Peter L. Berger's Blog, page 195

Trump’s China Trade Deal: Much Ado About Nothing?

The Trump Administration announced its first bout of trade deals with China on Friday, unveiling a 10-point package to renegotiate the parameters of an economic relationship Trump has long denounced as skewed and unfair. The NYT has the overview:

Under the newly announced deals, China set a deadline for fulfilling its promises to allow American beef and said it would speed up consideration of pending American applications to offer bioengineered seeds in China. It will also allow foreign-owned firms to provide credit-rating services in China, publish guidelines to let American firms offer electronic payment services there, and issue licenses to two American financial institutions to underwrite bonds. […]

The trade deal announced Thursday will also allow Chinese companies to export cooked poultry products and offered reassurance to China that it could buy liquefied natural gas from America.

The trade agreements did not address areas such as steel, aluminum or auto parts — areas where Chinese exports have a deep, industrywide impact.

The President himself was quick to tout the announcement as proof that his hardball negotiating tactics were delivering tangible results. “China just agreed that the U.S. will be allowed to sell beef, and other major products, into China once again,” Trump tweeted. “This is REAL news!”

Dig into the details, however, and the package looks rather shallow. The agreement on U.S. beef imports, for instance, merely added a deadline to an agreement already reached under the Obama administration. And the Chinese “opening” to U.S. payment processors like MasterCard and Visa likewise appeared to be symbolic, since Beijing reserved the right to issue restrictive licensing guidelines for foreign competitors. Meanwhile, China’s protected steel and aluminum industries went unmentioned, and Beijing earned a commitment to U.S. representation at Xi Jinping’s high-profile One Belt, One Road Summit this weekend.

This seems to be part and parcel of Beijing’s approach to Trump: as the Washington Post reported in March, Xi Jinping’s trade strategy was to present Trump with “tweetable promises he could present as victories.” And a version of that logic has also applied to North Korea, with the Chinese seeking to appease Trump with low-cost moves like the coal ban that he is eager to claim credit for.

Of course, it is still early days, so tougher and more substantive rounds of deal-making could happen down the road. But for now, the Chinese seem to be calculating they can get away with modest trade concessions maximized for political impact—and so far the Trump Administration appears to be proving them right.

The Shale Boom Gets a Data Boost

The shale boom has remade America’s energy fortunes overnight, but even after its recent resurgence (following a slight price-induced dip) the extraordinary phenomenon has still not come close to reaching its full potential. Shale drillers are getting better at their craft, and are innovating their way to higher outputs, lower decline rates, and (crucially) lower costs, but they’re still only getting a fraction of the oil and gas trapped in shale rock formations. But new research shows that the utilization of more accurate computer modeling could allow fracking firms to extract more hydrocarbons from the dense rock. Science Daily reports:

Most of the world’s oil and natural gas reserves may be locked up inside the tiny pores comprising shale rock…Hydraulic fracturing can create cracks that connect those pores, but without a solid understanding of the pore distribution and structure of the shale, oil and gas companies are working blind. […]

To better understand the physics of how fluids like water, oil and gas flow through such tiny pores, researchers have increasingly turned to computer simulations…[Yidong Xia, a computational scientist at Idaho National Laboratory,] and his colleagues used what’s called a coarse-grain approach. They modeled the fluid as a collection of particles in which each particle represents a cluster of a few molecules. This dramatically cuts down on how much computational muscle is needed.

What also sets these new results apart is the incorporation of high-resolution imagery of shale samples…”The combination [of microscopy and simulations] is what really produces meaningful results,” Xia said.

The shale boom came about because of the wedding of two distinct technologies: horizontal well drilling and hydraulic fracturing. The next phase of this energy revolution looks likely to be powered by the increased inclusion of a third technology—namely computer modeling.

These models give companies a better idea of how to drill smarter, and they’re already a big part of why the U.S. shale industry was able to weather the crude price collapse and still come out the other side looking relatively healthy. As these models and the instruments used to gather data for them continue to improve, we can expect to see similar growth in production from shale wells.

