Confusion, discontent and uncertainty reign in the heartland of Europe. Britain, having broken away, has become a cut-off scrap. Germany is in disarray after the departure of Angela Merkel, the “mutti” who embodied the steadfastness of its chosen course. France is abuzz with demonstrations
It was against this backdrop that the XIV Eurasian Economic Forum was held in Verona. It is the largest platform outside Russia for an exchange of views of the business community in Eurasia. The pathos and stylistics of the speeches made by the hosts and guests of the forum is a reliable indicator of the mood, which is changing as the ‘new normality’ (or rather, the new abnormality) is being established.
A consolation is the more or less sustained economic growth in the Old World. The forecast for the Eurozone is plus 5% of GDP by the end of the year. Italy, with an expected 6.3% GDP growth, looks the favourite. However, as one Chrysostom put it, “there is growth, but no happiness.”
Devaluation of traditional values
Several scenarios for the development of the crisis situation are visible, said Professor Giovanni Bazoli, honorary president of Banca Intesa Sanpaolo. First, in the case of a further imbalance in the relationship between man and nature, we face a catastrophe caused by climate change on the planet.
The second scenario, according to Professor Bazoli, boils down to “a loss of the universal values on which European (western) civilisation is based”. Both because of the shift of the centre of power to Asia and because of the erosion of socio-demographic pillars of society. Europe will face waves of migrants because in 20 years’ time there will be more than one billion people living in Africa alone. “Social inequalities are becoming unbearable”.
The devaluation of traditional values and the abandonment of “the legacy of Christianity on which Europe, including Russia, has rested for the past two thousand years” is alarming. As a consequence, postulates Professor Bazoli, there is a threat of “a return to an era of barbarism”.
After the collapse of the USSR, which represented an “alternative development model”, the illusion arose that the foundations and principles of Western democracy had universal significance, and that the “free market”, regulated by the big powers, would enable a further increase in new markets.
After 1991, the adherents of capitalism in its neo-liberal edition continued the “process of unbridled financialisation” which is characterised by the subordination of the real economy (production of goods and services) to the financial sector. An iconic detail: the condemnation of financialisation came from Giovanni Bazoli, founder of Italy’s leading (number one in the hierarchy) Intesa Sanpaolo, the third most capitalised and first liquid bank in Europe.
In pursuit of super profits, the banker reminded, the West failed to notice how it “became a victim of craving for excesses”, for which it paid with the financial mortgage crisis of 2008. The erosion of the middle class, always the pillar of economic prosperity, was accelerated. It is worth adding to Professor Bazoli’s words that the middle class has always been the guarantor of social stability. Now the pauperisation of the middle classes is increasing protest in society.
What is needed, says Bazoli, is to “restore trust in public institutions” and turn globalization into a process of “knowledge and people sharing, a process of rapprochement between responsible people – and therein lies the key to our survival.”
Consumer narcissism is rampant
Almost in tune with Bazoli was the wake-up call from his colleague Prof. Antonio Fallico, chairman of the board of directors of Banca Intesa. At the heart of his speech was a thesis that “economic growth must be driven by the needs of society, by the search for greater social equality and by a development model that puts people at the centre”. According to Professor Fallico, founding father of the association “Explore Eurasia”, “it is necessary to overcome the neoliberal economic model”. After all, neoliberal doctrine has been shaping the economic and political agenda of the vast majority of the world’s countries for half a century now.
This is unfortunate because the ideology and practice of the neo-liberal model of development assumes the primacy of competition and rivalry at the expense of the natural desire for engagement and solidarity.
One manifestation of the neoliberal dictatorship – with the exception of crises like the one that hit the world from the US in 2008 – is the restriction of the creative, regulatory role of the state and the dismantling of the social safety net, which undermines welfare in general and destroys the middle class in particular.
Meanwhile, social injustice is growing. Two billion people on the planet do not use electricity. One billion cannot write or read their own name. The richest one percent own 18% of all wealth, becoming slaves to “consumer narcissism”, to quote Antonio Fallico.
Jumping on the foot of the train
The main concern of Klaus Mangold, chairman of the supervisory board of Knorr-Bremse (a Munich-based group that holds a leading position worldwide in the production of braking systems for rail vehicles and trucks), is that Europe has become weak.
According to Herr Mangold, “the glue that binds economic success together is integration”. Therefore, “it is necessary to bring Russia and China closer to Europe”, all the more so because Russia needs Europe’s advanced technologies, and Europe will not be able to ensure its energy security without Siberian hydrocarbons.
How realistic is it to resume meaningful interaction between Europe and Russia in the context of the hybrid Cold War? “The situation is schizophrenic,” argues the CEO of Pirelli & C. S.p.A., co-chairman on the Italian side of the Russian-Italian Business Committee, Marco Tronchetti Provera. Europe, in his opinion, already “plays a secondary role” in the system of international coordinates, as it lacks autonomy. Full-fledged dialogue is needed, including with Russia, but businessmen alone cannot be its driving force – that is the task of politicians.
In another session, Simone Crolla, Managing Director of the American Chamber of Commerce in Italy, reinforced this tenet. He argued for the beneficial effects of business on politics by pointing out that McDonald’s has invested $2.5 billion in Russia and, in spite of all the lockdowns, intends to open 800 more fast-food restaurants. However, Mr Krolla failed to explain why McDonald’s McDonald’s has had no effect on bilateral relations marked by the sanctions war, provocations on the diplomatic track and spy mania.
Is it too late for Europe to jump on the bandwagon of the eastbound Russian train? Previously the volume of trade and economic interaction between Russia and Europe compared with the Asian direction was expressed as a ratio of 3:1. Today that ratio is nearly 50:50.
On a first-come, second-served basis!
If over the past 400 years Europe has been the dominant centre of power in the world, today it is receding into the background, being marginalised, transformed from a leader to a follower. These theses were developed in his speech at the Verona Forum by Sergey Karaganov, Dean of the Department of World Economy and World Politics of the National Research University Higher School of Economics.
In his report on the state of trade between Russia and the EAEU countries, the section “Imports and exports of mechanical and electrical equipment” attracts attention. In these two categories of goods Russia’s trade with the European Union fell from 51.1% to 39.2%, and from 38.1% to 20%, respectively. At the same time, trade with China increased from 22.6% to 32.9% and from 32.3% to 50.7%. Equally significantly, the share of energy exports to Europe fell from 53.6% to 45.6%, whereas oil and gas shipments to China rose from 6.5% to 20.8%. These are the statistics of the “pivot to the East”.
Beijing is re-creating on a high-tech basis the Silk Road, the ancient busy backbone of trade and other links between the East and West. And in so doing, Karaganov noted, China is taking us back to an era when the Middle Kingdom was the largest power and influence centre in Eurasia. What will China’s unstoppable ascent, which has already overtaken the US in terms of industrial output, have in store for everyone else?
There are two scenarios, Karaganov predicts. In the first, China will assertively resurrect a middle empire surrounded by vassal states. This will “inevitably cause resistance from India, Iran, Turkey and indeed Russia”, which will be forced to “strike a balance”.
The second scenario suggests that China will borrow the scheme of partnership with other states from the European Union and build an alliance in the image and likeness of the EU. And then “the creation of a ‘Greater Eurasia’ will proceed at an accelerated pace,” Karaganov noted, adding that if the USSR and the PRC had not quarreled half a century ago, the idea of Eurasian integration would have long ago found flesh.
In any case, we will face a breakdown of the old model of the world order. And will it happen after the clash of pretenders to world domination, or on the basis of mutually acceptable agreements on the changing rules of coexistence no one will probably say now.
Vladimir Mikheev, FSK