The Future of Europe – Reform or Decline

Alberto Alesina and Francesco Giavazzi, The MIT Press, 2006, 224 pages, £16.95.

The Future of Europe – Reform or Decline is an intriguing title, and the authors are well-known economists and commentators, working, respect-tively at Harvard and Bocconi University in Milan. The book, however, is hugely disappointing and, somehow, a lost opportunity to provide a significant contribution to the debate on Europe’s reforms. For the sake of reaching out to a broader audience, it leans too much on over-simplification and statements that are not fully supported by empirical evidence. The authors claim that this is not an academic book, but rather a sort of manifesto in which they "are not shy in taking sides". Fine, but avoiding a long reference list, footnotes and the academic jargon should not be a ticket to sloppiness and lack of intellectual rigour.

The authors seem to have an issue with the ‘third way’ and, more generally, with how Europeans do things – as against the Americans. In the Introduction they criticise Europe’s ‘fuzzy thinkers’ and how they talk about European reforms but in the next sentence emphasize that Europe should be different from the American ‘free market’. However, they do not explain why the ‘third way’ is very much stuck and, most of all, why Europe should embrace, or even consider, their own proposal for a large scale reform of markets and institutions to resemble more those of the United States, even if this does not imply "the adoption of every aspect of, for instance, the American welfare system". In addition, they fail to explain why their proposal is substantially different from the ‘third way’.

The book’s main argument is the prediction that without deep reforms, "Europe will inexorably decline, both economically and politically". Such a statement, once again, is not supported by meaningful figures.

Moreover, the authors forget to clarify what they mean by ‘Europe’. Is it the EU27, the Eurozone or just western Europe – with the main economies of Germany, France, the UK and Italy? Long-term projections – from Goldman Sachs to Oxford Economics – predict a smaller share of the world economy for the current European members of the G8 assuming that China pursues the right policies, but this is surely not the case for Europe as a whole. In any case, there is enough growth in trend labour productivity to keep GDP per capita rising in Europe, making the average European much wealthier by far than the average Chinese, and not much worse off than the average American.

Is this decline? It can be argued – but the authors fail here to elaborate a convincing argument – that the eventual reform of global governance would see, for example, the collapse of the four European seats around the G8 table into one – for the EU as a whole – with a considerable loss of influence for those countries. But, again, is this enough to support the ‘decline’ argument? Could we rather see some European countries turning into another Switzerland – ie a prosperous and wealthy country with little influence on the geopolitical scene?

Finally, the book would have considerably benefited from thorough copy-editing even if this alone would not have helped to make the argument stronger or the book more compelling reading.

Paola Subacchi

International Economics Programme, Chatham House