Cracks in the Ceiling? Contradictions of Ordoliberal Hegemony in the EU – Part I

Johan Ekman is a BA (Hons) student in European Politics with EIS Copyright: private

Johan Ekman is a BA (Hons) student in European Politics with EIS Copyright: private

An essay by Johan Ekman (@jgekman), BA (Hons) student in European Politics. Part II will be published next week.

The crisis of the southern Eurozone periphery – in itself an offspring of the great crisis of 2007-2008 – has highlighted German-led ordoliberalism as the dominant theory behind European integration after the adoption of the Single European Act (SEA) and the Maastricht Treaty. This piece suggests that the contradiction between the social effects of the implementation of the strict rules of economic governance in the southern Eurozone periphery and the ideals of solidarity as expressed in the EU treaties has put German-led ordoliberal hegemony under severe strain in the EU as discontent has increased.

First, I will roughly outline how the integration project has developed, from the post WWII Keynesian welfare state centric model of Western Europe towards neoliberal hegemony in the Neo-Gramscian sense, underpinned by German-led ordoliberal theory. I will then illustrate how the development of a freer market has taken place without – and often to the detriment of – a progressive agenda aiming to strengthen social rights as an essential part of the integration project. Finally, the effects of the crisis pose the question whether access to social rights is compatible with the European integration project in its current format. To adequately address that question, there is, following Magnus Ryner, a need to look beyond a “positivist evolutionary” approach to European integration that takes the rationality of economic, political and social integration for granted.[1]

I

As van Apeldoorn et al. have expressed, one of the advantages of critical IPE is that it can “move beyond a merely formal analysis of levels of governance, and particularly beyond the institutionalist focus on the form of the integration process of established integration theories, to identify the socio-economic content of the integration process, or the social purpose underpinning political authority in the EU”.[2]

The European integration project has, since the adoption of the SEA and later the Maastricht Treaty, shifted towards a reality where “market forces have come to constitute the dominant social principle to which all other principles and media of social organization have become subordinated”.[3]

Inspired by Antonio Gramsci, Robert Cox has characterized the role of the international organization as a “mechanism through which the universal norms of a world hegemony are expressed”,[4] thus providing a tool for understanding hegemony in the EU context. Hegemony in Europe today is of a “multileveled nature”:[5] while EU institutions have gradually expanded their competences, the state remains the key building block, which logically leads “one to acknowledge the crucial significance of Germany for neoliberal hegemony in Europe”.[6] Further, the Bundesbank and the German Ministry of Finance are strategically placed at the core of what has become known as the Franco-German axis serving as the motor of integration, of which the creation of the EMU has been a crucial pillar.[7] It is in this context the role of ordoliberalism, as a form of “authoritarian liberalism”[8] must be viewed.

Ordoliberalism traces its roots to the Weimar Republic of the late 1920s and early 1930s, where economic depression, financial crisis and class-based politics were the order of the day.[9] Ordoliberals developed a theory with the strong state as the ultimate enforcer of the free market, and their vision of society was articulated as “the social market economy”, based on competition and entrepreneurship, but also on a certain social responsibility, not the least as a means to counter demands for a welfare state.[10] Although influenced by Friedrich Hayek,[11] the ordoliberals, as Bonefeld has put it “saw their neoliberalism as a third way in distinction to laissez-faire liberalism and collective forms of political economy, the latter ranging from Bismarckian paternalism to social-democratic ideas of social justice, Keynesianism and Bolshevism”.[12] Thus they concluded that rules and their enforcement by a strong state are fundamental for a free market society where competition and entrepreneurship is the norm. Indeed, in West Germany, spectacular economic growth was achieved in the decade after WWII with help of policies such as slashing of labour- and capital taxes and deregulation, implemented by the committed ordoliberal Minister of Economic Affairs and later Chancellor, Ludwig Erhard.[13]

The 1960s and 1970s, however, were not opportune for ordoliberalism in Germany or Europe as a whole, as it was a time of “the zenith of the Keynesian welfare state”[14] when class conflict was counteracted by strategies of compromise between capital and labour.[15] When Erhard left office in 1966, the occasion was understood by Hayek as surrender to welfarism and overregulation characteristic of the times.[16]

II

With the “neoliberal turn” in the 1970s and 1980s, capital was disembedded from its constraints as Keynesianism proved inadequate to provide an answer for increasing unemployment and inflation.[17] The European integration process was not left unmarked by this shift. The SEA, with its establishment of the free movement of goods, services, people and capital,[18] led the way, followed by the Maastricht Treaty that established the monetary union and the launch of the Euro.[19]

At the same time as financial and economic integration has been stepped up, the social integration of the EU has not advanced similarly as binding legal instruments or EU-level competences that would allow a stronger social dimension of the EU have been generally shunned by member states despite wordings in the Social Charter and the subsequent Charter of Fundamental Rights.[20] This can be contrasted with the EU regulation and enforcement on budgetary discipline that has been strengthened, especially after the crisis.[21] These common budgetary rules can be viewed as sound, but without European level social responsibility that would make the Lisbon Treaty values of “equality” and “solidarity”[22] concrete in terms of income redistribution, the crisis response mechanisms risk appearing nothing less than coercive for those subjected to them. This aspect is strengthened further by the conflicting interests between states within the Euro-area that are exposed in a situation of crisis.

III

Any political authority needs, in order to be considered hegemonic, to rely not only on coercion but, to some extent at least, on consent, which implies a capacity to provide for real improvement in peoples lives.[23]  Comparable to the debate on globalization,[24] it must be acknowledged that the European integration project has succeeded in improving opportunities for many people. However, the limitations to the current institutional framework come to the fore when nominal notions of solidarity, as inscribed in the treaties, clash with the regulations of the Eurozone.

