The European: Mr. Attali, a few months ago, you argued that Germany is the sick man of Europe. Quite a bold statement.
Attali: I made this point a few months ago, but I believe that it is truer than ever. Take demography: Germany’s demographic situation is leading the country into an economic, political, and societal suicide. Germany is aging fast, and there will be fewer and fewer workers to sustain the country’s pension system and economic output. Secondly, Germany’s financial system is not as solid and strong as many think. The Landesbanken are weak and the state is no longer able to control the big banks. Deutsche Bank is not really “deutsch” anymore. And thirdly, the so-called German affluence is not really living up to its promises.
The European: Why not?
Attali: Wages of five euros per hour correspond to an emerging country rather than to a leading European economy. Such wages are not a sign of an affluent society. It’s easy to be affluent on paper but that doesn’t mean it’s true. And that’s what we are seeing with Germany.
The European: And yet most other European nations strive to follow the German example and consider the country the secret leader of Europe.
Attali: Germany is an engine of Europe. The German economic success is an example to study, not to follow. It is a country with a good record when it comes to balance of payments because it exports so much. If every country did that, we would start exporting to the moon or to Mars. Politically speaking, France is much more in a leadership position than Germany.
The European: How so?
Attali: The real leader of Europe is the Franco-German couple. Neither of those two can lead without the other. Yet I believe that in diplomatic and military terms, France is much more active and bold than Germany. Take the intervention in Mali: France took it upon itself to intervene militarily while Germany stayed inactive for a long time. Germany is very hesitant in foreign affairs and acts little and slow. It’s always been like that and it will probably stay that way.
The European: But President Hollande is unpopular at home and the government is in shambles. You argued that France’s current economic downturn is linked to an unwillingness to reform out of fear that reforms will always end in revolutions. How can that fear be overcome?
Attali: In France, we don’t do small-scale reforms but only big reforms. There have been reforms in 1945, 1958, and in 1981, but we are still waiting for our “Schröder moment”. There has not been a French president bold enough to undertake reforms on a scale like Chancellor Schröder did in Germany. And just to make things clear: I never argued that France is experiencing a downturn – it isn’t. I believe that many German citizens would wish for a French-style welfare system. Our GDP has not decreased since 2009 and our industrial index is not lower than the German one. So speaking of an economic downturn is erroneous. But it’s true that we need to undertake certain structural reforms to prevent that from happening. And for that, we need a strong Germany.
The European: Isn’t a strong Germany an economic threat for France?
Attali: Absolutely not! It is a requirement! A strong Germany is a must for a strong France.
“Globalization has not yet peaked”
The European: Would you say that France is currently experiencing a political downturn? The success of the National Front was surely a shock to France’s political system.
Attali: The National Front is a real threat, but I am confident that France will manage to overcome it. But for that we need a stronger European Union. The National Front is strong because Europe is weak and used as a scapegoat. New European infrastructure investments are needed to kick-start the European economy. This decision doesn’t even need to be taken at the European level. It would initially suffice if France and Germany could agree on an investment program. Both countries are still suffering from weaknesses in key domains like energy or digital networks.
The European: Germany is often applauded for its bold and laudable energy transition.
Attali: The German industry will need French energy and European networks to keep its current production level in place. Such a cooperative effort would benefit not only France and Germany but also Europe as a whole. It would furthermore set an example for joint investment initiatives.
The European: A few months ago, the American economist Nouriel Roubini published an op-ed in which he argued that globalization has peaked and that we will witness a reemergence of nationalism and protectionism. Do you share his assertion?
Attali: He is a dear friend of mine and has a lot of expertise. We know that protectionism is on the rise again, and that’s why I often compare the current situation with the situation in 1913. We all know what happened in 1914, so we should be very careful not to make the same mistakes again. It is clear that protectionism exists in India, Indonesia, the U.S., Japan, Germany…
The European: …Germany?
Attali: Germany used to be a very protective state and still is in many sectors. Just like France or Brazil and the others I just cited. There is a risk that the global economy as we know it will become smaller in size and that institutions like the WTO will lose out to bilateral agreements. But it would be exaggerated to say that globalization has peaked.
The European: Do you think that globalization is likely to change in the years or decades to come?
Attali: Rising protectionism will surely leave its mark. But the most important thing to remember is that globalization in and by itself is not good. The globalization of markets without a global rule of law is a disaster. There need to be a fundamental dialogue between democracy and markets. The absence of this global rule of law led to the financial crisis of 2008 because capital streams could flow too freely. The Basel III agreement that introduced an international regulatory framework for banks was an important step to make sure that global capital will be subjected to such a global rule of law.