Sri Lanka Snubs Chinese Subs

China’s effort to woo strategically vital Sri Lanka has hit a snag: under mounting pressure from India, the tiny island nation is refusing to allow Chinese submarines into its ports. Reuters:

Sri Lanka has rejected China’s request to dock one of its submarines in Colombo this month, two senior government officials said on Thursday as the Indian prime minister landed in the island nation.

Sri Lanka last allowed a Chinese submarine to dock in the capital of Colombo in October 2014, a move that triggered fierce opposition from its northern neighbor India, which worries about growing Chinese activity in a country it has long viewed as part of its area of influence. […]

A senior Sri Lankan government official said … Sri Lanka was “unlikely” to agree to China’s request to dock the submarine at any time, given India’s concerns.

Chalk this one up as a diplomatic victory for New Delhi. In India’s ongoing competition for influence with China, Sri Lanka has taken on a geopolitical significance far greater than its size or GDP might suggest. Situated along major trade routes off India’s southern coast, Sri Lanka is a linchpin of Beijing’s plans for a maritime Silk Road and its “string of pearls” strategy to establish a chain of friendly ports in the Indian Ocean. And though Beijing has notched a few key victories in that regard, like the acquisition of a major port at Hambantota, Sri Lanka’s current president has been much more cautious about embracing China than his predecessor.

Colombo’s deference to Modi here doesn’t mean that Sri Lanka is disinterested in China’s economic overtures. In an awkward bit of timing, Modi’s visit to Sri Lanka comes before Sri Lanka’s own Prime Minister heads to Beijing for Xi Jinping’s belt-and-road summit this weekend, which Modi is notably skipping. Expect competition to intensify as China strives to court Sri Lanka with investment and infrastructure, encroaching on what India considers its sphere of influence.

OPEC Sees the Writing on the Wall

The oil cartel roped eleven other petrostates into an agreement to curtail production in 2017 and are currently working on extending that deal, but the output cut’s ultimate goal of eating away at the oil market’s glut of crude is being undermined by the actions of suppliers outside of OPEC—U.S. shale producers chief among them. Now, OPEC is revising upwards its estimates of how quickly supplies will grow outside of its membership this year by a whopping 64 percent. Bloomberg reports:

Production from outside the Organization of Petroleum Exporting Countries will increase by 950,000 barrels a day this year, OPEC said in a report, revising its forecast up by about 370,000. The projection is four times higher than in November, when the group announced a production cut to try and re-balance oversupplied world markets. Non-OPEC nations pump about 60 percent of the world’s oil. […]

“U.S. oil and gas companies have already stepped up activities in 2017 as they start to increase their spending amid a recovery in oil prices,” OPEC’s Vienna-based research department said in the report. “In addition to the growth in the U.S., higher oil production is expected in Canada and Brazil.”

This supply-side surprise comes courtesy of American frackers, who have seized the opportunity afforded them by the petrostate cuts and have ramped up their own production over the past nine months. By cutting costs and boosting efficiencies, U.S. shale has made itself capable of profitably producing $50 per barrel oil.

This is the worst-case scenario for OPEC: whatever success its production limits have in inducing a price rebound, the fruits of those labors will be enjoyed first and foremost by U.S. companies who will find more of their shale operations profitable at higher prices. With projections for growth of non-OPEC supplies being ramped up so dramatically through the end of the year, it’s clear to see that that’s already happening.

May Pledges UK Defense Hikes

Even as it prepares to sever ties with the EU, the UK has signaled that its defense commitments are going nowhere but up. Reuters:

British Prime Minister Theresa May promised to increase the country’s defense budget by at least 0.5 percent in real terms every year until 2023 if she wins a June 8 election, adding an extra two years to her party’s existing spending pledge.

May, whose Conservative Party is expected to win the election next month, said the promise was about keeping the country safe and fulfilling Britain’s “obligations to the world”.

“If elected on June 8 I will ensure that the UK continues to spend at least 2 percent of GDP on defense and that the budget rises every year,” May said in a statement.

