The Matrix IV: how Europe changes from Mr Anderson into Neo

Lecture in the series "European Union in a Global Order”, by Minister Timmermans.

Later this evening, I will engage Kishore Mahbubani in a public debate about the rise of Asia and what that means for the West. This debate is organised by Felix Meritis, and I can’t tell you how much I am looking forward to it. For those of you who don’t know Mahbubani, he is a ground-breaking political thinker from Singapore. He used to be in the diplomatic service and ended his career as the Singaporean Representative to the United Nations. Later he went on to become a distinguished professor at the Lee Kuan Yew School of Public Policy at the National University of Singapore. He is the author of many articles on world affairs and the consequences of globalisation. But he is best known for his two seminal works on the re-emergence of Asia on the world scene: Can Asians Think? and The New Asian Hemisphere.

Maybe you watched his interview on Tegenlicht about two months ago. If you haven’t, look it up on the internet. Better still, read his books. I think you need to hear what he has to say about where our world is heading.

I agree with much that Mahbubani has to say. But I do not agree with him on everything. I may share much of his analysis, but not all of his conclusions. Certainly not where his ideas on the future of the West are concerned, and Europe especially. They strike me as too deterministic, a little shallow on the understanding of history, and guilty of the same sort of misplaced triumphalism that he actually accuses us of. And so I believe it is incredibly important that we have this debate tonight. And that we shall have it again and again. Not just a discussion between Mahubani and Timmermans, but a genuine and continuous exchange of views between East and West.

Asia is producing some of the best minds and leading industrialists today. And the really fascinating thing is that these great minds and businessmen make no secret of the ultimate source of their success: they studied the West and its ways. What Mahbubani calls “The Seven Pillars of Western Wisdom.” They replicated much of what they believed is good about it, ignored what they felt was less useful, and fused it all into something they believe works for them. In some ways, Mahbubani seems to argue, Asia carries on where the West is now thought to have left it.

Well, if we look at the Asian economic miracle, it seems to work. So perhaps we would be well advised to study ourselves a bit more closely too. That is what I propose to do with you this afternoon. What I am hearing a lot these days is that 2008 will be seen as the year when the center of financial and economic gravity decisively began to shift from West to East. When Mahbubani speaks of the rise of Asia, he also complains about how the Western mind has closed itself off from this new reality. How we appear unable to grasp the tectonic changes underway and what they imply for the global order of things.

He is right, of course, about the new complexities of a world in which more than three billion people in the East now demand their fair share of global prosperity as well. And he is right that the West has been slow to fully recognise the wider implications of this. But Mahbubani also underestimates the innate power of Western, democratic societies to reinvent themselves, to adapt, and to emerge stronger from periods defined by fundamental challenges. So I am convinced that 2008 will be remembered as the year when Europeans and Americans shed their ideological complacency, faced up to these new realities, and began that peculiarly Western process of democratic audit which leads to the adaptation and revitalisation of their societies and politics to the demands of a new era. In fact, this process is already underway, and it is happening at a speed which might surprise our Asian and other friends.

The famous economist John Maynard Keynes once said: “When the facts change, I change my mind.” And think of what Albert Einstein told his students when they came to complain to him that he had given them the exact same set of exam questions as the year before: “Yes, of course, the questions are the same. It?s that answers that have changed.”

This, in essence, is the big question before all of us in the West. It is really the question Mahbubani is asking of us. The facts have changed, and now we need different answers to the same old questions. This is what I want to talk to you about this afternoon. About how the big forces of globalisation are reshaping the geopolitical landscape. About the changes that are taking place inside the complex equation that has driven globalisation for the past two decades. I will speak about why I am convinced we have no real option but to restructure our economic model and put energy efficiency and sustainable energy solutions at its core. And it is also obvious that we need to refit the architecture we built for international cooperation more than fifty years ago to the new demands of today’s reality.

