The immediate effects of the Euro crisis have been tamed but the crisis has soured the relations between Southern and Northern Member states for many years to come. Comparative political economy explains the frictions between North and South as a result of different institutional configurations of national economies (Varieties of Capitalism), different interests of capital and labor coalitions (growth model perspective) or ideational traditions (ordoliberal vs dirigisme). We argue that the exclusive focus of these approaches on either, rational institutionalism, interest coalitions or economic ideas obscures that these three factors come together in a long-term evolutionary trajectory that has formed national economic cultures within the Eurozone since the 1950s. We examplify our cultural political economy approach showing empircally how the German and Italian political economies developed in different ways since the end of WWII. In the second part of our contribution we develop a conflicts law perspective offering it as a third way that can mediate between the two extreme positions of Wolfgang Streeck (back to the nation state) and Juergen Habermas (federation) in the debate on the future of the European Union. We show how the culturally grounded diversities of European capitalisms can be accommodated through a conflicts law.
Even though it seems that the acute turmoil of the eurozone crisis may have been overcome, it nevertheless led to the rise of identity politics within member states. On September 24, 2017, for the first time in postwar German history, a far-right party entered the German Bundestag with a landslide victory. Only five months later, in Italy, the far-right Lega party and the Movimento Cinque Stelle emerged as the big winners of the Italian federal elections of March 4, 2018. Forming a previously unthinkable coalition between right-wing and left-wing populism, they entered into government. The course of Italy’s political development has been affected by the migration burdens that Italy has had to shoulder and the lack of European solidarity; the bitter disappointment could be fused with the populist critique of the constraints that European rule imposes upon national economies. In a similar vein, the Alternative für Deutschland (AfD) in Germany had been founded as an anti-euro rescue party, which catalyzed quickly through the immigration crisis of 2015 into a xenophobic far-right populist party, sharing many positions with the Italian Lega. AfD in Germany and the Lega in Italy share two major targets against which they direct their rage: European integration, especially in the economic realm, and immigration.
Political economists have long argued that Europe consists of a set of highly diverse and heterogenous political economies. The unified legal framework that the common market prescribes cannot accommodate this diversity adequately. Crisis and tensions between member states are the result, and far-right parties use the tensions to mobilize along the lines of identity politics (Hernandez and Kriesi 2016).
Scholars suggest that the causes for the diversity of European capitalisms stem from a rational evolution of Europe’s institutions to maximize profits (P. A. Hall and Soskice 2001) or from interests pursued by different economic actors (Baccaro and Pontusson 2016). Against the background of the rise of identity politics, however, we believe that more attention should be devoted to the ideational, cultural, and legal rooting of the diversities of Europe’s organized capitalisms. The cultural rooting of European political economies has evolved through an iterative relation of norms, institutions, politics, and economic practices over the past one and a half centuries. Not only does the economy unfold within a set of institutions that are rationally trimmed to maximize profits, but these institutions themselves evolve within a cultural environment composed of ideas, ideologies, traditions, and the collective sentiments of their people. We exemplify our argument in the following contribution by empirically showing how not only compromises between capital and labor but also the different socioeconomic doctrines and economic ethics of Catholicism and Protestantism shaped the reinstitutionalization of national political economies in Europe after World War II.
We are not the first ones to introduce the concept of “economic cultures.” Economic historians, sociologists, and comparative law scholars have all advanced different notions of “economic cultures” (Abelshauser 2003; Abelshauser, Gilgen, and Leutzsch 2013; Jessop and Sum 2010; Teubner 2001). We think, however, that while these conceptualizations have brought about important new developments, they also remain confined in their epistemological point of departure, dependent on institutional rationality or neo-Marxism to undervalue the importance of long-term ideational traditions. We have based our concept of economic cultures on Weber’s notion of economic styles, showing how economic ideational traditions formed economic institutions and economic legal orders in the 1950s that define the national economic style of European member states to this day. Moreover, by emphasizing the importance of different legal traditions in governing the economy, which comparative political economy largely ignores, we introduce conflicts law (Kollisionsrecht) as a possible way forward for the legal ordering of the variety of different culturally embedded European political economies. We position our conflicts law proposal as an alternative to the prevalent integration-through-law approach. Conflicts law, following the economic sociology of Polanyi, also cuts a pragmatic and feasible middle way between the maximalist positions of Habermas (full integration) on one side and Streeck (back to the nation-state) on the other, a middle way that we use in the last part of our contribution to illustrate our point.
