The Potential for an Eu Supracapitalism

THE POTENTIAL FOR AN EU SUPRACAPITALISM By DAVID JENKINS A thesis submitted to the University of Birmingham for the degree of DOCTOR OF PHILOSOPHY The Department of Politics and International Studies School of Government and Society College of Social Sciences University of Birmingham September 2015 University of Birmingham Research Archive e-theses repository This unpublished thesis/dissertation is copyright of the author and/or third parties. The intellectual property rights of the author or third parties in respect of this work are as defined by The Copyright Designs and Patents Act 1988 or as modified by any successor legislation. Any use made of information contained in this thesis/dissertation must be in accordance with that legislation and must be properly acknowledged. Further distribution or reproduction in any format is prohibited without the permission of the copyright holder. Abstract This research set out to establish whether the supranational management by the European Central Bank (ECB) of the monetary policy and exchange rate policy of the 12 European Union (EU) member states adopting the euro single currency, could be considered as a precursor to the development of a one-size-fits-all model of EU capitalism. In doing so, eight typologies of EU national capitalisms were constructed from the broad range of literature of types or varieties of capitalism, and were employed to test the performance of their economies between 1986 and 2006. Using a broad range of macroeconomic variable indicators over a period that began with Single European Act (SEA) and coursed through seven years past the launch of the euro in 1999, levels of influence of the ECB and euro as institutions on the performance of the selected capitalism groups were measured in order to establish the extent to which the ECB as a genuine supranational body would be able to both complete the planned transmission to full EU economic and monetary union as a basis for future EU political union. The findings suggest that although there is evidence of significant overall influence over most of the macroeconomic variable indicators of the selected typologies, it remains unclear whether such supranational influence will be enough to overcome the difficulties surrounding the more politically sensitive areas of taxation and unemployment. And, until the effective supranational management of these variables, which would ultimately encompass levels of supranational influence over fiscal policy and tax harmonisation, the current level of ECB supranational power will remain as it is for the foreseeable future. I Acknowledgements In many ways I am pleased that my acknowledgements are few. This is not in any way to understate the magnitude of the indebtedness I variously owe these generous and supportive contributors to the making of this thesis, but rather demonstrates both the context in which the work was originally conceived, and the nature of its rather long gestation period. This also reflects the very supportive manner in which I have been at different times, inspired, advised, guided, and always encouraged, throughout what has been a long journey of self- discovery. First of all I would like to thanks Colin Hay for introducing me to political science and international political economy in the first place, and also inspiring me to study for my Ph.D. Secondly, my debt of gratitude to Matthew Watson is immense for a whole range of reasons, not least of which is for his continuing support and guidance throughout the whole process. However, none of this would have been possible without the love and support of Madeline. Thank you II Contents Chapter Title Page Abstract I Acknowledgements II List of Figures IV List of Tables IV Introduction 1 1 Varieties of Capitalism and European Integration literatures 20 2 The ECB and the Eurosphere as social constructs: 56 a constructivist-institutionalism approach 3 An analytical typology of EU national capitalisms 81 4 Analyses of selected EU macroeconomic variables 109 5 The evolution and performance of the ECB 159 6 A monetary production model for the Eurosphere 195 Conclusions 222 References and Bibliography 234 Appendices (1-10) 253 III List of Figures Figure Title Page number number 1 A politico-religious-economic linear-causal trajectory of capitalism 25 2 Classifying politico-economic systems and the global shift towards 32 the free-market 3 A constructivist continuum 63 4 The spectrum of neoinstitutionalist variants 70 5 EU growth by annual percentage change in Gross Domestic Product 116 (GDP) 1986-2006 6 Growth by increase in EU Gross Domestic Product (GDP) per head of 119 population 1986-2006 7 EU productivity by annual percentage change 1986-2006 122 8 EU productivity by annual percentage change – comparison with 123 