The Flaw in the Construction of the Monetary Union

This is a link to an article by Jurgen Habermas. Interestingly, he has come around to what many of political economists have been arguing since 2008 – the core problem in Europe is the political design of the EMU. But, he draws our attention not to the orthodox liberal economic policies being adopted in response to the crisis but the process through which decisions are being taken. This process is fundamentally undemocratic. No decisions are being contested at national or European level but through elite networks.

Habermas comes from the post-war social democratic German tradition that considers the European project as one of democratic unification. Despite the noble aspirations of this tradition, it completely closed its eyes to the reality of Europe since the late 1990s. Europe, and reflected in the design of the EMU, has been about creating a single liberal market premised on orthodox economic coordination. Quite simply it is has evolved into a market-economic project not a democratic one. There has been no convergence of social rights and the process of open methods of coordination in these areas (i.e. not hard law as it pertains to property, competition and markets) is a soft compromise to appease social democrats rather than an embedded form of democratic governance.

Habermas draws our attention to the decision on the 25th March at the European Council (which was barely covered by the Irish press) where heads of government decided to adopt a variety of financial, wage, labour and fiscal policies to tackle the crisis. These are to be coordinated not through formal-legal processes of decision-making but open methods of coordination. On a side note – if you look at the discourse of most politicians in Europe it is primarily focused on  flexing their austerity muscles. A political machismo –  look at how big my austerity package is!

The fact that most of these decisions are being taken in open methods of coordination means that they are never really challenged or contested either in national parliaments (or amongst the social partners) or at the European parliament and European council. Thus, contrary to what many scholars argue, the fluid methods of economic coordination premised on certain economic assumptions on how to resolve ‘market problems’ are less not more democratic. They are totally immune from legal procedure.

The policy of improving economic competitiveness through reducing labour costs (i.e. increase output, productivity and profit whilst holding down wages) and fiscal consolidation (cut spending on welfare, health and pensions) is being presented as a technical problem that requires political will for implementation (captured in an article by Wolfgang Schauble, the German Finance minister this morning in the FT). If there is no political process to challenge this at national or European level then riots and direct action on the street may be the only course of action for democratic voices to be heard.

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