This is a very fast note on the question of European political economy raised in my last post. It’s not intended to be exhaustive, and yes, it is pretty conclusory. My impression over many years as an international law professor who bridges the public and private law divides; not a specialist in EU law but someone watching closely from the outside … the movement toward ever closer union in the EU seemed to me always to have a double drive.
On the one hand, the Erasmians – the true believers, the ones who thought you just marched toward political union because it was, well, what civilized people did. These folks included many of the non-economist professors, the law professors particularly. I have long been struck by the astonishing levels of intellectual and ideological production – prodigious, really – by EU professors well-funded by the EU itself to come up with theories about why the EU was going to be such a dandy thing. I long thought of it as a perfect instance of creating your own demand.
The result of all this prodigious activity was the marvelous elaboration of a vast edifice of constitutional structure, most of it aimed at saying that the EU could not go wrong as a project of union, if it just kept at it. Go onto SSRN and see how much stuff continues to be cranked out in the category of constitutional theory about the EU itself. What an observer on the outside might have thought was a pretty historically contingent project is made to look like the Unfolding of History as It Must Unfold.
I mean, of course it might work out that way. But if so, it hardly seems like it on the basis of the theories offered by academics at institutions sponsored by the edifice presumably under study. (This phenomenon of funders creating their own demand for ideological product is, of course, just as ordinary in the United States.) Anyway, these are the Erasmian true believers. They seem to be mostly law professors.
On the other side are the realists and skeptics who might, slightly paradoxically, still favor ever closer union – but for the opposite reason. Many of them are economists. They see the whole thing as a bicycle about to fall over. It has to get up to speed to keep going. Far from “naturally” unfolding according to a special Natural Law that God has especially enacted for the benefit of the EU, on the contrary, the bike is wobbly, unnatural, lacking in balance, and only forward momentum can save it. The present moment is the worst, because it represents precisely the gap between currency union and fiscal/political union.
These two are not mutually exclusive positions, of course. One can have some of both. It’s simply my perception of the divide, as someone who reads the literature from each. The easy money years underwrote the feeling that maybe it was possible to have monetary union without fiscal/political union, but the artificial supports have dropped away and everything is wobbling again. The one thing I can predict with utter certainty as a law professor is that the EU will put up funding to produce yet a new iteration of constitutional theory to show how all this, too, will lead to ever closer union. Look for the wave of papers over the next four years on SSRN.
My skepticism is about ideology, by the way – I am mostly an admirer of the EU and what it has done in many things, starting with the long term transformations in Spain, Portugal, and Greece, to start with, let alone the expansion eastwards. But that does not lead me to any belief that it has worked out the deep internal contradictions in the political governance project, and less still any view that the EU points the way to some genuinely new kind of governance structure in human affairs. It might, I suppose – I’m not ruling it out. But let’s give it, say, a hundred years to see if it has staying power before we draft up too many theories of its historical inevitability.
In any case, how much does it matter? I’m not referring to myself – I mean simply that the Obama administration’s pooh-bahs seem to have written off Europe as the past, Asia is the future. The irony is that it is precisely on account of striving so desperately, so mightily, to become a Western European democratic socialist state that the Obama administration feels no need any longer to look to Europe. It has already priced-in internally anything of ideological value Europe might have to offer, on account of the transformations under way in the US. We’ve now got – thanks to the decension of Bush and the inclension of Obama -anything of value Europe might offer in the way of values, so why pay attention to those losers? What could Europe possibly teach President Obama about community, fraternite, welfare, socialism, social safety nets, unions, public sector employment, all the rest of the stuff in which Europe ideologically specializes? This is President Obama, after all – on all of these things, O Europe, you should learn from him. And from Rahm Emanuel.
Of course, the one missing piece of that puzzle is how it is that Europe went into decline, and whether that lesson for the US has been priced-in ….
We Atlanticists should all have paid greater attention to Raymond Aron.
LarryA says:
Part of that might be related to the reluctance to look at the Massachusetts health care system as a model for the U.S.
Europe has largely implemented what progressives want to emulate, and the results are showing. Asia is yet to be reformed, and optimism still reigns.
February 8, 2010, 11:51 pmUnion Marching in Different European Directions | Liberal Whoppers says:
[...] the original here: Union Marching in Different European Directions [...]
February 9, 2010, 3:43 ampireader says:
the Obama administration’s pooh-bahs seem to have written off Europe as the past, Asia is the future.
