The European Project: Dismantling Social Democracy, Globalising Neoliberalism

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The European Project: Dismantling Social Democracy, Globalising Neoliberalism
Andy Storey (Centre for Development Studies, UCD,
Paper for presentation at the conference ‘Is Ireland a Democracy?’, Sociology Department, National University of Ireland Maynooth, 2nd/3rd April 2004.
Pierre Defraigne, Deputy Director General for Trade at the European Commission, professes himself puzzled by Europeans’ attitudes towards the phenomenon of globalisation:
“Today, Europeans are ambivalent as regards globalisation. How is it that a people that ‘discovered the world’ at the time of the Renaissance and, for two or three centuries, colonised four continents, can fail to see the many benefits that the conquest of new markets and the emergence of new producers present for their own well-being?” (Defraigne, 2002).
While Defraigne is baffled by the inability of Europeans to correctly perceive where their own best interests lie vis-a-vis globalisation, other commentators are exasperated at the inability of some to recognise what it is that Europe can and does contribute to the world. According to Senator Martin Mansergh (2003), the EU is not a “a neo-liberal militarised superstate” in the making, but rather “a force for peace, development and social and environmental progress”.
There are two important arguments at work here: first, globalisation is good for Europe (Defraigne); second, Europe is good for the world (Mansergh). But do the best interests of Europeans truly lie in the more thoroughgoing embrace of globalisation, as currently constituted? Is the EU, as Senator Mansergh claims, a force for good in the world? More broadly, what is the relationship between the regional project that is the European Union (EU) and wider issues of globalisation and global governance? And how should those concerned with issues of social justice – both within Europe and globally – respond to the current pattern of European interaction with globalisation? These are the questions that this paper addresses.
Defining terms
This paper adopts a fairly conventional definition of globalisation as the tendency towards international economic integration across national territorial borders. This can take the form of increased trade, investment and/or capital flows. This, of course, focuses only on the economic dimensions of globalisation, but it is an adequate definition for the purposes of the present discussion. ‘Globalism’ may be defined as a policy or set of policies – how states and other governmental actors respond to, and seek (or do not seek) to govern, processes of economic integration. By the same token, regionalisation refers to the regional integration of markets, and

regionalism to the way in which states (and other governmental actors) govern (or choose not to govern) market forces within a given region.

Nesadurai (2002) helpfully distinguishes between two models of regionalism in relation to globalisation: ‘open’ and ‘resistance’ (though she does not claim that these two options exhaust the range of possible regional governance models, and, in practice, any country is likely to exhibit aspects of both ‘openness’ and ‘resistance’). Open regionalism establishes regional governance arrangements that serve to facilitate globalisation, whereas resistance regionalism seeks, in one way or another, to govern a region so as to restrain or limit aspects of globalisation and to favour regional interests over those from outside the region. An example of the latter – though it might also be termed ‘developmental’ regionalism in this case (Nesadurai, 2002: 26) – is the Association of South East Nations (ASEAN) Free Trade Area (AFTA) project, which contained a stipulation (put in place in 1998) that foreign investors would only receive full market access and other privileges 10 years after ASEAN investors (Nesadurai, 2002: 31).1
It is fairly clear that the current structures of global governance (globalism) are, broadly speaking, promotive, rather than restraining, of globalisation: “Neoliberal ideas associated with globalisation have been increasingly institutionalised through a multilateral rule-based framework that has substantial authority over national governments, especially through the WTO” (Nesadurai, 2002: 9). Do most current examples of regionalism essentially go along with these tendencies at the global level, or are there emergent resistance regionalisms constituting alternatives to globalisation and globalism? In particular, what is the relationship between, on the one hand, the dominant form of European regionalism (the EU, or the European project) and, on the other, globalisation and globalism?

Visions of European regionalism

Anthony McGrew, a leading commentator on globalisation, identifies a choice “between a European project which articulates a political alternative to neo-liberal globalization – the building block of a more humane world order – or a project which broadly embraces and reinforces it” (McGrew, 2003: 344). McGrew is here recasting, in normative as well as descriptive terms, the distinction between open and resistance regionalism (or, at least, variants thereof) drawn by Nesadurai (see above).