A triumvirate of crises

Last July, a barrel of oil sold for 147 US dollars. The market then was rife with rumours that some very large buyers were already offering more than 200 dollars per barrel to guarantee security of supply into next year. Today, oil has plunged to around sixty dollars on the back of a resurgent exchange rate and in anticipation of falling productivity as a result of economic recession in some of the world’s major economies. I am not an oil-market analyst, but when the price of the most precious commodity in the world swings up and down like a yoyo out of control, you know that some big things are happening. For one, it tells us just how incredibly connected the world economy is. And it tells us that, sooner rather than later, we will be facing an energy crunch.

The financial crisis. What began as a gathering storm of defaults on subprime mortgages in the US housing market has spread throughout the world’s financial industry like a virus, bringing down banks, mortgage lenders, insurance groups, stock markets, even an entire country that many believed was safely tucked away in the folds of trans-Atlantic security. The whole financial system, and with it our economies, was teetering on the brink of catastrophe. That is, until Europe intervened in a way that was truly historic. The unprecendented scale of the interventions, and the coordinated manner in which they were executed, prevented the world financial system from falling off the cliff. What took place was without exception the biggest government rescue of the private sector in modern history. The European Union led the way. Others followed.

But the biggest global threat facing us is without a doubt the relentless process of climate change. It is the biggest, because it directly imperils our physical world. Our land, our homes, the air we breathe, the water we drink, the soil where we grow our food. And it is the most pernicious, because it doesn’t hit us in the face the way the financial crisis does, but because it creeps up on us. Slowly, over the years, bit by bit, but relentlessly all the same. We cannot afford to discard this looming threat as the pet project of a green lobby eager to overstate its case in apocalyptic terms. Serious scientists and serious governments all over the world, chief among them the 27 member states of the European Union, have charted the cumulative effects of rapidly rising CO-2 emissions into our atmosphere. The threat is real, and it’s here.

Here are three major crunches that are global and which demand solutions on a global level. No government alone can hope to insulate its country and people against the harmful effects of either of these three. National measures by themselves are doomed to fail. Those who argue we should just retrench inside our borders and hope for the best, because the world out there is just too mean and too complex, are being naïve at best, grossly irresponsible at worst. To paraphrase the immortal Colonel Nathan Jessup: when you can’t handle the truth, the easiest thing to do is to pretend it isn’t there. But reality has this nasty habit of popping up anyway and then grabbing you by the throat.

The unmistakable truth is that the globalisation of trade and finance, of technology and information, has bound together the fates of countries, economies and people in ways never seen before in history. It has brought unprecedented freedom and prosperity to hundreds of millions. But what if these connections start to come apart? What happens if one day we wake up and we discover we have been living in Thomas A. Anderson’s Matrix? It could be more disruptive and more devastating than anything we have seen before. Unless we learn to be Neo very quickly.

How did we get here?

So what precisely is a crisis anyway? I think it is a question worth asking, because we are stumbling from one to the other these days. Are they somehow related? I believe they are. I think the energy crunch, the financial crisis and the threat of climate change are intertwined and reinforce each other.

Let me run a few numbers by you. Numbers that you have been reading about on the front pages. Numbers that will put things into perspective:

700 billion dollars is the amount the US government set aside to bail out its financial sector. That is one-third of the total received by the US federal government in 2007, including social security, income tax, corporate tax, and all other receipts. It is 140 billion dollars more than has been spent on the Iraq war since 2003. It is 120 billion dollars more than what was spent on social security benefits. It is the sum that equals the annual cost of energy imports for the United States. But these numbers pale in comparison to what the International Energy Agency has calculated the world will need to invest between now and 2030 into renewing our energy infrastructure: the sum of 17 trillion euro ? that is, 17,000 billion!

Nothing works like a crisis to concentrate the mind. The see the Matrix for what it is, a make believe world. For the past quarter century, the gospel has been that the markets are always right. That they will solve any problem, regardless of its nature. And do it faster, better, cheaper. Who could argue with that? The Soviet Union collapsed under the weight of its own internal contradictions and decades of political repression and economic mismanagement. That other big country, China, so enticed by the clever diplomacy of Richard Nixon and Henry Kissinger, decided to open up to the world and join the market economy – sort of. India, Brazil, Russia, and others followed. As more and more countries began to participate in this new global order of free trade and free capital, literally hundreds of millions of people have been lifted out of abject poverty.

