Jean Monnet is the father of the European Union. He spent his lifetime to the cause of uniting Europe. It all started during WW1 when Monnet was 26 years old.
Monnet saw how his birth country France and UK were allies, but yet there was no coordination between them. They would bid against each other for the same crucial supplies. And overpay for it.
Hailing from a rich and successful family with connections, he could meet the French Prime Minister. And that’s where he had his first success when he managed to convince the Prime Minister to not bid against the UK. He was put in charge of coordinating supplies for the joint war effort.
After the war he joined his family business. He did business from America to China. And genuinely prospered.
But when WW2 broke out, he was called back for duty.
Monnet was put in charge of coordinating Franco-British war supplies.
It was Monnet who went to the USA and persuaded Roosevelt to ramp up the arms production program massively – before America joined the war. Economist Keynes remarked that it was due to Monnet’s efforts in coordinating resources that the war was cut short by a whole year!
When France was invaded by Germany, Monnet knew just coordinating resources was not enough. France and the British would need to fight as a single person.
Monnet advocated for the Franco-British Union.
Winston Churchill was on board. Charles De Gaulle was on board. But the French cabinet opposed the idea and tried for an armistice with Germany instead.
Even when it was clear that the Nazis would march forth and conquer France, the cabinet led by Philippe Petain rejected the idea of creating a union with the UK. Why?
Because they felt that the British had a stronger hand. They would not be fair with France. France would forever be a subordinate in the union. A junior partner.
“Would rather be a Nazi province than a British dominion!”
It was then that Monnet learned an important lesson. It’s not enough to share the same goals to get people to cooperate together. Even defeating the Nazis was not a good enough goal to ensure mutual cooperation.
A shared purpose is merely a prerequisite. But in the end, humans are like crabs. We don’t like someone else getting ahead of us. We deplore any feeling of unfairness. And are willing to punish unfairness even at a personal cost.
Game theory experiments make this clear.
A group of 4 people are given $10. They can put any amount of it in a collective pot. The researcher would then double it and equally divide it amongst the 4 people.
From a single person’s selfish point of view, the optimal situation is putting in nothing yourself while everyone else puts in their full amount. Yet almost no one would do this. Almost everyone would put in their entire $10 in.
Until the experimenter would add a twist: One leader would get disproportionately more from the pot. This one change would make cooperation collapse immediately.
People hate the sense of being a subordinate. They would rather punish unfairness, even when it punishes them more.
After WW2, politicians again clamoured to create a united Europe.
Churchill was all for it. But there was no progress. Because other nations felt like subordinates. It was then that Monnet decided to make it his lifetime goal: unite Europe.
He knew what not to do. And so he waited patiently. Until he saw an opportunity.
There was a big push to re-modernize Europe. But there was the “German question” on everyone’s mind.
West Germany had to be rebuilt if Europe wanted to prosper. But twice in the last three decades, its industrial might had allowed world wars to emerge. Coal was needed for energy and steel was needed for infrastructure and building. Without coal and steel, Germany could not rebuild. With coal and steel, would Germany make history repeat?
Monnet came up with a solution: Create the European Coal and Steel Community (ECSC).
France and Germany would pull their entire coal and steel production together. And a committee not beholden to the politicians of both the countries would oversee this organization. Amazingly, 4 other European countries joined the ECSC as well.
A feeling of fairness had to be created for Germany. Or else they would feel subordinated again, and a new Hitler would rise again. How can a feeling of fairness be created?
Fairness needs a costly signal, especially from the bigger stronger party. Skin in the game. Monnet managed to create it. France signalled: we trust Germany enough to give up control. If they did the same.
By pulling in resources both the countries needed to grow, but not allowing the politicians of both the countries to oversee it, he created an organization that would ultimately become the EU.
Because coal and steel needed countries to cooperate with transportation. Tariffs had to be removed from transportation of coal and steel from one country to another, or else they would bicker on price. When there were no tariffs, railways started charging uneven rates for different routes. This had to be tackled by eliminating discrimination in shipping rates across the 6 nations.
When it worked so well for coal and steel, why not add other products to the mix? And slowly the pieces began to fall in place.
It was a slow process, but by 1993 the European Union was born!
But then how did Brexit happen?
As more countries joined the EU, UK’s vote became smaller. They felt like they were the subordinate now. Everything the EU did was spinned around as being unfair to the UK back home, some true some not.
Moreover, they didn’t have enough skin in the game as their currency was different. Which made it easier for them to break away.
Cooperation fails when someone feels like a subordinate and doesn’t have enough skin in the game.
Action Summary:
- A shared common goal, or a common enemy, or even a common identity is not enough to get everyone to cooperate. A feeling of fairness is required.
- A feeling of fairness is inherently unfair. Because the stronger party has to give in a little bit more.
- To sustain cooperation, there needs to be skin in the game. It needs to be made costly for people to not cooperate.