go from fiscal pressures to a generalized problem of, if you like, a diminished available pot of resources for global leverage.  It seems to me that even the United States, which has undoubtedly bankrolled global security on a far greater scale than the Germans have bankrolled European integration, that, too, that process, too, may not prove to be an enduring one over the median term. But Americans still believe in their mission, whereas I question, I really do question whether Germans today feel the same commitment to a process of European integration that they pay for that they did even in the 1980s. The lady at the back was next. QUESTION:  Zee Hough, Voice of America.  I'd like you to tell us a little bit more about the foreign policy of Europe in view of certain contacts with China and certain articles that said they're playing flute to Europe's trumpet.  And if you could say a little bit more about that.  Is there any plan, is there any vision, or is it just dabbing in the dark or something? MR. FERGUSON:  Well, I think one thing has become very apparent in the last 12 months, and that is that despite all reports-- [tape change] MR. FERGUSON:  --policy in Europe, and despite the fact that two offices that currently exist to conduct such a policy are supposed to be merged under the new draft constitution, despite all this the reality is that foreign policy is made by national governments and will continue to be made by national governments, and that at the moment there is almost a complete absence of meaningful coordination between the biggest of those national governments because their interests are so manifestly in conflict.  Just as was true 10 years ago during the Bosnian crisis, when it comes to a crunch, British interests, French interests, German interests are fundamentally at variance with one another even when war is waging literally within the borders of the European Union.  Now, when the war more recently has been beyond the borders of accession countries, or putative accession countries, the divisions have, if anything, have been more overt and more painful.  It seems to me that if there's anything which we can look forward not to seeing in our lifetimes, it is a common European foreign policy.  Thanks. Now, I'm probably going to start being unfair just because of the way I see hands, but I saw that gentleman's hand first. QUESTION:  I had occasion to give a speech on foreign policy in Latin America, in South America, about a few months ago, and there was a prominent German lawyer also giving speeches at the time.  And I met up with him, and he discussed with me the proposal in Germany to have the first universal democracy in which all Germans would vote, from birth to death, with--as you know, Germans in prison can now vote.  They're proposing that children vote through the proxy of their parents in order to stimulate the voting power of the young and improve their chances of increasing their population. Is this a serious factor?  Is this an answer, perhaps, to the German decline in that maybe Germany will boom again under such a proposal?  What is the situation on this proposal? MR. FERGUSON:  Well, ladies and gentlemen, and--I should watch what I say here.  One should always be careful of Germans in Latin America as a rule. [Laughter.] MR. FERGUSON:  Of course, it's very easy, having said that, to offer the vote to children when you're not having any children.  And in a sense, the question in Germany is almost of academic interest in a population in which the natural rate of reproduction has for some time been missed.  It's not that they need to give votes to children, it's that they need to give children to one another if they are to avoid ultimate extinction. I think it's a touching idea.  I've experimented with democracy in my own family.  Occasionally I allow my wife to vote.  And I've even experimented with consulting the children.  The results have almost always been better than when I take the decision unilaterally.  But I think on a national scale, the notion of lowering the voting age is a truly chilling one--unless, of course, this is simply a covert way of introducing taxation on pocket money as a last desperate measure of the crumbling Schroeder government:  We will give you representation but we will demand 50 percent of all that you get from your dad. Yes, the gentleman in the middle there. MR. FERGUSON:  You described the decline of the EU, I wonder about the nation state.  Do you see an increase in resurgence of the nation state?  And then, when happens to the rapprochement, Germany-France, which has characterized the post-World War II period? MR. FERGUSON:  It's often, I think, tempting to conceive of European integration as a kind of choice between nation state and Europe.  But it's never been anything of the sort.  As Millwood argued--and I think this is an absolutely crucial point--Europe really was designed to rescue the European nation states from their post-war crisis by taking certain difficult decisions regarding declining industries like coal and agriculture and sending them to some neutral higher instance.  So I don't think there's ever been a kind of choice between nation state and national interest in Europe.  I think they've always been complementary.  