Why do democratic nation-states transfer sovereignty and power to regional and international organisations? This is the fundamental question, whether made explicit or not, that lies behind most research on European integration.
One of the dominant explanations is neo-functionalism. This theory postulates that nation-states will gradually transfer most policy functions to supra-national authorities such as the European Union (EU) as a functional response to growing international economic interdependence. The argument was that, over-time, the EU will develop the capacities akin to a federal state.
The eurozone crisis has clearly shown that this is not the case. Politics matters.
The second dominant explanation for European integration, which emerged in reaction to neofunctionalism, is intergovernmentalism. This theory postulates that all decision-making on the process of European integration is determined by national governments in response to domestic economic interests. Power remains with national executives not supranational authorities (who simply act in the interest of powerful states).
Why then is the most important actor in responding to the crisis the European Central Bank (ECB)?
The third quasi-descriptive theory to explain European integration is ‘multi-level governance‘. In reaction to the rational choice assumptions of intergovermentalists, this theory argues that the nation-state no longer has monopoly over decision-making. Political and legal authority is now diffused across the national, sub-national and supranational levels.
In essence, this approach is primarily interested in illustrating that ‘euro governance’ is more important than ‘state-centric’ analyses in explaining policy outcomes. The process and outcomes of European integration are the independent not dependent variable.
The problem with multi-level governance theory is that the core policy areas that concern the preference of citizens such as fiscal, welfare, and the labour market, all remain organised and coordinated at the level of the nation-state. National governments have a veto on these policies.
However, in the aftermath of the eurozone crisis, the EU has developed new competencies to influence national budgets and monitor fiscal and labour market outcomes. Interpretations of existing legal treaties, such as the no-bailout clause, have become significantly stretched. National governments in the Council have emerged as the executive of the EU. But simultaneously, given the monetary constraints of EMU, they lack the instruments to condition policy outcomes at the domestic level.
The outcome is a form of post-democratic executive federalism with Germany sitting at the top.
This leads to the observation, and made obvious in the aftermath of the Euro crisis, that neither national governments nor the multi-level polity of the EU have the coordinating capacity to deal with the empirical problems facing Europe today. This is because none of the theoretical frameworks outlined above took nearly seriously enough the impact of global financial liberalisation on politics.
This is the real crisis facing decision-makers in the ‘multi-level’ polity of Europe.
Political scientists studying European integration need to confront the question: what sort of political economy is emerging in response to financial globalisation? Furthermore, in a world of increasing economic integration can member-states of the European Union construct an effective monetary system that responds to the normative considerations of a democratic polity?
This type of research requires re-integrating comparative and international political economy with European studies. It requires taking comparative difference seriously.
On the one hand politicising the European demos risks intensifying nationalism (as opposed to cross-national federal transnational alliances). But on the other, more supranational economic technocracy (and less politicisation) risks undermining the democratic legitimacy of the European Union itself.