Inside CVC: Defending Europe’s Miracle: Gerald Knaus on the Future of Peace, Prosperity, and Democracy

In this powerful episode of Inside CVC, Steve and Philipp are joined by Gerald Knaus, founding chairman of the European Stability Initiative and author of The European Miracle and Its Enemies.

Knaus reflects on how post-war Europe built an unprecedented framework of peace, democracy, and economic cooperation—and why that “European miracle” is now under its greatest threat since 1949. From the war in Ukraine to the rise of populist movements and waning transatlantic trust, he explores what’s at stake and what leaders—corporate, civic, and political—must do to defend Europe’s most vital competitive advantage: the rule of law.

Listeners will hear:

• Why complacency and forgotten history threaten Europe’s foundation of peace
• How corporate leaders can strengthen Europe’s unity and innovation through the rule of law
• What a truly independent, secure, and globally competitive Europe could look like by 2050

Transcript

Steve: 0:00

Welcome to Inside CVC, the podcast that brings together leaders in innovation and capital investment to explore the trend shaping the business of corporate venture capital. I'm your host, Steve Schmidt, and together with Philip Willigmann, we're speaking to corporate investors, entrepreneurs, and ecosystem builders driving the future of innovation. Inside CVC is brought to you by UPath Advisors, helping corporations and startups unlock sustainable growth through strategic partnerships. To learn more, visit upath.com. That's the letter UNPath.com. And to catch up on all of our episodes, search Inside CVC on your favorite podcast platform or visit upath.com forward slash podcast. Today we're joined by Gerald Knauss, founding chairman of the European Stability Initiative and co-author of The European Miracle and Its Enemies. In this conversation, Gerald explores what made post-war Europe's peace and prosperity possible, and why that miracle now faces its biggest test. From the war in Ukraine to the erosion of trust and institutions, he offers a blueprint for defending democracy, rebuilding transatlantic confidence, and ensuring that Europe's next great miracle endures.

Philipp: 1:16

Welcome, Gerald. It's such a pleasure to have you on Inside CVC today. How are you doing and where are you?

Gerald: 1:23

Hi, Philip. Hi, Steve. I'm uh in Berlin at the moment. And it's a Saturday, beautiful autumn day. Um, and I'm about to go on a tour to do a lot of presentations on Europe around Europe. So I'm fine. It's a it's a good moment.

Philipp: 1:40

Well, pleasure to have you. Um, I would love for you to share with our audience and our listeners the thesis of your new book, which you published a couple of weeks ago, um, Political Miracles and Its Enemies. Um, I would love for you to give a bit of an overview and then let's jump in and see what we can do to uh make uh a strong Europe.

Gerald: 2:02

Yeah, well, thanks a lot. Perhaps I should introduce myself just very shortly. I'm born and grew up in Vienna, but I spent much of the 1990s in the Western Balkans, many years in Bosnia, working in Kosovo, teaching at university in Ukraine. And I set up a think tank with some colleagues in 1999, after the end of the Kosovo War, the second NATO intervention in a few years, uh, to try to prevent similar things happening again. We had seen a succession of wars in the Balkans. And the miracle that the title of my new book that I wrote with my daughter, who was born in 2000, so after all of this, and who is now 25, so she has a different perspective of someone um born after all these Balkan wars, and obviously born long after the end of the Cold War. Um, the the title of the book, The European Miracle and Its Enemies, refers to the fact that people like myself and even my parents, who were born in the last two years of the Second World War. My mother was born here where I am now in burning Berlin as it was being bombed and as it was still controlled by the Nazi government in 1944. The experience of my parents and the experience of my generation has been to grow up in a Europe in which war among European democracies seemed unthinkable, and attacks from the outside as well. So we've had uh a framework in which, of course, all societies have problems, all societies have anxieties and worries, but the idea of being bombed in our homes or being forced to flee or being taken prisoner for expressing our views or um organizing politically, all of this was not part of what anyone growing up in Germany, Austria, France, or other Western democracies had to worry about. And our book discusses why this was the case against the background of challenges to this miracle that are probably more severe than at any moment since 1949. Uh, I'm sure we discussed that a bit more. From the outside, right now we are facing the biggest war in Europe since the end of the Second World War in Ukraine, the biggest refugee crisis in Europe since the end of the 1940s, um, and from the inside, where here in Berlin or Germany, for the first time since the creation of the Federal Republic in 1949, uh, there's a party leading in the opinion polls whose explicit program is to destroy this order, to get Germany out of the EU, to question NATO, uh, to question the basis of this democratic miracle. So understanding the miracle, preserving it, uh making the arguments why this is worth defending and how it might be defended, and also dispelling illusions about the enemies that are more determined, more strategic than at any moment in recent decades to try to destroy it. That's the goal of the book.

