Europe Forged in Crisis: The Emergence and Development of the EU

Federico De Cicco, 2014.
Fed­erico De Cicco, 2014.

“Europe will be forged in crises, and will be the sum of the solu­tions adopted for those crises.” - Jean Mon­net

These are tur­bu­lent but con­fus­ing times in Europe. The Great Reces­sion has taken a seri­ous toll. In Por­tu­gal, Italy, Ire­land, Greece, and Spain (the PIIGS), inter­ven­tion by the EU in domes­tic pol­icy seems unprece­dented. Por­tu­gal, Ire­land, and Greece were forced by finan­cial mar­kets into bailout agree­ments with the “Troika.”1 In Italy, under the watch­ful eyes of Europe, the unelected tech­no­cratic gov­ern­ment of Mario Monti replaced the elected gov­ern­ment of Sil­vio Berlus­coni – and not a sin­gle mem­ber of this new tech­no­cratic gov­ern­ment was elected. Spain nego­ti­ated with the Troika, but was saved by changes in the finan­cial mar­kets.

The EU’s inter­ven­tion has not been restricted to the so-called Euro­pean periph­ery. In the Nether­lands, the gov­ern­ment fell in 2012 under pres­sure from the Euro­pean Com­mis­sion to imple­ment major spend­ing cuts. The sub­se­quent gov­ern­ment did as it was told. In France, in the sum­mer of 2014, the Prime Min­is­ter pre­sented the res­ig­na­tion of the entire gov­ern­ment to the pres­i­dent, in protest over the imple­men­ta­tion of the aus­ter­ity pro­gramme demanded by the EU.

The polit­i­cal reac­tion has been fierce, with demon­stra­tions, riots, and occu­pa­tions a fre­quent occur­rence across Europe. There has also been an elec­toral back­lash. In the UK, France, and Den­mark, the far right topped the polls in the 2014 Euro­pean Par­lia­ment elec­tions, while in Italy, the Five Star Move­ment led by the clown­ish Beppe Grillo came sec­ond. Across Europe few gov­ern­ments now last more than one term. Jean Claude Junker, then Luxembourg’s Prime Min­is­ter and now the incom­ing Pres­i­dent of the Euro­pean Com­mis­sion, lamented: “We all know what to do, but we don’t know how to get re-elected once we have done it.” But the story can be told equally well in reverse: we all oppose what you’re doing, but even when we elect some­one dif­fer­ent it keeps being done.

This phe­nom­e­non whereby poli­cies are decided by Europe, imple­mented nation­ally, and con­tested help­lessly is not as new as it may seem. We need only think of the Juppe plan in France in 1994, which led to France’s largest strike wave since 1968. This was just an early exam­ple of a gov­ern­ment imple­ment­ing hated poli­cies in order to meet an EU tar­get. What is new is that with the cur­rent cri­sis, this is not hap­pen­ing in one or two coun­tries but across the EU simul­ta­ne­ously.

Although the EU is not new, and its role in deter­min­ing the eco­nomic and polit­i­cal devel­op­ment of Europe is both sub­stan­tial and well estab­lished, crit­i­cal analy­sis of the EU is sorely lack­ing. Most of what is writ­ten on the EU is uncrit­i­cally lib­eral and focuses on diplo­matic and leg­isla­tive detail.2 What lit­tle crit­i­cal lit­er­a­ture exists often sim­ply inter­prets the EU in terms of the func­tion it plays for neolib­eral glob­al­iza­tion. At one extreme, it is por­trayed as a transna­tional cap­i­tal­ist con­spir­acy, while at the other extreme the cri­tique is lim­ited to iden­ti­fy­ing the wrong poli­cies: too much lib­er­al­iza­tion, pri­va­ti­za­tion, etc.3 When analy­ses of the EU go from what it does to the larger ques­tions of what it is and why it exists, analy­sis often becomes com­pletely un-rooted. We see non­sense claims about the idea of a united Europe across time, some­times extend­ing to hagio­graphic accounts about the found­ing fathers of Europe.4 At times it is truly absurd: Europe is a bas­tion of social demo­c­ra­tic anti-impe­ri­al­ist cap­i­tal­ism in dis­tinc­tion to the USA.5 Other times more intrigu­ing claims are made, such as the argu­ment that the EU is a neo-medieval state like the Holy Roman Empire!6

Curi­ously the ques­tion of whether the EU is a state or not and, if so, what kind of state is it, rarely con­nects the devel­op­ment of the EU polity with what has been at its core: eco­nomic inte­gra­tion. The state is treated as though its exis­tence and form can and should be under­stood sep­a­rately to the ques­tion of the eco­nomic repro­duc­tion of soci­ety.

Instead, I will try to address the emer­gence and devel­op­ment of the EU as a new polit­i­cal form by focus­ing on the under­ly­ing process of eco­nomic inte­gra­tion: why was eco­nomic inte­gra­tion needed and why did its estab­lish­ment involve the cre­ation of the EU? Pur­su­ing this ques­tion will allow us bet­ter under­stand what the EU is in rela­tion to the state, how it devel­oped, and what it does.

Euro­pean inte­gra­tion should not be under­stood as a steady and con­tin­u­ous pro­gress towards “ever closer union.” Rather, we need to under­stand the devel­op­ment of the EU as an iter­ated process of deal­ing with crises of cap­i­tal­ist repro­duc­tion that arise from work­ing class power and the threat of work­ing class auton­omy. This iter­ated process can be seen then as hav­ing two waves, the first one emerg­ing in the late ’40s and ’50s, the sec­ond emerg­ing in the late ’80s and early ’90s, and con­tin­u­ing to develop ever since.7

I: Economic Regulation and State Form

In order to root my analy­sis of the rela­tion between the form of polit­i­cal insti­tu­tions (the EU and the national state) and the econ­omy, I want to begin this arti­cle with a brief the­o­ret­i­cal con­sid­er­a­tion of this issue. I would like to step back from Europe and dis­cuss the nature of the state and its rela­tion to eco­nomic reg­u­la­tion over a much longer time frame. I draw sub­stan­tially here on both, what Benno Teschke has called the “the­ory of social prop­erty rela­tions”8 and on the state deriva­tion debate in the 1960s and 70s.9

The ques­tion always fac­ing mate­ri­al­ist social analy­sis is: “how does a soci­ety repro­duce itself?” The answer to this ques­tion dif­fers across his­tory, but in every soci­ety cen­tral to the ques­tion of how a soci­ety repro­duces itself is the ques­tion of the extrac­tion of sur­plus labor.10

In pre-cap­i­tal­ist forms of soci­ety the extrac­tion of social sur­plus occurs pri­mar­ily under threat of direct vio­lence.11 For exam­ple, a peas­ant worked a corvée for their lord because that lord could directly threaten vio­lence on the peas­ant. Impor­tantly, here both eco­nomic power (the power to buy, sell and exploit) and polit­i­cal power (the con­trol of vio­lence) are united in the one per­son, the lord, whereas under con­tem­po­rary lib­eral cap­i­tal­ist soci­ety these pow­ers are sep­a­rated. With the sep­a­ra­tion of eco­nomic and polit­i­cal power, the exploit­ing sub­ject that extracts sur­plus labor no longer directly or per­son­ally holds the threat of vio­lence. Under cap­i­tal­ism, this exploit­ing sub­ject, i.e. the cap­i­tal­ist, is the sub­ject of a logic of accu­mu­la­tion through exploita­tion inde­pen­dent of the use of vio­lence, but which requires a form of vio­lence equally inde­pen­dent from the process of exploita­tion. This mutual require­ment of inde­pen­dence is sym­bi­otic. Nei­ther the eco­nomic nor the polit­i­cal can exist or be under­stood inde­pen­dently of the other, despite their nec­es­sary mutual inde­pen­dence.

This inde­pen­dent process of exploita­tion occurs through a seem­ingly non-vio­lent form of legal con­tract­ing. This free con­tract­ing involves the cap­i­tal­ist pay­ing the worker the value of their labor-power, which is less than the value of the goods they pro­duce. How­ever, despite the appar­ent polit­i­cal neu­tral­ity of this con­tract, work­ers engage in it is because they lack inde­pen­dent access to the means of pro­duc­tion. There­fore, they are inca­pable of sat­is­fy­ing their own needs and desires except by sell­ing their labor-power to an employer. This of course raises the ques­tion: “why do work­ers not have access to the means of pro­duc­tion?” The well-rehearsed answer is that the means of pro­duc­tion are the pri­vate prop­erty of the cap­i­tal­ist, and this pri­vate prop­erty is pub­licly enforced through the pub­lic power of state vio­lence. This returns us to the bifur­ca­tion of social power into pri­vate, eco­nomic power to con­tract and pub­lic, polit­i­cal power to enforce con­tracts. The eco­nomic power to buy, sell and, most impor­tantly, to exploit, and the polit­i­cal power to enforce, are sep­a­rated under cap­i­tal­ism. Through the sep­a­ra­tion of the polit­i­cal power of enforce­ment, eco­nomic power takes on a nat­u­ral sem­blance devoid of force. The vio­lence that is involved in ensur­ing the oper­a­tion of cap­i­tal­ist processes of exploita­tion is sep­a­rated into the sphere of the state.

The fun­da­men­tal char­ac­ter­is­tic of this sep­a­rate polit­i­cal sphere of the state is its con­trol of vio­lence. But what this vio­lence is there for is to ensure the oper­a­tion of cap­i­tal­ism. It is to ensure that seem­ingly neu­tral prop­erty rights exist. These prop­erty rights are ensured through the cre­ation of laws and reg­u­la­tions regard­ing the oper­a­tion of these prop­erty rights and through the use of vio­lence to main­tain the oper­a­tion of these laws and reg­u­la­tions. How­ever, as this polit­i­cal sphere is where laws and reg­u­la­tions are decided, they are also where these prop­erty rela­tions can be con­tested and fea­si­bly changed.12 The state is there­fore simul­ta­ne­ously the insti­tu­tion through which the legal frame­work of cap­i­tal­ist repro­duc­tion is put in place, the vio­lent orga­ni­za­tion that enforces that frame­work, and the insti­tu­tion through which antag­o­nism to cap­i­tal­ist repro­duc­tion can be medi­ated. The state medi­ates class antag­o­nism by being the insti­tu­tion that imple­ments the legal frame­work through which class rela­tions are main­tained. To reit­er­ate, we can point to three aspects of the state, firstly, a legal frame­work for exploita­tion to occur, sec­ondly, a medium for the medi­a­tion of class antag­o­nism, and finally, a means through which these prop­erty rela­tions are vio­lently imposed and main­tained.

This frame­work will help us under­stand the chang­ing nature of the state in the twen­ti­eth cen­tury, with the increas­ing incor­po­ra­tion and medi­a­tion of class con­flict within the state. And it will help frame the fun­da­men­tal argu­ment of this arti­cle: that the devel­op­ment of the EU needs to be under­stood as a bifur­ca­tion of the state, where the reg­u­la­tion of cap­i­tal­ist repro­duc­tion takes place at a Euro­pean level, while the medi­a­tion of class antag­o­nism and the enforce­ment of these reg­u­la­tions remains at a national level.

II: The creation of the EEC (1914-1957)

The Crisis of the Interwar Period

By 1945 Europe had expe­ri­enced over 30 years of chaos. Begin­ning in 1914, the con­ti­nent had seen over 10 years of war, and 70 mil­lion deaths. The 21 inter­war years were marked by per­ma­nent volatil­ity, with extreme eco­nomic and polit­i­cal crises. It was from this chaos, and more specif­i­cally the cri­sis of the post­war years, that Euro­pean inte­gra­tion was born.

World War I marked the end of the long period of peace, lib­er­al­ism, free trade, and unprece­dented eco­nomic growth that defined 19th cen­tury Europe. There were there­fore repeated attempts after the war to return to the 19th cen­tury order. But they all failed, and the econ­omy slumped. Growth of GDP per cap­ita in West­ern Europe between 1913-1950 was 0.8% per annum, lower than any period between 1820 and 2000.