February 9, 2010, 7:39 ampireader says:
the Obama administration’s pooh-bahs seem to have written off Europe as the past, Asia is the future.
That seems a much better description of the previous administration’s views that the current one’s. Can you offer any examples of actions or words comparable to Donald Rumsfeld dismissing the core European powers as “Old Europe”?
February 9, 2010, 7:43 amrbj says:
Rumsfeld was speaking about France & Germany being “old Europe” and Poland, Czech Republic et al. as the “new Europe”. Please don’t cut off half the quote.
February 9, 2010, 8:12 amGEO says:
“[T]he movement toward ever closer union in the EU seemed to me always to have a double drive.” You have omitted a critical third driver. I am an American attorney based in Brussels for the last couple of decades. One substantial factor that I observe driving towards closer union is the European Commission’s effort to perfect the Internal Market (and its own power in that structure). So long as Member States rely on / permit the Commission to develop common rules, rulemaking at the national level evolves towards simply implementing those rules. Further, so long as the directives and decisions are initiated in Brussels, then adopted through the Council and European Parliament, the role of national parliaments decrease. Thus, the very self-perpetuating nature of the European institutions is a substantial driver for “ever closer union.” This third driver does not necessarily have a direct impact on the constitutional aspects of the EU, i.e., the Treaties, but it shapes expectations and sets a structure that is subsequently interpreted into the Treaties.
February 9, 2010, 9:51 amAroniste says:
Everyone should have paid, and should still continue to pay, attention to Raymond Aron.
February 9, 2010, 11:30 amAroniste says:
The first great achievement of the post-war Europe was peace. (As Deng is reputed to have said about the French Revolution, however, it may be too soon to tell. After all, we’re about as far from the fall of Berlin as Sedan was from Waterloo, and only about half as far as Waterloo was from the Marne.)
The second great achievement was a free-trade zone.
The common currency (if it endures and if the central banker remains independent, prudent and credible) in theory offers additional benefits. (On the other hand, those benefits are limited if the most important financial center uses a different currency.)
What practical benefit does further integration offer? Europhiles subscribe to something like your bicycle analogy, but it is not convincing. The general public currently rejects the correlatives of further integration — further diminution of local sovereignty and distinctiveness.
Why not stop and consolidate the gains, in the hope that someday the public can be convinced — or at least lulled into acceptance? Why jeopardize the gains (particularly the gain from free trade in economies with deeply entrenched mercantilist and protectionist histories) for such speculative benefits?
February 9, 2010, 12:23 pmMartinned says:
That’s exactly what’s happening now. There will be no new treaty for several decades. (Except for the possible accession treaties of Croatia, Iceland, etc.) Everybody lost the appetite for further reform.
In the long term (as in: really long term, as in 100+ years), the EU is the only model we have to replace the Westphalian system, which has long outlived its usefulness. After 150 years of constant fighting, the peace of Westphalia and the international state system it created was a step in the right direction, but in the 21st century, this system causes too much suffering for us to continue to rely on it.
That’s a common claim, but I think it fails to do justice to the stringent legal basis checks in place. The Commission cannot simply do as it likes: every step of the way it has to justify why the Treaty allows it to do something. The same goes for the Community legislature, i.e. the Council and the Parliament. (Unlike the US Congress, who get a law struck down for legal basis reasons about once every other decade.) Anyone who keeps a bit of an eye on the ECJ’s case law knows how carefully the political branches are made to justify their actions given the competences conferred on them by the Treaties.
In fact, that is one of the problems with Greece. It is highly doubtful whether – as some have argued – art. 122(2) TFEU confers on the Council the authority to bail out Greece:
P.S. Anyone interested in this story should read the blog A Fistful of Euros, which is written by actual, and highly knowledgable, economists. They’ve been arguing that, if a bailout is necessary, it should be done by the IMF not by the EU.
February 9, 2010, 1:10 pmKenneth Anderson says:
Martinned, I thought I could count on you to offer the angelic argument for the EU! :) But I read A Fistful of Euros regularly, and I’m having trouble seeing why the IMF is so much better than the EU, save on a purely political basis. I understand the political basis, yes, and try not to discount the importance of the politics, but it seems hard for me to believe that the IMF will not be understood as merely the EU.
February 9, 2010, 1:18 pmMartinned says:
I’m not getting the argument, either. I ascribed that to my failure to think about it carefully enough. Good to know I’m not the only one.