Philipp: 5:21

And uh Gail, why why is it suddenly under threat? Um, why are there a sudden um forces who are trying to question Europe and the vision and yeah, this miracle? Um what what are what are the threats? Where are the threats coming from?

Gerald: 5:40

Well, I think uh as so much in in history, as so much in in the corporate world as well, uh there's always a real risk when one becomes complacent as a result of success. So West Europeans have forgotten that even since the end of the Cold War, we've had a huge number of wars in Europe, just not in Western Europe, not in the integrated part of Europe. We describe in our book how between 1990, the moment the Cold War ended, Germany was reunified, and 2022, the beginning of the big attack on Ukraine by Putin's army, in those 32 years, you had 10 million Europeans displaced by conflict. So we always had wars. We had 300,000 people being killed in European wars between 1990 and 2022. By now, the number of displaced Europeans has doubled to 20 million because of the Ukraine, the attack on Ukraine. Uh, but in Western Europe, this wasn't seen. There's this amazing uh quote from European leaders in March 2022 at a meeting in Versailles in France where they said war has returned to Europe, not seeing that we've had 20 conflicts between 1990 and 2022. Now, why is that? Because the conflicts took place outside of the Europe of integration. But what we haven't seen either is that in Russia in particular, for the last 25 years, there's been a leader who has been announcing his intention to upend the European order. I mean, there's been many wars uh that Russia has been involved in. And if we would have only just listened to Vladimir Putin or listened to, and I spent some time in Moscow also as a fellow of the Karnig Institute there in 2015, listening to uh the pundits on Russian state television, going to the museums and seeing how Stalin was rehabilitated as a model leader, listening to the cult of the tsars who come who were most successful in enlarging Russian territory. Recently, Vladimir Putin told us that Tsar Peter, you know, Peter the Great, who fought more than two decades of war against the Swedes in the Baltic Sea, that he was his great model. Now, we've ignored this, and suddenly we wake up in 2022 and we are seeing a heavily armed Russia with a war economy attacking a neighbor, threatening EU member states, and at the very same time, now, because of changes in the United States, we can no longer be sure that we can rely on what was for decades Europe's most reliable ally. So we have pressure from Russia that is a real threat. We have an uncertainty in the relationship with the United States, and then we have parties inside the European Union, again for different reasons, but supported by Putin, and astonishingly for many Europeans, supported by some of the people in the current US government who promise, hey, we are going to destroy NATO and the EU. And this combination we've never had before.

Steve: 9:07

In sharing the history that you've shared so far in this conversation, you mentioned the role of NATO, you mentioned the role of the EU, the European Human Rights Council, etc., in establishing that political miracle after 1949. Do you think their role is the same now? Do you think it's different? And how do you think they're doing in their job?