Table 1: Growth of real GDP per cap­ita, 1820-2000 (Aver­age annual com­pound growth rate)

1820-1870 1870-1913 1913-1950 1950-1973 1973-2000
Aus­tria 0,7 1,5 0,2 4,9 2,2
Bel­gium 1,4 1,0 0,7 3,5 2,0
Den­mark 0,9 1,6 1,6 3,1 1,9
Fin­land 0,8 1,4 1,9 4,3 2,2
France 0,8 1,5 1,1 4,0 1,7
Ger­many 1,1 1,6 0,3 5,0 1,6
Italy 0,6 1,3 0,8 5,0 2,1
Nether­lands 1,1 0,9 1,1 3,4 1,9
Nor­way 0,5 1,3 2,1 3,2 2,9
Swe­den 0,7 1,5 2,1 3,1 1,5
Switzer­land NA 1,5 2,1 3,1 0,7
UK 1,2 1,0 0,8 2,5 1,9
Regional Aver­age 1,0 1,3 0,8 4,0 1,8

Source: Barry Eichen­green, The Euro­pean econ­omy since 1945, 17.

In addi­tion to eco­nomic fail­ure, the period was one of extreme polit­i­cal volatil­ity. Imme­di­ately after the war there was the rev­o­lu­tion­ary wave, which in many ways con­tin­ues to define the ideational iden­tity of the rad­i­cal left. This wave coin­cided with the expan­sion of suf­frage, the rise of mass par­ties and mass unions, increased democ­ra­ti­za­tion of the state, and the politi­ciza­tion of the econ­omy. In Rus­sia this rev­o­lu­tion­ary move­ment took state power, while in Italy, Spain, Ger­many, Aus­tria, Greece, and Por­tu­gal the fas­cist coun­ter­rev­o­lu­tion took state power. In other coun­tries the high lev­els of class con­flict lead to the cre­ation of some form of demo­c­ra­tic cor­po­ratism: the Basic Agree­ment in Nor­way (1935), the Peace Agree­ment in Switzer­land (1937), and the Basic Agree­ment in Swe­den (1938).

As World War II approached it was widely expected that the cri­sis of the inter­war years would con­tinue unless there was some final res­o­lu­tion. For the Axis pow­ers this solu­tion was the vic­tory of the Third Reich. But oth­ers had dif­fer­ent hopes. On the Left, many believed that World War II would end with a rev­o­lu­tion­ary wave greater than that at the end of World War I. Leon Trot­sky founded the Fourth Inter­na­tional with the explicit aim of act­ing act as the “head of the rev­o­lu­tion­ary tide” which would inevitably fol­low the war.13 For lead­ers of the allied nations, it was equally clear that post­war recon­struc­tion could not fol­low the same path as after World War I.

In August 1941, Win­ston Churchill sailed to New­found­land to meet with Pres­i­dent Roo­sevelt to agree on the “Atlantic Char­ter,” an eight-point plan for post­war recon­struc­tion. At the cen­ter of this plan was a clear com­mit­ment to lower trade bar­ri­ers and to the rather social demo­c­ra­tic goal of bring­ing “about the fullest col­lab­o­ra­tion between all nations in the eco­nomic field with the object of secur­ing, for all, improved labor stan­dards, eco­nomic advance­ment and social secu­rity… and which will afford assur­ance that all the men in all the lands may live out their lives in free­dom from fear and want.”14 While the sin­cer­ity of this com­mit­ment can eas­ily be ques­tioned, it is clear that a lesson had been learnt from the inter­war cri­sis and the post­war period would be dif­fer­ent.

Postwar Settlement

After World War II, Trotsky’s antic­i­pated rev­o­lu­tion never hap­pened. As can be seen from Table 2, the years from 1946 to 50 expe­ri­enced far less labor unrest than those imme­di­ately fol­low­ing WWI. This does not mean there were no rev­o­lu­tion­ary pres­sures. Across Europe com­mu­nist par­ties were grow­ing rapidly, and in some coun­tries were win­ning elec­tions. But instead of lead­ing to social­ism, Europe saw the cre­ation of what has been called the post­war set­tle­ment.

Table 2. Strike Activ­ity (Annual days lost per 100 work­ers)

France Ger­many Italy UK
1919-24 120 191 149 233
1946-50 87 4 145 10
1953-61 41 7 64 28
1962-66 32 3 134 23
1967-71 350 8 161 60
1972-76 34 3 200 97
1977-81 23 8 151 112
1982-87 13 9 93 88

Source: 1919-1924 & 1946-1950: Andrea Boltho “Recon­struc­tion after Two World Wars: Why the Dif­fer­ences?” Jour­nal of Euro­pean Eco­nomic His­tory 30 no. 2 (2001), 429–456. 1953-1987: Philip Arm­strong, Andrew Glyn, John Har­rison, Cap­i­tal­ism since 1945, (Oxford: Basil Black­well, 1991). Note that the fig­ures do not mea­sure exactly the same thing. Boltho’s fig­ure mea­sure “man-days lost” per 100 non-agri­cul­tural wage earn­ers. Arm­strong et al mea­sure work­ers in indus­try and trans­port.

This post­war set­tle­ment resulted in the rise of the wel­fare state, full employ­ment, and the incor­po­ra­tion of work­ers’ orga­ni­za­tions into the man­age­ment of cap­i­tal­ist devel­op­ment. It also saw an unprece­dented eco­nomic boom and a mas­sive increase in inter­na­tional trade.

The growth boom is remem­bered well across the West­ern world. In almost every coun­try the thirty year period after 1945 has a unique name empha­sis­ing its nov­elty: Les Trente Glo­rieuses (France), Wirtschaftswun­der (Ger­many), Reko­rdåren (Swe­den), the “Eco­nomic Mir­a­cle” (Italy, Japan and Greece) or sim­ply the “Golden Age” (United States and UK). As Table 1 shows, growth in West­ern Europe in this period was around 4% per annum, the high­est growth ever recorded for West­ern Europe and star­tlingly higher than the 0.8% growth in the inter­war period.

The boom in inter­na­tional trade, while not as well remem­bered, is even more dra­matic. As can be seen in Table 3, while dur­ing the inter­war years exports declined, the post­war years saw a mas­sive increase in inter­na­tional trade.

Table 3. Growth in Vol­ume of Mer­chan­dise Exports (Annual aver­age com­pound growth rates)

1870–1913 1913–1950 1950–1973 1973–1998
West­ern Europe 3,24 –0.14 8,38 4,79

Source: Angus Mad­dison, The world econ­omy, (Paris, France: OECD, 2006), 127.

The post­war growth boom was dri­ven both by this increase in inter­na­tional trade and by a sig­nif­i­cant increase in invest­ment.

Cen­tral to this growth in invest­ment were the insti­tu­tions cre­ated as part of the post­war set­tle­ment. These “insti­tu­tions solved com­mit­ment and coor­di­na­tion prob­lems in whose pres­ence nei­ther wage mod­er­a­tion nor the expan­sion of inter­na­tional trade could have taken place.”15 Under these insti­tu­tions work­ers mod­er­ated their wage claims, mak­ing prof­its avail­able to cap­i­tal­ists to rein­vest. Cap­i­tal­ists restrained div­i­dend pay­outs in order to rein­vest. Invest­ing in mod­ern­iza­tion and expan­sion of pro­duc­tive capac­ity stim­u­lated growth and increased the future income of both work­ers and cap­i­tal own­ers.

The ben­e­fit for employ­ers was that the threat of an insur­gent work­ing class was avoided; for the orga­nized work­ing class, it was a seat at the table, which facil­i­tated the other aspects of the post­war set­tle­ment – it enabled the cre­ation of the wel­fare state and the over­sight of ris­ing liv­ing stan­dards and full employ­ment.

How­ever, the post­war set­tle­ment went fur­ther than the con­flict between labor and cap­i­tal. The insta­bil­ity of the inter­war years was not only cre­ated by work­ing class mil­i­tancy. In Ger­many, Italy, Spain, Aus­tria and else­where the far right had come to power on the basis of a pop­u­lar move­ment depen­dent on the sup­port of dis­grun­tled nation­al­ist farm­ers.16 Dur­ing the great depres­sion, agri­cul­ture was hit badly, result­ing in grow­ing demands for autarky and the pro­tec­tion of agri­cul­tural pro­duc­ers from the world mar­ket. The solu­tion to these issues in the post­war period was the cre­ation of the Com­mon Agri­cul­tural Pol­icy (CAP). Before get­ting to CAP, we need to look at the emer­gence of the Euro­pean Eco­nomic Com­mu­nity (EEC).

The Birth of Europe?

The stan­dard polit­i­cal nar­ra­tive regard­ing the EU is to pose the alter­na­tive as being either for Europe or for national sov­er­eignty. The appeal of national sov­er­eignty here is obvi­ous both to the Left and Right. For the Right national sov­er­eignty means the col­lec­tive nation walk­ing its own path, and for the Left it means peo­ple demo­c­ra­t­i­cally deter­min­ing their own social devel­op­ment. The post­war period was an era whereby national peo­ples were able to deter­mine their own domes­tic poli­cies in a highly demo­c­ra­tic and free man­ner that was unprece­dented. Today both the Left and Right recall this period wist­fully.

A seem­ing para­dox here is that this emer­gence of pop­u­lar sov­er­eignty went hand in hand with the devel­op­ment of a level of supra­na­tional gov­er­nance that had never been seen before. Inter­na­tion­ally, this was rep­re­sented by the cre­ation of the IMF, GATT, and World Bank. But this devel­op­ment was even more extreme in Europe, where a vast array of new insti­tu­tions emerged: the Organ­i­sa­tion for Euro­pean Eco­nomic Co-oper­a­tion (OEEC), which exists today as the Organ­i­sa­tion for Eco­nomic Co-oper­a­tion and Devel­op­ment (OECD), the Euro­pean Atomic Energy Com­mu­nity (Euratom), the West­ern Euro­pean Union (WEU), the Euro­pean Pay­ments Union (EPU), and of course the Euro­pean Coal and Steel Com­mu­nity (ECSC) and the Euro­pean Eco­nomic Com­mu­nity (EEC). Between them, these orga­ni­za­tions marked a new phase in the polit­i­cal orga­ni­za­tion of the Euro­pean econ­omy.

In order to dis­en­tan­gle the para­dox of a simul­ta­ne­ous increase in national demo­c­ra­tic sov­er­eignty with the increase in Euro­pean supra­na­tional gov­er­nance, it is nec­es­sary to depart with some of the mythol­ogy sur­round­ing the birth of the Euro­pean Union.

A fre­quent story often told is that the early devel­op­ment of the EU was dri­ven by a noble few or a sin­is­ter cabal, depend­ing on the polit­i­cal per­spec­tive. But regard­less of the per­spec­tive, the names are gen­er­ally the same. At the front is the French civil ser­vant Jean Mon­net and Robert Schu­man, the Lux­em­bourg-born French Prime Min­is­ter (1947-1948). The sup­port­ing cast is pro­vided by Altiero Spinelli, the Ital­ian author of the Ven­totene Man­i­festo; Paul-Henri Spaak, Prime Min­is­ter of Bel­gium (1947-49); Kon­rad Ade­nauer, Chan­cel­lor of Ger­many (1949-1963); and Wal­ter Hall­stein, a Ger­man civil ser­vant who became the first pres­i­dent of the Com­mis­sion of the Euro­pean Eco­nomic Com­mu­nity (1958-1967).17

The leg­end is that a few peo­ple deter­mined to estab­lish peace across the con­ti­nent, and con­vinced of the need for a Euro­pean Fed­er­a­tion, set about estab­lish­ing a Euro­pean state bit by bit. The first step in reach­ing this high and noble ideal was an agree­ment on coal and steel, and the rest nat­u­rally fol­lowed.

Indeed the Treaty of Paris and the cre­ation of the Euro­pean Coal and Steel Com­mu­nity (ECSC) is a rather odd moment of inter­na­tional diplo­macy. It emerged as a pro­posal from the rather grandiose “Schu­man Dec­la­ra­tion,” made by the then French For­eign Min­is­ter on May 9, 1950, which gave “world peace” as its aim, and “a united Europe” as its interim objec­tive, but set­tled for “the pool­ing of coal and steel pro­duc­tion… as a first step.”18

In addi­tion to these over­flow­ing state­ments, the treaty over­flowed with insti­tu­tions. To admin­is­ter a com­mon mar­ket in coal and steel, it cre­ated in embryo the insti­tu­tions of the mod­ern EU: a High Author­ity (the pre­cur­sor of the Euro­pean Com­mis­sion), a Com­mon Assem­bly (the pre­cur­sor of the Euro­pean Par­lia­ment), a Coun­cil of Min­is­ters (the pre­cur­sor of the Coun­cil of Min­is­ters), and a Court of Jus­tice (the pre­cur­sor of the Court of Jus­tice of the EU).

In order to under­stand why the Euro­pean fed­er­al­ists came to found the ECSC, the impor­tant issue is less their fed­er­al­ist ambi­tions, but rather the actual issue of Euro­pean coal and steel pro­duc­tion.

