Climateer Investing: Streeck: "The EU after Ukraine"

Saturday, June 18, 2022

Streeck: "The EU after Ukraine"

Our boilerplate introduction to the author of this piece Wolfgang Streeck:

Streeck is a German economic sociologist and emeritus director of the Max Planck Institute for the Study of Societies.
If you can plow through some of the econo-political rhetoric in this essay to the core ideas you get the sense he may be on to something.

And from American Affairs Journal, volume VI, No. 2:

War is father of all, and king of all.

—Heraclitus

Assuming that the history of the European Union begins with the European Economic Community (EEC), which was formed in 1958, it has now lasted almost two-thirds of a century. It started out as a six-country alliance jointly administering two key sectors of the postwar economy, coal and steel, making it unnecessary for France to repeat the occupation of the Ruhr Valley, which had contributed to the rise of German revanchism after World War I. In the wake of the industrial strife of the late 1960s, and following the entry of three more countries, the United Kingdom, Ireland, and Denmark, the EEC turned into the European Community (EC). Dedicated to industrial policy and social democratic reform, the EC was to add a “social dimension” to what was on the way to becoming a common market. Later, after the neoliberal revolution and the collapse of Communism, what was now renamed the European Union (EU) became both a container for the newly independent nation-states in the East eager to join the capitalist world, and an engine of neoliberal reform, supply-side economics, and New Labourism in twenty-eight European countries. It also became firmly embedded in the American-dominated unipolar global order after the “end of history.”

The European Union of the past three decades has served as a regional microcosm of what came to be called hyperglobalization.¹ Indeed, it was in a significant way a smaller-sized, continental model for the integrated global capitalism that was the ultimate objective of those subscribing at the time to the Washington Consensus. The EU offered a borderless internal market for goods, services, labor, and capital; rules-based economic governance was upheld by an almighty international court, the European Court of Justice (ECJ); and a common currency, the euro, was managed by an equally almighty central bank, the ECB. The arrangement closely matched the Hayekian idea of an international federation designed to limit discretionary economic policy—an almost perfect approximation of what Hayek called isonomy: identical market-liberal laws in all states included in the system.² This no-more-political economy was ruled by a politically sterilized combination of technocracy—the ECB and the EU’s pseudo-executive, the European Commission—and what might be called nomocracy—the ECJ—under an in practice unchangeable de facto constitution. The latter consisted of two treaties,³ unreadable for the normal citizen, among twenty-eight countries, each of them entitled to veto any change.⁴ Anchoring the whole project within the global financial system dominated by the United States, the treaties provided for unlimited capital mobility, outlawing capital controls of any sort not just within the Union but also across its borders.⁵

That this construction suffered from what came to be euphemistically called a “democratic deficit” did not go unnoticed. Indeed, among insiders in Brussels, the joke is often heard that, with its current constitution, the European Union would never be allowed to join itself. In recent years, efforts were made by the European Commission and, in particular, the so-called European Parliament to fill the democratic gap with a politics of “values” to be enforced by the EU upon its member states. Human rights, according to contemporary Western interpretations, would serve as a substitute for the debates over political economy that had become excluded from the Union’s political system. Above all, this involved educational interventions in the countries of the former Soviet empire to convert governments, parties, and peoples to Western European liberalism, economic but also social, if need be by withholding part of the fiscal handouts that are intended to support these countries’ transformation into bona fide market-economies-plus-capitalist-democracies. Increasingly top-down educational programs of this sort, the mandate for which was derived from ever-more extensive and indeed intrusive interpretations of the declaratory sections of the EU treaties, culminated in a crusade against so-called anti-Europeans, identified by social scientists and political spin doctors as “populists.”⁶

With time, the de facto centralization and depoliticization of the Union’s political economy has inserted a hierarchical center-periphery dimension into the Union. The “rule of law” instituted as the rule of an all-powerful court; the formally rule-based but in practice increasingly discretionary economic policy of the politically independent European Central Bank; and the sanction-supported reeducation in European “values” have led the EU to increasingly resemble a liberal empire, in both an economic and cultural sense, the latter as legitimation for the former.

Before Ukraine:
Critical Fault Lines, Foreseeable Failure

Empires are at a congenital risk of overextension, in territorial, economic, political, cultural, and other respects. The larger they get, the more it costs to keep them together, as centrifugal forces grow and the center needs to mobilize ever more resources to contain them. After the global financial crisis of 2008 and its spread to Europe after 2009, the EU and EMU began to fracture along several dimensions, their economic, ideological, and coercive capacities for integration becoming increasingly overtaxed. On the EU’s western flank, Brexit was the first case of a member state leaving a Union that ideologically considers itself permanent. There were many factors involved that contributed to the outcome of the Brexit referendum, which have been widely debated for almost a decade now. One major reason (less spectacular but certainly more fundamental than many others) why British membership proved unsustainable was a profound incompatibility of the British de facto constitution, and its parliamentary absolutism, with Brussels-style rule by judges and technocrats. Another reason, of course, was the inability and indeed unwillingness of Brussels to do something about the long-term neglect by British governments of the disintegration of the country’s social fabric.

Turning to the south, entrenched national ways of doing capitalism proved incompatible with the prescriptions of the EMU and the Internal Market, leading Italy in particular down a path of prolonged and by all indications irreversible economic decline. Attempts at reversing the trend either through “structural reforms,” according to neoliberal prescriptions, or via the ECB and the European Commission bending the anti-interventionist rules governing Monetary Union, silently tolerated by the French and German governments, failed dismally. By now it has become clear that even the European Union’s Corona Recovery and Resilience Facility (RRF), and the subsidies it will provide to Italy, will not halt Italian decline either.⁷ Among other things, the Italian case shows that an effective regional policy aiming at economic convergence is even less feasible among, as compared to within, nation-states.

Furthermore, on the Union’s eastern periphery, countries carry a historical legacy of cultural traditionalism, political authoritarianism, and nationalist resistance against international intervention in their internal life, the latter reinforced by their experience under the Soviet empire. Efforts to impose western European mores and tastes on these societies, especially when accompanied by threats of economic sanctions (as in the case of the Union’s so-called “rule of law” policies), caused “populist” opposition and resentment against what was perceived by many as an attempt to deprive them of their newly recovered national sovereignty.⁸ Conflicts in the European Council over cultural issues went as far as western heads of governments more or less explicitly urging their eastern colleagues, in particular those from Hungary and Poland, to exit from the Union if they were unwilling to share its “values.”⁹ Combined with the threat of economic sanctions, this in effect amounted to nothing less than an attempt to bring about a regime change in fellow member states....