Monday, 15 February 2016

Europe's Democratic Deficit

British debate on the nature of the EU has tended to revolve around federalism and the free market, which essentially reflects British history. The distrust of federalism is not so much a memory of Napoleon than the guilty secret of the UK's origins as an elite stitch-up that created the original "superstate". The attraction of the single market is less nostalgia for Victorian pre-eminence in manufacturing and trade than regret over the loss of the contrived market of empire and commonwealth (hence the significance of New Zealand lamb in 1975). But while important, federalism and the free market are both ideals with little presence in the real world. In terms of actual practice, the evolution of the EU needs to be thought of in terms of functional cooperation, political construction and the regulatory regime.

Functional cooperation means industry-level coordination across national borders, of which the European Coal and Steel Community of 1952 was the obvious starting-point. Though we were encouraged to think of the Common Market in terms of agricultural produce at first, and later white goods and services such as tourism, the chief economic objective was the rationalisation of industry on a continental scale, from which the UK was semi-detached until the 1970s. We recall the rationalisation of the 70s and 80s in terms of British losses in a global marketplace, e.g. steel and ship-building moving to the Far East, but this was also a period when key UK industries, such as car-making and financial services, benefited from European integration. The high-point of the functionalist era was the Single European Act of 1986.

The Maastricht Treaty of 1992 was when the focus shifted from functional cooperation to inter-governmentality, i.e. state-level coordination as a precursor to legal and political integration, most obviously in the formal declaration of the European Union and the planned introduction of the euro. The attitudes of the time - from the optimism of the coming "European century" to the concerns over German hegemony - were influenced by the events of 1989 and after, but it is clear now that this was the moment when the federal idealism of the 1950s died, essentially because subsequent expansion to the East set back social and economic convergence, while the adoption of the euro marked a disciplinary turn as most of the EU was divided into two camps: creditors and debtors. Europe has always progressed through national qualification - "joining the club" - but if membership was once about winning promotion, it was now about avoiding relegation.

The EU's political construction is both elaborate and opaque, with its many councils and presidents. This is often explained as a fudge between the need for popular legitimacy and the preservation of national sovereignty, but that ignores the evident distaste for democracy. This is not mere technocracy, important though that is to the Commission, but the inheritance of an older, ultimately aristocratic style of government: the continuation of the chancelleries of Europe by other means, specifically the persistent Council of Ministers and the episodic European Council (i.e. heads-of-state summits). The distance from a truly federal state is clear if you compare the EU with the US, where the institutions (Congress, Presidency, Supreme Court) construct the national polity and govern the agenda (consider the current political sensitivity over the replacement of Judge Antonin Scalia). The EU has either empty forms (Parliament) or elite bodies for whom secrecy is habitual.

Before 2008, the debate on the "democratic deficit" was given impetus in the European Parliament by regional parties whose primary target was their respective nation states rather than Brussels. Together with fringe parties who benefited from proportional representation but were excluded from national legislatures (e.g. UKIP), this imagined a European parliament that was not only comprehensive and inclusive, but representative of subnational elites. The pan-European groupings of left and right were never more than superficial. This model has been diluted by expansion - the "Europe of the regions" only made historical sense in the West - while the impact of the euro has been to shift the dynamic away from the national core and periphery (with the latter often being net-providers of fiscal transfers to the state - e.g. Lombardy and Catalonia) to the EU core and periphery (with the latter invariably the recipient of transfers).

The popular legitimacy of the EU does not depend on its political construction but on it's economic performance: the promise of rising living standards, secure welfare, and greater opportunity. But while the emblematic benefits of "free movement" have been real (to study, work, holiday and buy property), the era since Maastricht has been marked by widespread wage restraint, youth unemployment, personal debt and the erosion of public services, which casts the EU in an unflattering light compared to the old EEC. The ideology of "Europe" tends to obscure the economic reality through its focus on personal freedom and other Enlightenment values. Even today, liberals remain more comfortable talking in these terms, hence their volubility over the reactionary drift in Poland and Hungary, ironically reviving the familiar West vs East paradigm of the years before 1989, and the transfer of heroic status from dissident poets to cheeky cartoonists.

As with any political "project" (cf Bill Clinton, Tony Blair etc), there is an assumption that the demos must be cajoled into accepting what is good for it. This leads to a barely concealed contempt for actual democracy. Habituation is the core practice of the European project, which explains why you have to think of the EU in much longer timescales than we normally consider in politics, and why the champions of the project consider their work to be running to a schedule that makes local political manoeuvres (referenda, the posturing necessary for re-election etc) irrelevant. Though the origins of the EU are assumed to lie in the postwar reconstruction of the late-1940s and early-1950s, much of the theory of "Europe" originates in earlier reactions to the collapse of the pre-1914 order; reactions that were wary of democracy and inclined to corporatism.
The Austrian school of political economy was a product of the Hapsburg Empire, specifically the perceived failings of the Dual Monarchy to reconcile competing national and social interests through bureaucratic control. For Ludwig von Mises and Friedrich Hayek, free enterprise and free trade before 1914 had demonstrated a way to surmount the problem of nationality. In their view, the interference of the Hapsburg state in the economy, initially in its desire to act as a referee between competing national groups through planning, and later in its tentative steps towards a welfare state, impeded the market's ability to naturally resolve social and ethnic tensions. Despite this antipathy towards the state, Hayek was an early advocate of European federalism and monetary union in the 1930s (he later changed his mind and advocated competing private currencies).