The coal and steel heart­lands of con­ti­nen­tal Europe encom­passed the bor­der­lands of Ger­many, Lux­em­bourg, France, and south­east Bel­gium. It had been at the cen­tre of all recent west­ern Euro­pean mil­i­tary con­flicts, as well as being both eco­nom­i­cally impor­tant and poten­tially highly eco­nom­i­cally inte­grated. It was a region both where the break­down of inter­na­tional trade mat­tered greatly and where the indus­trial work­ing class was at its strongest.

The ques­tion, there­fore, was how to man­age the tran­si­tion to a lib­eral mar­ket econ­omy while avoid­ing social con­flicts that might arise from that tran­si­tion. The con­tent of the Treaty of Paris is there­fore focused heav­ily on the social dif­fi­cul­ties in man­ag­ing the tran­si­tion to an inte­grated coal and steel mar­ket. It is strik­ing from any brief perusal of Title III of the Treaty, the sec­tion which deals with the coal and steel indus­tries, how much of it is focussed on mat­ters such as “the pos­si­bil­i­ties of reem­ploy­ment… of work­ers set at lib­erty by the evo­lu­tion of the mar­ket or by tech­ni­cal trans­for­ma­tions” or “the appraisal of the pos­si­bil­i­ties of improv­ing the liv­ing and work­ing con­di­tions of the labor force… and of the risks which men­ace such liv­ing con­di­tions.”19

Alan Mil­ward sup­ports this under­stand­ing when, in his detailed dis­cus­sion of the social dynam­ics behind Bel­gian par­tic­i­pa­tion in the ECSC, he writes “The Treaty of Paris can be under­stood not just as the diplo­matic sub­sti­tute for a peace treaty, but also as the moment when Bel­gium for­mally entered the mixed econ­omy… It rat­i­fied the shift to pub­lic respon­si­bil­ity in man­age­ment, to the incor­po­ra­tion of the labor force into that respon­si­bil­ity, and to the com­mit­ment of the state to wel­fare and employ­ment.”20

How­ever, the impor­tance of the ECSC should not be over­stated – although it often is. The ECSC was impor­tant in pri­mar­ily two ways, firstly, it was an early step in the direc­tion of the cre­ation of the com­mon mar­ket; sec­ondly, it cre­ated the insti­tu­tions of the EEC. How­ever, the ambi­tion of an inte­grated Euro­pean econ­omy was not real­ized with the ECSC. In fact, the ECSC was really only a very small step in that direc­tion.21

The first major step in the cre­ation of the EU was not the Treaty of Paris or the ECSC; it was the cre­ation of the EEC with the Treaty of Rome. Today the Treaty that started as the Treaty of Rome con­sti­tutes roughly three quar­ters of the “con­sti­tu­tion” of the EU.22

International Trade and Social Protection: The Creation of the EEC

As we have already empha­sized, cen­tral to the post­war boom was the growth in post­war trade (see Table 3). In Europe this was enabled by the cre­ation of the Com­mon Mar­ket with the Treaty of Rome.23 The Com­mon Mar­ket entailed a cus­toms union — no inter­nal tar­iffs or trade bar­ri­ers. It was to be admin­is­tered through the Euro­pean Eco­nomic Com­mu­nity (EEC), which inherited the ECSC insti­tu­tions.

From the Treaty of Rome onwards the EEC was to present a sin­gle eco­nomic tar­iff and cus­toms bloc to the rest of the world, while inter­nally trade would be free.

But why was the cre­ation of the EEC nec­es­sary? In the late 19th cen­tury, tar­iff bar­ri­ers were rad­i­cally reduced across the West­ern world and a Com­mis­sion, an Assem­bly, a Coun­cil of Min­is­ters, and a Court of Jus­tice weren’t nec­es­sary. Through the won­ders of the “most favoured nation” clause, eco­nomic inte­gra­tion appeared to develop nat­u­rally.

How­ever, after World War I, things were dif­fer­ent. With the rise of democ­racy and the orga­nized work­ing class in the first half of the twen­ti­eth cen­tury, the sep­a­ra­tion between lib­eral pol­i­tics and the lib­eral econ­omy were threat­ened. The econ­omy was politi­cized. In the inter­war period there was no suc­cess­ful res­o­lu­tion of this prob­lem.

After World War II, the prob­lem was resolved through the incor­po­ra­tion of the orga­nized work­ing class into cap­i­tal­ist gov­er­nance. This entailed both an expan­sion of the state into new spheres of socioe­co­nomic life as well as its increased demo­c­ra­tic admin­is­tra­tion.

There­fore the inte­gra­tion of Euro­pean trade after the war required not only the reduc­tion of bar­ri­ers, but also the means through which the reduc­tion of these bar­ri­ers could take place with­out threat­en­ing the liv­ing stan­dards of Euro­pean cit­i­zens.24

We can see this clearly in the nego­ti­a­tions lead­ing up to the cre­ation of the EEC. Cen­tral to these nego­ti­a­tions were con­cerns regard­ing issues such as wage rates, dif­fer­ences in hol­i­days, and the fact that work­ing hours in the French auto­mo­bile indus­try were 40 hours per week, while they were 48 in Ger­many. Even the ques­tion of equal pay for women was on the agenda.

Here, we can finally return to the issue raised ear­lier regard­ing farm­ers. The Treaty of Rome included a com­mit­ment to the cre­ation of a Com­mon Agri­cul­tural Pol­icy (CAP). Whilst the sig­na­to­ries of the Treaty did surely not antic­i­pate the cur­rent size of the CAP in 1957, it serves as another exam­ple of cre­at­ing a means through which cit­i­zens could be pro­tected by the state from the dis­rup­tion and threat of free and open mar­kets. This kind of defen­sive mech­a­nism defines what is novel about the approach to the reduc­tion of trade bar­ri­ers brought about by the Treaty of Rome.25

The cre­ation of the EEC brought about the reduc­tion of trade bar­ri­ers, the expan­sion of trade within Europe and thereby con­tributed to growth and cap­i­tal­ist devel­op­ment. The cre­ation of this supra­na­tional orga­ni­za­tion cre­ated a new means through which the rules of eco­nomic life could be set. It thereby increased the power of national states to set these rules and facil­i­tated the increased demo­c­ra­tic admin­is­tra­tion of eco­nomic life.

It can now be seen how oppos­ing national sov­er­eignty to Euro­pean gov­er­nance makes lit­tle sense. Rather than threat­en­ing the power of the state, the EEC was cre­ated as a means through which the power of the state could be pre­served and enhanced.

III: From Consensus to Crisis (1957-1984)

The estab­lish­ment of the EEC ush­ered in the first wave of Euro­pean Inte­gra­tion, after which lit­tle changed for nearly 30 years. Indeed, it was not until the mid-1980s that the process of Euro­pean Inte­gra­tion was renewed.

But this is not at all to say that noth­ing was hap­pen­ing. Indeed, one can ret­ro­spec­tively dis­cern three very impor­tant devel­op­ments. First, expan­sion; sec­ond, the flurry of failed pro­pos­als; and finally, the early moves towards mon­e­tary union.

Per­haps the most major change in the EEC between 1957 and 1986 was its expan­sion. First the UK, Ire­land, and Den­mark joined (1973). They were fol­lowed later by the recently democ­ra­tized Greece (1981), Spain and Por­tu­gal (1986).26

The sec­ond devel­op­ment was the flurry of failed reforms. Amongst these, there were pro­pos­als for a com­mon cur­rency (see the Werner report27), pro­pos­als for a mas­sive expan­sion in Europe’s fis­cal capa­bil­i­ties (see the Mac­Dougall report28), and pro­pos­als for devel­op­ing a Euro­pean social democ­racy (see the Social Action Pro­gramme aris­ing from the Paris sum­mit29). How­ever despite these debates, processes, reports and agree­ments, very lit­tle of these pro­pos­als actu­ally mate­ri­al­ized, and they are there­fore of lim­ited inter­est and impor­tance.

The one major devel­op­ment that did take place was the response of EEC states to the break­down of the Bret­ton Woods sys­tem. First, there was the “snake in the tun­nel,” then sim­ply “the snake”. This was fol­lowed by the Euro­pean Mon­e­tary Sys­tem, which lasted the early 1990s. I will cover these in some more depth below. But first, it is worth con­sid­er­ing why these devel­op­ments hap­pened at all.

The Postwar Settlement becomes Unsettled

As described above the post­war set­tle­ment was a fun­da­men­tally unsta­ble arrange­ment, under which the work­ing class agreed to mod­er­ate wage demands and the cap­i­tal­ist class agreed to invest the sur­plus prof­its gen­er­ated by this wage restraint. The result was an unusu­ally high level of invest­ment in the post­war period (See Chart 2). This arrange­ment was man­aged through the expan­sion and inte­gra­tion of work­ing class orga­ni­za­tions into cap­i­tal­ist gov­er­nance. The insta­bil­ity arose from the fact that at any point there were gains to be made from aban­don­ing this agree­ment. There was an addi­tional prob­lem; the inte­gra­tion of the work­ing class into cap­i­tal­ist gov­er­nance was brought about par­tially as a means of avoid­ing rev­o­lu­tion­ary con­flict. In other words, in order to avoid the threat of work­ing-class orga­ni­za­tions seiz­ing power and expro­pri­at­ing the cap­i­tal­ist class, these orga­ni­za­tions were inte­grated into the man­age­ment of cap­i­tal­ist devel­op­ment. How­ever, this inte­gra­tion brought about a dra­matic increase in the size and power of work­ers orga­ni­za­tions, both as inte­grated bod­ies and, poten­tially, as inde­pen­dent actors. For those who believed in the poten­tial of rev­o­lu­tion­ary action, the oppor­tu­ni­ties for the rev­o­lu­tion­ary activ­ity of the work­ing class were not dwin­dling, but rather grow­ing.

Increas­ingly, the prob­lem for the rev­o­lu­tion­ary ele­ments in the work­ers’ move­ment was not orga­ni­za­tion; it was the bureau­cratic lead­er­ship of the work­ers’ move­ment, which had become inte­grated into cap­i­tal­ist man­age­ment. This prob­lem was expressed dif­fer­ently by dif­fer­ent sec­tors of the newly emerg­ing New Left, per­haps most clearly in Trot­sky­ism: “The his­tor­i­cal cri­sis of mankind is reduced to the cri­sis of the rev­o­lu­tion­ary lead­er­ship.”30 But sim­i­lar sen­ti­ments can be seen in Mao­ism, anar­chism, and the gen­eral rise of anti-author­i­tar­ian move­ments, in which notions of self-man­age­ment and self-man­aged autonomous strug­gles became para­mount.

Extri­cat­ing the exact causal rela­tion­ship is dif­fi­cult, but by the late 1960s, strikes were increas­ing, profit rates were decreas­ing, and the invest­ment rate began its decline.

In France, days lost to strikes more than dou­bled. In 1962-1966, annual days lost were 32 per 100 work­ers; between 1967-1971 it was 350 days lost to strikes per annum. This fig­ure was of course largely dri­ven by the rev­o­lu­tion­ary cri­sis of May 1968. In the UK, the fig­ure also more than dou­bled. It climbed from 23 in 1962-1966, to 60 in 1967-71. How­ever, in the UK the num­ber of strikes con­tin­ued to rise through­out the 1970s, and only began to fall after the elec­tion of Thatcher. In Italy, the work­ers’ move­ment was in the 1970s per­haps the most mil­i­tant of any­where in Europe, and the days lost to strikes nearly quadru­pled, from 64 annual days per 100 work­ers in 1953-61 up to 200 days in 1972-1976 (see Table 2).

oisin chart 1
Source: Phillip Arm­strong, Andrew Glyn, John Har­rison, Cap­i­tal­ism since 1945, 352.

Profit rates went in the oppo­site direc­tion, as can be seen in Chart 1. Here we see the weighted aver­age net man­u­fac­tur­ing and busi­ness profit rates for France, Ger­many, Italy, and the UK. As can be seen the net man­u­fac­tur­ing profit rate decreased from 24.3% in 1955 to a low of 8.8% in 1975.31

By the late 1960s, the invest­ment rate had also started to decline. As can be seen in Chart 2, in Ger­many it fell from 37% of GDP in 1965 to less than 27% in 1975. In the UK and France, the post­war rise in the invest­ment rate came to an end.32

oisin chart 2
Source: Penn World Tables 8.0

Not only was there a cri­sis in the pri­vate sec­tor, but the post­war state con­tin­ued to expand in order to meet ris­ing demands for the uni­ver­sal pro­vi­sion of social ser­vices. As can be seen from Table 4, the size of the gov­ern­ment sec­tor in West­ern Euro­pean economies had been increas­ing through­out the twen­ti­eth cen­tury, and by the mid-1970s there was lit­tle sign this trend would be com­ing to an end.