Gerald: 9:34

Well, I think it's useful to step back for a moment because Europe, indeed, all places in the world are complicated. There are many countries, many histories. The history of Estonia is different from the history of Portugal and Ireland is not Greece. But there is a very big, accurate narrative of the European miracle of democratic peace. It's that between 1949 and 19, let's say 58, institutions were created for six or a few more countries in the case of NATO. A small group of Western democracies created the first European community for coal and steel, and then the European Economic Community. And in 1949, they created NATO. And the insights behind these institutions were also very simple and clear and easy to communicate. The goal of NATO was to create an alliance that was strong enough to preserve peace because it would deter any attack. Don't attack us. That was the message. It wasn't aggressive, it never challenged the borders drawn in the in the Cold War in Europe, but it it was strong enough with hundreds of thousands of troops deployed in Germany, for example, West Germany, not to be attacked. And the idea of the European Economic Community was to say we create the biggest market, we'll expand it based on economic interests, common rules, common institutions, but the ultimate goal is to build confidence and peace. And what is remarkable about these institutions created more than seven decades ago, is that initially there are few members, it worked so well that everybody wanted to join. You know, Britain was at first skeptical about the European economic community, other countries were at first skeptical about NATO. But both institutions grew and grew and grew. And after 1990, when the European then economic community or European community had 12 members, it grew to 27 today, plus another 10 countries that want to join candidates today. So the great story of Europe in the last few decades is that some of the visionaries in the late 40s, early 50s, established institutions that were so successful in fulfilling their primary purpose of peace, democracy, prosperity, and trust and confidence between countries. That almost every European democracy either wanted to join them fully or almost join them, like Norway and Iceland and Liechtenstein, and in a way, even Switzerland, um, that is in Schengen. And this miracle, these institutions, the reason they worked is because they are not relying on force. It's all voluntary. You don't you're not forced to join the EU. You can leave the EU. And once you're in, there is no center that can send soldiers or police to a member state to enforce anything. But they were constructed in such a smart way that every country that joined became a lot richer. It was an economic motor like hardly anything else in economic history in the last hundred years. Ireland, Spain, Portugal, Greece, we forget how poor they were. And we forget how poor Poland used to be, or Romania, or the Baltic states. Well, they've all been catching up economically at dramatic uh speed. Um and and war among former enemies became unthinkable. So small European democracies, rich small countries, are not afraid because this framework has provided an umbrella of protection. And and that is really quite a remarkable story.

Steve: 13:23

I'm curious the establishment of those organizations, peace, prosperity, right? What you described? I believe that a lot of energy around that was driven out of the atrocities of World War II. Part of me believes that humanity at that point said, We have to we have to come back together. And as time goes on, I'm curious, do you think young people might not understand that history as much as we do?