His reasoning was pragmatic. A central government would be less able to adopt interventionist policies because of competing national sensitivities, and would thus revert to a focus on monetary policy (i.e. sound money) rather than fiscal policy. This would avoid the dangers of a "superstate" but would also remove monetary control from national governments that could be swayed by special interests, thus limiting their fiscal latitude in practice. This was a liberal vision that owed as much to the Bank of England's management of Sterling before the Great War as it did to the Hapsburg Empire. For Hayek, the latter failed because it committed to the unachievable goal of reconciling national interests, while the former succeeded because it ignored everything other than price stability (it is worth noting that this is the same remit given to the ECB).
The claim that the EU's problem is "a common currency without fiscal transfers" is an old-style federalist argument. The ordoliberal reality is that transfers are off the agenda but you can expect the further extension of fiscal discipline by the Commission and ECB. What we have today is an EU in which fiscal intervention is achieved through monetary crisis, as in the bailouts of Ireland, Portugal, Cyprus and Greece. Far from limiting the ambitions of the superstate, the euro has become the means by which the hegemony of European capital is advanced without democratic accountability. Just as the abstraction of monetary policy through the Bank of England served the interests of finance capital before 1914, often at the expense of national industrial interests in the UK, so the abstraction of monetary policy through the euro is serving the interests of a capitalist class today, and not just in the core.

This discipline is not a novelty that came in with the euro, and it certainly isn't limited to the policies of the ECB. As Perry Anderson said in The New Old World: "Because it possesses no independent powers of taxation ... There has been a virtually inbuilt drive within the Commission to expand its authority by the alternative route of regulation". The bureaucracy of the EU is a puny thing, measured in terms of its employees or budget, but it is impressive in its reach. It is closer to the civil service of the Roman Empire than that of the Hapsburg Monarchy. Of course this ignores the informal resources it can call on within multinational corporations, national quangos and think tanks, which points to the reality that Brussels is essentially the iceberg-tip of a lobby for supranational business interests. What is perhaps less appreciated is that its approach to regulation is heavily influenced by the US model of politically independent, technocratic bodies focused on market failure and consumer protection, a model that dates from the Progressive era of the early twentieth century.

This model was a conscious attempt to rescue capitalism from the predations of robber barons and to marginalise labour as a political actor. Though it became more interventionist (and thus contentious) in the US during the New Deal and Great Society years, it reverted to a more "purist" style in the 1970s and 80s, partly under the influence of neoliberal thinkers inspired by von Mises and Hayek, for whom the only justification for regulation was to ensure and advance competition. This chimed with the ordoliberal orthodoxy championed by Germany, and also suited the free enterprise evangelists of the UK, particularly when it helped advance privatisation, despite the media fluff about straight bananas. Much of the bureaucratic critique of the EU by the right has been directed at an American institutional style imported via the lobbying of US multinationals.

After the 1990s, functional cooperation declined in importance both because of globalisation, which turned the EU's commercial attention outwards, and expansion, which obliged it to repeat in Eastern Europe many of the structural and integrative reforms it previously went through in the West. Political construction ran out of steam because the original trajectory assumed by federalism's advocates and detractors alike - towards a more powerful Parliament and a rebalancing from the interests of commerce to those of civil society - proved illusory. The euro has revealed the "project" to be about the constraint of supranational democracy, not its furtherance. Meanwhile, the regulatory regime has developed beyond addressing market failures to encompass the creation of markets through privatisation and the incorporation of new areas of profit through expansion.

Since 2008 we have seen the return of class interests to the European political stage. Though this is framed in terms of geography (core versus periphery), demography (old versus young) and migration (native versus immigrant), it is clear that the central issue is the inequality of economic power. What we have witnessed is not just separate but thematically similar protests, such as Occupy and the Indignados, but the emergence of a pan-European political consciousness. This could be seen last year in popular attitudes towards Greece. Whether scolding or supportive, it seemed that most Europeans had an opinion and felt entitled, either because of their taxes or emotional identification, to express it. Similarly, wealth inequality (post-Piketty) and the refugee crisis are treated as EU-wide concerns. The free movement of labour within the EU, from East to West and South to North, is helping create a demos in the same way that movement from the countryside to cities did in the nineteenth century.

Few locate the democratic deficit today in the European Parliament. That has revealed itself to be a fig-leaf, its agenda set by the Commission (it still can't initiate legislation) and its composition fragmented by self-interested regionalists and social conservatives determined to keep it powerless, a situation that has worsened with each phase of expansion. The more important democratic deficit is that the troika of the ECB, the Commission and the Council of Ministers is incapable of representing, let alone reconciling, emerging class interests, which suggests that the EU is far more fragile than it has ever been, so much so that the UK's renegotiation (let alone Brexit) could have unforseen consequences. That the anti-immigrant Pegida, which was founded in Germany, has just launched a UK branch (made up of the usual EDL suspects) is as symptomatic of this as the left-leaning Democracy in Europe Movement launched by Yanis Varoufakis and others. The ultimate irony might be that the euro outlasts the EU as we have come to know it.

No comments:

Post a Comment