Table 4. Total Gov­ern­ment Expen­di­ture as Per Cent of GDP at Cur­rent Prices, 1913–1999

1913 1938 1950 1973 1999
France 8,9 23,2 27,6 38,8 52,4
Ger­many 17,7 42,4 30,4 42 47,6
Nether­lands 8.2a 21,7 26,8 45,5 43,8
United King­dom 13,3 28,8 34,2 41,5 39,7
Arith­metic Aver­age 12 29 29,8 42 45,9

Source: Angus Mad­dison, The world econ­omy, 135.

a. 1910

How­ever, despite the sig­nif­i­cant rise in social spend­ing dur­ing this period, social con­flict did not abate, and the legit­i­macy of the exist­ing polit­i­cal order was being increas­ingly under­mined.

A telling exam­ple was in Britain, where, in 1973, indus­trial action by the National Union of Minework­ers (NUM) had reduced the sup­ply of elec­tric­ity to the point where the Con­ser­v­a­tive gov­ern­ment was forced to declare a three-day-week. But pub­lic sup­port was largely behind the min­ers. The Prime Min­is­ter sought a man­date to take on min­ers and called a snap elec­tion under the slo­gan “Who gov­erns Britain?” – the gov­ern­ment or the labor move­ment. The Con­ser­v­a­tives got their answer when they were kicked out of office, and the Labor Party was voted in.

The reac­tion to the cri­sis of the late ’60s and ’70s was largely to con­cede to the demands of the move­ment. Wages went up, profit shares went down, gov­ern­ment expen­di­ture increased, and the doors were open to the social move­ment to come inside and share power. In brief, the post­war solu­tion was extended. Rather than aim­ing to sup­press the move­ment, it was thought that a demo­bi­liz­ing demo­c­ra­tic res­o­lu­tion was pos­si­ble.

This enables us to under­stand the flurry of well-mean­ing and often ambi­tious pro­pos­als that devel­oped at a Euro­pean level in this period, such as the afore­men­tioned Mac­Dougall report, which pro­posed to mas­sively increase Europe’s spend­ing power and move some fis­cal deci­sion-mak­ing to a Euro­pean level. It also helps us under­stand the Social Action Pro­gramme, which emerged from the 1972 Paris sum­mit, and began that ephemeral dream of the Euro­pean lib­eral Left: “Social Europe.” The polit­i­cal space from which these pro­pos­als arose was a cri­sis whereby the tra­jec­tory of post­war devel­op­ment was break­ing down and gen­er­at­ing a desire for new solu­tions. But none of these projects ever had any real legs. The rea­son for this is equally obvi­ous – they could not solve the prob­lems that existed within the nation states of Europe.

The only pro­posal that did get some real trac­tion was the one that was at first merely intended to solve a prob­lem aris­ing from Amer­ica.

The Breakdown of Bretton Woods

It is widely believed that a major con­tribut­ing fac­tor to the eco­nomic chaos of the inter­war period was the gold stan­dard. This oper­ated through the declared com­mit­ment to main­tain con­vert­ibil­ity of cur­rency into a spec­i­fied amount of gold. Thereby all cur­ren­cies were fixed in value against a homoge­nous inter­na­tion­ally trad­able com­mod­ity. In order to main­tain gold con­vert­ibil­ity, coun­tries needed to pur­sue a set of eco­nomic poli­cies to avoid bal­ance of pay­ments prob­lems and main­tain their gold reserves. This could involve cut­ting wages and gov­ern­ment spend­ing, regard­less of the effect this might have on the country’s wider eco­nomic health, the liv­ing stan­dards of its cit­i­zens, or its polit­i­cal sta­bil­ity. Accord­ingly, this led to many prob­lems in the inter­war period.

There­fore, in 1944 an agree­ment was reached that the post­war mon­e­tary sys­tem would be much more flex­i­ble. It was agreed that the US dol­lar would be con­vert­ible into gold, and every other cur­rency would be con­vert­ible into dol­lars. This allowed for adjust­ments to a country’s exchange rate. For exam­ple, if work­ers in a coun­try brought about wage increases and thereby made that country’s exports uncom­pet­i­tive, it would be pos­si­ble to adjust the exchange rate so that the value of the national cur­rency would be worth less in dol­lar terms, revers­ing some of the neg­a­tive effect that this wage increase might have.

By 1971, almost all of America’s main com­peti­tors had deval­ued against the dol­lar on a num­ber of occa­sions, and as wage demands, the cost of social ser­vices, and the cost of the war in Viet­nam rose, Amer­ica found itself in a sit­u­a­tion where it had a grow­ing bal­ance of pay­ments prob­lem and an over­val­ued cur­rency. The solu­tion was obvi­ous, and the US ended dol­lar-gold con­vert­ibil­ity. The stated inten­tion was to devalue the dol­lar but main­tain the sys­tem more or less unchanged. And indeed, a few short months later, the “Smith­so­nian Agree­ment” was signed, which largely returned the sys­tem to how it oper­ated before. One sig­nif­i­cant change, how­ever, was that cur­ren­cies were now allowed to fluc­tu­ate against the dol­lar more than pre­vi­ously. Under the new Smith­so­nian Agree­ment, coun­tries could fluc­tu­ate ±2.25% against the dol­lar. How­ever, this meant that in the EEC, cur­ren­cies would now be able to fluc­tu­ate much more against one another.33

The response to this drew on the Werner Report (1970), which laid out a plan for cre­at­ing a sin­gle Euro­pean cur­rency. The EEC coun­tries agreed to allow their cur­ren­cies fluc­tu­ate by only ±2.25% against one another. This frame­work, whereby Euro­pean cur­ren­cies fluc­tu­ated within a smaller band than the band for fluc­tu­a­tion faced by other coun­tries, was called “the snake in the tun­nel.” How­ever, very shortly after the sign­ing of the Smith­so­nian Agree­ment, its “tun­nel” fell apart and the inter­na­tional mon­e­tary sys­tem moved to free float­ing exchange rates. In Europe, how­ever, the snake per­sisted with­out the tun­nel. But even this was only of lim­ited suc­cess, and through the 1970s coun­tries entered and exited the snake depend­ing on their domes­tic eco­nomic sit­u­a­tion. In 1979, there­fore, the Euro­pean Mon­e­tary Sys­tem was cre­ated, which oper­ated on more or less the same prin­ci­ple, only in a more struc­tured man­ner.

Despite this impor­tant change, look­ing at the long period between the Treaty of Rome (1957) and the Maas­tricht Treaty (1992), we can see rel­a­tively few devel­op­ments. It is there­fore use­ful to con­sider Euro­pean Inte­gra­tion as occur­ring in two waves. The first was estab­lished by the Treaty of Rome, was cen­tered on the com­mon mar­ket, and lasted until the mid-80s. The sec­ond was estab­lished by the Maas­tricht Treaty and lasts to this day. This sec­ond wave was cen­tered on the sin­gle mar­ket and the com­mon cur­rency, whose early moments I have just described. How­ever, before we con­sider the devel­op­ment of this sec­ond wave from 1992 onwards, it is worth con­sid­er­ing the sit­u­a­tion in Europe in the 1980s that it devel­oped in response to.

The Delayed Resolution of the Crisis

By the late 1970s the cri­sis that had emerged in the mid-60s was still not resolved. Profit rates were con­tin­u­ing their decline and had not recov­ered (See Chart 2). Invest­ment rates had fal­len sub­stan­tially (See Chart 1). Growth rates were sub­stan­tially lower than what they had been dur­ing the 1945-1975 period. In addi­tion, the re-emer­gence of unem­ploy­ment became a major social prob­lem. This was in fact a very sig­nif­i­cant change, since full employ­ment had been the norm across West­ern Europe for the entire 1945-1973 period (see Table 5).

Table 5: Level of Unem­ploy­ment (% of labour force)

1950–73 1974–83 1984–93 1994–98 2000 2004 2008 2012 2014
Bel­gium 3 8,2 8,8 9,7 7,5 8,7 7,2 7,2 8,5
Fin­land 1,7 4,7 6,9 14,2 10,0 9,0 6,4 7,5 8,4
France 2 5,7 10 12,1 10,4 9,0 7,3 9,4 10,2
Ger­many 2,5 4,1 6,2 9 8,2 9,9 8,1 5,6 5,2
Italy 5,5 7,2 9,3 11,9 10,6 8,2 6,4 9,5 12,6
Nether­lands 2,2 7,3 7,3 5,9 3,3 4,8 3,2 5,0 7,1
Nor­way 1,9 2,1 4,1 4,6 3,4 4,2 2,4 3,2 3,5
Swe­den 1,8 2,3 3,4 9,2 6,2 7,0 6,0 7,9 8,2
United King­dom 2,8 7 9,7 8 5,7 4,7 5,1 8,2 6,8
Ire­land n.a. 8,8 15,6 11,2 4,8 4,9 5,0 15,0 12,1
Spain 2,9 9,1 19,4 21,8 12,7 11,3 9,0 23,2 25,5
Aver­age 2,4 6,0 9,2 10,7 7,5 7,4 6,0 9,2 9,8

Source: 1950-1998: Angus Mad­dison, The world econ­omy, 134. 2000-2014: Jan­u­ary data from Eurostat.

And soci­ety was still polit­i­cally highly unsta­ble. In Italy, the very high level of indus­trial activ­ity con­tin­ued, albeit with greater des­per­a­tion. This hope­less­ness saw the begin­ning of the “Years of Lead,” which per­haps reached its peak with the kid­nap­ping and exe­cu­tion of for­mer Ital­ian Prime Min­is­ter Aldo Moro by the Brigate Rosse in 1978. Such vio­lence was not lim­ited to Italy. Ger­many wit­nessed left-wing guer­rilla activ­ity dur­ing this period as well, with such groups as the Rote Armee Frak­tion, Rote Zel­len, Rote Zora and the June 2 Move­ment. The UK expe­ri­enced left-wing armed activ­ity in the north of Ire­land and, in Britain, there was a per­sis­tent increase in strike activ­ity.

Indeed, the British win­ter of 1978-1979 was rocked by a strike wave that is remem­bered as the “Win­ter of Dis­con­tent.” This strike wave was both felt and vis­i­ble across the UK. The fact that the win­ter was one of the cold­est on record did not improve things. City cen­ters filled with uncol­lected trash. Infa­mously, in Liv­er­pool, the city was forced to hire an empty fac­tory to store corpses as the gravedig­gers struck. The UK had to go to the IMF for a £2.3bn loan. By the time an elec­tion was called in 1979, the Con­ser­v­a­tive party under Mar­garet Thatcher won.

Thatcher famously used her man­date to take on the British labor move­ment piece by piece, until what was once one of the strongest and most mil­i­tant labor move­ments in Europe was destroyed. Today in Britain unions scarcely exist out­side the pub­lic sec­tor, and strikes are a minor issue eco­nom­i­cally and polit­i­cally.

Although the social move­ment of the 1960s and 1970s were filled with hope, by the late 1970s the move­ment had reached an impasse. It could con­tinue to force the state to increase its social spend­ing, but it was unclear how to fund it. Equally, it could con­tinue to increase wage demands, but it was clear that this was reduc­ing profit oppor­tu­ni­ties and dam­ag­ing the econ­omy. The next step seemed unclear, and many believed the moment for a break with cap­i­tal­ism had passed.34 As these hopes faded, the emerg­ing voices from the Right for a return to pre-war lib­er­al­ism began to gain favor.

