- My country, your colony | why the Holocaust in Europe?
- compliance and defiance to national integration in Africa [pdf] | on doing economic history
- ethnonationalism and nation-building in Siberia [pdf] | cosmopolitanism and nationalism
- political centralization and government accountability [pdf] | decentralization in military command
- unified China and divided Europe [pdf] | unilateralism is not isolationism
My full review of Joel Mokyr’s A Culture of Growth is forthcoming in the Independent Review. Unfortunately, it won’t be out until the Winter 2017 issue is released so here is a preview. Specifically, I want to discuss one of the main themes of the book and my review: the role of political decentralization in the onset of economic growth in western Europe.
This argument goes back to Montesquieu and David Hume. It is discussed in detail in my paper “Unified China; Divided Europe’’ (forthcoming in the International Economic Review and available here). But though many writers have argued that fragmentation was key to Europe’s eventual rise, these arguments are often underspecified, fail to explain the relevant mechanisms, or do not discuss counter-examples. Mokyr, however, has an original take on the argument which is worth emphasizing and considering in detail.
Mokyr focuses on how the competitive nature of the European state system provided dynamic incentives for economic growth and development. This argument is different from the classic one, according to which political competition led to fiscal competition, lower taxes, and better protection of property rights (see here). That argument rests on a faulty analogy between competition in the marketplace and competition between states. The main problem it encounters is that while firms can only attract customers by offering lower prices (lower taxes) or better products (better public goods), states can compete with violence. Far from being competitive, low tax states like the Polish-Lithuanian commonwealth were crushed in the high-pressure competitive environment that characterized early modern Europe. The notion that competition produced low taxes is also falsified by the well-established finding that taxes were much higher in early modern Europe than elsewhere in the world.
It is also not the case that political fragmentation is always and everywhere good for economic development. India was fragmented for much of its history. Medieval Ireland was fragmented into countless chiefdom prior to the English conquest. Perhaps we can distinguish between low-intensity but fragmented state systems which tended not to generate competitive pressure such as medieval Ireland or South-East Asia and high-intensity fragmented state systems such as early modern Europe or warring states China. But even then it is not clear that a highly competitive and fragmented state system will be good for growth. In general, political fragmentation raised barriers to trade and impeded market integration. Moreover a competitive state system means more conflict or more resources spent deterring conflict. For this reason political fragmentation tends to result in wasteful military spending. It can be easily shown, for instance, that a much higher proportion of the population spent their lives in the economically wasteful activity of soldiering in fragmented medieval and early modern Europe than did in either the Roman empire or imperial China (see Ko, Koyama, Sng, 2018).
Innovation and Decentralization
What then is Mokyr’s basis for claiming that political fragmentation was crucial for the onset of modern growth? Essentially, for Mokyr the upside of Europe’s political divisions was dynamic. It was the conjunction of political fragmentation with a thriving trans-European intellectual culture that was crucial for the eventual transition to modern growth. The political divisions of Europe meant that innovative and heretical thinkers had an avenue of escape from oppressive political authorities. This escape valve prevented the ideas and innovations of the Renaissance and Reformation from being crushed after the Counter-Reformation became ascendant in southern Europe after 1600. Giordano Bruno was burned in Rome. But in general heretical and subversive thinkers could escape the Inquisition by judiciously moving across borders.
Political fragmentation enabled thinkers from Descartes and Bayle to Voltaire and Rousseau to flee France. It also allowed Hobbes to escape to Paris during the English Civil War and Locke to wait out the anger of Charles II in the Netherlands. Also important was the fact that the political divisions of Europe also meant that no writer or scientist was dependent on the favor of a single, all powerful monarch. A host of different patrons were available and willing to compete to attract the best talents. Christina of Sweden sponsored Descartes. Charles II hired Hobbes as a mathematics teacher for a while. Leibniz was the adornment of the House of Hanover.
The other important point that Mokyr’s stresses is Europe’s cultural unity and interconnectedness. As I conclude in my review, Mokyr’s argument is that
“the cultural unity of Europe meant that the inventors, innovators, and tinkers in England and the Dutch Republic could build on the advances of the European-wide Scientific Revolution. Europe’s interconnectivity due to the Republic of Letters helped to give rise to a continent-wide Enlightenment Culture. In the British Isles, this met a response from apprentice trained and skilled craftsmen able to tinker with and improve existing technologies. In contrast, political fragmentation in the medieval Middle East or pre-modern India does not seem to have promoted innovation, whereas the political unity of Qing China produced an elite culture that was conservative and that stifled free thinking”.
