ABSTRACT
The financial crisis reaped its academic casualties. Asking why economists had not seen it coming, Queen Elizabeth surprisingly became emblematic for those finding their assumptions wanting (e.g., Boyer [2012: 292-6]). As the financial crisis morphed into the euro area (EA) crisis, reasons also arose to question European integration scholarship. A survey of the Journal of Common Market Studies found that of the 732 articles published between the inception of the Single European Market (SEM) and mid-2009, only five had anything relevant to say about the factors that had generated the crisis (Ryner 2012: 649). Yet, the dominant response to the anomalies that the EA crisis poses for Euro-
pean integration scholarship has been minimalist and complacent. First, the supposed prudence induced by Economic and Monetary Union (EMU) was compared favourably with American profligacy, leading to off-the-mark musings about a European ‘decoupling’ from the American economy (International Monetary Find [IMF] 2007). The collapse of Lehman Brothers, revealing exposure of European finance to toxic assets with crucial counterpart
ANALYSING THE EA CRISIS: TRADITIONAL SCHOLARSHIP AND CRITICAL POLITICAL ECONOMY
European integration scholarship was successful primarily because instrumental purposes served in addressing questions about rendering the transatlantic alliance organic on a pluralist template (Milward and Sørensen 1993). But this ‘structure of thinking’ was not appropriate for addressing the financial and EA crisis because of idealizations eliding the mechanisms that generated the crisis (Ryner 2012: 655). Most European integration scholarship rests on two common paradigmatic
assumptions inherited from foundational works that shape terms of debate a priori (Ryner 2012: 653-5). The disciplinary split results in an obstinately conventional division of labour between ‘economics’, ‘sociology’ and ‘politics’ of integration. Concerned with the allocation of scarce resources, economics of integration abstracts its sphere of analysis from social power relations. Analysing social relations becomes the remit of the sociology of integration, but conceiving these in terms of the ‘density’ of social interaction and postulating a positive functional relation between such density and rational order, also here power is ignored. Delegated to the concern of political scientists, power is seen as residing in the ‘political system’ without concern sources in the social and economic ‘environment’. With the integration telos, all of the aforementioned assume that integration expresses rational potentials inherent in human nature. Debates between ‘optimists’, ‘pessimists’ and ‘middle positions’, originating with Hoffman’s (1966) critique of Haas (1968), concern the prospects of realizing these potentials in the face of power-laden and arbitrary constraints that the weight of Europe’s statist history poses. Horkheimer (1937[2002]: 198) sees such assumptions as symptomatic of traditional social science when it itself becomes an input in the politico-economic system but nevertheless attempts to shroud itself in a general-scientific aura. It does so by universalizing its particular instrumentality through idealization. By doing so, however, it creates blind-spots. By contrast, critical theory seeks holistic analysis of the co-constitution of
economic, political and cultural forms in the stratified, complex, contradictory and historically specific capitalist mode of production. This is a complex enterprise with emancipatory intent, seeking to reveal ‘coercive illusions’ that appear objective whilst being socially constructed and preventing humans from becoming what they could become (Connerton 1976: 18). It is impossible to do full justice to this enterprise here, where not the least the Frankfurt School is divided over the very possibility of emancipatory reason in modern society. The focus is on a subset of this enterprise, concerning how we can understand the EA in terms of ‘regulatory effects’ (Horkheimer 1937[2002]: 225), which provisionally secure capitalist order in certain epochs but within definite limits. Economic analysis of the EA has followed Balassa’s (1962) foundational work
resting on Ricardian trade theory, which has ruled out considerations of mechanisms generating the crisis a priori. High-level export reports from the Cecchini
liabilities within the European Union (EU) itself, dispelled any illusions on that score. Then the effect of the financial crisis on the EU was acknowledged, but the institutions agreed at Maastricht were held to be fit for purpose (e.g., PisaniFerry and Posen [2009: v]). This became untenable when the price of credit default swaps and bond-yield spreads rapidly increased first in Greece in late 2009, and then in Portugal, Ireland, Italy and Spain. The symptom of rapidly increasing public deficits was henceforth treated as cause, facilitating macroeconomic ex post rationalization and justification for fiscal and structural conditionality to the European Stability Mechanism (ESM), and the European Central Bank’s (ECB’s) Long Term Refinancing Operations (LTRO) and, above all, the Outright Monetary Transactions (OMT), which were necessary for saving the euro and which then could be construed as indicating successful European governance and even spillover. This contribution argues that accommodating the anomalies in question
ought to motivate a more radical theoretical recasting. Drawing on Horkheimer’s (1937[2002]) famous distinction, the analysis of critical political economy of the emergent properties of the EA crisis and its management is compared favourably to that of traditional integration scholarship. But also critical political economy must be judged as a progressive research programme. Dispelling charges of tendentiousness, much excellent critical, yet highly formal and quantitative analysis has been done in recent years on European capital accumulation. As argued in the first section, some such works can even claim to have predicted the coming crisis. However, there is a tendency in such works to view the crisis and its management with reference to policy mistakes. Compelling findings about macroeconomic proportions, tensions and risks entailed in crisis management, and policy alternatives are offered. But resilience of current crisis-management is underestimated, the endurance of the euro remains unexplained, and difficult questions about agency required to advance alternatives are elided. By contrast, in the second section, this article contributes to works that see crisis management as a form of rule that may endure for some time. The particular contribution here is to steer clear of two oversimplifying ten-
dencies in critical political economy to either reduce rule to that of a transnational capitalist class or German dominance. An account is offered that integrates an inter-state understanding of how German EA leadership works as a common but variegated European response to predatory post-Bretton Woods American hegemony over finance-led transnational capitalism. This configuration, though far from optimal for Europe, is not easily changed. Invoking Parsons’s translation of Weber’s Stahlhartes Geha¨use to denote a deeply troubled situation from which it is impossible to escape, despite the disenchanted realization that the Celestial City will never be reached (Baehr 2001), I suggest that the paradox of a monetary union that endures despite its contradictions, social costs and conflicts can be seen as an ordoliberal iron cage.