Of course, the Left did not sim­ply aban­don its project, and the debates of this period remain of real inter­est.35 And although across Europe the labor move­ment was suf­fer­ing defeats: the mass arrests in Italy 1979-1981,36 the defeat at FIAT Mirafiori (1980),37 the UK Min­ers’ Strike (1984), Wap­ping (1986), etc. There were other attempts to find another route for the Left. Per­haps the most suc­cess­ful was François Mitterrand’s elec­toral vic­tory in France in May 1981. This brought together much of the Left, many of the mil­i­tants of 1968, along with many of the polit­i­cal refugees flee­ing per­se­cu­tion in Italy. Mit­ter­rand was elected on a rad­i­cal plat­form named the “110 Propo­si­tions for France.” This involved a major push fur­ther towards more social con­trol of the econ­omy. There were sev­eral nation­al­iza­tions and the min­i­mum wage, statu­tory hol­i­days, pen­sions, health insur­ance for the unem­ployed, social hous­ing, fam­ily allowances, taxes on wealth, were all increased, while simul­ta­ne­ously the work­week was reduced. How­ever, as this hap­pened, cap­i­tal began to leave the coun­try. With infla­tion con­tin­u­ing to rise, France faced a per­sis­tent and seri­ous bal­ance of pay­ments prob­lem. The franc was deval­ued in Octo­ber 1981, again in June 1982, and yet again in March 1983! Ulti­mately, Mit­ter­rand was forced to aban­don his left-wing eco­nomic pol­icy and launched the “Franc Fort” (Strong Franc) pol­icy. This involved a major shift to aus­ter­ity, and in many ways the end of post­war social democ­racy. From this point on across Europe, the par­ties of the Left reori­ented them­selves towards a pro-mar­ket, neolib­eral approach to the econ­omy.


Despite the appear­ance of neolib­er­al­ism as an intel­lec­tual move­ment, it is impor­tant to treat it as nei­ther a purely intel­lec­tual phe­nom­e­non nor as a return to nor­mal. Neolib­er­al­ism emerged as a response to the pro­longed polit­i­cal insta­bil­ity and eco­nomic down­turn of the 1965-1985 period. While the pro­longed polit­i­cal insta­bil­ity is often under­played and reduced to the momen­tary mad­ness of May 1968, the eco­nomic down­turn is often over­played. By almost any mea­sure, Euro­pean economies were doing bet­ter in the 1970s than at any point since. The growth rate was higher, the invest­ment rate was higher, the unem­ploy­ment rate was lower and inequal­ity was lower. Com­pared to the eco­nomic sit­u­a­tion in the 70s, the only clear improve­ment for work­ers today is that infla­tion has sta­bi­lized at a low level. How­ever, low infla­tion pri­mar­ily ben­e­fits cred­i­tors and cap­i­tal own­ers. Other changes also ben­e­fit cap­i­tal­ists. Strikes have gone down dra­mat­i­cally. Tax rates have sta­bi­lized and the growth of the pub­lic sec­tor has been more or less halted (although con­trary what much of the left might say, it has not reversed) (see Table 4). And, by most mea­sures, the profit rate has risen again.

Pre­sum­ably in 1975 it was pos­si­ble for Europe to con­tinue to develop away from cap­i­tal­ism and place the econ­omy under increas­ing demo­c­ra­tic con­trol. Whether this might have been achieved through social­ist rev­o­lu­tion, autonomous action, or leg­is­la­tion, is unknown to us because, of course, it never hap­pened.

In the West­ern Euro­pean coun­tries where rev­o­lu­tions did hap­pen,38 despite their rev­o­lu­tion­ary com­mit­ments, these soci­eties quickly entered the West­ern lib­eral order. The high points of work­ers’ auton­omy in Italy and the UK were crushed, and the more neb­u­lous forms of auton­omy among squat­ters and envi­ron­men­tal­ists in North­ern Europe were grad­u­ally hacked away at, so that lit­tle remains but some inter­est­ing con­cert venues and the embar­rass­ment of the Green par­ties. Where leg­isla­tive reform was attempted, most sig­nif­i­cantly in France under Mit­ter­rand, the renewed free­dom of cap­i­tal to flow across bor­ders brought about rapid bal­ance of pay­ments prob­lems, forc­ing the reforms to be aban­doned.

In short, by the early ’80s the Left was at an impasse while the Right had a clear agenda: lib­er­al­ize!

Seen from the Right, the prob­lem of the Euro­pean econ­omy and the rea­son for the down­turn was an over-empow­ered labor move­ment and exces­sive gov­ern­ment inter­ven­tion in the econ­omy. What was nec­es­sary there­fore was to facil­i­tate the process of pri­vate firms com­pet­ing for prof­its via the mar­ket. By stim­u­lat­ing trade and profit-mak­ing, this would lead to increased invest­ment, growth and employ­ment. Cen­tral to this process was increas­ing cross-bor­der Euro­pean trade.

IV: The Second Wave of European Integration (1984-Today)

The sec­ond wave of Euro­pean inte­gra­tion began with the Sin­gle Euro­pean Act (1986) and was prop­erly estab­lished with the Maas­tricht Treaty (1992). The Maas­tricht Treaty is per­haps the most sig­nif­i­cant of all treaties relat­ing to Euro­pean inte­gra­tion. It cre­ated the Euro­pean Union and along with the Treaty of Rome (1957), the Maas­tricht Treaty is the basis of one of the two “Treaties” that form the core of the Euro­pean con­sti­tu­tion.39

The core of the estab­lish­ment of this sec­ond wave of Euro­pean Inte­gra­tion was the cre­ation of Eco­nomic and Mon­e­tary Union (EMU) under Maas­tricht, which in turn involves two key ele­ments: the cre­ation of the Sin­gle Mar­ket and the cre­ation of the Euro.

It is worth dis­tin­guish­ing the Sin­gle Mar­ket from the Com­mon Mar­ket. The first was estab­lished under the Sin­gle Euro­pean Act (1986), the lat­ter under the Treaty of Rome (1957).

The core of the com­mon mar­ket (i.e. the EEC) was, as dis­cussed ear­lier, the cre­ation of a tar­iff free area within Europe for the inter­na­tional trade of nation­ally pro­duced goods. These goods were, even when pro­duced by multi­na­tion­als, pro­duced within nation states in a man­ner laid out by national leg­is­la­tion. The logic behind this process was to demo­c­ra­t­i­cally man­age the tran­si­tion to free trade. This involved the incor­po­ra­tion at the national level of work­ing-class and farm­ers’ orga­ni­za­tions into cap­i­tal­ist man­age­ment. The aim was to main­tain liv­ing stan­dards and avoid the chaos of the inter­war years, while still get­ting the ben­e­fits of higher lev­els of trade and mar­ket expan­sion and inte­gra­tion. In other words, the logic was one that saw the post­war main­te­nance of a mar­ket soci­ety through the exer­cise of social con­trol over the mar­ket.

The Sin­gle Euro­pean Act is often pre­sented as sim­ply being a part of the fur­ther exten­sion of an unde­ter­mined process of “ever closer union.” It is often sug­gested that it was sim­ply a mat­ter of “com­plet­ing” the com­mon mar­ket.40 How­ever, the logic of the cre­ation of the sin­gle mar­ket was qual­i­ta­tively dif­fer­ent from the cre­ation of the EEC. Whereas the cre­ation of the EEC was embed­ding the mar­ket within wider social con­trols, the move towards the sin­gle mar­ket was aimed at mak­ing greater aspects of soci­ety sub­ject to mar­ket con­trol.

The first wave of Euro­pean inte­gra­tion aimed at empow­er­ing both the mar­ket and the nation state, by reduc­ing polit­i­cal and social tur­bu­lence through the cre­ation of demo­c­ra­tic con­trols over the mar­ket econ­omy. The sec­ond wave of Euro­pean Inte­gra­tion, on the other hand, involved reduc­ing polit­i­cal and social tur­bu­lence by remov­ing the mar­ket from demo­c­ra­tic con­tes­ta­tion.

The Sin­gle Euro­pean Act, and the Maas­tricht Treaty which fol­lowed, com­mit­ted Europe not sim­ply to cre­at­ing a com­mon mar­ket free of tar­iffs for inter­na­tional trade within Europe, it aimed at cre­at­ing sin­gle mar­kets ruled and reg­u­lated by a com­mon set of rules and reg­u­la­tions deter­mined at a Euro­pean level.

The pre-his­tory of the SEA is rather telling about its devel­op­ment. The wordy dec­la­ra­tions by heads of states on the need for Euro­pean unity con­tin­ued through­out the ’70s and early ’80s. But over time the focus of these announce­ments, reports, draft treaties and white papers shifted from the ephemeral fed­er­al­ist goal of “polit­i­cal union” to what has always been the core of the Euro­pean project: eco­nomic inte­gra­tion.41

Inter­est­ingly, this period of the mid-80s, in par­tic­u­lar around the SEA, is per­haps the only point in the his­tory of Euro­pean inte­gra­tion when the UK plays an agenda-set­ting role in Europe. Desmond Dinan writes “Mit­ter­rand and Kohl42 had suc­cumbed to Thatcher’s min­i­mal­ist pro­gramme.“43

The core of the SEA was a com­mit­ment to imple­ment the 279 pro­pos­als in the 1985 Com­mis­sion White Paper on the Inter­nal Mar­ket and cre­ate a sin­gle mar­ket by Decem­ber 31, 1992. This involved har­mo­niz­ing eco­nomic reg­u­la­tion of a huge num­ber of indus­tries across Europe – thereby the reg­u­la­tion of the inter­nal Euro­pean mar­ket would be fun­da­men­tally Euro­pean, replac­ing the sys­tem of national reg­u­la­tion.

France’s enthu­si­asm for this process is of inter­est. As noted above, Mitterrand’s agenda for push­ing social democ­racy for­ward col­lapsed in ’83/’84 with the Franc Fort pol­icy. In response to this shift Jean-Pierre Chevène­ment, the Min­is­ter of Indus­try, resigned and was replaced by Lau­rent Fabius.44 In his first speech as min­is­ter, Fabius announced that “the state does not intend to become a sub­sti­tute for the role of enter­prises and entre­pre­neurs,” and launched a series of reforms under the motto “Mod­ern­ize or decline.” It is against this back­ground of the turn to mar­ket lib­er­al­iza­tion, and the notion that France must “adapt itself to the con­di­tions of the new world econ­omy,” that the French government’s atti­tude to the SEA and Maas­tricht should be under­stood. The aim was for France to bind her­self to Germany’s strong Deutschemark and to adjust her inter­nal mar­kets by lib­er­al­is­ing and inter­na­tion­al­is­ing.45


While the Sin­gle Euro­pean Act marked the launch of the sec­ond wave of Euro­pean inte­gra­tion, the Maas­tricht treaty marked its estab­lish­ment. At the core of the Maas­tricht treaty were two core ele­ments: insti­tu­tional change and eco­nomic inte­gra­tion.

The insti­tu­tional changes brought in by Maas­tricht were sub­stan­tial. For one, Maas­tricht estab­lished the Euro­pean Union. Sec­ondly, it estab­lished a new struc­ture of the Euro­pean Union, which was to last until the pass­ing of the Lis­bon Treaty.

The new struc­ture brought together an array of forms of Euro­pean coop­er­a­tion that had pre­vi­ously been sep­a­rate under the com­mon frame­work of the EU. Part of the logic here was to increase Euro­pean inte­gra­tion in areas beyond eco­nomic inte­gra­tion by tying them insti­tu­tion­ally to eco­nomic inte­gra­tion. Under Maas­tricht, the EU was struc­tured around “the three pil­lars of the EU.” These were the Euro­pean Com­mu­nity (EC), Jus­tice and Home Affairs (JHA), and Com­mon For­eign and Secu­rity Pol­icy (CFSP). Intu­itively, this maps onto the econ­omy (EC), law (JHA), and for­eign affairs (CFSP). The Euro­pean Com­mu­nity was basi­cally the EEC renamed and was by far the most impor­tant pil­lar of the EU. The other two pil­lars that were cre­ated under Maas­tricht took over from rel­a­tively minor insti­tu­tions, but it was hoped they would grow in impor­tance. Jus­tice and Home Affairs took over from TREVI, which was lit­tle more than a means to facil­i­tate cross-bor­der coop­er­a­tion in respond­ing to ter­ror­ism, in par­tic­u­lar the grow­ing num­ber of left-wing armed actions and by Pales­tinian groups within Europe.46 Com­mon For­eign and Secu­rity Pol­icy (CFSP) took over from “Euro­pean Polit­i­cal Coop­er­a­tion” – the name given to the then exist­ing insti­tu­tion which aimed to give form to the peren­ni­ally unre­al­ized dream that one day Europe would have an inde­pen­dent and united for­eign pol­icy.47 The com­pe­ten­cies of nei­ther the JHA nor the CFSP pil­lar grew much over time, as deci­sion-mak­ing under these pil­lars was based on con­sen­sus. There­fore, many of the respon­si­bil­i­ties under the JHA and CFSP pil­lars were trans­ferred to the EC pil­lar, to allow for eas­ier deci­sion-mak­ing. With the Lis­bon Treaty the pil­lar sys­tem was abol­ished, and the EU was given a sin­gle legal per­son­al­ity. Nev­er­the­less, the insti­tu­tional changes under Maas­tricht were sig­nif­i­cant, mark­ing the cre­ation of a sin­gle struc­ture in rela­tion to which essen­tially all future moves to greater Euro­pean inte­gra­tion would be ori­ented.