It is this greater network connectivity that needs particular emphasize and should be the focus of future research into the intellectual origins of growth in western Europe. At present we can only speculate on its origins. The printing press certainly deserves mention as it was the key innovation that helped the diffusion of ideas. Mokyr also points to the postal system as a crucial institutional development that enabled rapid communication across political boundaries. Other factors include the development of a nascent European identity and what Chris Wickham calls, in his recent book on medieval Europe, “the late medieval public sphere” (Wickham, 2016). These developments were important but understudied complements to the fragmented nature of the European state system so frequently highlighted in the literature.
Lately I have been thinking about how minorities affect the Democratic Party here in the US. Basically, all minorities vote for the Democrats in national elections, but minorities tend to be conservative culturally. This has the effect of pulling the Leftist party waaaaay to the center (a fact that makes it hard for me to complain about Democrats’ pandering tactics).
Sure, the GOP will always be the party of old white people, but if the Democrats’ left-wing is essentially neutered due to minority voting blocs within the Party, who cares?
The fact that the Democrats pine for minorities explains why the US has never had a very powerful socialist movement. Socialists will often blame “neoliberals,” “capitalists,” “reactionaries,” and other assorted boogeymen, but doesn’t the minority insight make much more sense?
This minority insight has also got me thinking about demographic changes in Europe over the past 30 years. Basically, Europe has had a huge influx of immigrants since the fall of socialism. In the old days, Sweden was for Swedes, France was for the French, Germany was for Germans, etc. etc. This mindset helps to explain why European states had such overbearing welfare states and why economic growth was so limited up until the late 1980s.
As immigrants moved into these welfare states, the Left-wing parties began to pander to them. This had the same effect as it did in the United States: culturally conservative voting blocs diluted the Leftism of traditionally Left-wing parties. As a result, these welfare states became less robust and economic growth became attainable again.
A big underlying point about my musings on this subject is that socialism relies on nationalism in the area of popular politics and policymaking. Without Sweden for the Swedes-type sloganeering, socialism becomes ridiculous to the masses. This underlying point, along with the straightforward fact that immigrants dilute socialist power (economic, political, and cultural), suggests to me that libertarians who pay close attention to popular politics should relax when it comes to the fact that minorities don’t find libertarian ideals all that appealing.
Urban theorist Richard Florida is celebrated for arguing that cities today succeed by attracting members of the “creative class.” In a similar spirit I have a recent paper with Noel D. Johnson where we investigated whether or not cities in medieval and early modern Europe grew faster if they possessed a Jewish community.
Scholars have long noted the role of minority groups in economic development. This is particularly true for the the premodern period. The great scholar of long-run historical development in Europe, Fernand Braudel, observed that “successful merchants who controlled trade circuits and networks often belonged to foreign minorities.” These minorities could be other nationalities or religious minorities, for example, “the Jews, the Armenians, the Banyans, the Parsees, the Raskolniki (Old Believers) in Russia or the Christian Copts in Muslim Egypt” (Braudel, 1979, 1982, 165).
Hornung (2014) studies the impact of the Huguenot migration to Prussia. Since the nineteenth century, scholars like Friedrich List linked the presence of Huguenots with the transmission of human capital, skills, and innovation. Hornung (2014) is able to test this hypothesis using Prussian immigration lists from 1700 that document the location of Huguenot settlements and firm-level data on input and output for all 750 textile manufactories in Prussia in the year 1802. Approximately 16,000 to 20,000 Huguenots fled France to Prussia at the end of the seventeenth century. Hornung finds that the presence of Huguenots significantly increased firm productivity. Specifically, a 1 percentage point increase in the share of Huguenots was associated with 1.5 percentage points higher productivity in 1802.
Jewish Communities and City Growth
In our paper we take a broad sweep of European history from 1400 to 1850. We have a total of 1,792 cities in our panel data from the Bairoch (1988) dataset and 1,069 Jewish communities that appear in the Encyclopedia Judaica. The figure below shows both the cities in the Bairoch dataset and the Jewish communities mentioned in the Encyclopedia Judaica.