USA and Japan 1896-2006 9 EU inflation by Gross Domestic Product (GDP) deflator 1986-2006 127 10 EU inflation by Harmonised Index of Consumer Prices (HICP) 1997- 128 2006 11 EU unemployment 1986-2006 134 12 EU social benefit payments as a percentage of Gross Domestic 136 Product (GDP) 1986-2006 13 EU direct government taxation as a percentage of Gross Domestic 140 Product (GDP) 1986-2006 14 Intra-EU trade openness 1986-2006 148 15 Extra-EU Trade openness 1986-2006 148 16 Spaces of EU politico-economic contestation 170 17 Inflation and money growth (1979-1999) average yearly changes (low 177 inflation counties) 18 Consumer prices in selected countries compared to Eurosphere 2001- 188 2006 19 Unemployment – Eurosphere compared to selected economies 2001- 189 2006 20 Industrial production – Eurosphere compared to selected economies 191 2001-2006 21 10 year government bond returns – Eurosphere compared to selected 192 economies 2001-2006 22 Illustration of the allocative and non-allocative features of the 203 monetary production economy 23 The flow of funds in an adapted monetary circuit model 220 24 Illustration of the Eurosphere Monetary Production Model 221 IV List of Tables Table Title Page number number 1 A typology of the wealth distributions of France, Germany, and 5 the United Kingdom 2 An evolutionary schematic of capitalism’s development 10 3 Typology of national politico-economic systems 34 4 Market competition, corporate strategy, and national structures 36 5 A constructivist-institutionalism theoretical alignment to the ECB 57 and the Eurosphere 6 Comparisons of traditional institutionalism and 67 neoinstitutionalism 7 EU members states’ interpretations of the capitalism model 97 8 An analytical typology of EU national capitalisms 108 9 Summary of selected EU macroeconomic variables indicators 113 10 Explanation of statistical output components 114 11 EU growth – summary of statistical analysis 1986-2006 117 12 EU GDP per head of population – summary of statistical analysis 121 1986-2006 13 EU productivity – summary of statistical analysis 1986-2006 125 14 EU inflation – summary of statistical analysis 1986-2006 129 (GDP deflator) 15 EU inflation – summary of statistical analysis 1997-2006 130 (HICP) 16 EU unemployment – summary of statistical analysis 1986-2006 135 17 EU social benefits payments – summary of statistical analysis 138 1986-2006 18 EU Direct government taxation – summary of statistical analysis 142 1986-2006 19 EU direct government taxation and social benefits payments 144 comparisons 1986-2006 20 Correlative relationships between direct government taxation and 146 social benefits payments 21 EU trade openness – summary of statistical analysis 149 22 Analysis of statistical outcomes by typological group and 155 economic variable indicators taken from the statistical summaries tables 23 Analysis of statistical outcomes by collective group and 156 economic variable indicators taken from the statistical summaries tables 24a The evolution of the Eurosphere 1962-1995 161 24b The evolution of the Eurosphere 1996-2006 162 25 Inflation and GDP growth in accession countries 1997-2002 176 V Introduction Origins and background The notion and concept of a European ‘supracapitalism’ originate in two aspects of international political economy: the asymmetric distributive patterns of wealth1, and the national politico-economic systems that manage the generation, aggregation, and deployment of wealth. In particular, the original focus rested on how differing politico-economic systems reconcile the generation of wealth with attempting to achieve optimal levels of welfare for their populations; effectively, the nexus between the creation and distribution of wealth and the politico-economic systems nation-states choose to adopt within any given timeframe. And, while these constructs can be largely typified by levels of direct government involvement in the economy and the property rights of individuals, they are also increasingly influenced by, and in some part related to, international and transnational institutions and structures such as the Organisation for Economic Co-operation and Development (OECD); the International Monetary Fund (IMF); and the World Trade Organisation (WTO). And, with emergence of the European Union (EU) as an experiment in regional political and economic integration, where a number of individual politico-economic systems, or national capitalisms, are both interconnected and interdependent at various levels, offered itself as both a relevant and timely opportunity to explore the capitalist system in a clearly defined and delimited international political economy laboratory. In particular, the question is, given the long history of capitalism’s recurring and sometimes extraordinary

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