Blindness to these is due not just to the dogmatics of rational choice, but to the curiously apolitical cast of The Choice for Europe, much of which reads like a swollen theoretical side-bar to the technocratic discourse of committees and functionaries in Brussels itself. Not, of course, that Moravcsik himself is in any way unpolitical—it would difficult to suspect a more mainstream New Democrat. His manifest aversion to De Gaulle is not simply as a figure too unmistakably resistant to the postulates of his theory, but also as a ruler whose ‘incoherent’ foreign policy, pursuing French independence in defiance of Atlantic solidarity, was fortunately doomed to failure. But such conventional American dislike of a threat to Washington is no spur to any serious analysis of the balance of different forces in France, or any other country, at the time. In Moravcsik’s optic, the domestic interests informing government policies boil down to little more than various producer lobbies, with virtually no attempt to reconstruct or even refer very much to the party systems and ideological landscapes of the period. Just how drained of politics the result becomes can be judged from—one example among many—his description of Thatcher’s regime as a ‘centrist coalition’,17 a notion she would have regarded as slanderous, and her opponents as risible.
The best antidote to such dehydration comes from another, younger American scholar, Craig Parsons at the University of Oregon. In a brilliantly executed study of France’s part in the history of integration, A Certain Idea of Europe, Parsons shows how far the political realities of the French role in the building of Europe were from the utility functions of assorted economic interest groups. After the Second World War French elites, confronted with the problem of avoiding a re-run of their failures after the First, had—Parsons argues—three options: traditional realist diplomacy, pragmatic inter-state cooperation led by France and Britain, and direct Franco-German integration within a supranational community. Each was informed by a distinct set of ideas that cross-cut Right/Left attachments along the non-Communist spectrum, and set the agenda for decisions. That ‘community’ approaches prevailed over either confederal or traditional lines of action was never due to pressure in favour of them from domestic lobbies, industrial or agrarian. Underdetermined economically, it was the outcome of a ‘historic battle of ideas’.18
But if a series of leaders—Schuman, Mollet, Giscard, eventually Mitterrand—had sufficient, if nearly always temporary, political leeway to impel integration without there being any organized demand for it, they equally never benefitted from it. Elected for other reasons, they fell from power for other reasons, in domestic contests unrelated to European issues. Indeed, every party responsible for a major advance towards European unity was punished at the polls, not thereby but thereafter: the MRP after the Coal and Steel Community (1951); the SFIO after the Treaty of Rome (1958); the UDF after the European Monetary System (1981); the PS after the SEA (1986) and again after Maastricht (1992). Yet each time the step forwards, once made, acted as an institutional constraint on subsequent leaders who had originally opposed it, but once in office were turned in favour of it—De Gaulle in 1958, Mitterrand in 1983, Chirac in 1986, Balladur in 1993, Chirac again in 1995. The ‘conversion mechanism’ was the accomplished fact, and the costs of trying to reverse it: not a spillover, but a ratchet effect.
While restoring quite unshakeably the driving role of political ideas in European integration, Parsons is careful not to overstate the success of federalism as its accelerator. Without the community commitment of successive French leaders, he remarks, ‘today’s Europe would look much like the rest of modern international politics’. But it does not fully represent them either, for although federalist directions prevailed at several crucial stages, they always had to contend with alternative—confederal or traditional—projects that slowed them down or boxed them in, making of the Union that eventually emerged a product of oscillations between the three.19 Coolly dismissing Moravcsik’s edifice as ‘embedding a poorly supported argument in a largely untested theory’, and eschewing all comparable hubris, A Certain Idea of Europe shows what a lucid political science immune to the fevers of rational choice can accomplish.