Gerald: 14:00

I think you touched on a very important point, but I think I would add a very important twist to that story, which is that after World War II, the founders of these European institutions had learned lessons, and we describe some of their really dramatic life stories. It's really important, I think, and it's it's a pity that these stories aren't more known. Like people like Jean Monnet, I mean, they are adventurous. It's incredible the role he played around the world. And he had seen two world wars, or his close friend and associate, a Dutchman, Max Konstam, was in a German concentration camp in the Netherlands, in the in the student resistance, uh spent years in jail, then came out and played a leading role in building the Europe. Uh, on the idea that even former enemies, you should treat them as equals, and you create common institutions that everyone abides by, and that builds the trust. It's that big countries like Germany respect small Luxembourg. And by being in the same institutions and proving every day that they play along, they build the trust so Luxembourg no longer fears Germany. So there were these people, they had these experiences, it's exactly as you described. But careful, the same generation of leaders had no problem at all fighting wars in the colonies. It wasn't peace that they had embraced. You know, French leaders basically started right away to fight an eight-year war in Indochina, violent suppression of an uprising in Madagascar, the Dutch fought for years in Indonesia, the French then fought eight years in Algeria. The lesson from World War II, it led to a strangely schizophrenic attitude. In Europe, the right lesson was drawn. To have peace, you need respect in institutions and rules, including a European Charter of Human Rights. You know, it was not idealistic, leftist, you youthful people full of illusions who said, let's create a charter of human rights. It was people who'd gone through war, oppression, deportation, uh, concentration camps who said, we need this. But then when the same generation of leaders, not the same people, but the same generation of governments turned around and looked at the colonies, they made the same mistake that Putin is making today in Ukraine. To believe that force is all that matters to prevail. And what is striking is all these wars were lost. You know, sometimes they temporarily won, but then the colony was still still lost. So the lesson for for me from this history, which is so striking that I think a 15-year-old understands that, is if you want to build something that lasts, what might sound naive, you know, let's trust an institution and rules and in courts and international human rights, let's create these mechanisms, turn out to be the structure that survived all the empires, even the Soviet Union, even the Soviet Empire, created by tanks and Stalin. And that's why we need to understand how this European miracle, how these institutions worked. We need to explain to every generation anew those stories, and we need to defend it as the barrier against the falling back into barbarism. Because human beings have not changed. And the story that in Europe, in the last 30 years, you had half of Europe wars all the time, and the other half, wars seemed unthinkable. You know, that's a very profound lesson about the power of the right institutions. But institutions need to be backed up by majorities that understand them, and this happens through stories that we know why we have the institutions. And if you forget that, it gets very dangerous. What we have at the moment in the US and in our democracies, and of course, in a very aggressive way, what Putin is doing, is an attack on the world created in 1947, 48, 49. You know, I find it striking that some of the MAGA people in the US are attacking Marshall, George Marshall, you know, the great uh foreign secretary after World War II, the great war hero. Uh they are really going against the order created by Truman and Marshall and Eisenhower, and in a way, even frankly Delano Roosevelt. You know, they want to go in the pre pre-dad world. In Germany, the the IFD, the far-right party, is really attacking not Merkel or Cole, they're attacking Adenauer. The order Germany reconciled to France. The leader of the IFD, Alice Weidel, you know, she's an entrepreneur, she spent years working for serious companies, uh, also some years in China. But when you read her book and or when you listen to her, the distrust, almost hatred against countries like France, you know, that's pre-1950. And and Jörn Höcke, his admiration for Putin and his distrust or hate against um, you know, um others, uh, including Muslims, but not only, you know, that really takes us back a very far, very into a very distant past. What they are attacking is the institutions of that miracle. And it's important because it's a transatlantic story. The Europeans built those institutions in 49, 50, 52, all the way up until the enlargements of the 1990s, which I saw with strong support by Americans. You know, I still worked with and knew Madeline Albright, uh, you know, and and and Richard Holbrook, people who in the Balkans. Without them, the peace that we had for the last 30 years in Bosnia, exactly in 1995, in October, now 30 years ago, these negotiations took place in Ohio, and they brought a peace that lasted for 30 years. On the principles of there was an international court, there would have been human rights, there would be elections, all these principles, which today to some sound naive, brought the longest peace after such a devastating conflict. But it was a transatlantic effort, and America played a key role. So, in a way, it is shocking for Europeans uh who grew up with that amazing experience of transatlantic cooperation, working for both sides, uh, to realize we cannot anymore rely on the US administration. In a way, it's becoming an adult. You know, Europe, we should be able to do that ourselves. We shouldn't need people in, you know, young people in Illinois or Ohio or Tennessee to protect us against our authoritarian neighbor, Russia. But and and there was a lot of complacence in Europe too, far too long. But there is it's a much better world if we can manage to preserve the transatlantic relationship. But right now, what we need to do in Europe is preserve that miracle with our own force, with our own arguments in Europe, extend it, and then wait for the US to come around and rejoin the West.

Philipp: 21:06

Gerald, you have said that Europe's true competitive advantage doesn't come from cheap labor, natural resources, or even technology. Uh it comes from something which is much more fundamental, which I would frame as the rule of law. I'd love to unpack this a little bit as we are moving into the corporate perspective on our discussion. So, why do you believe Europe's rule of law order is a real source of competitiveness? And how does that translate into something concrete, something corporate boards, investors, family business owners can actually act on?