And whenever Europe has come into conflict with the national interest, Europe has tended to lose. That said, I think what you ask is right.  In the absence of a sustained process of integration, in the presence, indeed, of a kind of atrophying of European Union institutions of the sort that I've tried to describe, will the old national animosities manifest themselves?  I'm not sure that they will, actually.  I think more likely is a kind of--and we're already seeing this happen--a kind of multi-speed Europe, rather like one of those horrible Venn diagrams of multiple overlapping and interlocking circles.  There will soon be six or seven--in many ways, there already are six or seven European institutions, [inaudible] for migration, the euro for currency, the European Union for agriculture, a wider European union for trade.  These sorts of, as it were, multi-speed, multi-geometry arrangements seem to me quite likely to thrive.  But precisely in thriving, these different entities will condemn the central notion of ever-closer union to decline and fall. Radek, I can't resist asking you. MR. FERGUSON:  I'm rather amused by your picture of Germany as a sort of milch cow which has been milked by the clever French and others over all these decades, and you ask what does Germany get out of it.  Well, I think Germany has got out of it, first of all, markets for its industry, and secondly, the recovery of the position that Germany had a hundred years ago, which is to say, being the leading continental nation of Europe. Let's have some perspective on the figures.  You say that 40 billion for enlargement is the sort of figure that German taxpayers might finally balk.  I think it's a bargain.  It's cost them a trillion to integrate East Germany.  And in fact, it is the cheapness of the enlargement that is causing some of the political difficulties now.  And, you know, let's have some idea of the scale of the German economy.  The German government received 100 billion for third-generation GSM licenses, which haven't even been taken up. Finally, and following up on the previous question, what's the alternative?  Do we really want to renationalize European foreign policies, and are we prepared to see Germany pursuing its leadership role by traditional means, as Karl Lamers, the CDU foreign policy expert, so memorably put? MR. FERGUSON:  Thank you, Radek. Well, of course, one of the interesting things about the deal that was struck back in the 1950s was that Germany didn't really need the Treaty of Rome to gain markets for its exports.  Germany was exporting successfully to world markets.  There wasn't any obvious reason why it should give preferential treatment to the other five members of the original six.  And indeed, Ludwig Ehrhardt opposed the Treaty of Rome on just that basis.  So one could equally well argue that the process of European integration has impeded Germany's penetration of, for example, American and Asian markets by confining so much of German exports to what are now relatively slow-growing West European markets. I agree with you that--and this was a point I thought I tried to make earlier, that in many ways Germany has gained politically, has gained respectability, which it had clearly lost in mid-century, from the process of European integration.  That's why German politicians always recite the same mantra:  What we want is a European German, not a German Europe.  It's absolutely clear that the memory of the 1940s is still fresh--not least in French minds, for in the 1940s it was France which was the milch cow of the German war effort.  In some ways, the net contributions to the European budget are simply a slow repayment by Germany for the depredations that occurred during the Second World War. The tragedy, as you rightly say, is that the gravy that's now available in the form of tacit reparations for Eastern Europe will be such a small amount of money compared with the money that was made available, say, to Ireland, when the Irish received ultimately from German taxpayers sums of the order of 5 percent of GDP, well, it's very clear that no such largesse will be coming the way of Poland or any of the other new members.  Maybe the real point about that figure that was agreed as the cap on money for enlargement is precisely it's smallness.  I thank you for that point.  It seems to me to illustrate precisely the fact that the gravy in the train, relative to the German economy, is far, far less, far, far, less than it was in the '60s, '70s, or, indeed, in the 1980s. Is there an alternative?  I certainly wouldn't welcome a return to traditional German methods.  Who would?  It's not only the Poles who suffered heavy casualties at the hands of German armies in the 20th century.  The Scots, the shock troops of the British Empire, suffered percentage losses that compare--and in this, they're almost unique in Western Europe--with the losses suffered by Poland. So I share your anxieties about that.  We would all wish to see this process of European integration to succeed insofar as it succeeds in restraining Germany, in Europeanizing Germany.  But I think we need to recognize the facts.  That process depended on a certain German altruism and on a measure of German wealth, both of which seem to me rapidly to be diminishing. I've no idea when I'm going to be told to shut up, so I will try to offer shorter answers now to your questions.  