To understand the relationship between the presence of a Jewish community and subsequent city growth we conduct a difference-in-differences style regression analysis.
The fact that we have data on city populations every century means we can hold constant the identity of a city using city fixed effects and see whether or not it grew faster in the centuries when it had a Jewish community in comparison to those centuries when it did not. We can also control for the possibility that overall city growth was faster in some centuries in comparison to others using century fixed effects.
We are also able to hold constant other factors that could plausibly have affected city growth. We control for local geography including cereal suitability, proximity to rivers, and proximity to coast, as these factors likely affected city growth in different ways over time. We also control for local infrastructure including presence of university and distance to a medieval trade route.
Our analysis suggests that, indeed, cities with Jewish communities grew faster on average between 1400 and 1850. The effect we find suggests that cities with Jewish communities grew about one third faster than those that did not have Jewish communities. This analysis remains a correlation, however. We do not know if the presence of a Jewish community brought with it economic benefits or if Jews merely choose to settle in faster growing cities.
Instrumenting the Presence of a Jewish Community
We model the network of Jewish communities as one way to see whether the effect of Jews on city growth was indeed casual. By examining how Jewish communities expanded we hope to isolate a source of exogenous variation in the presence of a Jewish community.
We assume that a Jewish community is more likely to be established close to another Jewish community because of trade networks, financial relationships, or cultural linkages. We then calculate the closest travel path between Jewish communities using our information about the location of roads and river networks and estimates of premodern transport costs. The important assumption we make is that if cities with Jewish communities share certain “unobservable” characteristics that might make them more likely to grow rapidly, these characteristics become less correlated with distance.
We then divide Europe into 5km x 5km grids and assign the lowest travel cost to each grid. We apply Djikstra’s algorithm to determine the lowest cost of travel between all 3,211,264 city pairs (van Etten, 2012). This allows us to create a measure of ‘Jewish network access’ for each city.
Jewish network access itself is, of course, correlated with the unobservable characteristics of the city for which it is calculated. To overcome this we adopt two strategies to create valid instruments out of the network access measures. First, we calculate Jewish network access for cities that are only more than a certain distance away from each other. Second, we use information on expulsions to weight our measure of Jewish network access. The intuition behind this is that Jewish expulsions consist of an exogenous “push” factor leading to Jews settling in new cities close to the existing network of Jewish communities. Using these two strategies we obtain similar (though larger in magnitude) effects from the presence of a Jewish community on city growth. This provides further suggestive evidence that the correlation we found in our baseline analysis was indeed causal.
The Relationship Between Urban Growth and the Presence of a Jewish Community Over time
Across specifications, we find that cities with Jewish communities experienced no growth advantage in the 15th and 16th centuries. After 1600, however, they began to grow significantly faster.
The relationship we observe in the Figure does not appear to be inline with a pure human capital story. Jews had higher human capital than Christians throughout the medieval and early modern period. But the growth advantage of cities that had Jewish communities only became evident after 1600. This raises the possibility that something else changed around 17th century that made the human capital and skills of Jews more complementary to economic growth.
Two Mechanisms: Jewish Emancipation and Market Access
The two factors that stand out in explaining the emergence of a growth advantage for cities with Jewish communities after 1600 but not before are: (1) Jewish Emancipation after 1750; and (2) a complementarity between the presence of a Jewish community and market access.
The process of Jewish emancipation began in continental Europe after 1780. It was a major institutional break that signified a major change in the economic, social, and political status of the Jews in Europe. In work with Jean-Paul Carvalho, I’ve shown that Jewish emancipation lead to a religious schism and the emergence of both Reform and Ultra-Orthodox Judaism.
In the period before Jewish emancipation, legal barriers limited the ability of Jews to put their labor to its highest value use. Jewish businesses were prevented from hiring non-Jewish workers. Jews could not attend universities. Moreover, Jews and Christians were culturally isolated. This changed with emancipation, and we expect to see it reflected in the contribution of Jewish communities to city growth in the post-1750 period.