Gerald: 21:43

You know, businesses work in a world of disruption. Disruption is permanent. We can never predict what will happen. Um, just what happened the last 10 years from the pandemic to Russia's attack to uh various economic crises, we know that things will happen that we don't anticipate. That makes it all the more important that there are things that businesses and citizens can rely on. Now, in last in the recent decades, they could rely on the fact that in Europe uh we had a single market, long the biggest in the world, now the second biggest single market in the world, in which rules would be made that would apply everywhere and would be enforced everywhere, and that you could rely on the rule of law in this single market. There would be no borders for goods and services and people and capital. And so this wasn't just a big economic market, it was also a big jointly regulated institution. And now we come to the myths. The myth is oh yeah, but if we wouldn't have had the European Union, perhaps we could be more nimble, more flexible. It's this empire of bureaucracy in Brussels. I mean, you know the stories. Well, actually, if you look at the most innovative economies in the world, uh, you know, the global innovation index from this year, I mean there are many, many ways to look at this. And I look at this and I look at the countries among the top 20. You have number one, Switzerland, number two, Sweden, then among the top 10, Finland, Denmark, among the top 20, Estonia, Ireland, Austria, Norway, small European countries that show you can be very innovative in this Europe of common rules. Not everybody is, right? Not all countries are, and some countries, and there is a serious debate in Germany, in what respect things are over-regulated in Germany, but that's not because the EU forces you, as the Finns and Danes and Austrians and and and uh Estonians show us. But what we all have in common is this framework on which you can rely. And imagine for a moment, and I think this is where it affects businesses, and why businesses need to keep that in their mind. Imagine for a moment that you can no longer be sure that these rules apply in all EU countries. That suddenly in one country, you know, things happen to you that if that we now see happening, and obviously we see them happening in Russia, but we we we also have seen all the difficulties in in China. You know, it's been a very lucrative market for many, but it's not an easy market, and it's certainly not one where you can rely on the rule of law in a case of any sort of geopolitical tensions. Now, in Europe, we've preserved this, and and this is a huge asset. The rule of law also means that migrants, you know, talents that want to come and innovate, you know, if they come legally, if they arrive here, they should feel safe, they should be secure. Again, there are lots of countries in the world where that's not the case, and there are parties in Europe that want to change that. So, this is why defending the rule of law for businesses and for the people that in the end make up those businesses to make take advantage of this huge single market with all of its 400 and more than 50 million people is crucial.

Steve: 25:10

I'm curious, what do you see as the role of corporations and CVCs to help reweave that fabric, to close that, to heal that fragmentation? Certainly in Europe, perhaps in in Germany as well, when when you talk about Dexit and transatlantically, what are what are the role that corporations and CVCs have in in bringing everybody back together?

Gerald: 25:35

I mean, the core idea of the founders of Europe, and don't forget Jean Monet was a businessman. You know, he he never went to university, he was certainly not an intellectual or an academic. He started with 16, he went as an apprentice. This is a Frenchman who went with 16 to London to learn about uh how to then sell cognac from his father's family firm, and he then went to Canada and the Rocky Mountains, uh, then still the wild pioneers to sell a family product. Uh their idea, the founder's idea, was that Europe had to be built on economic interests, that economic interests could be harnessed to create political stability and confidence and trust. So you create institutions, but you don't overregulate. I mean, Jean Monet, when he created the coal and steel community, um, and he was the first uh head of the high authority, uh, he never wanted to run a steel mill or run a coal mine. You know, that wasn't the idea. National states sometimes nationalized things, the European Union didn't. It was to create a common framework, common rules. Now, I think businesses, especially those that know how important um flexibility, but also scale can be, you know, economies of scale in terms of markets, in terms of investments in innovation. Uh, businesses know this instinctively, but need to communicate to the wider public. You know, one of the difficulties I see is by when you say we take things for granted, it means that sometimes the obvious points are not made often enough to those that are crucial in shaping the environment in which business operates. I mean, if businesses had been more outspoken earlier in the United Kingdom about the importance of cooperation with Europe for their business, had also been more outspoken about many of the myths. You know, the myth that the United Kingdom was somehow now controlled by Brussels. Turns out, after the UK left the European Union, hardly anything they did differently. Except that their GDP decreased by 5 to 10%, according to all the models of the economists. There wasn't much that they did differently. They were not suppressed. In fact, the European single market we have today was very much a product of UK policy, including Margaret Thatcher, who was one of the innovators of the single market in Europe. But businesses knew that. But they didn't talk enough about this to the outside world. And I think this is a challenge at the moment when the system is really under threat and when stories matter, is that those who think, okay, how do we make investments in innovation in the next five, 10 years that will transform the way we produce, chains of production, uh, innovation clusters. But hey, a precondition for all of this is that the basic structure remains. And the basic structure relies on people, majorities in our democracies, understanding them. And you know, you can disagree on all sorts of details, but to communicate that this essential point we need we should agree on. You know, we don't want customs wars between Germany and Poland. You know, we don't want economic wars or fear of German investment in Luxembourg or France. You know, this would destroy far more. You know, I see these economic calculations what Dexit would cost. Because just for your viewers, there is a party in Germany that says let's Germany should leave the European Union. I mean, one of its most prominent leaders, Bjorn Hoecke, says the EU has to die for Europe to live. But the reality is you can't calculate the costs of Drexit because Germany is the pillar of post post today's post-World War II European stability. There would be no euro without Germany, there would be no Schengen, there's no European NATO, there is no single market. And so to destroy to take Germany out of the EU is to destroy the whole order, and then things become completely unpredictable. And businesses need to communicate about this outside their business. Yeah, I know businesses have enough to do to focus, but it's actually crucial, crucial investment to make sure that their calculations, which assume stability of institutions, are not based on something that might suddenly disappear. As a lot of British businesses trading with Europe have found, as trade dramatically contracted with the single biggest market next door.

