European Integration, 195O–2Oo3 Superstate Or New Market Economy?
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European Integration, 195o–2oo3 Superstate or New Market Economy? JOHN GILLINGHAM University of Missouri, St. Louis published by the press syndicate of the university of cambridge The Pitt Building, Trumpington Street, Cambridge, United Kingdom cambridge university press The Edinburgh Building, Cambridge cb2 2ru, uk 40 West 20th Street, New York, ny 10011-4211, usa 477 Williamstown Road, Port Melbourne, vic 3207, Australia Ruiz de Alarcón 13, 28014 Madrid, Spain Dock House, The Waterfront, Cape Town 8001, South Africa http://www.cambridge.org © John Gillingham 2003 This book is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 2003 Printed in the United States of America Typeface Sabon 10/12 pt. System ams-tex [fh] A catalog record for this book is available from the British Library. Library of Congress Cataloging in Publication data available isbn 0 521 81317 4 hardback isbn 0 521 01262 7 paperback Contents Preface page xi List of Abbreviations xix I A German Solution to Europe’s Problems? The Early History of the European Communities, 195o–1965 Introduction to Part I A New Global Setting 3 Chapter 1 The Liberal Project for an Integrated Europe 6 The Legacy of Friedrich von Hayek 6 The Classical Liberal Solution to the German Problem 11 Chapter 2 The Rise and Decline of Monnetism 16 Monnet and the Condition of Postwar Europe 18 Monnet and the Origins of European Institutions 22 Chapter 3 More or Less Liberal Europe: The Institutional Origins of Integration 34 From Pax Americana to Pax Universalia 37 Miracles Can Sometimes Happen: Erhard’s Reforms 41 All Hands on Board: The Re-launching 43 Chapter 4 All or Nothing? The Founding of the EEC and the End of an Era, 1958–1966 53 Walter Hallstein’s Commission 55 Independence, Interdependence, or Dependence? President Kennedy and Europe 66 Empty Chairs and Hallstein’s End 68 Conclusion to Part I Needed: A New Integration Scenario 73 II From Embedded Liberalism to Liberalism, A Step Forward: European Integration and Regime Change in the 197os Introduction to Part II A New European Situation 81 Chapter 5 From Realms of Theory to a Sphere of Action: Integration Revived 84 Taking Stock in a Whirlwind: Rethinking Integration 85 vii viii Contents Regime Change 97 Dollar Dethronement and Collapse of the Bretton Woods System 100 Chapter 6 Better than Muddling Through: The World Market, the European Community, and the Member-States in the 1970s 105 The New Protectionism 106 Neomercantilism and Corporatism in France, Germany, Italy, and Great Britain 110 A Most Imperfect Union: Structure and Policy Process at the EC 120 Toward a Less Imperfect Union: European Law, the European Council, Monetary Convergence, and the Recovery of International Trade 130 Margaret Thatcher: Founding Mother of the New Europe 136 Conclusion to Part II Needed: A New Integration Theory 144 III Seeking the New Horizon: Integration from the Single European Act to the Maastricht Treaty Introduction to Part III A New Realm of Possibility 149 Chapter 7 Forces of Change and Resistance in 1980s Europe 152 The United States and Globalization: Challenges to Europe 152 Monsieur Jacques Delors Meets Europe 157 Chapter 8 Mrs. Thatcher, Europe, and the Reform of Britain 164 Mrs. Thatcher and Europe 166 Mrs. Thatcher and the Reform of Britain 168 Chapter 9 The Crisis of the Welfare State and the Challenge of Modernization in 1980s Europe 180 New Zealand Experiments 182 Denmark Conserves 184 Sweden’s Beacon Goes Out 188 France Regroups 194 Germany Rests 200 Italy Resurrects Itself 201 Spain Modernizes 208 Reforming the Welfare State 221 Chapter 10 Maastricht Ho! (by Air, Land, or SEA?): The Parameters of Change 228 The SEA and the Maastricht Treaty: Negotiating Frameworks 231 Big Business and the Commission: High-Tech Neocorporatism in Action 237 Competition Policy and the Single Market 249 Chapter 11 Stumbling toward Superstate: The Delorean Agenda 259 The Delors Packet and Regional Policy 262 Contents ix The Social Charter, Imagined Space, and Policy Networking in Brussels 263 The European Monetary Union Examined 269 Political Maastricht 278 Ambitions and Realities: Delors II and Ratification 284 German Unification and the Crisis of 1992 289 Conclusion to Part III Needed: A New Integration Direction 294 IV A False Dawn? Challenge and Misdirection in 199os Europe Introduction to Part IV A New Global Framework 303 Chapter 12 Almost a Road to Nowhere: The EU in Trouble 313 Summits and Scandals 317 Prodi, Nice, and the Breakdown of Governance 329 Plans, Projects, and the Convention on the Future of Europe 340 Chapter 13 No Open-and-Shut Cases: Member-States and the European Community in the 1990s 357 A Finnish Festival 359 The Failing Italian Miracle 366 A Different Dutchman? 