One important aspect that is highlighted in all approaches of cultural political economy is the resistance of economic cultures to the imposition of changes, which can render interventions meaningless or even destructive. Werner Abelshauser submits that the imposition of structural reforms through which Europe’s crisis politics seeks to accomplish socioeconomic convergence risks, instead, destabilizing the targeted economies further (Abelshauser 2018). Gunther Teubner has corresponding objections to legal unification politics. What we suggest is that Europe should stop lamenting its diversity. It should, instead, learn to take the fortunate motto of the ill-fated constitutional Treaty of 2004 seriously and learn to establish its unitas in diversitate.1 We even expect this learning process to have the potential to generate political, social, and economic benefits. The striving for ever more uniformity of the political economies of the European Union is unproductive: Europe should instead pursue the “united in diversity” vision through conflicts law constitutionalism.
1. The Dominant Approaches within Political Economy to the Crisis
The “varieties of capitalism” approach has dominated comparative political economy for almost twenty years (P. A. Hall and Soskice 2001). In the original account of the varieties of capitalism and in most of the follow-up literature, Italy and Germany are classified as coordinated market economies. The theory has been seriously challenged through the shock waves that the financial crisis sent through the European coordinated market economies (P. Hall 2014; Johnston and Regan 2015). The crisis drastically showcased a strong “variety within the variety” of European coordinated market economies between Northern, Southern, Central, and Eastern Europe (Höpner and Lutter 2018). Accounts started to reclassify countries, and Italy is now presented as a “mixed model.”
There was another, deeper critique from neo-Marxist scholars. Authors such as Wolfgang Streeck and Lucio Baccaro had already criticized the “varieties of capitalism” scholarship before the crisis for not accounting for the far-reaching processes of neoliberalization that all of these national economies have undergone since the 1990s (Streeck 2009; Baccaro and Howell 2011; Svallfors 2016). The different ways in which these liberalizations were executed contributed to significant shifts in the configuration of GDP growth in both Germany and Italy. Germany turned from a growth model that was equilibrated between domestic demand and exports to an export-led economy. The share of exports in German GDP growth doubled in the 1990s and 2000s (Baccaro and Pontusson 2016, 189). To support the export competitiveness of the price-sensitive German manufacturing goods, domestic demand (household consumption) was suppressed through wage depression (Baccaro and Benassi 2017). The German model runs at the expense of the southern political economies of the Eurozone, which are geared toward demand-led growth. The interests of the German export coalition are the underlying motives of the austerity policies that the German government made the precondition for loans and rescue packages.
A third explanatory framework for the euro crisis is based upon ideas. During the euro crisis, idiosyncratic national economic ideologies such as German ordoliberalism and French dirigisme and planification experienced an unexpected explosion of public and scholarly interest because they link expert ideas with a common national tradition of how the economy should be run (Economist 2015; Blyth 2013; Scharpf 2014; Hien and Joerges 2018b; Amable 2017; Hien 2013). In particular, the clash between French economic ideas and their German counterparts has been blamed for the prolonged stalemate between the countries over “what is the right crisis policy” (Brunnermeier, James, and Landau 2016).
All three approaches point out that European national economies are highly diverse but emphasize different reasons why this is the case. The “varieties of capitalism” model is anchored in a rational-efficiency-oriented institutionalism. The growth model perspective relies ultimately on an interest coalition between segments of capital and labor in the export sector. And the ideational approaches rely on the power of ideologies to serve as blueprints for socioeconomic actions and institution building. None of the approaches takes the structuring effect of different legal orders and traditions into account.
A more integrated approach to look at the capitalist diversity of European economies is to emphasize the prevalence of different economic cultures (Abelshauser 2003; Abelshauser, Gilgen, and Leutzsch 2013; Jessop 2004; Jessop and Sum 2017; Hien and Joerges 2018a). This resonates well with Weber’s and von Schmoller’s political economy. In Weber’s study of capitalism, culture is the “most fundamental category,” and economics is the study of “a cultural phenomenon” (Swedberg and Agevall 2005, 56, 57; Weber 1922; Scaff 1987). Economics should be interdisciplinary, including the study of “law, the power of moral emotions and cultural ideas” (Von Schmoller 1874, 264). Economics is a historical science and must therefore contain the historical, theoretical, cultural, and ethical explanations of the phenomenon of the economy (Von Schmoller 1874, 253).
