Although the unification of Europe provides the opportunity for Europe to open itself to the rest of the world, the short-term, second-best solutions available for managing the problems of the transition process will trigger off strong tendencies to Europe's closing and becoming a fortress. The struggle between ideas will therefore be very important in this transition process. Can the advocates of an open Europe show that this aim is not only viable in the short or medium-term, but superior to its closure? In order to address the possibilities of promoting European openness in this dialogue, the main obstacles to such an opening have to be addressed. I consider there to be three major obstacles: labour market rigidities in relation to the currency union, the absence of a dynamic periphery for the European Union, and the absence of a common doctrine or policy within the European Union.

The currency union removes the mechanism of foreign exchange rate adjustment in order to cope with the differences in productivity development in different regions of the Union. Economies with below-average increases in their productivity can no longer adjust by lowering the international costs of their local factors of production. Adjustments are made on the basis of differing rates of unemployment.

With rates of productivity growth differing sectorally or regionally within a homogeneous capitalist economy, adequate demand in relation to productive potential is realised by means of the high growth sector or region pulling the "rest". The high growth sector or region is able to do so by increasing real incomes, thereby pulling the rest of the economy via demand. This mechanism implies tendential full employment, sectoral and regional migration giving labour strong bargaining power in the backward regions, and the backward regions not being able to substantially undercut the prices of factors of production in the high growth sector or region in sectors important for employment. The high overall level of unemployment in the European Union as well as the initially low levels of migration and organised cohesiveness of labour will tend to favour a race to the bottom, which will be intensified by the capacity of "regional" governments, the old national ones, to subsidise sectorally limited catching-up strategies. This will intensify underconsumptionist tendencies which, in turn, will favour a closure of the European Union.

The process of globalisation (the intensified international division of labour which incorporates previously underdeveloped, low-cost economies with initially low-productivity) is devaluation-driven. Those economies are successful which are able to drive down the exchange rate to levels where the national currency wages are low in international currency; hence, the international costs of this labour are low. This does not necessarily mean that real wages are low, as wage goods are supplied by the surplus of an efficient local agriculture and, in the case of rising mass demand, by a booming informal sector in industry whose export propensity is low until – through an economy-wide rise in efficiency and productivity – international competitiveness is achieved. The capacity to devalue depends on the productivity of the local agriculture which is able to supply additional export workers with wage goods.

Whereas Asia, especially its rice-growing regions, is able to supply such agricultural surpluses and therefore to allow rates of devaluation where the international purchasing power of the local currencies can decline to around only ten per cent of the purchasing power parity, the "periphery" of the European Union is not able to adopt such strategies. Neither the countries of the southern shore of the Mediterranean nor of sub-Saharan Africa, which are characterised by low levels of productivity, hence low real wages and high shares of food in mass consumption, are self-sufficient in feeding their populations. Devaluation for improving their international competitiveness is limited to the level where additional export workers can still buy their wage goods from the world market. East European transition countries, on the other hand, face limits to devaluation from their already higher levels of productivity and real wages and hence high import intensities of their consumption and production.

In order to dynamise its own near periphery and to accede to a new pattern of initially exploitative but already growth-inducing specialisation, the European Union's strategy should look beyond its near periphery and include South Asia – with its large potential of labour and agricultural self-sufficiency – in its strategic design. A basis of support for such a long-term option is to be found neither in the traditional foreign policies of the European Union members nor in the traditional perceptions of "chasses gardées" of Europe. Without such an option, the structural adjustment of production sites in the European Union to new international competition may slow down, and, as a result, openness may diminish.

The globalisation process is basically devaluation-driven – and not real-wage-differential-driven, as most analysts assume. Furthermore, new patterns of specialisation do not only depend on innovativeness: Innovativeness in emerging leading branches may not lead to technical leadership if high advances in productivity in old branches means that these economies keep comparative advantage in these old branches despite technical efficiency in new ones. An economy will not specialise on products where it is innovative, but on products where it is relatively more advanced in productivity than in others. A leading country may have less advance in productivity in the new products than in old products, because the catching-up economy is so backward in the old products. Therefore, the technically leading countries may suffer from Dutch disease. It is quite probable that the German economy with its specialisation on price-inelastic and income-inelastic investment goods provides Euroland with earnings on technological monopolies, hence technological rents which keep the euro high, intensify unemployment union-wide and disempower labour. Thus, the bases for a reformist political process in Europe are undermined and the reformist orientation will be replaced by a protectionist one.

There is no inevitability to this scenario. It can be avoided if Europe returns to its reformist orientation, which implies increasing mass incomes. It may be that in a prospering European economy the problem of Europe being surrounded by a periphery which is blocked because of its low agricultural production and productivity is a manageable one. A more far-reaching foreign policy would be accompanied by an expansion of the internal market, but there is the very threatening possibility that the prophets of impending decadence will carry through their project of accepted decline. These prophets of impending decadence are a powerful force in various walks of European political society, not only in business. They are particularly strong in Germany, which fears exclusion from international trade if others catch up, despite her record shares in world trade and record trade surplus.

Biography

Hartmut Elsenhans is a historian and political scientist. He is Professor for International Relations at the Institute of Political Sciences at the University of Leipzig. He was born in 1941 in Stuttgart, Germany.

Hartmut Elsenhans studied political sciences, sociology and history in Tübingen, Berlin, and Paris. His thesis for the doctorate was on France’s war in Algeria. After his habilitation in 1976 on the history and economy of the European conquering of the world, he worked at the University of Frankfurt (1975/76) and Marburg (1976 to 1980 as extraordinary Professor) before becoming Full Professor at the University of Constance in 1980. During these years he was also visiting Professor in Montreal, Dakar, Salzburg, and New Delhi, and conducted field studies in France, Algeria, Senegal, Mali, Bangladesh, and Vietnam.

Hartmut Elsenhans’s numerous publications in nine languages include ‘North-South Relations’, 1984, ‘Development and Underdevelopment’, 1991, ‘Equality and Development’, 1992, and ‘Global Change and Implications for India’, 1992. In all his work, main concerns of his are the political economy of the international system, the rise of capitalism, North-South relations, development strategies, as well as social movements in the Third World.

Hartmut Elsenhans is Member of the Advisory Board of the Society of Founders of the International Peace University