The Transaction Costs Of Diversity

[Taranne]

Like it or not, Europe is paying the transaction costs of diversity

Renaissance Europe's restless pluralism brought great creativity, but also bloodshed. Now we have peace without dynamism

Timothy Garton Ash

Thursday May 25, 2006

Guardian

To be in Florence is to reflect on Europe's intricate diversity - and its lost creativity. Five hundred years ago a small city state, locked in fierce rivalry with its neighbours, nourished the genius of Michelangelo, Leonardo da Vinci and Machiavelli. Now the old city lives mainly from tourism and the production of luxury goods, such as clothing and leatherware. Its walls are plastered with advertisements for the film of The Da Vinci Code. From Leonardo to Dan Brown.

I'm here for the ceremonial opening of a new Institute of Human Sciences, a brave and imaginative attempt to improve the top end of Italy's struggling higher-education sector. The ceremony, in the magnificent Renaissance Palazzo Strozzi, lasts three hours. Before we get to the three main academic lectures, of which I am to deliver one, there are no fewer than eight protocol speeches: the mayor of Florence, the regional governor of Tuscany, the chair of the supporting foundation, the rectors of two participating universities, and so on. I can see that we are witnessing here a triumph of Florentine academic diplomacy of which Machiavelli would be proud. It's plainly a small miracle to have brought together all these different interests to create a new institution. But the transaction costs of diversity are very high.

As in Florence, so in Italy. The formation of the new Italian government under Romano Prodi has been a masterpiece of Roman political diplomacy, bringing together an extraordinarily complex and fissiparous coalition of the centre-left, with a tiny majority in the upper house. The balancing of special party interests and personalities, including the election of a widely respected former Eurocommunist as president of the republic and a current communist as speaker of the lower house, has been of the kind we still call "byzantine" - though by now, perhaps, we should simply call it European.

The Prodi cabinet contains a remarkable array of talent, including three former prime ministers: Prodi himself, Giuliano Amato, as minister of the interior and Massimo d'Alema, as foreign minister. But Italy's projected growth rate this year is less than 1.5%, its budget deficit more than 4% of GDP and its public debt the highest in Europe. With the best will in the world, it's hard to see how such a coalition, almost structurally gridlocked by a complex pattern of countervailing interests and party platforms, can find the executive dynamism to make necessary, painful reforms of labour markets, the public sector and the welfare state. Here, too, the transaction costs of diversity are very high.

As in Italy, so in Europe. Like the Italian government, it's something of a miracle that the European Union of 25 member states functions at all. Gathered around vast tables with 50 seats (two for each member state), the councils of Europe increasingly resemble the opening ceremony of that Florentine institute. Like the elaborate inter-party agreement that underpins the Prodi coalition, the EU managed to patch together all its conflicting special interests into an elaborate inter-state agreement, called the constitutional treaty. But that treaty is dead. We will begin to see what will replace it only after the French presidential elections a year from now. Using a football simile, the European commission president, Jose Manuel Barroso, says the EU's "period of reflection" is already in extra time. If so, this looks like being the longest extra time in history.

What do we hear in this long siesta of reflection? Amid yawns of boredom from most of our citizens, Europe's political intellectuals agree that the EU needs a new narrative to inspire us. What should that be? Ah, say some, the narrative of diversity. On the face of it, this is an odd thing to say. This new political narrative must presumably address the question: "What do we all have in common?" "That we are all so different!" does not seem a sufficient answer. The more conventional European formula is "unity in diversity" - but where's the unity?

In the great age of Renaissance Florence, diversity was indeed the dynamo of Europe's extraordinary creativity. There's a marvellous book called The European Miracle, by the economic historian EL Jones, that explores why Europe rather than China - scientifically and technologically more advanced than Europe in the 14th century - produced the scientific, agrarian and industrial revolutions that led the world into modernity. In brief, his answer is: Europe's diversity.

But this was the diversity of a restless, often violent competition between cities, regions, states and empires. Florence and Siena, England and France, Christian Europe and the Ottoman empire - they did not resolve their differences by coalition agreements and endless negotiations in airless committee rooms on the Rue de la Loi in Brussels. To reverse Churchill's post-1945 adage: they made war-war not jaw-jaw.

Many readers will remember the speech that Orson Welles put into the mouth of the gangster Harry Lime, in the film of Graham Greene's The Third Man: "In Italy, for 30 years under the Borgias, they had warfare, terror, murder, bloodshed - they produced Michelangelo, Leonardo da Vinci and the Renaissance. In Switzerland, they had brotherly love, 500 years of democracy and peace, and what did that produce? The cuckoo clock." Has Europe today entered its age of the cuckoo clock?

Of course I'm not suggesting that what we in Europe need is another good dose of warfare, terror and bloodshed; but I am wondering aloud about the conditions in which diversity produces dynamism and creativity. The question for all Europeans today is whether the path we have chosen since the end of our last 30 years' war (from 1914 to 1945) - the path of permanent, institutionalised, peaceful conflict resolution, both domestically and internationally, inspired by the "spirit of solidarity and consensus" that the former European commission president Romano Prodi has promised to rebuild in his new Italian government - is capable of producing a dynamism to match that of the US, let alone of the rising powers of Asia. Yes, we have Airbus - which produces slightly better planes than Boeing - and a European GPS system called Galileo, which may eventually be slightly better than the American one; but aren't these the exceptions that prove the rule? They should not obscure the fact that the economies of China and India are currently growing at around 10%, ours at an average of around 2%. And that's at least partly because of the enormous transaction costs of what, to be more precise, we must describe as the peaceful management of diversity.

A probable future is that, having chosen this path of the peaceful, consensual management of diversity, Europe is set for a long period of relative economic decline. But relative decline need not be absolute decline. If we Europeans are conscious of the choice we are making; if we don't kid ourselves that we can have our cake and eat it, simultaneously enjoying the social solidarity and easier lifestyle of Europe and the economic dynamism of America and Asia; if we mobilise to make the maximum reforms that our political systems and societies permit; then we can still live quite well. After all, Florence is not doing so badly after 500 years of relative decline. Perhaps Florence is Europe's future.

http://www.guardian.co.uk/print/0,,329488666-103390,00.html