2. Cultural Political Economy
The concept of cultural political economy highlights the importance and instrumental use of shared imaginaries (commonsensical ideas about how the economy should be run) for contemporary economic actors. Moreover, for Weber, social science was about “Verstehen,” about finding out about the “subjective meanings.” Therefore, social analysis and, especially, the study of political economy should be a “science which is concerned with the subjective meaning of action,” in which “explanation requires a grasp of the complex of meaning” (Weber 1968, 9). The interdisciplinarity and the combined analysis of the legal, social, ethical, political, and economic spheres that von Schmoller, Weber, and their peers formulated was captured in the concept of economic styles (Wirtschaftsstile) (Spiethoff 1938, 19; Gioia 1997, 169). Economic styles consisted of a combination of prevalent ideational elements (Zeitgeist or Wirtschaftsgeist) like worldviews, religious and ideological background of a society, their reflection in legal institutions (Wirtschaftsverfassung), and their stage of technological progress (Von Schmoller 1874, 264, 1888, 298).
It was problematic that this style concept was coupled with a stage model of economic development (Nau 2000, 514). The telos and law-like regularity that von Schmoller, Sombart, and Spiethoff theorized into this model has been criticized for a lack of proper empirical foundations (Müller-Armack 1947); but for Weber, different economic styles could coexist and were not subject to a stage model. Weber’s economic styles concept is open enough to capture long-term evolutionary character and the different legal traditions of today’s political economies that the traditional approaches in political economy (varieties of capitalism, growth-model perspective, ideational accounts) leave by the wayside.
3. The Cultural Roots of European Capitalist Diversity
In the early 1960s, Amitai Etzioni (1963) pointed out that European integration in the 1950s was possible because the founding states shared similar cultural background conditions. One of these background conditions was that these countries all had sizeable shares of Catholics in their populations. Early historiography about the integration process corroborated this. Walter Lipgens (1977) advanced the view that the integration project was a creation of continental European Catholic Christian Democrats in search of peace. Starting from the dominant position of Christian Democratic parties in all European member states in the 1950s, Wolfram Kaiser (2007) brought attention to the role of Christian Democratic networks in the early phases of European integration. Kaiser focused on the network structures of the Nouvelle Equipes Internationales (NEI), gatherings of Catholic politicians from all over Europe in the 1940s and 1950s. (See also Acanfora 2015; Forlenza 2017; Cellini 2018). Early Christian Democrats called for a unified socioeconomic ideology by Christian Democrats in the early phases of European integration. The Italian Christian Democratic leader Luigi Sturzo commented on the Sorrento congress that “a positive doctrine” is needed to oppose communism, and the French Christian Democratic leader Henri Teitgen seconded at the Bad Ems congress in 1951 that this has to be an ideology of “democratic and social action” that is “aimed at emancipating the proletariat” (both cited in Acanfora 2015, 380, 387). But this was difficult because the different branches of Christianity had different ideas about what should be the right socioeconomic doctrine for the new movement. While it was quite straightforward in monoconfessional countries like Italy, it was controversial in confessionally split countries like Germany and the Netherlands, where the Protestants and Catholics in the Christian Democratic parties had to engage in difficult ideological compromises.
In political economy, it has been established how different mixes of Catholic and Protestant social doctrine lead to different conservative welfare states and varieties of capitalism (Van Kersbergen 1995; van Kersbergen and Manow 2009). The insight that the diverging socioeconomic ideologies of Catholicism and Protestantism led to different socioeconomic institutional designs of member states has, however, not been taken into account in the research on European economic integration.