The second factor we study is the complementarity between the presence of a Jewish community and the development of markets. The historical literature points to the importance of Jewish trading and financial networks. But, while economic historians have conducted numerous studies of market integration during the early modern period, with a few exceptions these have focused on the grain trade with little systematic study of other markets due to data limitations. Jewish merchants in medieval and early modern Europe, however, did not play a prominent role in the grain trade but, rather, were involved in the transport of diamonds, sugar, silks, tobacco, and other luxury products in addition to playing a large role in banking and finance. Therefore, rather than looking at grain markets, we explore a more general measure of market integration based on market access.
Market access depends on the population size of nearby cities weighted by the cost associated with the least cost travel path. We show that market access was increasing for all cities after 1700. We find evidence that cities with Jewish communities were better able to take advantage of this increase in market access. As we detail in the paper, our findings are consistent with the argument made by numerous historians that Jewish trading and finance networks help to knit together the European economy, particularly in the period 1650 to 1800 (Israel, 1985).
Our analysis provides support for the accounts of historians who have emphasized the important role played by Jewish traders in 17th and 18th century Europe (such as Fortune, 1984; Israel, 1985; Trivellato, 2009). Furthermore, our story is in line with institutional arguments such as those developed by Douglass North, John Wallis and Barry Weingast, and Daron Acemoglu and James Robinson. In the Middle Ages, the presence of Jewish communities was part of an institutional arrangement that extracted rents from society and distributed them among members of the ruling elite. The eradication of these rent-seeking arrangements and the liberalization of Jewish economic activity, first in the Netherlands and England and then in the rest of Europe following Jewish Emancipation, was of critical importance as it is in those cities that possessed emancipated Jewish communities that we observe the strongest relationship between the presence of Jews and economic growth.
Warren shot me the following email a few days ago:
Brandon, do you know the name Deirdre McCloskey?
She is a first-rate economist with extensive expertise in history, literature and anthropology. She recently finished a trilogy, the third volume of which is “Bourgeois Equality.” It’s a fat book but you would be well rewarded for time invested. You don’t have to read the first two volumes to benefit from the third.
The purpose of the trilogy is to explain why we’re 30 times richer than our forebears of 250 years ago, as best that can be estimated. Conventional answers like the industrial revolution and rule of law don’t go far enough. The answer lies in attitudes toward commerce.
I haven’t read McCloskey’s book yet, but it’s been on my amazon wishlist for awhile and thanks to Warren’s prodding it’ll be my next purchase. (Here is all of NOL‘s stuff on McCloskey so far, by the way.)
My first instinct on this topic is to think about Europe’s Jews. Bear with me as I lay out my thoughts.
McCloskey’s book, which as far as I can tell takes readers to the Netherlands and the United Kingdom from the 17th to 19th centuries, is about how Europeans began to reconceptualize equality in a way that was very different from notions of equality in the past.
A very basic summary is that notions of equality in Europe prior to the modern era largely aligned with notions of equality elsewhere in the world. Basically, an established hierarchy based on either inherited land ownership or clerical ranking was justified in all cultures by a religious appeal: “we’re all Christians or Buddhists or Muslims or fill-in-the-blank, so don’t even worry about what we have and you don’t have.” This way of thinking was irrevocably altered in 17th century northwestern Europe. Once I actually read McCloskey’s book, I can give you more details (or, of course, you can just read it yourself).
This argument, that northwestern Europe became free and prosperous because of a change in ideas about equality, is of course very broad and qualitative, but I buy it. The big “however” in this line of reasoning is Europe’s treatment of its Jews.
I forget where I heard the argument before, but somebody or some school of thought has argued that because Europe’s Jews were forced by legislation to go into “dirty trades” like commerce, they became more broadly open-minded than other ethnic groups in Europe and therefore more prosperous. Dutch and British bourgeois culture no doubt had a Jewish influence, and because bourgeois culture is internationalist in scope this Jewish influence must have penetrated other European societies, but anti-Semitism in these other bourgeois centers was more rampant than than it was in the UK and the Netherlands. Why was this?
My main guesses would be “Protestantism” (because Protestants at the time were more open-minded due to being at odds with the Catholic Church), or “the seafaring character of British and Dutch societies.” These are just guesses though. Help me out!
I have been debating classical liberalism and the European Union with Edwin van de Haar. For the moment at least, I think the debate should end or we will risk repetition of previously made points. I would like to thank Edwin for a constructive debate and to invited readers to read through it themselves. Now is the time to move onto a more concrete discussions of the UK referendum vote to leave the European Union.