The gentleman there had a question. MR. FERGUSON:  I had two thoughts.  One is, given the disproportionate amount of monies that Germany has given to the rest of Europe, that phenomenon is true in the United States federal union as well.  I mean, Senator Moynihan always used to point out that if you took the subsidy that California and New York gave to Alabama and Mississippi over the last hundred years, it's just astronomical.  So that in itself is sort of the nature, I guess, of federalism. The other thought that I would ask you is this.  You quite properly point out that--we can exaggerate a little bit here--that the Europeans have stopped having babies.  I mean, it's down to some ridiculous levels.  But it's happening all over.  I mean, you look at the Japanese fertility rate and it's 1.3 children per woman; I mean, not much more than half of what you need to replace a society.  So it seems to me you can't be Euro-specific about that.  And I wonder what your thoughts are. MR. FERGUSON:  Well, two excellent points.  The first is, of course, that if it were a federal system, if Europe had a genuinely federal fiscal system, then you'd be absolutely right and we would simply be looking at the kind of transfers that have always gone from--at least have always gone since the New Deal--from rich states to poor states. The truth of the matter is, though, that Europe has failed to achieve fiscal federalism.  The European Union's central budget is now less than 1 percent of EU GDP.  I mean, as Radek himself was suggesting a moment ago, it's a kind of incredible shrinking federation in terms of the transfers that are actually going from the rich to the poor countries. And that's precisely my point.  You can't really have a deal between rich and poor countries if there isn't some kind of central budget.  One of the fatal structural problems about Europe today is that it is a monetary union, but not a fiscal union.  And the transfers that are necessary to make this monetary union stable in the way that monetary union has been stable in the United States are transfers not only of tax, euros, but also of labor.  I mean, think of the labor mobility in the United States compared with the labor mobility in Europe today.  Today in Europe, all the adjustment takes place through monetary and fiscal policy and there's absolutely no central coordination of the fiscal system. And that, I think, is inherently unstable.  It seems to me collisions between a single monetary system and completely disparate fiscal systems, in the absence of any central budget worth talking about, are precisely the sorts of strain that will slow, if not halt, the integration process. Your second point is, of course, correct.  This phenomenon of population decline is not peculiar to Western Europe.  I wasn't claiming for a second that it was.  But what is peculiar is the cultural implication of what remains of Christendom side-by-side with an extraordinarily vibrant and youthful Muslim world.  The Muslims societies that run in a ring--in a crescent, as it were--around Europe, from Morocco to Turkey, have such remarkably high birth rates by comparison with Western Europe that the cultural implications seem to me to be of inescapable historical importance. And of course we have been here before.  As an historian, one can't help but think not only of the Battle of Poitiers, but the gates of Vienna.  The difference is that this time--this time I think Islam is poised to win.  Already 7 to 9 percent of the population of France are Muslims.  And with the differential in birth rates, these numbers will very rapidly rise. Now, ladies and gentlemen, please don't misunderstand me.  I see this in no sense as a bad thing.  I'm not warning against some rising tide of immigration in the manner of a latter day Enoch Powell.  There are many things about Islam which I think are preferable to the decadent secular society of Western Europe today.  But I think we must recognize that this is what's happening.  And the minaret of Oxford is a symbol of a profound shift that will change fundamentally the nature of what we still anachronistically call the West.  The West is being Orientalized. The lady in the corner had a question.  And, I've been warned, two or three questions more. QUESTION:  You talk about immigration as an answer to the decreasing population in Europe.  And yet, with that immigration, you must provide employment.  The European countries tend to have higher unemployment, extremely restrictive labor regulations.  How are they going to be able to cope if they have large immigration into any of those countries?  They could be ruined economically, and then the social friction could be awful. MR. FERGUSON:  One of the great advantages of immigration historically is that it tends to attract the kind of people who are willing to work hard for relatively low wages.  And from what we can see, the people who actually want to migrate westward from the new accession countries are generally young, single, and well educated.  This is precisely the shot in the arm that Western Europe really needs, in truth.  And just as the hard-working Asians who came to post-imperial Britain in my lifetime are, generally speaking, not only gainfully employed but, in some cases, a great deal wealthier than I am.  