We live in a world that is immensely inter-connected. What we do here has an effect elsewhere in the world. And vice-versa. There truly is a butterfly effect. We see it every day, most clearly, in the area of trade. If you take a screwdriver to the back of your laptop, you will find that its various components have been manufactured in such places as Vietnam, China and Austria. The raw materials to build these components have been sourced in Australia or the Congo. It was probably a Danish shipping company that transported those raw materials from their source to the other side of the world, to a port that was constructed by Dutch engineers. The capital for this complex enterprise was put up by a London firm, while the Chinese CEO of the factory that produces the laptop probably got his MBA from the Harvard Business School. Which would make him an alumnus, just like senator Obama and president George W. Bush.

By all accounts, this globalised world, and all the good it has brought us, provided a magnificent spectacle. But looks can be deceptive. What we failed to understand - or chose to ignore - is that this global system of massive outsourced production and boundless trade has been riding a monster wave of cheap oil and cheap credit. Thanks to both, it made business sense to relocate production to places with an abundance of cheap labour and to tie everything together in hugely complex global supply chains. This system has been good for many developing and emerging economies. It made it possible for those outside the Western hemisphere to catch up and begin to partake in what has been the biggest growth in global prosperity in the history of humankind.

But now the two principal factors on which this system hinges have changed. The business case for this globalised system rested on the assumption of an infinite supply of cheap energy. But energy is no longer so cheap. Not in monetary terms and certainly not in terms of its derived costs to our global environment. The managing director of one of Europe’s largest transport companies told me recently that sending two of his Boeing 747’s to China caused more CO-2 emissions into our atmosphere than his entire fleet of 55,000 trucks on the road. Or listen to the chief executive of DHL in Europe, who states that the global supply chains are in turmoil. Where manufacturers previously thought nothing of shipping finished goods from China to the United States and Europe, they are now looking for shorter supply chains. The present priority is proximity to markets. In a recent business review with high-tech companies, DHL found that customers were looking at assembly in Europe rather than supply out of Asia. This chief executive reckons that the world is moving from globalisation to regionalisation. The price of oil may have halved in the last three months, but it is still three times the average price of twenty dollars that was considered the norm for this model of global supply chains. We are running out of fossil fuels. Not because we are not alert to the need to use this precious commodity as efficiently as we can; but because we have been joined by new and big economies, like China, which also need lots of it.

The last twenty years the world has been awash in liquidity. Money was cheap and abundant, and so allowed for this enormous global economic expansion. The high end of the financial industry created its own Matrix, which allowed it to expand even further. Bankers who we thought were prudent caretakers of our capital took on the appearance of ever so many Agents Smith, true believers in the Matrix, feeding on it, keeping it alive. The Matrix disintegrated and banks and other financial institutions started deleveraging faster than you can say “a billion dollars”. Capital is either being hoarded or in full flight to safety. One of the structural consequences of this financial crisis will be the emergence of regional financial hubs in the Gulf and the Far East, which will service their regional markets the way Wall Street and The City have done sofar. The bankers in New York and London are under no illusion that they will lose market share to these new regional centers of finance. As the world economy enters recession in some places and a prolonged economic slowdown in others, interest rates are likely to stay relatively low, but credit itself will not be extended so carelessly as it has been in the last fifteen years. Prudent banking is bound to make a strong comeback. And the first rule of prudent banking is ‘know thy customer’. Proximity to markets, in other words.

Time for an audit of politics

I am convinced that in the midst of our troubles and uncertainty a better world is within our grasp. Neo, Trinity and Morpheus can prevail. We live in an age where so much of our daily lives is shaped by global events and global politics. It would be a great start if we could see it. “Welcome to the real world. Remember there is no spoon.” We need to get off our backsides and start where politics do matter: locally. There is no world government and there will never be one. My mandate was given by you. By the people of this country on the basis of its particular political system. The same applies to the next President of the United States and the men and women in Congress he must work with. France and Britain are no different. And, each in their own way, neither are China, Russia, India, or Brazil. The power invested in government and politics is a national affair.

