The Crisis of Legitimacy in Europe

There are many people in Europe who feel that the creation of the European Union, and subsequently of the eurozone, and of the extension of the Union beyond its original members, was achieved by elites without adequate participation by the people. No one denies that the political leaders were democratically elected, but still the feeling prevails that the public somehow lost control. The Greek crisis brings the question of where the legitimate power lies painfully to a head. Who, if not the people, has legitimacy – the political or the economic elite?

Legitimacy may be another word for ultimate power.

The following are edited observations by George Friedman, published by Stratfor Global Intelligence, on May 4.

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In Germany, elite sentiment accepted that some sort of intervention in Greece was inevitable. Public sentiment overwhelmingly opposed intervention, however. The political elite distanced itself from the financial elite under public pressure. In Greece, a similar crisis emerged between an elite that accepted that foreign discipline would have to be introduced and a public that saw this discipline as a betrayal of its interests and national sovereignty.

There has always been a great deal of ambiguity concerning the powers and authority of the European Union, but its intentions were always clear: to harmonize Europe and to create European-wide solutions to economic problems. This goal always created unease in Europe. There were those who were concerned that a united Europe would exist to benefit the elites, rather than the broader public. There were also those who believed it was designed to benefit the Franco-German core of Europe rather than Europe as a whole. Overall, this reflected minority sentiment, but it was a substantial minority.

Europe now has a double crisis. As in the United States, there is a crisis between the financial and political systems. This crisis is not as intense as in the United States because of a deeper tradition of integration between the two systems in Europe. But the tension between masses and elites is every bit as intense. The second part of the crisis is the crisis of the European Union and the sense that the European Union is the problem and not the solution.

For now, the important thing is to understand that both Europe and the United States are facing fundamental challenges to the legitimacy, if not of the regime, then at least of the manner in which the regime has handled itself. In the United States, we see a predictable process. With the unease over elites intensifying, the political elite is trying to stabilize the situation by attacking the financial elite. It is doing this both to demonstrate that the political elite is distinct from the financial elite and to impose the consequences on the financial elite that the impersonal system was unable to do. There is precedent for this, and it will likely achieve its desired end – greater control over the financial system by the state and an acceptable moral tale for the public.

The European process is much less clear. The lack of clarity comes from the fact that this is a test for the European Union. This is not simply a crisis within national elites, but within the multinational elite that created the European Union. If this leads to the de-legitimization of the EU, then we are really in uncharted territory.

The most important point is that almost two years since a normal financial panic, the polity has still not managed to absorb the consequences of that event. The politically contrived corporation, and particularly the financial corporations, stand accused of undermining the wealth of nations. As Adam Smith understood, markets are not natural entities but the result of political decisions, as is the political system that creates the allocation of risk that allows markets to function. When that system appears to fail, the consequences go far beyond the particular financials of that event. They have political consequences.

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First comment – financial corporations were “politically contrived.” They operate under the law; laws in our world are made by democratically elected legislatures. The political elite, therefore, prevails.

Second comment – “uncharted territory” may mean chaos and anarchy. If the political elite in Germany, pushed by a public that overwhelmingly rejects the bail-out of Greece, decides to expel Greece from the E.U. (which would of course mean drastic changes in the E.U.’s legal structure), chaos and anarchy in Greece may very well ensue.