McGrew goes on to argue that, in practice, European élites have determinedly opted for an open regionalism within Europe that has served to foster the extension and institutionalisation of globalisation. For McGrew, the European project is not an alternative to globalisation – rather, globalisation is embedded within the European project itself:

“For the most part, Europe is not so much a barrier as a key building-block of the liberal global economic order. In this respect, for European states – East or West – regionalism in its present form does not necessarily present, if it ever did, a meaningful political alternative to liberal globalization... The European project for all the political rhetoric appears to many of its citizens today simply an extension of the global economic project” (McGrew, 2003: 348, 353).
As we will see, there are good reasons why European citizens might see the European project in these terms. But for some, McGrew’s argument comes close to heresy: after all, as former French prime minister Lionel Jospin has argued, “Europe is much more than a market. It stands for a model of society” (cited in McGrew, 2003: 357).
Jospin’s view is not confined to top European politicians. A recent article (first published in the German newspaper Frankfurter Allgemeine Zeitung) by two of Europe’s leading philosophers – Jurgen Habermas of Germany and Jacques Derrida of France – makes similar claims. According to Habermas and Derrida (2003: 291), 15th February 2003, the date of the huge marches against war with Iraq, represented the “birth of a European public sphere”, evident on the streets of “London and Rome, Madrid and Barcelona, Berlin and Paris”. Interestingly, the enormous marches which also took place that day in the United States and elsewhere in the world against the war are not referred to by the philosophers and thus the claimed public sphere remains exclusively European, establishing Europe alone as the locus of an alternative to the “hegemonic unilateralism” of the US (Habermas and Derrida, 2003: 293).
The nature of that European alternative, in the view of Habermas and Derrida, is encapsulated in two distinctively European models. The first is a model of post-national governance, a means of reconciling national identity with a wider (in this case regional) identity which supersedes national allegiances and dilutes national rivalries. The EU, it is argued, provides a unique model for how people can live together simultaneously within and beyond nations, thus removing a perennial source of conflict between peoples.
The second claimed dimension of the European alternative is a peculiarly European model of social protection:
“Europeans have a relatively large amount of trust in the organisational and steering capacities of the state, while remaining sceptical towards the achievements of markets... They maintain a preference for the welfare state’s guarantees of social security and for regulations on the basis of solidarity” (Habermas and Derrida, 2003: 295).2
For Habermas and Derrida, while this ‘social model’ is distinctively European, Europeans can seek to transfer it to the global arena and imbue globalisation and globalism with the idea of social solidarity currently exclusive to Europe alone. Thus, in summary, because of their distinctive perspectives on, and practices of, citizenship and social solidarity, Europeans can make the world a more civilised and safer place if they have the confidence and capacity to export their ideas and models to the rest of the world.
A somewhat similar view is expressed by economist S. Mansoob Murshed, who has also called explicitly for the globalisation of the European social model:
“Europe can play a leading role in bringing about reform and can offer a viable alternative policy to unfettered globalisation.... This is because of Europe’s experience in extending social protection within its own internal borders, its history of successful broad-based post-conflict reconstruction and its relatively more generous record in development assistance” (Murshed, 2003: 1520).
Like Habermas and Derrida, Murshed is pitching his vision of Europe in direct and overt opposition to the US approach (which is seen as the driving force behind “unfettered globalisation”).

The historical trajectory of European regionalism

Leaving aside for now obvious questions of how exclusively European are the citizenship and social models discussed above, to what extent does European regionalism in the form of the EU currently promote these models? We may conclude with little argument that it does promote a certain version of post-national citizenship (though increasingly restrictive asylum and immigration policies render that rather less inclusive than its adherents might claim – Beatty, 2004). However, does it promote the social model? In the view of some observers, including Anthony McGrew (see above), it most certainly does not.