And here’s the rub, as Hamlet said. The dilemma. We are facing global problems that demand global solutions. But experience also teaches us that you don’t achieve those by simply sitting the governments of the world around a table and expect them to resolve it all at a conference. That is not the way of the world. Neither is it very productive to simply tell the governments of emerging economies that they, too, need to cut back on carbon emissions, because their industries are kind of messing up our desire to live in a cleaner world, and we don’t wish to see our planet go to hell. They know this as well as we do. But what these governments worry about even more are the billions of people who want the same economic lifestyle that we are enjoying. The trick is to find ways to square the circle through new and better ways of international cooperation. High-minded lectures from the West will not achieve that.

Therefore, above all, we must talk about what I believe is perhaps our most important task: the need to rediscover our core beliefs and our ability to persuade others to join us in a campaign to meet common challenges. “Can we fix it?” would be Bob the Builder’s next question. To a large extent this depends on our ability to regain our moral authority. Long have we have viewed it as self-evident. As a given. Up to the point where we have become terribly complacent about it. But as other regions and countries gain in wealth and power, they no longer accept Western leadership as the normal state of affairs. They are telling us that we have had our run at history, and now it’s their turn. We no longer simply tell others what to do. Certainly not in times when faith in the principles of our political and economic culture has been shaken to the core.

Restoring moral authority, however, begins here – at home. We need to take a long, hard look in the mirror and ask ourselves: how do we go forward from here? Our task, in these uncertain times, is to rediscover our faith in the promise of progress, in our will to make sure that the next generation will inherit a better world than ours. This complex of crises serves as a massive correction to an ideology we allowed to get completely out of hand. When we ended the Cold War and declared victory for the West, we made one big mistake: we allowed our values to harden into ideology and dogmatism. We forgot that it was our pragmatism and sense of moderation that had given us our moral authority and which had made us strong and adaptable.

Maybe you remember Ronald Reagan. One of the truly great presidents of the United States. Who restored confidence to a troubled and divided nation in the wake of the Vietnam War. Who broke the deadlock of the Cold War. But he is also remembered for that one slogan that won him the presidential elections in 1979. What he called the nine scariest words in the English language:

“I’m from the government, and I’m here to help.”

Well, I have not been hearing too many complaints lately about government assistance to the banking sector or from individuals who parked their savings in Iceland. When the going gets tough, governments get going. That’s what people may expect. That’s why we elect governments in the first place. But somehow, somewhere along the way, we seem to have forgotten about that. Government became something suspicious and alien, almost like the Matrix’s sentinels. At best a service provider, at worst a blood sucker.

At the core of both democracy and capitalism is the idea of competition. We compete for votes and power, just as we compete for market share. But we the citizens deluded ourselves by thinking that the principles of the market apply in equal measure to the principles of politics. We politicians succumbed to the rhetoric of the free market and came to see ourselves as managers rather than political leaders. We lost sight of the fact that what is good for each of us individually, may not always be so good for us collectively. Our politics made the mistake of equating the citizen with the consumer, and we engineered our political institutions to behave as just another competitor in the free market for service delivery.

But – and let me state this as clearly as possible – this is not the fault of capitalism or the free market. You cannot fault business for wanting to make bigger profits. Nor can you blame the consumer for looking for the best bargains. Both are behaving rationally and in ways that are expected of them. Yet, as we see now, the net result is that we have struck a path that we simply cannot keep to.

We need to restore government to its true function. Which is to protect and secure, to bring order and to mobilize society to face common threats. And, above all, to take responsibility for the issues of the longer term, which cannot be left to the short-term considerations of the market. I don’t think the free market is a system as such. In a way, it is the opposite of a system. It’s more like a complex bundle of contracts. It is hive of human energy, with no specific goal or particular ambitions other than self-improvement. But the relentless search for efficiencies and profits that drive today’s culture of shareholder capitalism and popular consumerism, often acts as a powerful break on our ability to act collectively to address the big challenges that concern us all. What I call the ‘MBA-approach’ to government, this Matrix of inputs, outputs, and quarterly dividends, has not provided the right framework for mobilizing the necessary resources for dealing with the inevitable issues of tomorrow.