The UK referendum vote to leave the European Union is not producing the consequences its most eloquent supporters and ideologues had predicted. It is of course very early to have a complete view of the consequences of Brexit, but a large part of Brexit journalistic, campaigning and intellectual elite have argued for leaving the EU on the grounds it would enable a mıore free market UK, one less burdened by regulations ‘imposed’ from Brussels.
A disproportionate part of this elite claims to be libertarian or conservative libertarian, operating in party politics via the Conservative Party and the UK Independence Party and operating in libertarian to conservative campaigning groups. Employees of the most important classical liberal and libertarian policy institutions, the Institute of Economic Affairs and the Adam Smith Institute were divided on this issue. However, some part of the Brexit elites were High Tory, that is traditionalist conservative.
The insistence on sovereignty and national institutions outweighs a commitment to free markets and individual rights. Immigration in particular comes off badly here. The High Tory narrative dominates the Brexit narrative in practice. Some Brexit enthusiasts welcome the supposed opportunity to boost defence spending (though this has nothing do with the European Union which places no limits whatsoever on national defence spending) and believe Brexit will allow restoring the UK’s Great Power status. This is already very high by general European standards and given the inherent limits of the UK’s resources compared with the USA, Russia and China, it’s hard to see how great power status could be attained and why the UK should try. It is clearly not compatible with retrenchment of the state.
David Cameron announced his resignation as Conservative Party leader and Prime Minister straight after the referendum result. His replacement Theresa May began her term of office with a speech suggesting greater state involvement in the economy and society. As Home Secretary she has a particularly illiberal record in civil liberties, immigration and drugs. She has announced support for changes in company law to force firms to accept employee representatives onto boards and restriction on takeover laws.
These measures have led the ‘Red Tory’, Philip Blond, to announce compatibility with his views and enthusiasm for her leadership. Blond runs the policy institute, ResPublica (http://www.respublica.org.uk). He was a colleague of mine in graduate programs at the University of Warwick in the late eighties, though I have not been in touch with him since. He moved from a period of research and university teaching in theology (he was studying European philosophy since the early nineteenth century when I knew him) into the policy world.
The contemporary theologian who influenced him most is John Milbank, an adherent of a version of the Christian tradition which tends to advocate community above individual, or at least would seem to do so if its social philosophy is turned into state enforced actions. There is a strong element of Medieval nostalgia for an organic society in Blond’s social and political thought. He is arguing for less not more free markets and individualism. Now there is no reason to think that Blond’s ideas will have a major influence on May, but if he feels so comfortable with her then that is reason to think there will be strong streak of communalist conservatism in the post-referendum government and even a hint of Christian socialism.
May’s approach has also been compared to that of Joseph Chamberlain, a nineteenth century advocate of interventionist local government and then of a protectionist, state-welfare orientated British Empire; he was as well considered by some to be the strongest advocate of Empire ideology in his time.
Even the Brexit supporters who have the strongest free market small government history have come out in favour of interventionist and corporatist polices. Allister Heath, a senior member of the Daily Telegraph staff, who has a reputation as a free market advocate published advice to Theresa May which is anything but free market, full of corporatism and buying off people who might be relative losers in the post-Brexit UK.
Previous free market advocates, who found it easy to be advocates when the EU served as a scapegoat for any and every overextension of state activity in the UK (whether or not in reality it originated with the EU), have become less clear in their commitment given that some EU support for open markets, such as bans on subsidies to keep bankrupt companies afloat, are no longer available. With some institutional supports for free markets removed, the Brexit liberty advocates find themselves in a world of paying off voters who voted for ‘leave’ because they don’t like ‘neoliberalism’ and blame any difficult consequences of technological invention and market innovation on Brussels Bureaucrats along with immigration from EU countries.
One key theme of the more ostensibly libertarian parts of the ‘leave’ campaign was to argue that they did not want to reduce immigration, but globalise it by replacing automatic rights of EU citizens to live in the UK with an Australian points system, which allows people to enter from anywhere in the world who has sufficient points with regard to educational level, scarce skills, money to invest and so on. However, it is clear that many ‘leave’ voters just want a reduction in immigration and May has distanced herself from a ‘points’ system in favour of absolute reduction.