It is by now established that the ordoliberal project as it evolved in Germany from the late 1920s onward is the reaction of Protestant social thought to the upheavals of Weimar that cumulated in the world economic crisis of 1929 (Manow 2001; Krarup 2019a, 2019b; Hien 2019). Numerous “explicitly normative-anthropological deliberations” of the ordoliberals were derived from Protestantism, and “the strong affinity of a liberal ethos [was] largely influenced by Protestantism” (Jähnichen 2010, 11, 13). Eucken wrote in a 1942 letter to Alexander Rüstow: “I could neither live nor work if I did not believe that God exists” (Lenel 1991, 42:12). All the key figures of the first ordoliberal generation were Protestants. The Freiburger Denkschrift, drafted to be the blueprint for postwar reconstruction, laid out the first coherent Protestant economic and social ethics. The debate circle in Freiburg from which it originated had been brought together by the Protestant theologue Friedrich Bonhoeffer.2
In his work, Eucken seeks a compromise between “a Calvinist theocracy with its near identity of church and state and the Lutheran two-kingdoms doctrine with its separation of the spiritual and secular spheres” (Petersen 2008, 23). His concepts mirror Bonhoeffer’s “authoritative-paternalistic […] thinking” that “trusts an order and authority based on law and responsibility more than individual freedom” (Falcke 2011, 382). Ordoliberalism’s notion of society is not paternalistic, even though the state’s capability to provide order is so important to it. The state is supposed to hold back and limit itself to setting the underlying conditions for the social order. Ordoliberals reject social transfer payments as false incentives. Unconditional transfers for reasons of solidarity would, in the end, result in a “total catastrophe for state and society” and make citizens “slaves of the state” (Röpke 1949, 257). Instead, the state should limit itself to ensuring equal opportunity and creating the conditions for helping people to help themselves. This is what sets ordoliberal ideology apart from the Keynesian and Beveridgean welfare-state concept that aims at equality in society, on the one hand, and social-Catholic welfare concepts that emphasize a male-breadwinner-centered corporatist-transfer-heavy welfare state, on the other.
Due to their Protestant religiosity, the ordoliberals searched for a political home in the Christian Democratic Party, not in the Liberal Party. Franz Böhm was minister in Hessen and became a member of the Federal Parliament, Ludwig Erhard was minister and later became chancellor, and Alfred Müller-Armack became state secretary. The problem for the ordoliberals was that their ideas about how to govern the economy ran counter to the ideas of the Catholic majority in the party.
At the same time as the ordoliberals developed the Freiburger Denkschrift, social Catholics had developed socioeconomic ideas that were largely the opposite of what the ordoliberals prescribed. Since the nineteenth century, Bishops like Wilhelm Emmanuel von Ketteler and the Jesuit social philosopher Heinrich Pesch had adapted Catholic social thought to the developments of modern industrialized capitalist societies (Hien 2012). Ketteler’s thought influenced the first social encyclical Rerum Novarum, issued in 1891. Pesch’s Jesuit students Oswald von Nell-Breuning and Gustaf Gundlach partly drafted the second social encyclical Quadragesimo Anno, from 1931. The prime target of criticism in Quadragesimo Anno is the current “economic dictatorship” (Quadragesimo Anno 1931, 109) brought about by a rampant system of free competition. According to Quadragesimo Anno, “the free market has destroyed itself” (Quadragesimo Anno 1931, 1931, 109). Quadragesimo Anno is of the view that “the right order of economic life cannot be left to a free competition of forces” (Quadragesimo Anno 1931, 87). Unrestricted free market competition would be directed by “evil individualistic spirit” (Quadragesimo Anno 1931, 88). In contrast, for the ordoliberals, guaranteeing undistorted economic competition was at the heart of their economic concept.
In contrast to socialism, private property remains central; however, all private property has to be subject to the advancement of the common good (Misner 2004). The encyclical promotes Christian socialism, a specific type of neocorporatism, which emphasizes the importance of collective organization for the common good (Quadragesimo Anno 1931, 85). The encyclical notes that “both workers and employers with united strength and counsel can overcome the difficulties and obstacles and let a wise provision on the part of the public authority aid them” (Quadragesimo Anno 1931, 73). Wages should be negotiated fairly in bipartite negotiations. Co-determination should reduce industrial conflict. With its corporatism and the transfer-heavy welfare state, the encyclical is strongly opposed to most of the ideas that ordoliberals promoted (Hengsbach 2010). It went especially against the minimal welfare safety net that ordoliberals prescribed and also against their opposition of the concentration of economic power (Vermachtung) in interest groups of capital and labor.