Whether we talk about the meltdown in the financial markets, the huge threat of climate change, or the creeping uncertainty in our societies about the forces of globalization, the common theme goes back to our ability to order and shape our immediate environment. To regain that ability, we need to escape this Matrix that we believe we live in. We need to shake off this misconception that we are somehow subject to forces beyond our control. That our actions do not matter all that much. Or will make much of a difference. And that each of us, therefore, enjoys some kind of implicit license, an unspoken right, to while away our time on this planet in search of self-centered gratification, in whatever form we may happen to like it today. Or, at the other end of the spectrum, to wallow in bitter recriminations and self-pity, because so many others appear to be enjoying what we do not have. This is what I sense in our society. A kind of benign fatalism bordering on dangerous nihilism. What Jean-François Mattéi calls ‘le regard vide’, the empty gaze of European culture.

But I do not share Mahbubani’s pessimism that the West has lost the script. That we are somehow destined to decline. If there is one element that sets the Western model aside from all others, including Asia’s, it is our built-in reflex to submit our actions to an audit. Evaluating and rigorous self-criticism are part of our DNA. At the core is our fundamental belief that government is beholden to its citizens and must always account for itself. That is why we have invented a political system based on liberty, the rule of law and the separation of powers. This system was not designed to make life easy for those in power. On the contrary, it was designed to make their political life very difficult. Government is never off the hook, it is always under scrutiny. Now this political system may strike many as messy and sometimes chaotic, but its genius is that it stores tremendous powers of rejuvenation. For the intercourse between citizen and government generates a constant drive to adapt and to improve.

As I said earlier, I believe we find ourselves today once again in the midst of another great audit. These crises should open our eyes to the fact that we do not live in the virtual reality of a matrix. We have choices – and we have some big ones to make in the coming years. All politics maybe local, but that doesn’t mean we can afford for our politics to be narrow-minded.

A new era for Europe

The world will become a bit rounder again, then, after Thomas Friedman had earlier pronounced it to be flat. Globalization will assume a new face in the coming years. And I think that if we handle it well, if we resist the siren of protectionism, if we do not confuse healthy patriotism with unsound nationalism, then this new face will smile on us in Europe. If proximity to markets is the driver of the new economic order, then Europe suddenly looks a very good place to be. What strikes me today, probably more than I ever realized, is that the investments we have made over the last decades in our European cooperation, and the institutions we created to facilitate and guarantee that cooperation, are paying off in what we all agree are testing times. Let me tick off the most important ones and explain why I think the European project in the 21st century will prove a success at least equal to the success of the preceding fifty years.

So let’s get back to basics. We need to retrace our steps out of this cul-de-sac that the past decade of the politics of trivia have led us into. I will state my case first in classic economic terms. The EU comprises an internal market of almost 500 million people. If we include the countries that are a member of the European Economic Area and others with which the Union has free-trade agreements, the number goes up much higher still. We are talking about the largest and richest economic zone on the planet. Now take a look at the map. Look beyond the borders of the Union. What do you see? To the East, Ukraine, an emerging economy with more than fifty million people. Russia, a vast country, with vast resources and a population of some 140 million people. To the South-East: Turkey, another rapidly emerging economy of more than 70 million people. Farther beyond, but not so far in real distance: hundreds of millions of young people in the Middle East, the vast majority of whom are just itching for a better life and greater prosperity. To the South, North Africa. Again, tens of millions of young people hoping for a better and more productive life.

What we see, in other words, in classic geo-economic terms, is that Europe enjoys enormous strategic depth. Mahbubani and others in the East might not forgive me for saying that Europe is still the center of the world, so let me just observe that Europe is at the core of a huge economic hub, with the world’s shortest and most accessible supply chains, and great advantages in terms of infrastructure and transport facilities. Our task is to develop that huge potential and bring prosperity, order and stability to this neighbourhood. It demands that we stop eyeing our neighbours through that short end of the telescope which cannot see beyond the issue of EU-membership. The EU will honour its engagements, but to those knocking on our door for candidate status we should point out that there are more mutually advantageous partnerships than a marriage neither really wants – or some want for entirely the wrong reasons.

