Tuesday, June 28, 2016

Brexit and the Incorrigibility of the EU

A standard argument from the left runs like this: in principle there are three positions a country like Britain could take toward the EU, opposition/exit, support/remain, and transform.  But transforming the EU is not on the table, so the choice comes down to whether a country should remain part of the existing EU with all its faults or leave it.  This is a lousy pair of options, and the debate between them can’t help but be muddled and unproductive.

The interesting question for me is why the EU is such a determined enforcer of neoliberalism and so resistant to fundamental reform.  I asked this on Crooked Timber yesterday, and one of the commenters (thanks!) sent me to Gerassimos Moschonas, the Greek political scientist.  I haven’t read his book In the Name of Social Democracy: The Great Transformation, 1945 to the Present yet (what’s taking me so long?), but I did take a look at this article, which was published in 2009 after the first edition of In the Name and seems to summarize his position.

Moschonas is very insightful about the structural constraints on anti-neoliberal (or genuinely social democratic) politics in Europe.  The EU obstructs transformative political projects at the national level; meanwhile it prevents party formation and radical political action at the supranational level.  This structure, which institutionalizes the deregulation of national economies in the name of the single market and imposes anti-Keynesian policies through the Stability and Growth Pact, is intrinsically resistant to change.  Moreover, it coincides with a grand coalition at the EU level whose political ideology is resolutely neoliberal.  Some of this is obvious to anyone who follows events, but Moschonas’ analysis of the structural aspect of “embedded neoliberalism” (my term) is enlightening.

But there is a hole in his narrative.  Somehow, during the crucial period from the mid-80s to the early 90s, this neoliberal consensus in Europe was forged, and its project was the creation of exactly those structures that Moschonas studies.  How could it be that, in a Europe that lacked explicit political organization at the confederal level, such a coalition, powerful enough to create entirely new institutions, could be assembled?  Here structural political analysis of the sort represented by Moschonas is useful for posing the problem but doesn’t give us the resources to begin to answer it.

I think the missing dimension is political economy.  Politics does not occur in a vacuum, with ideas competing on the basis of pure logic or emotional resonance.  Political economy proposes a larger terrain, in which wealth and material interests generally condition politics and make particular ideas or projects more “realistic” or attainable.  I’ll be the first to admit, however, that political economists have relied primarily on indirect evidence—historical or geographical correspondences between economic motives and political outcomes—and have been mostly unsuccessful in tracing the actual processes through which they occur.  Understanding them is important not only in a general intellectual sense, but also, especially, for coming up with counter-hegemonic political projects.

I see this difficulty, for instance, in Varoufakis’ DiEM25 project to democratize the EU.  He has in mind a two-step process: first the political structures are changed to enable a Europe-wide political space, and then that space can used to combat neoliberal hegemony.  I’m not against this, but it seems to me that the first step presupposes the second: the existing structures exist precisely because of that hegemony, and it will have to be challenged in order to create new ones.  It would be interesting to get Moschonas’ reaction to DiEM25.

In any case, DiEM25 was not on the ballot in Britain.  You could vote to be part of the actually existing EU or vote to leave it.  Like I say, lousy choice.


Sandwichman said...

Peter, you may want to have a look at "Campaigning on expertise: how the
OECD framed EU welfare and labour market policies – and why success
could trigger failure," Jorg Michael Dostal, Journal of European Public Policy 11:3 June 2004: 440–460.

ABSTRACT This article explains how the Organization for Economic Cooperation and Development (OECD) assumed a leadership role in creating and disseminating liberal welfare reform and labour market policy proposals between 1994 and 2001. The article first sketches the increased Europeanization of welfare and labour market policies throughout the 1990s. The second part examines how international organizations such as the OECD influence agenda-setting at different levels of policy-making by providing a controlled environment for the creation, development and dissemination of political discourse. The OECD’s influence on policy-making can be explained through an analysis of the specific features of its ‘organizational discourse’, dominated by liberal economists, and characterized by the exclusion of interest groups. The third part takes the OECD Jobs Study (1994)as an exemplary case of its organizational discourse and demonstrates how the OECD utilized this study to bridge the gap between abstract liberal economic beliefs and concrete agenda-setting efforts. It underlines the high degree of influence of the Jobs Study on the EU’s subsequent European Employment Strategy (EES).

Rich C said...