The sec­ond major change with the cre­ation of the Euro­pean Union under Maas­tricht was the com­mit­ment to the cre­at­ing the Eco­nomic and Mon­e­tary Union (EMU). The euro is the cen­tral plank of the EMU. Every mem­ber of the EU is a sig­na­tory to the Maas­tricht treaty and as such every coun­try, bar­ring two,48 is com­mit­ted to join­ing the com­mon cur­rency. How­ever, join­ing the euro is a three-stage process. First, the coun­try must reach a set of “con­ver­gence cri­te­ria.” Sec­ond, it must join the Exchange Rate Mech­a­nism II (ERM II).49 The third and final stage is adopt­ing the euro.50

Per­haps as sig­nif­i­cant as the euro itself was the cre­ation of the sys­tem through which coun­tries adopt the cur­rency. There are four con­ver­gence cri­te­ria. First, there is a tight limit on infla­tion.51) Sec­ond, there is an extremely tight limit on gov­ern­ments fis­cally: debt to GDP must not exceed 60% and gov­ern­ment deficits must not exceed 3%. Third, exchange rates must be sta­ble with the euro. Finally, the inter­est rate of 10-year gov­ern­ment bonds must be below a cer­tain level.52

With the cre­ation of the “Sta­bil­ity and Growth Pact” in 1996 the two ele­ments of the fis­cal con­ver­gence cri­te­rion – the 60% debt rule and the 3% deficit rule – were made per­ma­nent. All coun­tries must, after acces­sion to the euro, remain with their debt at or below 60% and with their deficit at or below 3%. If they do not meet these cri­te­ria, they must be on a path towards real­iz­ing them.

Thereby all EU coun­tries, with the par­tial excep­tion of the UK, have com­mit­ted them­selves to hav­ing the same reg­u­la­tions for the indus­tries in their economies and hav­ing the same macro­eco­nomic sit­u­a­tion. Indus­trial reg­u­la­tion and mon­e­tary pol­icy are now decided at a Euro­pean level, not a national level, while national fis­cal pol­icy in the form of expan­sion­ary or con­trac­tionary pol­icy is sim­ply pre­cluded by Euro­pean law.

After Maastricht

Since Maas­tricht the sec­ond wave of Euro­pean inte­gra­tion has not abated. There have been three major changes to the Treaties since Maas­tricht. First there was the Ams­ter­dam Treaty, which was mainly about two things: the CFSP pil­lar, and the fact that many cen­ter-left gov­ern­ments had been elected and wanted to reform the Maas­tricht treaty by increas­ing the power of the Euro­pean Par­lia­ment, and by includ­ing some “social” issues in the Treaty.53 Then there was the Nice Treaty, which was pri­mar­ily about amend­ing the vot­ing arrange­ments in the EU to allow for the acces­sion of East­ern Euro­pean coun­tries. Finally, there was the Lis­bon Treaty. This was basi­cally the EU Con­sti­tu­tion under a dif­fer­ent name. It involved a large num­ber of changes includ­ing, as men­tioned above, the abo­li­tion of the pil­lar sys­tem. The main thing the Lis­bon Treaty did was push Maas­tricht fur­ther, in terms of turn­ing the Euro­pean insti­tu­tions into a sin­gle inte­grated whole. But beyond that the Treaty did not change the direc­tion or speed of Euro­pean inte­gra­tion dra­mat­i­cally.

In terms of Euro­pean eco­nomic inte­gra­tion things also pro­ceed apace. Build­ing on the suc­cess of the reg­u­la­tory homog­e­niza­tion brought about by the Sin­gle Euro­pean Act, more and more aspects of eco­nomic life within the EU are being homog­e­nized. In some areas this is gen­er­ally wel­comed; for exam­ple, the cre­ation of a sin­gle Euro­pean tele­coms mar­ket has resulted in tech­no­log­i­cal improve­ments and lower roam­ing charges, although it has also over­seen the pri­va­ti­za­tion of tele­coms com­pa­nies. Today it is harder to think of aspects of eco­nomic life that are reg­u­lated by the national state rather than the EU,54 and the extent of Euro­pean reg­u­la­tion of mar­kets within Europe is only increas­ing. For exam­ple, today, there is a major drive to move the reg­u­la­tion of all aspects of the finance indus­try, e-com­merce, and patents to a Euro­pean level. In addi­tion to the ever-increas­ing com­pe­ten­cies of the EU with regards to the reg­u­la­tion of mar­kets, the com­pe­tence of the EU over national eco­nomic pol­icy has also increased.

As men­tioned above, the 60% debt rule and the 3% deficit rule were expanded under the Sta­bil­ity and Growth Pact to cover all coun­tries all the time, not just in the period lead­ing up to adopt­ing the euro. How­ever, in 1998 Ger­man debt went above the 60% mark, where it has remained since (with the excep­tion of 2001 when it dropped to 59%). Like­wise, France went over the 60% limit in 2002 and has remained above it ever since. There­fore, in 2005 the rules were changed to allow for breaches but requir­ing that coun­tries have a Medium Term Objec­tive (MTO) whereby they would return to the 60% debt, the 3% deficit and a 1% “under­ly­ing deficit.” Since the cri­sis this has been extended fur­ther, and now every coun­try must have bind­ing national leg­is­la­tion regard­ing the 60% debt and the 3% deficit rules.

In addi­tion, the EU has sig­nif­i­cantly increased it over­sight of national eco­nomic pol­icy. This began with the Broad Eco­nomic Pol­icy Guide­li­nes (BEPGs), which coun­tries had to send to the EU Com­mis­sion explain­ing how their eco­nomic pol­icy was in line with Euro­pean objec­tives. Then in 1998, the Euro­pean Com­mis­sion began to issue Coun­try Speci­fic Rec­om­men­da­tions (CSRs) explain­ing how coun­tries should improve their poli­cies. In 2000 the ten-year Lis­bon Strat­egy was launched, which aimed to bring Euro­pean eco­nomic and social pol­icy more in line and tried to use the BEPG/CSR frame­work to achieve that. How­ever, the Lis­bon Strat­egy was not a major suc­cess, and was replaced in 2010 by the Europe 2020 strat­egy.

More sig­nif­i­cantly, in 2011 a new process known as the Euro­pean Semes­ter was launched.55 It is a rather com­pli­cated process of eco­nomic sur­veil­lance through which the EU mon­i­tors national eco­nomic devel­op­ment. It com­bi­nes and inte­grates

  1. A rein­forced Sta­bil­ity and Growth Pact, with sig­nif­i­cant sanc­tions if coun­tries breach the set objec­tives
  2. A Macro­eco­nomic Imbal­ance Pro­ce­dure which sets out 10 objec­tives which a coun­try must achieve
  3. The overview of national bud­getary plans by the Euro­pean Com­mis­sion
  4. A rein­forced process around Coun­try Speci­fic Rec­om­men­da­tions
  5. A set of sanc­tions for coun­tries that are fail­ing to achieve their tar­gets
  6. An annual frame­work through which this entire process is organ­ised
  7. A frame­work through which coun­tries that are fail­ing to address their prob­lems are dealt with

In addi­tion to these recent reforms, dur­ing the ongo­ing eco­nomic cri­sis Ire­land, Por­tu­gal and Greece have been placed in EU/ECB/IMF recov­ery pro­grammes, which deter­mine eco­nomic pol­icy for a few years.56

Hav­ing now fol­lowed the process of Euro­pean inte­gra­tion up to the cur­rent day, it is now pos­si­ble to make some gen­eral remarks. I have already made a dis­tinc­tion between the first wave and sec­ond wave of Euro­pean inte­gra­tion. The first was an attempt to gain con­trol over the mar­ket, in order to both avoid social­ist change and facil­i­tate the inte­gra­tion of labor and agri­cul­tural inter­ests into cap­i­tal­ist gov­er­nance. The sec­ond wave was qual­i­ta­tively dif­fer­ent. Over the last thirty years, with the sec­ond wave of Euro­pean inte­gra­tion, greater and greater respon­si­bil­ity for eco­nomic reg­u­la­tion is being shifted to the Euro­pean level. This hap­pened in response to the polit­i­cal impasse faced by the Left, and the new polit­i­cal eco­nomic sit­u­a­tion that had devel­oped by the 1980s. Con­trol over eco­nomic reg­u­la­tion was taken out of the hand of demo­c­ra­tic national states and trans­ferred to the Euro­pean Union.

V: The European Union as State Form

This brings us back to the Mid­dle Ages – to what might have seemed the slightly eso­teric start to this arti­cle. As described above, the emer­gence of cap­i­tal­ism was char­ac­ter­ized by a divi­sion of social power into eco­nomic power and polit­i­cal power. Eco­nomic power is the power to buy and sell, in par­tic­u­lar to buy labor-power and sell the com­modi­ties pro­duced. Polit­i­cal power, on the other hand, is power over vio­lence. The con­trol over vio­lence implied in polit­i­cal power involves not only the exer­cise of vio­lence, but also the deter­mi­na­tion of when and how to exer­cise that vio­lence. This deter­mi­na­tion process involves set­ting down rules, and the con­tes­ta­tion of those rules. Less abstractly, it is through the state that laws are made, con­tested and enacted. These laws cre­ate the frame­work through which social repro­duc­tion occurs under cap­i­tal­ism. The state thereby uses its con­trol of vio­lence to deter­mine the frame­work through which eco­nomic life occurs, and acts as a means and forum for the con­tes­ta­tion and change of this frame­work.

We can there­fore see how with the post­war set­tle­ment, the frame­work through which eco­nomic life occurred was changed by the expan­sion of state action into aspects of eco­nomic life that were pre­vi­ously con­sid­ered out­side the scope of pol­i­tics.

We can also under­stand what has hap­pened with Euro­pean inte­gra­tion. The first wave of Euro­pean inte­gra­tion was an aspect of the gen­eral expan­sion of state action into pre­vi­ously non-polit­i­cal spheres. The devel­op­ment of the wel­fare state and the incor­po­ra­tion of the orga­nized work­ing class into cap­i­tal­ist gov­er­nance at a national level went hand in hand with Euro­pean inte­gra­tion. The EEC and the orga­ni­za­tions that pre­ceded it devel­oped to facil­i­tate the demo­c­ra­tic gov­er­nance and orga­ni­za­tion of inter­na­tional eco­nomic activ­ity. This was the inter­na­tional dimen­sion of the pri­mar­ily national process of the post­war set­tle­ment.

The sec­ond wave of Euro­pean inte­gra­tion is rather dif­fer­ent. This too can be under­stood as the inter­na­tional dimen­sion of a pri­mar­ily national process. But this national process was a process whereby demo­c­ra­tic inter­ven­tion in the econ­omy was being reduced. How­ever, this did not mean sim­ply dereg­u­la­tion or pri­va­ti­za­tion. In Europe it involved the trans­fer of power over eco­nomic reg­u­la­tion out of the hand of the national state and onto a supra­na­tional level. Increas­ingly, the laws that gov­ern eco­nomic activ­ity in the EU are deter­mined at a Euro­pean level.

While the power of the feu­dal lord was bifur­cated into the eco­nomic power of the mod­ern employer and the polit­i­cal power of the mod­ern state, the devel­op­ment of the EU over the last 30 years involves a fur­ther bifur­ca­tion. The polit­i­cal power of the state involves the cre­ation, con­tes­ta­tion, and imple­men­ta­tion of the legal frame­work for eco­nomic life and the rise of the EU involves the bifur­ca­tion of this polit­i­cal power. The EU now cre­ates the reg­u­la­tions that gov­ern almost all aspects of eco­nomic life in Europe. How­ever, both the con­tes­ta­tion and imple­men­ta­tion of these reg­u­la­tions remains at a national level. This is not sus­tain­able.

Today, the polit­i­cal con­tes­ta­tion of eco­nomic life, which has been the core of lib­eral democ­ra­cies based on uni­ver­sal suf­frage, is increas­ingly impos­si­ble. In each national state, gov­ern­ments change, but the poli­cies do not. Poli­cies are not set by national gov­ern­ment, but by the EU. But it is not pos­si­ble to demo­c­ra­t­i­cally change the gov­ern­ment of the EU, or to demo­c­ra­t­i­cally change the poli­cies it pur­sues.