We need more political courage to shape our relations with our neighbours in the world of Islam. And here is where I most certainly agree with Kishore Mahbubani: Europe committed a strategic mistake by neglecting its relations with North Africa and the Near East. Our ties to that part of the world go back millennia, but for the past decades we have failed to invest in real cooperation across the broadest possible spectrum. The net result is there for all to see: the huge disparities in wealth between our regions have caused migrations from there to here, causing tensions in our cities, allowing that dark ghost of xenophobia rearing its ugly head once again on the one continent where people should know better. We must employ all means to bring our European neighbourhood to prosperity, and bind it to us in friendly relations.

The European Union is a community of law, and it has the strongest institutions in the world to maintain that community of law. In times of change, instability, and insecurity, perhaps the greatest competitive advantage lies in the strength and credibility of this system. This is the ultimate source of our moral authority in the world, and we have every reason to be proud of it and to have confidence in it. This steady and quiet confidence that comes from inner strength, and that will make others come to us in search of inspiration and models that work in the real world.

Europe also has other advantages that will help us shape the future. The heart of this vast regional economic hub is the eurozone. This is more than a monetary union and a currency, which provided the kind of depth and stability to help us through the extremely turbulent last few months. Critics may point out that Europe needed lots of crisis meetings to come up with a common response. That is true, even when the European Central Bank rose to the occasion and pumped tens of billions of euros of liquidity into the markets. But what these critics forget, is that there was no script in Brussels or Frankfurt for dealing with a crisis of this magnitude. Nobody had a script. Not in Washington or New York, not in London or Beijing, or anywhere else for that matter. And yet, the 27 countries that constitute the European Union got together in record time, and not only managed this crisis, but showed others the way. The institutions of our union displayed remarkable leadership and ingenuity. It is a tribute to the nature and quality of European political cooperation. It demonstrates that this strange political entity has matured into something that I believe its originator, Jean Monnet, had in mind at the very beginning of it all: that is, the right balance and chemistry between the national and the supranational. This is quite far removed from the notion of ‘an ever closer union’. It is about the right balance between executive effectiveness and democratic legitimacy. It is the way forward for Europe.

We have long maintained the doctrine that the national interests of a smaller country like ours are best served by a strong European Commission and majority decision-making in the European Council. This prevents the bigger member states from dominating. This doctrine is as valid today as it has been in the last decades. Our country benefits from what we call the community method, because at its core is the principle that common policies apply in equal measure to all the citizens of the Union, big and small.

However, the financial crisis demonstrated that the right response, at this point in time, was not to be found in one-size-fits-all solutions. Support to the financial sector is primarily a national responsibility and conditions vary per member state. Where the European Union proved vital was in providing the kind of tried-and-tested framework for the crucial coordination of national policies and use of national resources. With the Commission playing its essential role as European arbiter. In a crisis of this magnitude it was right that European heads of state and government took the lead, but this does not signal that we shall now discard our doctrine of the community method. This episode merely shows that the European Union is capable of finding the right blend between its various institutional mechanisms. It is not a zero-sum game. And we have shown ourselves these last weeks to be really rather good at making our influence felt.

We should be less shy in this country about recognising and embracing that blend. A little more faith in our European institutions, and a bit more confidence in our own diplomacy to make Europe work for our interests, would not be misplaced. This crisis demonstrates that Europe is no accidental hero. Our cooperation is strong and deep, even when it needs constant gardening. That is the daily grind of diplomacy. There is no perfect blueprint. And as the French, the Germans, the British and the Dutch slowly converge towards more common ideas about how to run the economy and the politics that go with it, it might be time for us to kill some of our own darlings and reconsider our knee-jerk reaction to ideas, such as put forward by president Sarkozy, prime minister Zapatero and others that Europe needs to put a sound political mind on this headless economic giant. The events of the last several months show us that European cooperation has matured well beyond the internal conflict-management system that it was originally set up to be. It is time, then, for the next step.