It seems to me that the opportunities are there for immigration to have dynamic economic benefits. There's no question that, even allowing for the over-regulated markets of Western Europe, there are opportunities there that will be exploited if the right people are allowed to come. Of course, the policy is to maintain rigidities and to exclude the immigrants, which really is the worst possible response. If Europeans really want to have any hope of prosperity, it seems to me they must shake off their cultural prejudices and learn to love the other, because the other works harder than they do. Let me take a couple more questions and then I feel we really must end.  The lady at the front has a question.  I'm discriminating in favor of women.  I'm so politically correct these days. QUESTION:  I'd like to say that I think that was a brilliant lecture.  And I was struck by the fact that you mentioned the extent to which Americans work harder than Europeans generally.  I've noticed this very strongly as between the United States and France, which I study particularly.  More striking than that, which is clear and demonstrable and has been demonstrated, is the fact that the French government, particularly at the end of the last socialist government, sought to pass laws which outlawed working more than a 35-hour week. MR. FERGUSON:  Right. QUESTION:  And set out police, as I'm sure you know, who checked the parking lots of most major French factories, including the parking places of the executives, to make certain they were not violating the laws against working too hard. That's extraordinary, I think.  That's even more decadent, if possible. MR. FERGUSON:  It certainly was when I spent some time in France recently that I began to think seriously about these questions.  It was a luncheon in Montpelier, actually, that just went on and on and on.  I realized by 4 o'clock that nobody in the restaurant had the slightest intention of going back to work that day. [Laughter.] MR. FERGUSON:  Now, I had just done my first semester at NYU.  I had spent three and a half months in New York.  Lunch for me had become this sort of sandwich that I had at my desk, at best.  So I was shocked. Partly also, I'm a product of a kind of last enclave of 19th century Calvinism in the west of Scotland--been persecuted by socialist local governments for so long that most of us have long ago emigrated.  But I kind of hung on in there, a desperate rear-guard action that I finally abandoned two years ago.  So I, of course, I'm ready to be shocked by the absence of a work ethic.  But, you know, I'm not that shocked by its absence in France, because that's Catholic France. [Laughter.] MR. FERGUSON:  What really shocked me was to encounter it in Germany, in the Protestant parts of Germany.  I live for two years in Hamburg and detected precisely this phenomenon of statutory idleness, imposed idleness.  The German version, which was actually nuttier than the 35-hour week, was the reduction of the retirement age, pioneered by that firebrand of the Left, Oscar Lafontaine.  Now, there can have been in the post-war period few policies more misguided, more economically stupid than the German Left's sponsorship of a lower age of retirement, a belief--an extraordinary belief that this would generate jobs for the unemployment.  It's almost comical, and yet they quite seriously believe this. So I share your incredulity, but it does seem to me to have not only economic implications but also profoundly important cultural ones. Should I take one more question or should I shut up?  The dilemma is yours to resolve. MR. DeMUTH:  Just one.  I think you should take one more. MR. FERGUSON:  All right, I'll take one more question.  The gentleman towards that side of the room has been persistent. QUESTION:  Thank you.  Decadence as a source of imperial disintegration has been offered with respect to the Roman Empire, yet scholars have pointed out that, at the time of greatest economic opulence and what you may call decadence in ancient Rome, Rome has also experienced the greatest territorial expansion and greatest military power.  We are talking about the last century of the republic and the first two centuries of the empire.  How do you square that circle? MR. FERGUSON:  What a wonderful question to end on.  Thank you very much.  It's quite true, of course.  People will look back and they will say how paradoxical the European Union enlarged in the early 21st century, reached its furthest extent.  Indeed, it was in the year 2015 that Turkey itself became a member of the union--under the Emperor Tony-- [Laughter.] MR. FERGUSON:  --an implausible figure who had some from the Britannic periphery to preside over the European Empire.  This was shortly after the capital was moved from Brussels to Rome, and shortly before it was moved from Rome to Byzantium. [Laughter.] MR. FERGUSON:  But Gibbon, of course, argued--and in this I can offer some answer--that Rome was undone not by imperial overstretch, but by an ideological, indeed a religious, threat from within.  The most profound argument in The Decline and Fall is that it was monotheism that did for Rome; it was Christianity.  Well, what goes around comes around.  And now it is the turn of Islam to be the monotheism that destroys an over-extended empire. Thank you very much indeed.</body></html>