This has not only drawn out­rage from the Euro­pean elec­torate, but also from national gov­ern­ments. In 2012, when Olli Rehn, the Euro­pean com­mis­sioner for eco­nomic and mon­e­tary affairs directed the Bel­gian gov­ern­ment to cut between €1.2 bil­lion and €2 bil­lion from its bud­get, a gov­ern­ment Min­is­ter responded: “Who knows who Olli Rehn is? Who has seen Olli Rehn’s face? Who knows where he comes from and what he’s done? Nobody. Yet he tells us how we should con­duct our eco­nomic pol­icy.”57

The super­fi­cial solu­tion to this “demo­c­ra­tic deficit” would be to return to national democ­ra­cies. This is not an unpop­u­lar idea. We see this demand being raised by both the far right and the far left. In France, the quasi-fas­cist Front National was the largest party in the 2014 Euro­pean Par­lia­ment elec­tion win­ning one in every four votes cast. In the UK the right-pop­ulist UK Inde­pen­dence Party also topped the poll. In Italy, the “Five Star Move­ment” went from noth­ing to win­ning 20% of the vote. In social demo­c­ra­tic Den­mark, the extreme right Dan­ish People’s Party also topped the poll.

How­ever, the super­fi­cial, and obvi­ously pop­u­lar, appeal for a return to national democ­racy does not cor­re­spond with the social pos­si­bil­i­ties that exist today. I have tried to describe at some length the cri­sis in response to which the EU and the sec­ond wave of Euro­pean Inte­gra­tion devel­oped. And I have tried to show that the alter­na­tive route pur­sued by the Mit­ter­rand gov­ern­ment in France in the early 1980s did not and could not work. In the pres­ence of free cap­i­tal move­ment, the kind of poli­cies that Mit­ter­rand pur­sued will always end with bal­ance of pay­ments crises.

This is not to pose some grim inevitabil­ity to the Euro­pean devel­op­ment, but rather to point to the fact that the scope of change that has occurred over the last 150 years is mas­sive, and that to change the direc­tion of its fur­ther devel­op­ment involves more than polit­i­cal ambi­tion or a change in polit­i­cal focus. The post­war set­tle­ment hap­pened where there was an immi­nent threat of social­ist rev­o­lu­tion and where, due to wartime cap­i­tal con­trols, it was very hard for cap­i­tal flight to occur. We are liv­ing in a very dif­fer­ent world.

Europe is at an impasse. Eco­nomic reg­u­la­tion now takes place at a Euro­pean level, but the social con­tes­ta­tion of eco­nomic issues is con­tained at an impo­tent national level. It seems most likely that Euro­pean inte­gra­tion will con­tinue to fol­low the path mapped out in this arti­cle for the fore­see­able future. Despite this, one fact remains: all struc­tures of gov­er­nance rely on the pas­sive con­sent of the gov­erned. It is hard to see much hope for social­ist change in Europe. But it is equally hard to see European’s pas­sive con­sent last­ing indef­i­nitely.

  1. The name given to the Euro­pean Com­mis­sion, the Euro­pean Cen­tral Bank and the Inter­na­tional Mon­e­tary Fund. 

  2. See for exam­ple John Gilling­ham, Euro­pean inte­gra­tion, 1950-2003: Super­state or new mar­ket econ­omy? (Cam­bridge: Cam­bridge Uni­ver­sity Press, 2003), Harold James, Mak­ing the Euro­pean Mon­e­tary Union (Cam­bridge, Mass.: Har­vard Uni­ver­sity Press, 2012), or David Marsh, The Euro: The Bat­tle for the New Global Cur­rency (New Haven, Conn: Yale Uni­ver­sity Press, 2011), which all provide won­der­ful his­to­ries of the EU despite their lib­eral assump­tions and diplo­matic focus.  

  3. At times this cri­tique leads to vac­u­ous calls for a “Social Europe” to coun­ter­bal­ance eco­nomic inte­gra­tion, as though social pol­icy is some­how dis­tinct from eco­nomic pol­icy. 

  4. This extends down from seri­ous aca­d­e­mic work such as Wal­ter Lip­gens, A His­tory of Euro­pean Inte­gra­tion (Oxford: Claren­don Press, 1982) and Desmond Dinan Ever Closer Union (Bas­ingstoke: Pal­grave Macmil­lan, 2010) down to the Euro­pean Com­mis­sion claims about its own his­tory. See foot­note 17. 

  5. See some of the argu­ments in Daniel Levy, Max Pen­sky, and John Tor­pey, eds., Old Europe, New Europe, Core Europe: Transat­lantic Rela­tions After the Iraq War (Lon­don: Verso, 2005).  

  6. Jan Zielonka, Europe as empire: The nature of the enlarged Euro­pean Union (Oxford: Oxford Uni­ver­sity Press, 2006). 

  7. As already men­tioned, I will be address­ing the devel­op­ment of the EU by look­ing at how Euro­pean responses were pro­vided to national and Europe-wide polit­i­cal and eco­nomic crises. Unlike much of the lit­er­a­ture on the devel­op­ment of the EU, I will not be engag­ing in detailed diplo­matic or leg­isla­tive his­tory. My approach here is not the norm but it is also not par­tic­u­larly novel. A sim­i­lar the­o­ret­i­cal argu­ment to mine has been pre­sented pre­vi­ously by the arti­cle by Werner Bone­feld in his edited vol­ume, The Pol­i­tics of Europe: Mon­e­tary Union and Class (New York, N.Y: Pal­grave, 2001). And my attempt to give a mate­ri­al­ist analy­sis of Euro­pean inte­gra­tion draws on and echoes the work of lib­eral eco­nomic his­to­ri­ans, in par­tic­u­lar, Alan Mil­ward, The Euro­pean res­cue of the nation state (Lon­don: Rout­ledge, 1992) and Barry Eichen­green, The Euro­pean Econ­omy Since 1945: Coor­di­nated Cap­i­tal­ism and Beyond (Prince­ton Uni­ver­sity Press, 2008). 

  8. This school has also been referred to as “Polit­i­cal Marx­ism” and as “Cap­i­tal-Cen­tric Marx­ism.” Cen­tral to this is the work of Robert Bren­ner (See in par­tic­u­lar his arti­cles in Trevor Henry Aston and Charles H.E. Philpin, eds., The Bren­ner debate: agrar­ian class struc­ture and eco­nomic devel­op­ment in pre-indus­trial Europe (Cam­bridge Uni­ver­sity Press, 1987), and Robert Bren­ner, “The ori­gins of cap­i­tal­ist devel­op­ment: a cri­tique of neo-Smithian Marx­ism,” New Left Review 104, no. 1 (1977), 25-92). Other major fig­ures and works include Ellen Meiksins Wood, The origin of cap­i­tal­ism: A longer view (Lon­don: Verso, 2002), Charles Post, The Amer­i­can road to cap­i­tal­ism: Stud­ies in class-struc­ture, eco­nomic devel­op­ment, and polit­i­cal con­flict, 1620-1877 (Lei­den: Brill, 2011), Heide Ger­sten­berger, Imper­sonal power: His­tory and the­ory of the Bour­geois State (Lei­den: Brill, 2007) and Benno Teschke, The Myth of 1648: Class, Geopol­i­tics, and the Mak­ing of Mod­ern Inter­na­tional Rela­tions (Lon­don: Verso, 2003). 

  9. The major Eng­lish lan­guage com­pi­la­tion of this debate is Hol­loway and Sol Pic­ciotto, State and Cap­i­tal: A Marx­ist Debate, (Lon­don: E. Arnold, 1978). Heide Gerstenberger’s Imper­sonal Power, men­tioned above, grew out of this debate. 

  10. As Karl Marx writes in vol­ume 3 of Cap­i­tal: “The speci­fic eco­nomic form, in which unpaid sur­plus-labor is pumped out of direct pro­duc­ers, deter­mi­nes the rela­tion­ship of rulers and ruled, as it grows directly out of pro­duc­tion itself and, in turn, reacts upon it as a deter­min­ing ele­ment. Upon this, how­ever, is founded the entire for­ma­tion of the eco­nomic com­mu­nity which grows up out of the pro­duc­tion rela­tions them­selves, thereby simul­ta­ne­ously its speci­fic polit­i­cal form. It is always the direct rela­tion­ship of the own­ers of the con­di­tions of pro­duc­tion to the direct pro­duc­ers – a rela­tion always nat­u­rally cor­re­spond­ing to a def­i­nite stage in the devel­op­ment of the meth­ods of labor and thereby its social pro­duc­tiv­ity – which reveals the inner­most secret, the hid­den basis of the entire social struc­ture and with it the polit­i­cal form of the rela­tion of sov­er­eignty and depen­dence, in short, the cor­re­spond­ing speci­fic form of the state.” Karl Marx, Cap­i­tal: A cri­tique of polit­i­cal econ­omy, Vol 3 (Har­mondsworth: Pen­guin, 1981), 927. 

  11. What fol­lows is of course merely an illus­tra­tive sim­pli­fi­ca­tion. 

  12. The issue here is not that the emer­gence of the bour­geois state allows for the free res­o­lu­tion of class con­flict. If this were the case, the notion of class would dis­solve into that of cit­i­zen­ship. Rather, the point is merely that the state pro­vides a forum for the medi­a­tion of class con­flict, not for its res­o­lu­tion. 

  13. It is per­haps worth quot­ing from the found­ing pro­gram of the Fourth Inter­na­tional to get some fla­vor for this rev­o­lu­tion­ary fer­vor: “The world polit­i­cal sit­u­a­tion as a whole is chiefly char­ac­ter­ized by a his­tor­i­cal cri­sis of the lead­er­ship of the pro­le­tariat… Mankind’s pro­duc­tive forces stag­nate… The bour­geoisie itself sees no way out… The present cri­sis, far from hav­ing run its full course, has already suc­ceeded in show­ing that ‘New Deal’ pol­i­tics, like Pop­u­lar Front pol­i­tics in France, opens no new exit from the eco­nomic blind alley… Inter­na­tional rela­tions present no bet­ter pic­ture… All talk to the effect that his­tor­i­cal con­di­tions have not yet ‘ripened’ for social­ism is the pro­duct of igno­rance or con­scious decep­tion. The objec­tive pre­req­ui­sites for the pro­le­tar­ian rev­o­lu­tion have not only ‘ripened’; they have begun to get some­what rot­ten. With­out a social­ist rev­o­lu­tion, in the next his­tor­i­cal period at that, a cat­a­stro­phe threat­ens the whole cul­ture of mankind. The turn is now to the pro­le­tariat, i.e., chiefly to its rev­o­lu­tion­ary van­guard. The his­tor­i­cal cri­sis of mankind is reduced to the cri­sis of the rev­o­lu­tion­ary lead­er­ship… The present cri­sis in human cul­ture is the cri­sis in the pro­le­tar­ian lead­er­ship. The advanced work­ers, united in the Fourth Inter­na­tional, show their class the way out of the cri­sis. They offer a pro­gram based on inter­na­tional expe­ri­ence in the strug­gle of the pro­le­tariat and of all the oppressed of the world for lib­er­a­tion. They offer a spot­less ban­ner. Work­ers – men and women – of all coun­tries, place your­selves under the ban­ner of the Fourth Inter­na­tional. It is the ban­ner of your approach­ing vic­tory!”; “The Death Agony of Cap­i­tal­ism and the Tasks of the Fourth Inter­na­tional: The Tran­si­tional Pro­gram.” 

  14. The Atlantic Char­ter,” August 14, 1941. 

  15. Barry Eichen­green, “Insti­tu­tions and eco­nomic growth: Europe after World War II,” in Eco­nomic Growth in Europe since 1945, eds., Nico­las Crafts and Gianni Toniolo (Cam­bridge Uni­ver­sity Press, 1996), 41. 

  16. Mil­ward, The Euro­pean res­cue of the nation state, 30-31. 

  17. The Euro­pean Union itself, in a slightly silly imi­ta­tion of the US found­ing fathers, lists these peo­ple along with Joseph Bech (Lux­em­bourg), Johan Willem Beyen (Nether­lands), Win­ston Churchill (United King­dom), Alcide De Gasperi (Italy) as the “The Found­ing Fathers of the EU.” 