One of the rights of EU citizens is free movement. While not necessarily guaranteeing the fulfillment of material needs, this right still opens up alternatives and perspectives to millions, while naturally also working as a shock absorber in times of economic crisis. When there are limited possibilities to find work at home, many opt, as the case of immigration from Greece since the crisis began shows, [25] to seek employment abroad, thus buffering social discontent. However, the Single Market Area has not been capable of absorbing all those seeking employment following the treatment of the southern Eurozone periphery, leaving exceptionally high amounts of people, especially the young, unemployed and socially deprived, thus posing a serious challenge to German-led ordoliberalism. During the Cold War a middle way between Soviet Communism and disaster prone unfettered liberalism was actively sought by policy makers and policies based on the idea of the Welfare State or the “social market economy” were consequently at the fore of the key intellectual battleground.[26]A progressive integration project would require a true social model of the EU to be created – so far this has not materialized, as is exemplified by the crisis response policy in relation to the Eurozone crisis. A first step would be to recognize that an unquestioning belief in integration in itself does not provide the answers to this dilemma.

Acknowledgments

Part of the research for the piece has been made in connection to a King’s UG Research Fellowship in June and July 2016. Thanks to Roberto Roccu for helpful comments. Remaining errors are all mine.

Bibliography:

Apeldoorn Bastian, Overbeek Haas, Ryner Magnus (2003), Theories of European Integration: A Critique in Cafruny Alan, Ryner Magnus eds., A Ruined Fortress? Neoliberal Hegemony and Transformation in Europe (Oxford:Rowman&Littlefield)

Bonefeld, Werner (2012) Freedom and the Strong State: On German Ordoliberalism, New Political Economy, 17:5, 633-656

Consolidated version of the Treaty on European Union, Title 1 article 2,

Cox, Robert W. (1983), Gramsci, Hegemony and International Relations: An Essay in Method, Journal of International Studies Vol. 12, No. 2

Dinan, Desmond (2010), Ever Closer Union-An Introduction to European Integration 4th ed (UK: Palgrave MacMillan)

El-Agraa, Ali M. (2011), The European Union-Economics and Policies 9th ed. (Cambridge:Cambridge University Press)

European Commission Fact Sheet: The EU:s Economic Governance Explained, November 2014

Gillingham, John (2013), European Integration 1950-2003-Superstate or New Market Economy? (New York: Cambridge University Press)

David Harvey (2007), A Brief History of Neoliberalism (New York: Oxford University Press)

Peck, Jamie(2010), Constructions of Neoliberal Reason (Oxford: Oxford)

Magnus Ryner (2012), Financial Crisis, Orthodoxy and Heterodoxy in the Production of Knowledge About the EU, Millennium: Journal of International Studies 40(3) 647-673

Showstack Sassoon, Anne (2001) Globalisation, Hegemony and Passive Revolution, New Political Economy, 6:1, 5-17

Young, Gifted and Greek: Generation G-the World’s Biggest Brain Drain, the Guardian 19.1.2015

 

[1] Magnus Ryner (2012), ’Financial Crisis, Orthodoxy and Heterodoxy in the Production of Knowledge About the EU’, Millennium: Journal of International Studies 40(3) 647-673, p654

[2] Bastiaan van Apeldoorn, Henk Overbeek, Magnus Ryner(2003), ’Theories of European Integration: A Critique’, in Alan Cafruny & Magnus Ryner, A Ruined Fortress? Neoliberal Hegemony and Transformation in Europe (Rowman&Littlefield: Maryland), p. 20.

[3] Van Apeldoorn et al., p.18.

[4] Robert W. Cox (1983), Gramsci: Hegemony and International Relations: An Essay in Method, Millennium: Journal of International Studies Vol. 12, No. 2 p. 172

[5] Magnus Ryner (2003), ’Diciplinary Neoliberalism, Regionalization, and the Social Market in German Restructuring’, in Cafruny&Ryner, p. 202.

[6] Ibid.

[7] Ryner, p. 202.

[8] Werner Bonefeld (2012), ‘Freedom and the Strong State: On German Ordoliberalism’, New Political Economy, 17:5, 633-656, p.636.

[9] Bonefeld, p. 634.

[10] Ibid.

[11] John Gillingham (2003), European Integration 1950-2003-Superstate or New Market Economy?, New York: Cambridge University Press, p.7

[12] Bonefeld, pp. 634-635.

[13] Jamie,Peck (2010), Constructions of Neoliberal Reason, Oxford: Oxford University Press, pp. 56-57.

[14] van Apeldoorn et. al., p.27.

[15] David Harvey (2007), A Brief History of Neoliberalism, New York: Oxford University Press, p.10.

[16] Peck, p. 57.

[17] Harvey, pp. 9-12.

[18] Ali M. El-Agraa (2011), The European Union-Economics and Policies 9th ed., Cambridge: Cambridge University Press, p. 102.

[19] Desmond Dinan(2010), Ever Closer Union-An Introduction to European Integration 4th ed., UK: Palgrave MacMillan, p.91.

[20] Dinan, pp. 422-426.

[21] European Commission Fact Sheet: The EU:s Economic Governance Explained, November 2014, http://europa.eu/rapid/press-release_MEMO-14-2180_en.htm.

[22] Consolidated version of the Treaty on European Union, Title 1 article 2, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/228848/7310.pdf.

[23] Anne Showstack Sassoon(2001),  ‘Globalisation, Hegemony and Passive Revolution’, New Political Economy 6:1, 5-17, 2001, p. 11.

[24] Sassoon, p 10.

[25] ‘Young, Gifted and Greek: Generation G-the World’s Biggest Brain Drain’, the Guardian, 19.1.2015.

[26] Peck, p. 58.

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