As we have noted before, the UK has often wavered on its defense commitments in recent years, cutting back on capacity while struggling to come up with a consistent vision for its place in the world. So this is good news: a reassuring sign that as long as Theresa May is in charge, the UK will remain an outward-looking power that is committed to a responsible defense posture. With so many unanswered questions about Britain’s future status in Europe, May’s pledge is a reassuring harbinger of stability—and as Brexit nears, the UK’s defense plans will make it an even more valuable ally for the U.S.

The Iceberg Cometh

The Great Convergence: Information Technology and the New Globalization

Richard Baldwin

Belknap Press, 2016, 344 pp., $29.95

The Emergence of Globalism: Visions of World Order in Britain and the United States, 1939-1950

Or Rosenboim

Princeton University Press, 2017, 352 pp., $37.50

Globalization has become unpopular. Celebrated as the vehicle for lifting hundreds of millions of people out of poverty and offering consumers a wider selection of products at lower prices, it has, seemingly overnight, provoked a formidable political backlash, which has emerged as a threat to the stability of Western democracies, like an iceberg that they are unknowingly approaching. Populist leaders, movements, and political parties, all strongly opposed to trade, immigration, and the elites deemed responsible for foisting them on vulnerable publics, have appeared on both sides of the Atlantic. Donald Trump is the most conspicuous but by no means the only example.

The political reaction against the cross-border movement of goods, services, money, and people has more than one cause. Globalization has become a scapegoat for those angry at the long-term reduction in the West’s economic growth rate, which has its roots in the exhaustion, during the past century, of a series of remarkable, world-changing innovations.1 Populism responds as well to the globalization-induced disruption in economies, societies, private firms, and individual lives caused by the use of machines for jobs that humans were once well paid to do. Millions of jobs have been outsourced not only to India and China but also, in Thomas L. Friedman’s term, to the past. Disruptions also arise, according to Richard Baldwin, a Professor of International Economics at the Graduate Institute of International and Development Studies in Geneva, from a sea change in the process of global economic activity, which is the subject of his informative and provocative book, The Great Convergence.

Baldwin defines globalization as consisting of three kinds of cross-border flows: of goods, ideas, and people. Its history, he says, falls into two distinct eras. In the first, which he dates from 1820 to 1990, the cost of moving goods—mainly cloth and grain in the 19th century and a host of manufactured products in the 20th —plummeted because of the revolutions in the technologies of transportation. Steam-powered vessels replaced sailing ships on the oceans; the railroad and the automobile supplanted the horse-drawn wagon on land.

From these developments emerged several major features of the modern world. Both the value and the volume of trade soared, and as they did a great economic reversal took place. For centuries Asia had led the world in wealth and power. The Industrial Revolution—the harnessing of inanimate power for the first time on a large scale, which made possible, among many other things, the extraordinary advances in transportation—conferred that distinction on the previously backward region known as Europe. The Industrial Revolution did this because it began, for reasons historians still debate, in Europe, inaugurating there something without precedent in history: sustained economic growth. What Baldwin calls “the global North”—consisting of Europe, its North American offspring, and later the archipelago of Japan, the only non-Western country to master industrialization before the second half of the 20th century—was the great winner in globalization’s first era. These rising powers, led by Great Britain, built factories that, clustered in their growing cities, turned out the products they sold around the world, mainly in the North itself but also in the countries of the suddenly declining global South, such as China and India.

All this is a familiar story. What is less familiar, because it is more recent, is what Baldwin designates as globalization’s second, post-1990 era. In this period, the revolutions in information and communication technology have driven down the cost of what he defines as globalization’s second component, the cross-border movement of ideas. “The ability to send ideas down cables for almost nothing to almost anywhere,” he writes, “triggered a host of reformations in work practices, management practices, and relationships among firms and their suppliers and customers.” Together they made high-quality manufacturing easier in the South, which already enjoyed the competitive advantage of lower labor costs. As a result, a large chunk of global manufacturing migrated from the North to the South, much of it to China.

Of course, jobs have moved from richer to poorer countries for decades, but the plunging cost of conveying information over long distances, which is new, greatly accelerated this movement. With this migration of manufacturing, known as “offshoring,” economic growth in the South surged. Where the first globalization produced a sharp divergence in global wealth favoring the North, in the second era the gap narrowed, to the South’s economic benefit. Output, growth, wealth, and standards of living across the globe are now converging: hence the book’s title.