  18. Schu­man Dec­la­ra­tion,” May 9, 1950 

  19. Treaty con­sti­tut­ing the Euro­pean Coal and Steel Com­mu­nity,” April 18, 1951. 

  20. Mil­ward, The Euro­pean res­cue of the nation state, 83. 

  21. Today the ECSC does not exist and the Treaty of Paris was allowed to lapse. 

  22. Today the “con­sti­tu­tion” of the EU com­prises two treaties, a num­ber of pro­to­cols and the Char­ter of Fun­da­men­tal Rights. Col­lec­tively they are gen­er­ally referred to as the “Con­sol­i­dated Treaties” or sim­ply the “Treaties.” The two treaties are: the “Treaty on Euro­pean Union” (TEU), which is an amended ver­sion of the Maas­tricht Treaty, which estab­lished the EU, and the “Treaty on the Func­tion­ing of the Euro­pean Union” (TFEU), which is an amended ver­sion of the Treaty of Rome, which estab­lished the EEC. “The Con­sol­i­dated Treaties.” 

  23. There is a sub­stan­tial dif­fer­ence between the com­mon mar­ket and the sin­gle mar­ket. I dis­cuss this in Sec­tion IV of this arti­cle. 

  24. The dif­fer­ing approaches to deal­ing with this need to socially cush­ion the shift to free trade sheds some light on the com­par­a­tive devel­op­ment of the EEC and the Euro­pean Free Trade Asso­ci­a­tion, which was the UK’s pro­posed alter­na­tive. 

  25. The agree­ment on CAP was a major issue in par­tic­u­lar for France. After the war, the agri­cul­tural heart­land of pre-war Ger­many was in what had become East Ger­many and Poland. 

  26. The first expan­sion of the EEC was slightly rocky, with ear­lier appli­ca­tions in 61 for mem­ber­ship being vetoed by De Gaulle. The UK, Ire­land Den­mark and Nor­way applied for mem­ber­ship. But when De Gaulle vetoed the UK’s appli­ca­tion the entire expan­sion process was sus­pended. Nor­way sub­se­quently with­drew from the process and remains to this day out­side the EU. The rea­son for De Gaulle’s veto is gen­er­ally explained by his anti-Amer­i­can­ism. In Decem­ber 62 the UK and US reached an agree­ment whereby the US would provide the mis­sile deliv­ery tech­nol­ogy for the UK’s nuclear war­heads. De Gaulle saw this as the UK aban­don­ing its mil­i­tary sov­er­eignty and accept­ing its inter­na­tional posi­tion as sub­or­di­nate to the US. There­fore in Jan­u­ary 63, De Gaulle declared at a press con­fer­ence that if the UK joined the EEC, the com­mu­nity “world not endure for long [but] instead would become a colos­sal Atlantic com­mu­nity under Amer­i­can dom­i­na­tion and direc­tion.” Desmond Dinan, Ever Closer Union, 40-41. How­ever, as Andrew Moravc­sik points out a much larger con­cern for De Gaulle appears to have been the risk that the UK would veto the still on-going CAP nego­ti­a­tions. Indeed on the day of the above-men­tioned press con­fer­ence De Gaulle observed pri­vately that the UK should be free to join the EEC after the CAP was irre­versibly agreed. Andrew Moravc­sik, The choice for Europe: social pur­pose and state power from Messina to Maas­tricht, (Ithaca, NY: Cor­nell Uni­ver­sity Press, 1998), 190-191. 

  27. Werner Report,” Octo­ber 8, 1970. 

  28. Mac­Dougall Report,” April 1977. 

  29. See Tony Brown’s paper on the emer­gence of the Social Action Pro­gramme, “Some­thing Worth Work­ing For: The Emer­gence of the 1973 Social Action Pro­gramme.”  

  30. Death Agony of Cap­i­tal­ism,” 1938. 

  31. The mea­sure­ment of the profit rate is a highly con­tentious issue. So for exam­ple, some find no uptick in the profit rate in the 80s. How­ever, there is lit­tle debate on the fact that the profit rate in West­ern Europe declined in the 1955-75 period. 

  32. In Italy, the invest­ment rate fluc­tu­ated much more. The post­war rise in the invest­ment rate ended in the mid-60s but from that point on it is harder to see a trend. 

  33. If a cur­rency started at the bot­tom of its band, it could increase by 4.5%, and, vice versa if a coun­try started at the top of its band. If both hap­pened simul­ta­ne­ously the first coun­try could appre­ci­ate by 9% against the sec­ond. 

  34. See for exam­ple Eric Hobsbawm’s arti­cle “The for­ward march of labor halted,” 1978. 

  35. See in par­tic­u­lar the vol­ume In and Against the State, 1979. 

  36. Italy 80-81: After Marx, Jail! The Attempted Destruc­tion of a Com­mu­nist Move­ment (Lon­don: Red Notes, 1981). 

  37. See Marco Rev­elli, “Defeat at FIAT,” 1980. 

  38. The Car­na­tion Rev­o­lu­tion in Por­tu­gal (1974) and the Athens Poly­tech­nic Upris­ing in Greece (1973). 

  39. The “Con­sti­tu­tion for Europe” (2004) was of course never imple­mented, but was replace by the Lis­bon Treaty (2007), which car­ried through the pro­posed constitution’s reforms as amend­ments to the Treaty of Rome (1957) and the Maas­tricht Treaty (1992). Thereby mak­ing the Treaty of Rome (renamed the Treaty on the Func­tion­ing of the Euro­pean Union (TFEU) and the Maas­tricht Treaty (renamed the Treaty on Euro­pean Union (TEU), the con­sti­tu­tion of Europe. These two treaties, along with a series of pro­to­cols and the Char­ter of Fun­da­men­tal Rights of the Euro­pean Union, form the “Con­sol­i­dated Treaties” or sim­ply “the Treaties.” See foot­note 22. 

  40. The offi­cial title of the Com­mis­sion White Paper on the Inter­nal Mar­ket (1985) was “Com­plet­ing the Inter­nal Mar­ket: White Paper from the Com­mis­sion to the Euro­pean Coun­cil.” 

  41. This devel­oped from the ear­lier men­tioned Paris sum­mit in Octo­ber 1972, to another in Decem­ber 1974, to the Doc­u­ment on the Euro­pean Iden­tity of Decem­ber 1973, the state­ment in the Hague of Novem­ber 1976 to the “Solemn Dec­la­ra­tion on Euro­pean Union” of Stuttgart in June 1983. In 1984, the Euro­pean Par­lia­ment approved a “Draft Treaty estab­lish­ing the Euro­pean Union,” known as the Spinelli Draft. These events helped cre­ate the impe­tus for the com­mis­sion­ing of a report by the Fontainebleau Euro­pean Coun­cil of 25 and 26 June 1984, named the Dooge Report, and the pub­li­ca­tion of a White Paper on the Inter­nal Mar­ket of 1985 by the Delors Com­mis­sion in Decem­ber 92. The Dooge Report (1985) and the Com­mis­sion White Paper on the Inter­nal Mar­ket (1985) formed the basis of both the SEA (1986) and (along with the later Delors Report on Eco­nomic and Mon­e­tary Union (1988) the Maas­tricht Treaty (1992). 

  42. Hel­mut Kohl was the Ger­man Chan­cel­lor for the astound­ing long period of Octo­ber 1, 1982 – Octo­ber 27, 1998. He was pro-mar­ket con­ser­v­a­tive but played a rel­a­tively minor role in the SEA nego­ti­a­tions when com­pared to Germany’s role in the rest of the Euro­pean inte­gra­tion process. 

  43. Although, as the Sin­gle Euro­pean Act was the most sig­nif­i­cant set of reforms to advance Euro­pean inte­gra­tion since 1957, it is odd to call it a min­i­mal­ist pro­gramme. Dinan is fur­ther mis­taken to imply that whereas Thatcher was con­cerned with eco­nomic inte­gra­tion, this was of less con­cern for other coun­tries. Desmond Dinan, Ever Closer Union, 82. 

  44. Fabius shortly after­wards went on to be appointed Frances youngest ever Prime Min­is­ter, and later went on to spear­head the suc­cess­ful “No” cam­paign against the EU Con­sti­tu­tion in 2005. Today he serves as France’s For­eign Min­is­ter. 

  45. Andrew Moravc­sik, The Choice for Europe, 332-347. 

  46. The 1972 Munich Olympics mas­sacre by the Pales­tinian group “Black Sep­tem­ber” was a major moti­vat­ing fac­tor in the estab­lish­ment of TREVI. 

  47. This has been on the cards since the estab­lish­ment of the West­ern Euro­pean Union (WEU) in 54, through the French “Fouchet Plan” for Euro­pean inde­pen­dence from NATO in the 60s, all the way up to Franco-Ger­man oppo­si­tion to the Iraq war (2001-2003), the cre­ation of the EU For­eign Min­is­ter with the slightly absurd title of “High Rep­re­sen­ta­tive of the Union for For­eign Affairs & Secu­rity Pol­icy” under Lis­bon (2007) up to this year’s attempts to respond jointly to the tur­moil in Ukraine. Despite all these ini­tia­tives, Europe, despite its size and impor­tance, strug­gles to act col­lec­tively on ques­tions of secu­rity and defense on a world scale – a fact that, most prob­a­bly, is not a cause for tears. 

  48. Dur­ing the nego­ti­a­tions, Britain got an “opt out” whereby it was the only coun­try in the EU which would not join the Euro and have its cur­rency float freely. Then the ref­er­en­dum in Den­mark on the Maas­tricht Treaty was defeated, so the gov­ern­ment nego­ti­ated a num­ber of opt outs, includ­ing one whereby it would not have to adopt the euro, but would have to remain within 2.25% of a fixed exchange rate (essen­tially the same arrange­ment as the “snake” men­tioned ear­lier). Finally, Swe­den, despite hav­ing com­mit­ted to join­ing the Euro, has avoided doing so through a loop­hole in the treaties. 

  49. Prior to the launch of the euro in 1999 the ERM II was named the ERM. The need for this name change is com­pletely beyond my com­pre­hen­sion. 

  50. As noted in foot­note 48, Den­mark is not part of the Euro. It is in the ERM II. Den­mark does not have to pro­gress fur­ther because of their opt out. Lithua­nia, which is the only other coun­try cur­rently in the ERM II, will adopt the euro in 2015. The legal loop­hole men­tioned in rela­tion to Swe­den is that despite meet­ing the con­ver­gence cri­te­ria, they have not joined ERM II, and there­fore their adop­tion of the Euro­zone is inten­tion­ally at an impasse. 

  51. The infla­tion rate must not be 1.5% higher than the unweighted aver­age of the three low­est infla­tion rates in the EU. (If it is deemed that the any of the low­est infla­tion rates are low for “excep­tional” rea­sons they are excluded from this cal­cu­la­tion. 

  52. This is sim­i­lar to the infla­tion rate cri­te­ria. The yield must not be 2% higher than the un-weighted aver­age of the three low­est infla­tion rates in the EU etc. 

  53. It is indica­tive of both the changes over the last 30-40 year in social struc­tures and the self-under­stand­ing of the left and its project that “social” ques­tions are seen as sup­ple­men­tary and/or sep­a­rate from eco­nomic ques­tions. 

  54. Health­care and pri­mary level edu­ca­tion are two indus­tries that remain largely reg­u­lated at a national level. It is easy to see the com­par­ison here by com­par­ing pri­mary with third level edu­ca­tion. Or by com­par­ing the reg­u­la­tion of the pro­vi­sion of health­care with the approval process for drugs and devices used in health­care. The for­mer dif­fers coun­try-by-coun­try, while the lat­ter is more-or-less the same across the EU. 

  55. The Euro­pean Semes­ter process has been estab­lished through two sets of leg­isla­tive reforms called the “Six Pack” and the “Two Pack.” Infor­ma­tion regard­ing and links to this leg­is­la­tion is avail­able online at “EU Eco­nomic Gov­er­nance.” 

  56. A num­ber of accounts of recent devel­op­ments in Europe dur­ing the cri­sis have been pub­lished. Carlo Bas­tasin, Sav­ing Europe: How national pol­i­tics nearly destroyed the euro, (Wash­ing­ton, D.C: Brook­ings Insti­tu­tion Press, 2012), Paul Legrain, Euro­pean spring: Why our economies and pol­i­tics are in a mess - and how to put them right (2014) and David Marsh, Europe’s dead­lock: How the euro cri­sis could be solved, and why it won’t hap­pen (New Haven, Con­necti­cut: Lon­don, 2013), are all good, albeit quite dif­fer­ent from each other. 

  57. Quoted in Paul Legrain, Euro­pean Spring, 425. 

Author of the article

is currently a PhD candidate in economic history at the Economics, Econometrics and Finance department at University of Groningen in the Netherlands.