Of entirely different inspiration is the work of John Gillingham, a historian at St Louis whose European Integration 1950–2003 offers the first true narrative of the process of unification from the time of Schuman to that of Schröder, in a bravura performance that lights up the all too often leaden skies of the field like an aurora borealis. Resolved to ‘cast aside official language’—what he calls Brussels-Volapük—‘whenever possible and use standard terms and common measurements in order to demystify ideas, events and persons’,20 Gillingham has written an unfailingly vivid and pithy—at times even, as he himself notes, too racy—account of the complex story of European unification, on a grand scale. Its registers run a gamut from theoretical analysis of underlying economic processes to the dynamics of political manoeuvre or surprises of diplomatic settlements, to pungent portraits of their dramatis personae, always with a keen curiosity for ideas—both those that moved leading actors historically, and those developed afterwards to situate them. Its span, not confined to the major states, is virtually continental.
The intellectual convictions governing the narrative come from Hayek, to some extent also the Freiburg School of Ordo-liberals around Walter Eucken and Wilhelm Röpke, mentors of Ludwig Erhard. Politically, this is a tradition on the intransigent right of the spectrum, and Gillingham makes no secret, with many a colourful expression, of his hostility to anything on the left of it. But as a paradigm for understanding the history of the Community, Austrian economics has obvious advantages over the neo-classical variant on which rational choice is based, since as Gillingham remarks, it envisages market systems as inherently unstable—dynamic processes of discovery in which information is always imperfect—rather than as a set of utility functions tending towards equilibrium. Unexpected or ironic outcomes are, necessarily, no strangers to it.
What is then the historical yield of a Hayekian vision of European unity? For Gillingham, two antithetical models of integration have coexisted from the start. Negative integration is the removal of all barriers to the free movement of factors of production within the Community, entrusting the unification of economic life to the natural workings of the market, conceived in Hayek’s terms as a spontaneous order. Positive integration is the attempt to orchestrate a set of uniform practices into being by state intervention. For a quarter of a century after the Second World War, the dominant social arrangements at national level, combining capital controls, fixed exchange rates and extensive welfare systems, represented an ‘embedded liberalism’,21 more or less throughout the West. Transposed to European level, the effect was an unstable amalgam of positive and negative integration, in which proponents of the former initially had the upper—though never a free—hand. From Monnet’s design of the Coal and Steel Community in 1950 through to the first years of Hallstein’s presidency of the Commission in the late fifties and early sixties, projectors of a social Europe, to be shaped in the spirit of French indicative planning and German bureaucratic legalism, held the initiative, until Hallstein over-reached himself in 1965, provoking De Gaulle to pull France out of the Council, and put an abrupt stop to further supranational schemes.
But if the empty chair crisis spelt the end of ‘chiliastic Monnetism’ in the EC, it was a much larger change that in due course shifted the balance of forces away from positive to negative integration. This was the ‘regime change’ that supervened across the advanced capitalist world after the collapse of the Bretton Woods system in the early seventies. Here the term—not a euphemism for overthrowing foreign governments, Gillingham explains, but a notion taken from the work of Douglas Forsyth and Ton Notermans, an American historian of modern Italy and a Dutch political scientist based in Norway22—signifies a set of system-wide policy constraints affecting all governments, no matter what their complexion. Just as the great deflation of the Slump years had over time imposed a new regime,
governed by the goal of full employment, so the inflation that broke loose in the seventies would eventually create another one, dictated by the imperatives of monetary stability.
With this came the downfall of embedded liberalism, and a revival of the principles of a classical liberalism. Under the new regime, markets were freed from statist interference and international mobility restored to capital. Social expenditures were cut, unions weakened, and corporatist practices abandoned. This great change did not occur immediately—the seventies were a time of futile attempts to patch up corporatist arrangements—or automatically. It required powerful ideas and political will to give birth to an international consensus. Credit for these belongs to Thatcher’s rule in England, inspired by the lessons of Hayek and other critics of the preceding order. By the mid-eighties, the conditions had matured for European integration finally to swing over in the right direction, with the long overdue abolition of obstructions to an unimpeded single market within the Community. The sweeping deregulation package of the SEA, drafted by an emissary from London, was ‘at bottom . . . Mrs Thatcher’s baby’.23 Negative integration, the only viable kind, was at last in the saddle.