The second era of globalization has changed economic life in another way: It has fragmented production. In the past, a product generally emerged from a single factory. Component parts, if any, were made in the factory itself or somewhere nearby. Now component parts for a finished retail product come from all over the world, thanks to the new technologies of information and communication. “The telecom and Internet revolutions triggered a suite of information-management innovations that made it easier, cheaper, faster, and safer to coordinate separate complex activities spatially.” They “revolutionized people’s ability to manage multifaceted procedures across great distances.” Products now come not from single factories but from the combined efforts of many workplaces, which have come to be called, collectively, supply chains. (Baldwin calls them “value chains.”) These consist of multiple factories, offices, studios, and laboratories, often scattered around the world, the outputs of which are coordinated by information technology. As Baldwin notes, manufacturing is increasingly divided into three distinct stages: pre-fabrication, including innovation and design; fabrication, during which the product is assembled (this is China’s specialty); and post-fabrication, which involves marketing, distribution, and licensing.

The first and third stages tend to be considerably more lucrative than the second. This limits the economic gains that the Southern countries that specialize in assembly can expect to reap in the future, which explains the Chinese government’s commitment to mastering the tasks that come before and after the assembly of products. It also means that Western workers engaged in assembling products are doing far less well economically than their compatriots involved in the first and third stages of the production process.

Offshoring production has been particularly hard on industrial workers in the North, including in the United States; they are, in Baldwin’s vivid description, “competing with robots at home and Mexicans abroad.” It has fueled the 21st-century populist uprisings in Europe and North America. The low-skilled workers who have lost their jobs to machines or to their Southern counterparts, along with those who, with good reason, fear losing their jobs in the future make up a substantial part of the constituency for populism in the United States and Europe. They have voted for Brexit, for Trump, for Marine Le Pen in France, Geert Wilders in the Netherlands, and the Five Star movement in Italy. Fragmentation has also helped create that constituency by increasing insecurity and inequality, and therefore resentment at the elites whose policies are seen as having caused them. 

The economic interests of the losers of globalization’s second, information-technology-driven era increasingly conflict with the economic interests—and cultural preferences—of those of their countrymen who have had more education and thus possess rarer and more valuable skills. The better educated have made gains, sometimes substantial ones, in globalization’s second era. Politics in the Western democracies have come to revolve around the clash between the losers and winners from the seismic economic changes that stem, in Baldwin’s analysis, from the falling costs of conveying information.

Baldwin’s depiction of globalization as a two-stage, technology-determined historical process is oversimplified—abstracted from reality—and deliberately so. The author is presenting a model to illustrate a major dynamic of the global economy, not telling a story designed to account for everything that has happened in the past two hundred years. He writes as an economist, not an historian, and in the tradition of the best writing about economic subjects The Great Convergence comes equipped with a large number of helpful charts, graphs, and tables. His approach gives short shrift, as he recognizes, to the other great determinant of globalization besides technology: politics.

Politics is, however, central to all economic activity. A market of any scope, whether local, national, or global, requires a secure political framework to function effectively.2 In the three decades between 1914 and 1945, politics overrode technology: Cross-border flows of all kinds contracted rather than expanded, for political reasons. Politics gave the world two great wars, from 1914 to 1918 and 1939 to 1945, during which globalization not only shrank but also changed in content: The people moving across borders were not migrants or traveling businessmen but refugees, often fleeing for their lives, and soldiers, usually invading other countries. In between the wars came the Great Depression, whose origins lay in economics but that further reduced international flows because of the political responses to it, in particular the erection of barriers to trade.