The ordoliberals nevertheless had to go together with the Catholics in the Christian Democratic party to get an electoral majority in postwar Germany. With German partition, the denominational balance had shifted to roughly 50 percent Catholic and 50 percent Protestant in West Germany. Since Protestants voted not only Christian Democrat but also Liberal and Social Democrat (but almost all Catholics voted Christian Democrat), ordoliberals needed the Catholics to form an electoral coalition to get at least some of their points through. Social Catholics worked as an effective counterweight to ordoliberal ideas in the early years of the republic, but the collaboration with ordoliberals drew also social Catholicism toward a moderate position away from its strong original corporatism.
The balancing between ordoliberal Protestant and social Catholic economic concepts in the early Christian Democratic Party had effects on the initial institutional configuration of the West German political economy. While the Catholics were able to implement a transfer-heavy welfare state, strong industrial relations between organized interests of capital and labor, codetermination, and peak level wage bargaining, the ordoliberals managed to implement an independent central bank, a cartel agency, and an independent economic advisory board (Sachverständigenrat). They were also successful in inhibiting the formation of large state holdings that were so typical for other European political economies in the 1950s and 1960s. The institutional formation of this “Modell Deutschland as interconfessional compromise” (Manow 2000) still provides the basic institutional setup of the German political economy today. Such a moderation effect between the different socioeconomic doctrines of the two confessions did not exist in Italy. Here, monoconfessionalism led to a less clear-cut break with the past and an embracing of corporatist and social Catholic ideas.
The founding father of Democrazia Cristiana (DC), De Gasperi, had training as a Catholic sociologist and Catholic militant in Vienna (Pombeni and Nobili Schiera 2009). De Gasperi emphasized in his early writings the centrality of the Catholic corporatism of Quadragesimo Anno. The independence of organizations was “a natural consequence of personal freedom” since they were “natural organs of civil society” (Cau 2009, 441). De Gasperi’s DC had a strong Catholic left wing led by Giuseppi Dossetti, a professor and social philosopher at the Catholic University of Milan. Dossetti’s social thinking drew heavily on personalism, championed by the Frenchmen Emmanuel Mounier and Jacques Maritain. The emphasis was on the view that “the human personality unfolds through organic belonging to the successive communities” (La Pira, cited in Acanfora 2007, 312).
In 1942 and early 1943, the first programmatic party manifesto of the DC emerged, bearing a strong imprint from the Catholic Left. The program had a strong Christian socialist leaning inspired by the encyclical Quadragesimo Anno. The most remarkable prescription of the program is for the establishment of two parliamentary chambers: one elected, the other serving as a forum for corporatist interest representation. This “assembly of the organized interests” (DC 1943, 1) should be “founded foremost on the elected representatives of the organized professions” (DC 1943, 1). This represented an almost exact incorporation of the provisions of the social encyclical Quadragesimo Anno into the Christian Democratic program. The concept was one of a “liberal Christian idea of a free organic collaboration of all means of production” (DC 1943, 2). Another difference between Italian and German social Catholicism was that the DC could count on the backing of a strong Catholic union movement (Gronchians headed by the influential union leader Giovanni Gronchi), while in Germany the Catholic unions were subsumed under the roof of the Deutscher Gewerkschaftsbund(Schroeder 1992).
In Italy most of these provisions were implemented once the social Catholic Amintore Fanfani took over the leadership of the DC and became prime minister in 1954. He directly started to implement the corporatist provisions of Catholic social teaching. Fanfani created the Ministry of State holdings in 1956, and a year later, he managed to give the state company ENI a monopoly on research and exploitation in the fossil energy sector. Fanfani also strengthened the states role in the economy by withdrawing the largest state holding IRI (Instituo per la riconstructione Italiana) from the employer association Confindustria in 1958 (Galli 1978, 180). Together with the introduction of a transfer-heavy welfare state, the Italian political economy institutionalized in the 1950s and 1960s was much more corporatist and had a much larger involvement of the state than its German counterpart despite the fact that both were implemented by Christian Democratic parties. The reason is that in Italy, in contrast to Germany, the social Catholic demands for corporatism were not counteracted by protestant ordoliberal ideas on limitations of the state’s involvement in the economy to the role of a supervisor of undistorted competition.