Philipp: 30:09

Gerald, uh fascinating. Thank you so much. Uh if we look out to 2050, what would the next European miracle need to look like to preserve peace, prosperity, and technological leadership for Europe?

Gerald: 30:23

Well, I mean, I I don't want to go into the areas your your listeners certainly understand very well themselves, you know, what needs to happen with new technologies, economies of scale, investment in your research, energy policy to supply cheap energy. All of this, I think, is known. I would like to stick to what we discussed here. We need to make sure that Europe remains secure. So Europe should be able to deter itself without relying on the United States, hopefully closely allied with the United States. But uh if a European country is attacked, a European democracy is attacked, Europe should be able to, by itself, if only European countries come, say we trigger Article 5, we come to the defense, this should be strong enough as a deterrent to not make such an attack ever feasible. Now we are not there yet. We need to go there as quickly as possible. But that that's my vision, that by 2050, the European economies, European societies, their militaries are capable of deterring attacks from outside. And within Europe, well, be even more of a pool for talents. Yes, there's been a lot of fear related to a lot of migration in the last 10 years that had to do with wars at the borders of Europe. I mean, Germany took in more refugees in the last 10 years than any moment since 1949. But this was because there was a massive war in Syria, and now there's a massive war in Ukraine. Now, this creates fears. That's it true in all democracies. We need to overcome that without sacrificing our values and institutions, make a success of this integration, and then with the diverse societies that we already are, ensure that we get the talent to come and innovate in Europe, across borders and among Europeans. And and then extend this miracle. The borders of Europe are not yet drawn. We have 50 countries in Europe, but the Balkans should be inside the European single market, inside the European Union, and Ukraine. I mean, we are now seeing that Ukraine is perhaps a more important ally to many NATO members than their NATO partners because of the innovation in Ukraine, because of the resilience of society, because of the experience with fighting against an enemy and their determination not to give in. If that becomes a trade shared more widely in Europe, I think we can see Europe as a continent of real hope. Because within that framework, there are enough innovative companies, countries, people that this continent can thrive. So the miracle of democratic peace, defend it the next five years, keep the institutions, then extend it and put it on a solid foundation. I think that is a realistic vision that we can all work towards. And I will be 80 in 2050, but my daughter will be 50. She might live, she's as old as my aunt, until 2100, right? So uh that is not in a far distant future. This is something that is really essential for anyone who's young today or who is born today, that we don't destroy this legacy.

Steve: 33:30

You've been listening to Inside CVC with Gerald Knaus, author of The European Miracle and Its Enemies. His reminder that Europe's great source of competitiveness lies in its institutions, and its rule of law itself is both urgent and inspiring. To hear more conversations with leaders shaping innovation, investment, and impact, follow Inside CVC on your favorite podcast platform or visit upath.com forward slash podcast.