The Depression affected economies throughout the world; both wars, too, were waged on a global scale. World War II in particular inspired ideas for reordering the world to prevent the recurrence of the three calamities that had befallen it. These ideas are the subject of The Emergence of Globalism. They included proposals, in the words of Or Rosenboim, a research fellow in politics at Queens’ College, Cambridge University, for “new forms of political associations beyond the state: regional and world federations, religious networks, transnational liberal communities, functional agencies, and constitutional unions.” The proposals with which the book deals were expressed in the writings, between 1940 and 1950, of two dozen “public intellectuals,” all of them European or American. Almost all are now more or less forgotten; a few, notably the Frenchman Raymond Aron, deserve to be remembered.

Rosenboim’s selected writers addressed political subjects because it was politics, above all in the form of the ideologies that led to war, that dominated their era. Most of them did not go into the details of reconstructing the global economic order. None foresaw that the postwar global economy, at least in the West, would operate successfully by reviving the political conditions under which the pre-1914 globalization had flourished: a political framework provided by a single country, with the United States filling the role after 1945 that Great Britain and its empire had played before World War I.

Rosenboim ends her account in 1950 because by then the onset of the Cold War had put her chosen writers out of the business of imagining a new, better, less divided, less conflict-filled global order. The political, economic, and military division between the Western democracies and the Communist countries that marked the next four decades of world history made that impossible.

Here the two very different books under review converge, for in his final chapter Baldwin offers a speculative account of the future of the global economy, just as the authors with whom The Emergence of Globalism is concerned supplied visions of a new global political order. The future that Baldwin envisions emerges logically from his three–part definition of globalization. The Industrial Revolution lowered the cost of transporting products; the digital revolution lowered the cost of transporting ideas; the next step is lowering the cost of transporting people. That has already happened, of course: the railroad, the steamship, and the jet aircraft gave rise to migration on a larger scale than ever before.

Now, however, technology is beginning to provide the tools for virtual migration, with people in one place performing tasks in other countries far away that used to require their physical presence. The combination of the digital revolution with advances in artificial intelligence and robotics raises the possibility, for example, of American physicians performing heart surgery in Kenya, or of women in Bangladesh cleaning hotel rooms in London by remote control.

To the extent that such things come to pass, the range of jobs affected, and the consequent insecurity of those who do them, will increase, perhaps exponentially so. In that case, the political impact, especially in the global North but in the South as well, might exceed in turmoil and anti-globalization energy what has taken place thus far in the Western democracies. Trump, Brexit, and Le Pen may turn out to be only the tip of a very large iceberg.

Millennials May Be Entering the Housing Market in a Big Way

Amidst all the dysfunction and decay in Washington, some good news about America’s long-term social and economic prospects: Millennials are finally starting to get a foot in the housing market. The Wall Street Journal reports:

After sitting on the sidelines for a decade, millennials are buying homes en masse, promising to kick the already strong housing market into higher gear.

Virtually all major builders are migrating away from the luxury homes that dominated the early years of the economic expansion and are focusing on lower price points to cater to this burgeoning clientele.

“There’s an increasing confidence level in that part of the market,” said Gregg Nelson, co-founder of California home builder Trumark Cos. “The recovery is finally starting to take hold in a broader way.”

Since the 1940s, homeownership has been a major engine of American middle-class prosperity. It encourages family formation, helps people save for retirement, and strengthens civil society. It also tends to make voters more moderate; the uptick in millennial home purchases may be another indication that the rising generation of young adults may follow in the path of the Boomers—dabbling in radical politics in their youth before moving to the center as they buy into the system and lay down roots.

But we should not get complacent. There are still far too many artificial regulatory and environmental obstacles to healthy home construction in many states and regions. And the nation lacks adequate infrastructure to sustain a Third Ring of Suburbs—or the needed housing development further outside of city cores where land is more affordable. As millennials start to zap out of their post-recession hangover, we need to make sure that the a healthy and accessible housing market is waiting for them.

Liberals Won the Culture Wars. What Comes Next?

Liberals are continuing to get the better of conservatives on a range of long-running moral debates, according to a new Gallup survey:

Americans continue to express an increasingly liberal outlook on what is morally acceptable, as their views on 10 of 19 moral issues that Gallup measures are the most left-leaning or permissive they have been to date. The percentages of U.S. adults who believe birth control, divorce, sex between unmarried people, gay or lesbian relations, having a baby outside of marriage, doctor-assisted suicide, pornography and polygamy are morally acceptable practices have tied record highs or set new ones this year.