Van Appeldoorn (2001) provides some useful historical perspective on these questions. He identifies three different visions of European order: neoliberalism; neo-mercantilism; and social democracy. The neo-mercantilist vision, it is argued, underpinned the initial drive towards the creation of the European single market and Economic and Monetary Union (EMU). For neo-mercantilists, a European competitiveness gap vis-a-vis the rest of the world was attributed to fragmented markets, a related inability to fully exploit economies of scale in production, and insufficient investment in research and technology. (For neoliberals, the problems were – and still are – more likely to be attributed to factors such as inflexible labour markets, and unsustainable and work-discouraging welfare states).
As van Appeldoorn documents, the neo-mercantilist project was closer to a ‘resistance’ than ‘open’ model of regionalism (see above):
“A strong European home market was expected to serve as both a stepping-stone to conquer the world market as well as a protective shield against outside competition. The neo-mercantilist project thus constituted a defensive regionalisation [more precisely, regionalism] strategy oriented towards the creation of a strong regional economy, not only through the completion of the Internal Market, but also through an industrial policy aimed at the promotion of ‘European champions’, if necessary protected by European tariff walls” (van Apeldoorn, 2001: 75).
Under the protective banner of the neo-mercantilist framework, social democrats envisaged “a united Europe [as offering] an opportunity to protect the ‘European model of society’, and its traditions of the mixed economy and high levels of social protection, against the potentially destructive forces of globalisation and neo-liberalism” (van Apeldoorn, 2001: 76). Thus, a confluence of interests between neo-mercantilists and social democrats underpinned the construction of what seemed to many a genuinely alternative model of regionalism.
But the vision was not realised: “as the internal barriers came down, no external barriers were erected and the Internal Market provided as much opportunity for US and Japanese as for European firms” (van Apeldoorn, 2001: 79). The idea of developing and supporting ‘European champions’ was abandoned. Tariff barriers and interventionist industrial policies were eroded rather than deployed.
Lobbying from corporate groups played a vital role in this outcome, especially the influential European Roundtable of Industrialists (ERT), which, from the 1980s onwards, decisively shifted towards, and lobbied for, a neoliberal version of the single market. Kol and Winters (2003: 345) note, approvingly, that “The ERT was the main driving force to urge the European Commission to create the Single Market, and saw to it that it did not result in a fortress Europe”. Van Appeldoorn attributes this shift and subsequent lobbying pressure to the phenomenon of globalisation itself: the interests of the leading European companies came to lie, for the most part, in the extension of open markets globally, and many of these companies had or developed interests (investments, strategic alliances, and others) in the US and elsewhere as well as in Europe. Globalised or globalising companies such as Shell, Unilever, ICI, BP, La Roche, BT and Bayer joined or rejoined the ERT from 1988 onwards, whilst longer-standing members saw their interests go more global than merely regional (van Apeldoorn, 2001: 80).
European capital, in other words, became increasingly globalised and relatively disinterested in ideas such as ‘European champions’ (Gill, 2001: 49). This did not mean that sections of European capital would not continue to welcome and pursue state support wherever possible, as the example of European agribusinesss defending the Common Agricultural Policy demonstrates. But most European capital came to perceive its interests as lying, broadly speaking, in the embrace of neoliberal globalisation. And European regionalism, with some exceptions and hesitations, followed the lead of capital (Holman, 2001: 171; van der Pijl, 2001), as even ‘left-wing’ European political parties increasingly embraced neoliberal policies (Esman, 2003).
Institutionalised neoliberalism in the EU
Instead of a neo-mercantilist and/or social democratic project, EU integration ended up institutionalising what Stephen Gill (2001) has dubbed ‘disciplinary neoliberalism’. Neoliberal policies are locked, politically, into the structure of the EU. Examples of such policies include:

  • An activist competition policy at EU level, which can act against exclusive state provision of certain goods and services. For example, the US parcel service company UPS used the Commission to break the German post office (Deutsche Post) monopoly over the German parcel market (Wickham, undated: 15). In the words of former Competition Commissioner Leon Brittan the objective of competition policy has been “to help European capitalism become more healthy, vibrant and competitive and prevent its decline into the cosy corporatism that so much of the European left used to espouse” (cited in Allen, 2003: 64). At the same time, the fact that competition policy is decided upon on a case-by-case basis means that more powerful corporate actors have better chances of getting favourable rulings (Carchedi, 2001: 127).

  • As a subset of competition policy, the EU limits state aid to private businesses, especially where such aids distort the ‘level playing field’ of competition. For example, German public banks, whose investments are guaranteed by the state, have been deemed to be in receipt of illegal state subsidies and, as a result, government policy towards the sector has to be altered by 2005 (Döring, 2003). In similar vein, Électricité de France, the state power company, has been ordered by the Commission to repay €1 billion in subsidies received from the French state, and the French government ordered to terminate its credit guarantees to the company (Irish Times, 15th December 2003). A dramatic and more recent example is the EU ruling that a Belgian regional government’s support to Charleroi airport constituted illegal state aid (in this case, to the main Charleroi user, Ryanair). The ability of publicly owned airports (or other enterprises) to compete with privately owned ones is, as a spokesperson for Ryanair has pointed out, severely damaged by the ruling (Fitzsimmons, 2004). Accession states are also subject to pressure in this regard as a Commission investigation of Polish state aid to its energy sector attests (Frydrych, 2004).

  • Monetary policy is administered by an ‘independent’ (from electoral pressure) European Central Bank (ECB) with an anti-inflationary mandate but with little or no concern for issues of growth and employment (Irvin, 2004; Stiglitz, 2003). The statutes of the ECB state that “The primary objective… shall be to maintain price stability” ( and ECB president Trichet has emphasised “the overriding goal of monetary policy should be the maintenance of price stability” (cited in Keegan, 2004). Bonefeld (2002: 133) notes that “the removal... of the Central Bank from political influence.. [accords] it a quasi-judicial status independent from the established liberal-democratic systems, expelling the ‘mob’ from the seat of government”, though, of course, this expulsion had already often occurred at national state level prior to the foundation of the ECB (see later sections of this paper).

  • Fiscal monitoring by the EU Commission through the Stability and Growth Pact (SGP) seeks to limit (to 3 per cent of GDP) states’ capacities to run fiscal deficits even when these might appear justified by the need to lift an economy out of recession (Irvin, 2004). Tensions surrounding the SGP are now obvious given the failure of France and Germany to abide by its rules and this subject is returned to in the conclusion to this paper.

  • The negotiation of international agreements by EU authorities, such as through the World Trade Organisation (WTO), binds European countries into the global liberalisation of trade in goods and services (again, this is discussed further below).

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