Yet its triumph, too, would be qualified. At the head of the Commission, Delors worked tirelessly against the grain of liberalization, even when apparently yielding to it, hitching Structural Funds—that is, otiose regional subsidies—to the SEA, and manoeuvring towards monetary union. It is characteristic of Gillingham’s treatment of individuals that, though he judges Delors an arrant ‘constructivist’, incapable of understanding the virtues of a spontaneous order, whose legacy was mostly pernicious where it was not ineffectual, he has no difficulty acknowledging that he was ‘an undeniably great figure’, whose ‘exceptional energy, political talent and ideological commitment’ made him one of a kind, as Monnet had been.24 In the end, by pressing European leaders on down the road from the SEA to Maastricht, Delors provoked the furious resistance of Thatcher, that led to her fall at home. But his own dreams of a social Europe were no more successful than hers of a truly liberal one. ‘Delors’s economic plans went down the drain. So, too, did Thatcher’s hopes that market reforms would sweep away the detritus of socialism and corporatism. Both leaders eventually parted the scene in anger, convinced the other had won’.25
Thus although regime change was irreversible, and has given European integration not just a new lease on life, but for the first time a life that is real and not artificial, the nineties became a time of misguided schemes and largely frustrated energies. At national level, there was welcome progress with privatization nearly everywhere. The public sector has been reduced by nearly half across the OECD, and state intervention in the economy has contracted sharply. Welfare systems have proved less tractable, but Gillingham can record significant improvements in most countries and commend star performers overall: Finland, Spain, Estonia. But at European level, there was no compelling economic rationale for the introduction of a single currency—Hayek, after all, had advocated competing private issues—and no community-wide securities market had issued from it, which to acquire real depth would in any case need general privatization of pension funds. The CAP had not been dismantled, and even the historic feat of enlargement had been marred by mean-spirited provisions ensuring that new members ‘will have to buy a full-price ticket in order to see only half the show’.26 The upshot is a continuing stand-off. Positive and negative integration still confront each other in the Union like cobra and mongoose.
What explains this unsatisfactory outcome? Retrograde opposition to liberalization from unions, public sector employees and the left is only to be expected. But however recalcitrant, these are groups bereft of ideas, without a future. Governments bear the main responsibility for not facing them down. Nearly all have indeed been agents of neo-liberalism, as their enemies charge. But the term is over-rated. Neo-liberalism has in general been less a principled conviction than a pragmatic tacking to regime change, whose practitioners have mostly been professed socialists—Thatcher’s government was the exception in openly proclaiming the virtues of capitalism. Ideologically speaking, therefore, since it adopts pro-market policies with stealth rather than candour, let alone ardour, ‘neoliberalism is a dull weapon’, incapable of delivering a quietus to the baleful alliance of unions and transfer-recipients who block change in the old Union.27 The distressing fact is that since the departure of Thatcher, ‘there is no serious, organized political constituency for classical liberalism anywhere in Europe today, not even on the conservative political right’.28 But without a return to it—the concluding judgement—the Union is at risk of discord and decline.
Framed by a strong economic theory, Gillingham’s book is nevertheless, in keeping with its subject, essentially a political history of European integration. For the European economies themselves, the commanding study comes from Barry Eichengreen, who teaches at Berkeley. In many ways, The European Economy since 1945: Coordinated Capitalism and Beyond (2007) moves in close parallel to Gillingham’s work. In certain others, it reverses its signs. Eichengreen covers both Western and Eastern Europe throughout, but his periodization is identical. The economic history of the continent divides into two contrasting phases, the watershed between them lying in the early seventies. In the first phase, ‘extensive growth’ was achieved by making good wartime destruction of capital and diversion of manpower, and then drawing on a backlog of (principally American) technological advances and still abundant reserves of rural labour, to make up for lost time and converge towards US levels of productivity and income. In the second phase, ‘intensive growth’ was required, demanding riskier investments in faster and more abrupt forms of technological innovation. Eichengreen’s story is of the way Europe flourished during the former, then stumbled at the latter.