Sometime during the late Obama years—and especially after the Supreme Court same-sex marriage ruling in Obergefell—commentators (on both sides) began to say with increasing frequency that the culture wars were over and that the liberal side had won. The new Gallup poll shows that, for better or worse, there is a good deal of truth to this. James Davison Hunter’s authoritative 1992 book on the culture wars described a battle between the religiously orthodox, who prioritized Biblical teachings and natural law, and secular progressivists, whose lodestar was reason and utilitarianism. While tens of millions of Americans still adhere to the moral vision that defined the cultural right in the latter half of the 20th century, the progressivists, aided by the decline of institutional religion, have steadily gained ground on most questions related to sex and the family.

Of course, that doesn’t mean that cultural politics is over—far from it. It just means that the key issues defining the culture war, and the coalitions fighting it, will evolve. We have already seen political correctness—or the increasingly pitched struggle over what kind of social sanctions should be attached to offensive speech—take center stage, with the “right” taking the position of the rebellious counterculture and the “left” arguing for stricter limits on expression. While debates over the morality of same-sex relationships are essentially moot, journalists and academics and policymakers are now debating different kinds of sexual conduct, like affirmative consent and catcalling. And as Peter Beinart has argued, the decline of the religiously-animated conflicts characterized the old culture wars has brought various forms of ethnic tribalism to the fore in new and unsettling ways.

The liberal coalition has probably won what Pat Buchanan famously called “the war for the soul of America” that was inaugurated by the 1960s and 1970s social movements. But another war is coming. And we don’t yet quite know what it will look like, much less which side will win.

American LNG Can Learn From Australia’s Mistakes

A missed opportunity for liquified natural gas (LNG) infrastructure synergy in an eastern Australian port represents something of a cautionary tale to other countries looking to build out their own LNG export terminals. Bloomberg reports:

On the leafy southern shore of Australia’s Curtis Island, a jetty shoots out over a stretch of water to fill tankers the length of city blocks with liquefied natural gas. Another jetty juts out about 2 kilometers south. A further 800 meters down the coast sits a third.

For one industry veteran, the crowded shoreline represents a $10-billion missed opportunity. It’s the amount that could have been saved had the energy rivals that built separate LNG plants on the island collaborated on a single facility, according to Martin Wilkes, a consultant with 20 years industry experience. They could have produced the same amount of fuel but eliminated extra jetties, storage tanks and other costly infrastructure, he estimates.

$10 billion is obviously an enormous chunk of change, even by energy major standards. It’s not surprising, though, given that the costs associated with constructing a single LNG export terminal run into the tens of billions of dollars.

A decade ago, the United States was looking to construct import terminals for LNG, a sign of our nation’s concern over our energy balance at that time. Since then, the shale boom has remade our entire energy outlook, changing the attitude from one characterized by scarcity to the steady confidence that comes with being a major energy producer. With all of the shale gas we’re now producing, LNG import terminals no longer make sense, and we’ve since broken ground on export facilities (and are, in fact, exporting cargoes of LNG from one such already).

There’s a big push to bring more LNG export terminals online quickly so that U.S. gas producers might find new buyers for their product abroad. In that rush, though, let’s not make the same mistake those three Australian LNG producers did. If there’s an opportunity to “share” a facility, we might not only save a chunk of change, we could also become a major global LNG player more quickly.

Germany Holds the Key to Europe’s Future

The European commentariat has greeted the election of Emmanuel Macron as France’s next President with an almost uniform sense of relief. Many have lauded the French for building an impenetrable dam against the tide of anti-EU nationalism breaking across the Continent, with some suggesting that these results mean the tide will finally be turned back. But the French election was more a reflection of factors peculiar to French politics than a harbinger of a fundamental shift across Europe. Popular discontent with elites remains as strong as ever. Indeed the French vote, which arguably marked the most humiliating defeat for establishment parties in French postwar history, actually re-affirmed the electorate’s willingness to “kick the rascals out.”