4.1. German Traditions of
It is quite safe to say that a communality of paradigmatic importance and strength exists when it comes to the perception of the economy and the interrelationship between law and economics. The Weimar Republic saw a wide range of theoretical efforts that conceptualized the sociopolitical basis and background of an ordering of the economy. Suffice it to mention here the debate on industrial democracy initiated in particular by Hugo Sinzheimer,3 the critique of laissez-faire liberalism by German neo- (later, ordo-) liberalism with its focus on the control of economic power and the protection of perfect competition through law (Manow 2001; Teubner 2015). A countermove against all of them is well known and particularly problematic—namely, Carl Schmitt’s plea for authoritarianism in his essay on the strong state and its healthy economy (Schmitt 1932).4
The German Sonderweg in the conceptualization of economic ordering through law was resumed after World War II. Hermann Heller (1933) had published an intriguing critique of Schmitt’s authoritarianism. Heller’s own core concept of a democratic “social Rechtsstaat” made it into the Basic Law of the Federal Republic with the status of the Ewigkeitsklausel (eternity clause).5 His influence within legal academia remained nevertheless limited (exceptions: Ehmke 1961; Wiethölter 1965). Outside the legal profession, Heller’s standing as a “true teacher of law” was and continues to be very considerable.6
Not Heller’s democratic constitutionalism, however, but the economic constitutionalism that had been developed in the ordoliberal tradition and most importantly in Freiburg represents a very remarkable success of specifically German Wirtschaftsrecht. The story has been told often enough by others and by us and need not be retold here (Hien and Joerges 2018b). In view of the recent widespread critique of ordoliberalism as the intellectual orchestrator of the controversial German crisis politics, we should underline that the dominance of ordoliberal concepts in German scholarship was restricted to the private law departments, and its remarkable influence on German politics and public agencies was by no means hegemonic within the Federal Republic and was of minor importance beyond Germany’s borders. As Giandomenico Majone soberly explains it, in the 1950s, planification and interventionist practices were commonplace within the founding members of the EEC. How could defeated Germany, of all states, have prevailed at the European level with an Ordnungspolitik that could not even claim domestic consensus and that hardly anybody outside the German Sprachraum knew about (Majone 2014)?
4.2. The Poverty of European Conceptualizations of Economic Law
We will not go into the intricacies of the debates during the Weimar Republic and thereafter. The concern we wish to pursue here can be summarized by a programmatic statement submitted by a renowned if controversial defender of Heller’s democratic constitutionalism back in 1965:
“The overwhelming importance of the economy to the maintenance of political community, not only demands correspondingly-comprehensive legal intervention into spheres impacted by it, but also establishment of an economic law to act as the unifying parenthesis of the economic state” (Wiethölter 1965, 44).
“The modern democratic state is home to a broad and powerful demand for comprehensive social self-constitution… this social state [is not afraid] to solve the economic law problem of the 20th century, or to determine the relationship to be maintained between political and economic power” (Wiethölter 1965, 46).
Both of these statements synthesize the legal and the political in the conceptualization of Wirtschaftsrecht. We do not, of course, wish to suggest that their validity would have remained unaffected by the developments during the past five decades.7 We will instead submit an account of Wirtschaftsrecht that is indebted, if only implicitly, to Karl Polanyi’s economic sociology. What we defend is the objective of a democratically legitimated ordering of the economy. What we would, by the same token, like to document is the absence of such intuitions in the prevailing understanding of the law of Europe’s economy and the integration process.
This understanding is of a stunning continuity and strength (Joerges 2016, 312). Its foundational trademark is the “integration through law” project as designed by Mauro Cappelletti, Maria Seccombe, and Joseph Weiler in the 1980s (Cappelletti, Seccombe, and Weiler 1986). This project and its messages have impressed generations of lawyers, and continue to do so. With some benefit of hindsight, however, we see its conceptual weaknesses clearly. The famous characterization of law as the “object and the agent of integration” in an essay by the former president of the EUI, Joseph Weiler, and his present successor, Renaud Dehousse, was coined at the height of the American law and society movement, which advocated the study of “law in its social, economic and political context” and stimulated all sorts of interdisciplinary studies (Dehousse and Weiler 1990, 243). How could European law scholarship defend views and visions on the potential of “law as such” that looked so outmoded and were long since discredited? This is a sociological caveat. It is similarly a normative query. On what grounds can we assume that legal uniformity will create a “better”—normatively preferable—law? The only conceivable reason is the assumption that uniformity reduces obstacles to free trade and that the removal of such obstacles is more beneficial for all than the defense of policy choices embodied in democratically legitimated legislation—an argument that is dubious even for defenders of economic rationality when it claims the status of a binding legal commitment of constitutional dignity.