The European: Isn’t the problem with global capital that the market is global but politics remain national and thus weak or ineffective?
Attali: Absolutely! That’s why we must continue to strengthen the global rule of law. I don’t say global government because I know that that is a utopist thought – at least for the next 50 years. But we must establish a stronger political union in Europe because if we just have an integrated market but no political integration, the market won’t stand a chance. I firmly believe that the euro will not survive the next decade if we don’t establish a federal political union in the euro zone. So far, no currency has ever survived without the backing of a strong political entity, a treasury, and a budget. The euro will not be the exception.
“America is just a utopia of Europe that has succeeded”
The European: You have recently published an article in which you explain the popularity of the TV series “Game of Thrones” by making the point that we are currently witnessing the rise of a new Middle Ages. What makes you think so?
Attali: We are currently witnessing the relative decline of a ruling American empire, but it’s not a traditional decline as we know it from history books. The power of the U.S. is shrinking in relative terms, but there is not one single nation state that could take up its place. I have never believed and continue to disbelieve that China can replace the U.S. as the world’s ruling power. The only actor able to do this would be a strong Europe, but that is unfortunately not very likely. The only historical situation that is similar to our present one was the decline of the Roman Empire. When Rome fell, there was no empire to succeed it. The other similarity between then and now is cultural.
The European: The cultural legacy of a falling empire?
Attali: Exactly. When the Roman Empire fell, it left a cultural mark behind, and barbarians across Eurasia adopted that culture. They started or continued to speak Latin, to dress like Romans and to behave like them. The same paradoxical thing is happening right now: as America’s power is waning, its cultural or soft power is experiencing its heyday. But actually, it would be more accurate to say that it is Europe’s cultural power.
The European: Why?
Attali: Because America is just a utopia of Europe that has succeeded. It is made up of different European cultures. But to come back to my previous point: the Western culture has never been stronger. In China, India, Brazil, or Nigeria – everywhere people want to dress and speak like Westerners. But trends like Bollywood movies show that cultures like the Indian or Chinese also want to retain their inheritance. Another significant thing we must not overlook when discussing this issue is the most important process in the 21st century: the rise of Africa. The continent will grow from 1 billion to 2 billion people, which will make the 21st century the African century and not the Asian century. That will also be a chance for France, because the large number of French-speaking Africans will foster the French soft power and drive the French economy.
The European: You are advocating what you call a “positive economy” that takes a long-term perspective and puts the well-being of all people at its core. The current crisis must have been a blessing in that regard, because it shattered the optimism that we can just continue along the same lines. Do you think that lessons have been learned?
Attali: I think that there has been a rethinking – at least among a large group of people. But we are still a long way from the ideal, positive economy that puts the interests of future generations at its core. Finding a way to combine markets, democracy, and new generations is a key challenge. Many companies – especially German ones – are starting to do business differently and to think about the repercussions their actions have. Partly because they are being monitored more closely, but also because they know that business as usual is no longer an option.
“Politics needs capitalism and vice-versa”
The European: You argue that the positive economy needs finance to serve the interests of the real economy and not the other way around. Is that a likely scenario?
Attali: If we remain as passive as we are now, then clearly not. But parliaments have the power to change that and tackle climate, demographic, and long-term issues. It could, for example, be decided that the shareholders’ voting right is multiplied by the time they have held the shares. It is a scandal that someone who has a share for one second has the same voting right as someone who’s had it for 50 years. That is just a very simple example, but it is a crucial one. It would encourage shareholders and thus companies to think about the long term and not just from second to second.
The European: The concept of the “positive economy” doesn’t really question capitalism itself – it merely wants to reform it. Do you think that altruistic capitalism is even possible, or is it a contradiction in terms?
Attali: Clever capitalism is by definition altruistic: if you want to sell something to somebody you have to think about the client’s well-being and wishes. The happiness of the consumer is the highest precept of capitalism. What is important is that capitalism is checked and balanced by a strong political agent. Politics needs capitalism and vice-versa. We haven’t found a better market system than capitalism so far and we haven’t found a better political system than democracy. So the two will have to make do with each other. But the balance between the two is currently completely out of balance and both are under the tyranny of short-termism.
The European: It’s a bit like an unbalanced marriage that needs couple counseling. The question is: Who could be the counselor?
Attali: They do need a counselor and it’s difficult to find one, but one thing’s for sure: they should choose the best counselor taking into account new generations.
Did you like the conversation? Read one with Robert Reich: “I am optimistic because I see no alternative”