The ‘leave’ vote won based on the anti-immigration, anti-globalist and anti-‘neoliberal’ instincts of a significant section of the ‘leave’ vote. It is not the whole of the ‘leave’ vote, but ‘leave’ could not have won without it. The evidence so far is that whatever the intentions of the libertarian to conservative element of ‘leave’ thinking that the government is now driven by the wish to follow that aspect of public opinion. The UK is headed towards communalist corporatism, or even protectionist/mercantilist, security-state Great Power nationalist versions of conservatism. Clearly there is much work for liberty advocates to do in the UK counteracting this disaster.
I write in reply to Edwin van de Haar’s post ‘Classical Liberalism, Cosmopolitanism and Nationalism’, which contains some generous remarks about my social media posts while putting forward a view different from my own about the role of the nation state. Edwin argues that the nation state is foundational to classical liberalism in that post. I have previously argued for the benefits of the United Kingdom staying in the European Union, just before the referendum which has put the UK on the path to leaving.
I will start with the doctrinal issues of how far classical liberalism might be considered as something that is embedded in the emergence of the nation state as we know it. It is true that classical liberalism arose as the nation state emerged and consolidated and it did not occur to classical liberals, on the whole, to question the state system as they knew it. That is a system defined in early modern natural law and contractual theory about law and state as one of a very unified system of sovereignty in a world of ‘a state of nature’, anarchy, or lawlessness between states.
We have to note at least one major deviation in the familiar list of classical liberal authors, which is Immanuel Kant, thinking of his essays ‘Idea for a Universal History with a Cosmopolitan Purpose’ (1784) and ‘Perpetual Peace: a philosophical sketch’ (1795), which do not question the internal sovereignty of states, but does argue for a law governed set of relations between states with a global institution of some sort to prevent republics going to war with each other.
We should consider John Stuart Mill’s thoughts on federal states in Considerations on Representative Government (1861), particularly chapter XVII, ‘Or Federal Representative Governments’ which looks at the possibility of a state with decentralised decision making functions. A nation state can be federalised, at least in principle, but what are the components of the federation other then sub-nations, where the population may even regard them as nations within the state. Mill was building on the experience of the United States since the constitution of 1787, and Switzerland, particularly since the federal constitution of 1848.
The United States and Switzerland did not come out of nowhere. The US consolidated the links between thirteen colonies of Great Britain while federal Switzerland built on the Swiss Confederation and its links with places like Geneva which were associated with the confederation, but were not part of it until the restructuring of European states in the Napoleonic period. The point here is that modern states may be federal as well as unitary states and that includes continuity with pre-modern links between at last partly self-governing regions-nations. We could even say that kind of state of associated states was the Medieval norm.
The example, and even idealisation, of this Medieval structure enters classical liberalism via Montesquieu’s The Spirit of the Laws (1748), along with the work of Swiss jurists of the time, particularly in Berne. Montesquieu was building on the experience of the kind of medieval and early modern monarchy where he thought there was liberty, moderation in government, distinguishing it from tyranny. In such situations different laws and assemblies for towns and for historic regions was quite normal under the monarchy. In so far as such states, like France, were tending to evolve in states based on the absolute sovereignty of the centre, in the formation of what we call a nation state, Montesquieu saw the danger of despotism.
The historical experience that Montesquieu was drawing on was the way that Medieval monarchies were constructed through assembling patch work of the monarch’s personal domains, regions with their own lords and institutions, and church domains, along with increasingly self-governing towns. He also looked at the antique experiences of allying republics in a federation, which he thought was preserved in the Netherlands and Switzerland of his time. Germany, which at that time was a kind of federal/confederal empire of very varied forms of sub-imperial sovereign units including princes with lands outside the Empire, was also a form of federation for Montesquieu.
If we go back to the German history of the century before Montesquieu, the idea of the modern nation state is strongly associated with the Treaty of Westphalia (1648), which ended the Thirty Years war, focused on Germany, but drawing in most of Europe. ‘Westphalian state system’ has become a label for an internal system of states which are completely sovereign internally and face each other as equal legal personalities with no higher instance of sovereignty or collective instrument for enforcing the laws of nations, which do have some basis in the natural law doctrines of the time, and earlier.