Hindsight is a somewhat unfair perspective. The implicit agenda of “integration through law” was “functional” for understandable reasons. It promoted the building of a common (later, “internal”) market, which was to become a common creed of the EEC under the ideational and political reign of economic neoliberalism (Joerges 1991). There was simply no space for political and normative contestation over the ordering of Europe’s economy. With hindsight, however, we can also understand that this could not remain a sustainable basis for the future of the European project. In our further development of this argument, we take what may look like a detour or an aberration from our previous line of argument. We will turn to the recent “nostalgia debate” between two German master thinkers—namely, Jürgen Habermas and Wolfgang Streeck—with Habermas defending the vision of a more integrated Europe and Streeck appealing to the protective potential of nation-states. It should be obvious why this controversy concerns our understanding of Wirtschaftsrecht and its potential to promote the democratic legitimacy of the ordering of the economy “through law.”
The controversy of our protagonists builds on well-known arguments (Habermas 2013; Streeck 2014).8 Its substance reflects the Heller tradition of German constitutionalism. Streeck questions the potential of Europe to establish, at a transnational level, an equivalent to the national Sozialstaat, which is in his understanding a democratic essential (Streeck 2017). Because of the ongoing erosion of social protection provisions in the integration process, he opts for a defense of the nation-state and its institutions against a deepening of economic integration (Streeck 2014). Habermas shares a commitment to Hermann Heller—small wonder, as Wolfgang Abendroth, with whom he wrote his habilitation thesis, wrote a famous defense of Heller’s constitutional theory in Germany’s first major postwar Verfassungsstreit(Joerges 2010).
“The social” is deeply ingrained in Habermas’s “discourse theory of law and democracy.” As Habermas submits, however, the nation-state (with its welfare accomplishments) has become merely a nostalgic option, a hideaway in the sovereign powerlessness of the overrun nation (*eine “nostalgische Option für eine Einigelung in der souveränen Ohnmacht der überrollten Nation") (Habermas 2013, 62). There is some unity in the diversity of the two opponents. Both invoke the interdependence of facticity and validity. They share the premise that economic liberalism is far too insensitive to quests for social justice and should therefore be subjected to political corrections. Their disagreement is about "the level of governance" at which such corrections can be realized. This, however, is anything but a trivial query. It is one that reveals deep lacunae* in the extensive legal debates on what has been characterized with ever more intensity as”Europe’s Justice Deficit" (Kochenov, de Búrca, and Williams 2015). This notion is of a revealing vagueness. What exactly is Europe supposed to do? Should it compensate member states for justice failures—for example, by imposing a uniform “European Social Model”? Should it pursue these objectives through rigid convergence policies and huge transfer payments? Should it, instead, supervise inter-state relations and ensure “justice between” its members?
Streeck’s political and normative conclusion builds coherently on his sociological analysis—including his critical evaluation of the varieties of capitalism (Streeck 2010, 2013; Roos 2019). The logic of his argument seems both sociologically and legally compelling: under European rule, the social state cannot survive. The cultural embeddedness of the Italian and German economy would have to be dismantled. We have hence to replace the supremacy of European law by a primacy of the nation-state. His normative argument is also richer than the usual rejection of European claims to supremacy:
[W]hat I would suggest to call the acquises démocratiques of the national demoi in Europe… importantly comprises a wide range of political-economic institutions that provide for democratic corrections of market outcomes—for democracy as social democracy. (Streeck 2016, 198)
This is one of the very few suggestions to take the European diversity problem normatively seriously. Very few jurists have taken the varieties of capitalism studies into account (Beckers 2015, 50ff.; Kaupa 2016, 219ff.; Offe and Preuß 2015, 15ff.; Teubner 2001, 2015). As they have all underlined, legal rules and institutions do not operate in splendid insulation but constitute interdependencies. These insights break with the integration through law orthodoxy but fail to take into account to what degree the economic functionalism of the varieties studies has come into disregard by now (see Streeck 2010). Streeck explicitly refers to the conflict constellations internal to capitalist economies rather than the diversity of modes of economic efficiency. In Streeck’s account, the democratic legitimacy in the EU depends upon the quality of the democracies in the member states, their historical experiences, ideational traditions, and political preferences—in short, the cultural sources of Europe’s capitalisms as we have reconstructed them in the previous sections with the Italian and the German examples. Rather than subjecting these traditions to rigid market governance, Europe should promote and protect these accomplishments. To replace national endeavors by the prescription of some uniform political rule risks their destruction. We understand these considerations as a complement to the Polanyian notions to which we will turn in our legal reconstruction of the “united in diversity” motto.