In conclusion:

A lot of facts have changed. I think all of us agree on this. And so I would be a fool if I didn’t change my mind too. The events of these last couple of months have shaped and unlocked thoughts that had been germinating in my mind ever since the referendum of June 2005 on the Constitutional Treaty. It has been a long walk to where we are today. These days I am reminded of what John F. Kennedy said at his acceptance speech in Los Angeles in 1960:

“We stand at the edge of a new frontier. The frontier of unfulfilled hopes and dreams. Beyond that frontier are unchartered areas of science and space, unsolved problems of peace and war, unconquered problems of ignorance and prejudice, unanswered questions of poverty and surplus.”

When an American says this, it rings like a message of hope and opportunity. It sounds so much like we hear in the current presidential campaign in the United States. But if a European were to utter such words, he would be accused of spelling doom and gloom. Even though the words would be the same. Yes, we live in interesting times. But it is what we make of it. I have presented a reasonable case this afternoon which I hope will make you think about the importance of politics and the endurable values and benefits of European cooperation and European leadership in the world. These are not just words. While China and India balk at the short-term costs of the measures needed to arrest climate change, and the United States is in denial, it is Europe that is providing global leadership on this agenda.

If the logic of scarcity, pricing, and climate change point us towards an economic model that has proximity to markets at its core, then the task of politics is to build consensus around what should be our answers. I do not have them all, but let me try and summarise the main themes.

Globalisation, and the rise of big economies outside the Western hemisphere especially, present formidable challenges. We must develop new ways of sharing what are essential, but limited, resources. If we fail to develop such new ways, there is a real danger we will fall into this trap of resource competition, protectionism, and a marked increase in international political tension. No country on earth can afford to go down that road again. We know what this could lead to. But while we need global solutions, we should also be honest about the fact that we are still making do with an architecture for international cooperation that was constructed over fifty years ago. Until we refit it to meet the demands of today’s rather different political and economic realities, this international system is unlikely to produce the solutions we need. Just sitting the governments of the world at a conference table and expecting them to resolve all their differences, is not going to do the trick.

But not only do we have to come to terms with these new realities, we have to build a new consensus at home about what should be the government’s mandate to enter into this big debate. That requires the kind of confidence and outward-looking mentality for which our country has long been famous and respected, but which I find in short supply in today’s national political debate. If we persist in amplifying the trivia rather than pouring our political energies into building that new consensus, we shall find ourselves, very quickly, on the sidelines. For me, our first port of call in finding that bigger political scale, is Europe.

I think it would be wiser and safer to recalibrate our position in the world on the back of a set of new facts we shall have created ourselves on the ground. I have enumerated a number of strategic advantages that Europe enjoys. I also believe that these big shifts in global economic and political relations present a unique opportunity for us to change the rules of the game. We all know that if we want to escape this crunch of economic growth, the global democratisation of wealth, and the limited resources of our planet to sustain these demands, we need to change the fundamentals of our energy use. Of course, this will not happen overnight, but I am pretty confident that the economy that cracks this hard nut first, will enjoy a huge competitive advantage and will set future standards for a new and sustainable global economic order.

This is no small thing. This is a very big ambition. But the current global economic order is characterised by unsustainable asymmetrical relations. The United States must find an alternative to its current model, which one of its Congressman a few days ago described as its ‘borrow-buy-burn’ way of living. China and other emerging economies, too, are alive to the threat of climate change and the fact that the bare commodities that feed their economic engines are not unlimited. They know very well that shortcuts to boosting national prosperity come at a terrible price for next generations.

I see only one way out, and this is to re-engineer the European economic model towards becoming the smartest, most dynamic, and greenest economic hub in the world. To develop the kind of technologies and innovations that others want and are willing to pay good money for. Sustainability is just another word for continuous regeneration. A process that feeds itself. We need to lead by example, not simply by telling others what we believe is good for them. We must show evidence. If we demonstrate success, others will follow.

As I said, I believe Europe is well-placed to do so. We have set the agenda so far. Now we must turn that ambition into action. If it turns out we cannot, well, we are going to have to do it anyway. At the end of Matrix revolutions, Mr Smith says to Neo: “You can’t win, it’s pointless to keep fighting! Why, Mr Anderson, why? Why do you persist?” Neo answers: “Because I chose to.”