Peter, you may also want to look at some older material by Alan Milward (especially The European Rescue of the Nation State), which has a more explicitly political economy explanation for the EU's construction up through Masstricht. He argues that beginning in the early 1950s, the increased productivity and output made possible by the elimination of interwar/imperial tariff regimes enabled a much higher level of welfare state spending, which in turn provided the electoral support and ideological legitimacy for the project. The key issue, of course, is that since the early 1990s, especially since 2010, it sure looks like European structures (both the growth and stability pact and the Euro in particular) are impeding higher levels of productivity and output growth, requiring reductions in welfare state spending and hence a decline in the political popularity and legitimacy of the project. Exactly why that became the case post 1992 when it was not (apparently) the case earlier is a key question.

Sandwichman said...

And for a thoroughgoing critique of the flexible specialization nostrums being purveyed by the OECD, see Ben Fine's Labour market theory: a constructive reassessment Routledge, 1998.

blissex said...

«imposes anti-Keynesian policies through the Stability and Growth Pact»

That seems to me a common hallucination suffered by those that are unfamiliar with the history and details of that (widely disregarded) pact, because it does nothing like «anti-Keynesian policies».

It is a "pact" by which members in essence promise that they will not ask other members to fund their deficit spending, that is, a pact by which members agree not to ask fiscal transfers from each other beyond those already agreed in treaties. Little more than a more emphatic repetition of what is already said in the ECB treaties.

The mechanism is an unenforceable promise to avoid creating deficits so large that individual members are unable to fund them, thus requiring a bailout.

The pact explicitly allows a member government to run Keynesian *counter-cyclical* policies, as long as their size can be funded by that member government.

The best counter example is that of the right-wing kleptocratic governments of 2001-2010, which used massive fraud to hide ridiculously *pro-cyclical* deficit spending of up to 20% of GDP for several years, thus putting the greek state in a condition to request a bailout; that was a strategy of intentional fraudulent bankruptcy of their own state to fill the swiss bank accounts of the rich and affluent members and supporters of those right-wing parties, while making the working and underclasses pay the consequences in the subsequent squeeze.

blissex said...

«right-wing kleptocratic governments of 2001-2010, which used massive fraud to hide»

Obviously I was referring to Greece here.

«ridiculously *pro-cyclical* deficit spending»

As to that, pro-cyclical borrow-and-spend is a favourite tool of neo-liberal right-wing governments, including those of Greece 2001-2010, as this allows them to bankrupt the state (a sa prelude to shrinking it) while benefiting themselves with tax cuts on the rich or spending on the affluent and old or military splurging.

It is one of the favourite tools of the USA Republic party when they are in power, inspired by J Wanniski's "Two Santa" strategy:


This pro-cyclical borrow-and-spend right-wing neoliberal policy however is usually implemented in the variant where right-wing governments boost private borrowing and spending via leverage deregulation and quasi-explicit guarantees of speculators' borrowing, which has been called by the UK sociologist C Crouch "privatized kenesianism":


blissex said...

«The OECD’s influence on policy-making can be explained through an analysis of the specific features of its ‘organizational discourse’, dominated by liberal economists, and characterized by the exclusion of interest groups.»

In the OECD the "interest groups" that matter seem to me to the right of most "liberal economists", as the working-class have dwindled into a largely electorally irrelevant minority, and ravenously greedy middle-class rentier interests have become a plurality or even a majority, in an unholy alliance with upper-class rentier interests.

The members of that alliance want lower wages and higher unemployment because cheaper help is always hard to find, and want even more intensely bigger leverage and state-guaranteed borrowing because property prices are always too low.

So many "progressives" continue to adhere to the tenets of "resolutionary socialism", without confronting the massive shift in the political economy towards mass rentierim, in politics away from social democracy.

Sandwichman said...

"In the OECD the 'interest groups' that matter seem to me to the right of most 'liberal economists'..."

Maybe the effective demand for these policies comes from interest groups to the right but the supply -- at least the intellectual foundations -- of the policy ideas comes from liberal economists. See Fine, cited above, pp. 42-48 (NAIRU, Layard, Nickell & Jackman) and 81-86 (Flexible specialization, Piore & Sabel).

Of course in practice these policy ideas may lose all but terminological resemblance to their forebearers. That's not unusual. But in thinking about alternatives it is best to know how we got here or we might just end up reinventing the rack.

rosserjb@jmu.edu said...

I would say, S-Man, that while the OECD is influential, you are overstating that influence. German leadership in the Eurozone has been key to the disaster in Greece, and fear of conservative fiscal drag from Germany has been what has kept more social democratic Sweden and Denmark from joining the euro, although the Danes have largely pegged their krona to the euro (the Swedes have let theirs float).

Sandwichman said...


You are talking about recent events. I am talking about foundations. In my opinion, recent events have no influence on things that began a quarter of a century ago.