374 Chirac to Chirac: France on Hold 382 United Germany: Well-Meaning but Unwise 390 Britain: No Beef Here 399 Chapter 14 Shrinking Enlargement: Betrayal of Pledge or Opportunity in Disguise? 410 EU Enlargement Policy 413 The Accession Countries: The Front-Runners 420 Estonia: New Zealand of the Baltic 422 Hungary: Right Way or Rightist Way? 427 The Polish Question: As Always, Unanswered 431 Chapter 15 The New Market Economy and Europe’s Future 446 The New and the Old in the European Economy 451 The 3G Telecom Debacle 454 Not Yet a Single Financial Market 461 The European Union: An International Market-Conforming Regulatory Agency? 473 Conclusion to Part IV Needed: A New European Union? 480 Envoi 487 Notes 503 Bibliography 547 Index 563 1 The Liberal Project for an Integrated Europe There was a liberal project for an integrated Europe, even one avant la lettre. Its author was the Austrian economist Friedrich A. Hayek.1 He ranks alongside Jean Monnet and many others as one of the founding fathers of the new era. Hayek’s work inspired both Ludwig Erhard, who turned West Germany into the engine and model of European economic growth, and Margaret Thatcher, the moving force behind the Single European Act, which restarted the integration process in the late 1980s, as well as many others who have followed their footsteps. Hayek discovered the logic underlying the integration process. It is as relevant now as ever. Hayek postulated that the competition principle, if allowed to operate, sets in motion a mutually reinforcing reciprocal process in which the market and self- government together reduce interstate conflict and promote economic growth. It is not only Hayek’s devotees and admirers who hold that integration can pro- ceed on the basis of such “negative integration.” The argument has been restated and confirmed by many specialists and practitioners, some of whose work will be discussed in these pages. The result may, however, simply reflect the diffuse and pervasive nature of Hayek’s influence. Not just economists but also political scientists, sociologists, and legal and constitutional scholars are all slowly be- coming at least partly Hayekian, just as by the third quarter of the past century even President Nixon, as he famously announced, was a Keynesian. the legacy of friedrich von hayek Friedrich von Hayek was born at the turn of the century and lived long enough to witness the fall of communism. His active career, begun after World War I, ended with the onset of senility in the mid-1980s. Hayek impressed people when still in his 20s as being serious beyond his years and, at 80, as being remark- ably spry and alert. The sixty intermediate, grayish years of middle age were the most productive period of his life. Hayek was tall and slightly stooped, reserved, somewhat courtly, unmistakably donnish, and spoke English as a second lan- guage with accents that varied according to the time and place of his residence. The placid and unremarkable demeanor masked a personal life not always con- sistent with the image. Such matters are trifling by comparison to Hayek’s ideas. Hayek never held public office but operated instead on (or close to) the intel- lectual plane. A great economist and social scientist, he was also a brilliant 6 Liberal Project for an Integrated Europe 7 promoter of think tanks dedicated both to reviving the tradition of classical lib- eralism internationally and providing guidance to policy makers who shared his views. Hayek’s influence has been both pervasive and enduring – not merely as a technical economist but as a political visionary with a deep understanding of the historical process. His gifts as a publicist and intellectual entrepreneur should not be overlooked in any assessment of his importance in the history of integration. The Mont Pèlerin Society, which he co-founded in 1947, has served as a cen- tral point of diffusion not only for his own views but also for those of related schools influenced by them, such as monetarism, public choice theory, and the new institutional economics.2 In addition, Hayek and other eminent members of the association have founded colonies of classical liberal intellectuals in the United States, throughout Europe, and, above all, in Great Britain. The Insti- tute of Economic Affairs, despite its bland name, became a hotbed of policy formulation for the government of Margaret Thatcher, who – as has since been nearly forgotten – set in motion a new wave of liberal reform into the Euro- pean Community in the early 1980s. The competition directorate (DG IV), the most influential branch of the eventually labyrinthine Commission bureaucracy, became its locus. Hayek also imprinted the thinking of the Freiburg School of so-called ORDO-liberals who devised the famous Soziale Marktwirtschaft (so- cial market economy) associated with Ludwig Erhard and the German economic miracle of the 1950s.