What made extensive success possible, he argues, was a set of institutional arrangements comprising a mixture of cooperative trade-unions, responsible employers’ associations, long-term bank credits to industry, and last but not least, governments taking active charge of the needs of growth, in some cases with elements of indicative planning. This ‘coordinated capitalism’ was a historically admirable model in its time. But once the limits of extensive growth were reached, it became a fetter on Europe’s ability to adapt to the imperatives of intensive growth. The new conditions demanded lower taxes, less job protection, greater income disparities, higher levels of general education and R&D, and—most important of all?—more venture capital for innovative start-ups, raised from readier-to-gamble financial markets rather than stick-in-the-mud banks. Rooted in attachments to the past, European resistance to these changes exacted a heavy price. Between 1945–1973 and 1973–2000, GDP growth per capita fell by over half.
As for the onset of the crisis that brought extensive growth to an end, though completion of industrial catch-up and running-out of rural labour also come into it, Eichengreen lays main emphasis on the breakdown of labour restraint in Europe in the late sixties and early seventies, as a new generation of workers with no memories of mass unemployment set off a wage explosion that led to a decade of inflation. But as an explanation of the deceleration of growth, this will hardly do, since without any comparable union militancy, the slow-down took hold in America as well. Elsewhere, the epochal change is attributed to the impact of discontinuous technological innovation and financial globalization. But these are never themselves causally grounded, remaining descriptions rather than historical explanations, in this much like regime change in Gillingham’s account.29
Politically, of course, Eichengreen’s study is far more generally benevolent to Europe. His intellectual sympathies, more clearly on display in Globalizing Capital (1996), have lain not with Hayek, but Polanyi. The Hungarian was in nearly every way the antithesis of the Austrian, and the unstated difference is plain in The European Economy since 1945. The embedded liberalism of the post-war settlement that Gillingham treats as at best a provisional expedient, already laden with vices to come, becomes the
notably effective and imaginative—unspontaneous—order of a coordinated capitalism, which only earns Eichengreen’s praise. His respect for what it represented persists to the end. Europe’s recent productivity record may not be so much worse than that of the US; if Americans earn more, Europeans are not necessarily worse off, since they enjoy more leisure and security, and are surrounded by less poverty and crime. The EU needs to adjust to intensive growth, but are not parts of it already showing the way? The Dutch and Irish, he suggests, have already got things more or less right, with neo-corporatist arrangements that combine fiscal discipline, wage moderation and hi-tech investment. Perhaps European capitalism may not have to renounce its habits of coordination after all, but merely slough off one set of them for another.
The suggestion, however, is half-hearted—more a wistful glance back than a confident look forwards. It is not just that in small countries like Holland or Ireland, external vulnerabilities have always favoured corporate solidarities not readily achievable elsewhere. Equally significant, what in each case Eichengreen singles out as the key to their success is essentially wage restraint. His general instruction to Europe for getting on board the train of intensive growth is the same. Labour must settle for less—flatter incomes, more wage dispersal, and less job security.30 In other words, a standard neo-liberal package in just the ironically pejorative sense Gillingham gives the term.
The European Economy since 1945 ends by asking whether the EU could not adopt Anglo-Saxon-style financial markets—as it is now more or less sensibly doing—without following suit in its labour and product markets. That will depend, Eichengreen suggests, on whether further technical innovation in the next decades is incremental or radical. If it were the former, the European model would be open to reinvention; if the latter, international competition would probably force thoroughgoing Americanization. Formally, judgement is left suspended there. But substantively, there is no doubt which prospect is inscribed in the logic of the argument. Earlier, Eichengreen has already made clear that ‘comprehensive’ reform of the European model is required, and explained at length that enlargement of the EU provides it with an open-shop East to match the US South—obviously, to far larger potential dynamic effect than parish-pump concertation in Wassenaar or Dublin could ever furnish. So, too, he concedes that the probability is that technical innovation will continue to involve radical and discontinuous, rather than gentle or gradual, changes.31 Entailed, if never stated, is only one plausible outcome: that ultimately, the Old World is likely to be compacted into the shapes of the New.
The New Old World Page 13