So far, my opinion is that – to translate a Dutch expression – the shore will stop the ship one way or another. The Greeks still seem to busy with their denial and their search for scapegoats to really get to work. (Not to mention that half the civil servants, including the tax collectors, are on strike.) Sooner or later they’re going to have to start with their internal devaluation. Given that there’s no external demand that they can rely upon, except Randy-style tourism, the recovery of their economy and the recovery of their competitiveness will take at least the rest of the decade. Hopefully, though, by the end of it they will have learned a valuable lesson about the importance of frugality and good bookkeeping, a lesson that so far they’ve always been able to avoid by devaluing their drachme.
If some kind of bailout is necessary, the powers that be in Frankfurt and Brussels won’t want outside interference. Can you imagine the IMF bailing out California? As a matter of prestige, they will cough up the cash.
February 9, 2010, 1:29 pmKenneth Anderson says:
Martinned: I agree – recall the reaction in the US government when the UK government said last year that it would not be embarrassed to call upon the IMF to rescue it if necessary. The reaction, even among US Democrats, was something like, if you want to end the IMF, be our guest but after all the IMF consists of funds from its state members, and although a temporary liquidity issue was the original IMF purpose, Britain’s problems are solvency not liquidity. Some US Treasury official, as I recall, said something very much like, “Don’t think about going there.” Greece is different, I guess, and perhaps it could be the IMF specially but indirectly funded by the EU, but again hard for me to see that it isn’t so obvious as to be pointless.
But then I’m interested in your reaction to my later post about Germany bribing Greece to leave. What’s the legal situation inside the Eurozone? Who has the hold-up rights? Who can force who out?
Great Dutch expression, btw. Reminds me of the saying – Milton F or Martin Feldstein or someone or other, “if it can’t go on, it won’t.” What is the original Dutch? Great epigraph for a book or article.
February 9, 2010, 1:42 pmMartinned says:
@prof. Anderson: Everything you need to know about countries being kicked out of the Eurozone, leaving unilaterally, etc. is in this ECB working paper from December. In a nutshell, the answer is that it can’t be done. The Treaties are written based on the assumption that all EU member states are members of the Eurozone, and that to the extent that some are not, this is temporary. The idea of going from inside the Eurozone to outside was simply never contemplated. Under the Lisbon Treaty, Greece now has the explicit right to leave the EU as a whole, but there is no way to make a country leave the EU. A country’s voting rights in the Council can be suspended for human rights infractions, and a country can be fined for sins against the stability and growth pact. Those are about the most drastic measures that can be taken.
So nobody can force anybody to do anything. Greece can’t be forced out of the Euro or the EU, and the others can’t be forced to bail Greece out. (At least not legally.) If Greece defaults, that is unfortunate, but the only consequences that would have for the other MS are economic. (i.e. Market panic and other contagion.)
The Dutch expression is: “Uiteindelijk keert de wal het schip.”, or, word for word: “Eventually turns/stops the shore the ship.” (Remember, Wall Street used to be the southern most part of Manhattan, before the island grew.)
February 9, 2010, 1:57 pmKenneth Anderson says:
Martinned: thanks on all counts for the comment above – I’m going to put some of it up as an update to my later post, if that’s ok.
February 9, 2010, 2:03 pmptt says:
And how is New Europe’s leadership role coming along?
February 9, 2010, 2:09 pmMauricio says:
Read pages 15 to 17 of the suggested book review.
February 9, 2010, 3:59 pmtroll_dc2 says:
Prof. Anderson, I have a question that has bothered me for some time. There is a prologue to the question:
As I understand it, the EU grew out of things like the European Coal and Steel Community and other things in which concrete, specific activities were made multilateral in an effort, in part, to constrain the Germans and prevent yet another war. Not everything that was proposed was adopted, like the European Defense Community. But enough progress was made that the Common Market was adopted (even though the UK opted out). The six-nation agreement caused seven other nations to create economic ties as well. Eventually it was decided to have one organization, and the EU was created, with ambitions that far exceeded a concern about the Germans. One of those ambitions was European unity. It was thought that a common currency would be an important driver here. The assumption was made that a common currency would cause the various nations to converge even though they still maintained separate economies with separate decisionmaking authority over economic policy.
The question: Was it a mistake to adopt a common currency before having a common economy? Put another way, is a currency system an engine of change, or is it a reflection of change made elsewhere? In other words, did the Europeans get things backward, with political aspirations exceeding economic capabilities?
February 10, 2010, 2:24 pm