Europe’s electorates remain angry and edgy, dismayed over policies on immigration, the economy, and the future of the European project. Macron’s spectacular victory in the second round does not change the fact that in the first round 55 percent of the electorate chose neither him nor Marine Le Pen, and that abstentions topped 25 percent (and were as high as 35 percent among the young and unemployed). According to the Interior Ministry, the second round also saw four million blank votes cast (a record 8.49 percent of all registered voters cast a blank or invalid ballots in the second round, compared to 2 percent in the first round). Nor does Macron’s win do much to stabilize French politics, notwithstanding the occasional nostalgia in the European press about the return of a “French imperial presidency.” And yet, while 20.7 million voters chose Macron in the second round, Le Pen got 10.6 million votes—a new record for the National Front, beating the previous best of 7.6 million achieved in the first round. In effect, support for Marine Le Pen is almost twice that of the 5.5 million votes her father garnered in the second round in 2002. Taking account of the public mood in France and the country’s tough economic and social problems, Macron’s election may arguably be a temporary reprieve rather than a final victory for the establishment.

The French election has also underscored how truly critical to Europe’s future the upcoming German national ballot in September will be. The big win for Angela Merkel’s CDU in the Schleswig-Holstein regional elections has dealt a significant blow to the Social Democrats’ confidence and caused a further shift in national polls in favor of the Chancellor retaining her post. The real predictor of the fall elections will be the outcome next week of the far bigger regional vote in Nordrhein-Westfalen, Germany’s most populous Land. Assuming the CDU/CSU retains power after the national election, Angela Merkel will be positioned to define the future of the European Union from a dominant position in Europe. Underscoring this trend is the overall shift in the balance between the Eurozone center and the non-euro periphery of the EU; once the United Kingdom has left the Union, the percentage of the EU’s GDP generated outside the Eurozone will shrink from approximately 30 percent to 10 or 11 percent. Moreover, the departure of Europe’s second-largest economy from the European Union will force the Franco-German anchor of the EU to shed all pretense of co-equality, underscoring a reality increasingly apparent since the unification of Germany in 1990.

Should the Christian Democratic Union win in Germany this fall, Berlin will be positioned to move ahead full speed, led by the most experienced politician in Europe and with one of the most seasoned administrative structures in place. Paris, meanwhile, will be left to bask in the afterglow of its “Obama moment,” with a bright and charismatic but young and inexperienced leader in search of a political party and base he can genuinely call his own. The consequence will be the even greater political influence of Germany within Europe’s core, with the immigration issue a key challenge for the next Merkel government. The situation is likely to look different for EU members that will fall deeper into Europe’s “semi-periphery” once the United Kingdom has completed its exit from the Union. A lot has been written of late about how the surge of nationalist politics in postcommunist democracies, especially in countries such as Hungary and Poland, has contributed to the progressive parochialism of what not so long ago was proudly, if still somewhat aspirationally, called “Central Europe.” Perhaps. But the reality is also more straightforward, not to say banal. Despite tremendous economic progress over the past quarter century, the postcommunist states of the Eastern Europe of the Cold War era have yet to fully interconnect with Europe’s core. In fact, only Germany, because of its historical and geostrategic position as the quintessential Mitteleuropa state, has a deep sense of connectedness to the EU’s eastern flank; since its unification the security and stability of the countries along Germany’s eastern border have been a vital national interest. Here, the state of German-Polish relations in particular this fall will be an important predictor of the extent to which the semi-periphery will retain its waning political influence within the European Union..

Most importantly, the angry and disconnected electorates across Europe will continue to demand solutions to the questions of continued immigration, cultural fragmentation, weak growth, and high unemployment. Likewise, the great MENA migration that is changing European societies will continue to polarize and cleave politics across the EU. Hence, after the fall elections in Germany, Europe will likely turn further inward, while its neighborhoods, especially Turkey and Russia, will remain anything but stable. The EU’s ever-more self-obsessed agenda to stave off disintegration and restructure itself will continue for years come. Now more than ever, it is up to the Germans to find an answer to this most urgent of questions: After the 2017 elections, what’s next for Europe?