The trouble with this understanding of Westphalia is that though it has some truth for Europe outside the German Empire (officially known as the Holy Roman Empire), it is very misleading for the Empire, and therefore for those European powers, including Sweden and Denmark, which had land within the Empire. The princes, cities and other territorial units within the Empire were under the legal authority of the Emperor, who largely served as a judge of interstate disputes though with far greater powers in the lands of the Habsburg family (consolidated as the Austrian Empire in the Napoleonic era) which always had the Emperor, though the Emperor was legally an elective office. The Habsburgs land extended outside the Empire into central Europe so the Westphalian system of Imperial authority brought in other European nations and extended outside the Empire strictly speaking.
Westphalia modified a system rooted in the Middle Ages of Germany as a middle European federation or confederation, drawing in other parts of Europe and therefore anchoring a European system of some kind. Periods of dominance by France or Spain complicate this story, but French claims always overlapped with Imperial claims and the peak of Spanish power was when the Spanish monarchy was from the same family as the German Emperors.
The Napoleonic era disrupted these arrangements severely, but we can see Napoleon as trying to revive the original Empire of the Romans under Charlemagne in the ninth century, which united France, Germany and neighbouring territories under a Frankish over-king. Charlemagne was know as ‘father of Europe’ in his time, perhaps more in connection with Europe as Christendom and his wars against Muslims in Spain, then with Europe as we might think of it now, but this is part of the story of what it is for there to be a Europe and a European system. Coronation by the Pope and recognition of the Frankish kingdom as heir to ancient Rome connects the medieval German Empire with the first great European political system, the Roman Empire.
The aftermath of the Napoleonic period in Germany was a confederation, which again included those European powers (the United Kingdom was one) which had lands in Germany. This evolved into the German Empire founded in 1871, which was itself an extraordinary mixture of Greater Prussia, federation, democracy, aristocracy, monarchy, and so on. It was more of a nation state than German predecessor systems in that it was a sovereign unified part of the international state system. The size and growing economic power of the Kaiserreich, incorporating Polish, French and Danish speaking areas, made it a destabilising force in Europe. Too big for the security of other European states, too small to anchor a European system.
The First World War and the Second World War were both consequences of this unstable system. The European Union is in large part an attempt to solve the problem by creating a European system which Germany anchors, though since unification the dominance of Germany has become an issue again. Whatever the problems, the EU provides a better framework for structuring a European system in which Germany is both contained and can exert influence in a consensual manner.
Returning to the issue of the nation state, Germany was never a nation state in the strictest sense of a very unitary state with a single language and ethnicity. France has usually been taken as the model of the nation state ‘strictly speaking’, but even so it has only been a country of speakers of standard French since the late nineteenth century. As it is now, it includes speakers of Breton, Basque, Occitan and Alsace German. Corsica has special status and Alsace-Lorraine also has some special arrangements in recognition of its specificities.
The European world before the First World War was more of a Europe of multi-national Empires than nations, with four Empires (German Hohenzollern, Austrian Habsburg, Turkish Ottoman, Russian Romanov) dominating the centre and east. Spain in practice has always been an extended Castille in which other regions-nations have played variable distinct roles. The United Kingdom never completely integrated as a nation state; even at the peak of integration in the nineteenth century, Scotland kept its own legal, state church and educational system and since then in a rather complicated way the UK has become more loosely integrated and may lose Scotland in a few years.
Even with the imminent departure of the UK from the EU, Europe continues to be a political system, not just an aggregate of nation states. The larger European states are not nation states in the strictest sense. Even without the EU, European states accept various kinds of obligation with regard to north Atlantic security and global trade which limit sovereignty. The UK will negotiate some kind of membership of the internal market of the EU and its passport union aspect, as well as participation in various EU schemes. It will therefore continue to be part of a European system anchored by Germany.
Ever since the Romans, Europe has needed a European system of some kind, and the German anchor schemes going back to 800 have recognised the Roman precedent. In reality there has never been a Europe of nation states and the periods closest to that model ended in catastrophic wars. Disaggregation of the European system as it is now may not result in war, but it has the potential to unleash trade wars, protectionism, competitive currency devaluation, erosion of chances to live, work, and study abroad, associated labour market sclerosis, destabilising struggles for political-diplomatic dominance, and an incapacity to ally in order to deal with global and strategic issues affecting Europe, including migration flows, Russian expansionism, and Middle Eastern conflict and terror.
(more on the consequences of the UK leave referendum soon)