4.3. Institutionalizing (“Constitutionalizing”) the “United in Diversity” Vision
Habermas’s critique of Streeck’s position is threefold and stark in its tone, but much more nuanced in substance. Habermas (2015) is prepared to acknowledge the existence of specific identities and pleads for their recognition. There is hence a concession to the diversity vision.9 He adds, however, that we should not equate cultural identities with conceptualizations of economic governance; on no grounds, he submits, must legal protection be granted to an ensemble of socioeconomic practices.10 It is somewhat surprising that Habermas does not mention here the insights into the contextual dependencies of legal ordering that he has explored so impressively—for example, in Between Facts and Norms(Habermas 1998, 132ff., 392ff.). His conclusion and recommendation: we should instead trust that a postnational identity and solidarity will somehow emerge.11
Never take Habermas lightly. Fortunately enough, however, we can invoke the authority of another classic—namely, the founding father of economic sociology, Karl Polanyi—for our objections against his argument. Polanyi’s Great Transformation is concerned with the emergence of “market societies,” where “instead of the economy embedded in social relations, social relations are embedded in the economy” (Polanyi 2001, 57). Writing at the end of the Great War, Polanyi had witnessed the destruction of liberal economic ordering by fascism and Nazism. However, by now, at the end of the Second World War, the rebirth of alternative counter-movements was in sight and nurtured hopes for a better national and international future: alternatives to the fascist transformation—namely, social counter-movements that would undermine the working of the market system (“the tension between a constant push towards self-regulating markets and spontaneous resistance to the subordination of society to market forces”—see Bohle and Groskevits 2012, p. 13). His somewhat enigmatic views are difficult to decipher. “The Great Transformation can legitimately be read either as an anti-capitalist manifesto or as a social democratic bedtime story” (Dale 2016, 286). Be that as it may, we believe that the following passage in the concluding chapter of TheGreat Transformation is to be taken seriously. There Polanyi considers that
… with the disappearance of the automatic mechanism of the gold standard, governments will find it possible to […] tolerate willingly that other nations shape their domestic institutions according to their inclinations, thus transcending the pernicious nineteenth century dogma of the necessary uniformity of domestic regimes within the orbit of world economy. Out of the ruins of the Old World, cornerstones of the New can be seen to emerge: economic collaboration of governments and the liberty to organize national life at will. (Polanyi 2001, 253--54)
Was this just wishful thinking? The passage was written at a time when Keynes and the like-minded American economist and politician Harry Dexter White were working toward the postwar settlement of Bretton Woods. There were reasons to envisage a better future. Polanyi’s considerations deserve attention for three additional and interrelated reasons. For one, he restates his foundational argument that the capitalist market economy is not an evolutionary given but a political product—“laissez-faire was planned” (Polanyi 2001, 147)—that requires institutional backing and continuous political management. To put it slightly differently, “the political” is inherent in “the economic”; market economies “are polities” (see Block 2005). A second insight of topical importance follows from this: capitalist market economies will exhibit varieties that mirror a variety of political preferences, historical experiences, and socioeconomic configurations. This is what we can expect and, so we conclude, should respect, once our societies have gained the “liberty to organise national life at will.” The third point is only alluded to in half a sentence. It is, however, a stringent and necessary implication of the new freedom. Polanyi predicts and advocates “collaboration”; diversity, we can assume, is there to stay.
Three follow-up queries have to be addressed:
Even if we concede that the diversity of the institutional infrastructures of the European economies deserve (contra Habermas), in principle, recognition, we have to add and underline that these infrastructures are not written in stone. Endogenous democratic change must remain possible, and insulation against the impact of Europeanization and globalization is inconceivable. What precisely distinguishes a variety of an economic culture from a Habermasian “Schrebergarten”?
Query (1) assumes implicitly that both Streeck’s defense of the nation-state and Habermas’s defense of European rule are going a step too far. What we need instead is a channeling of change. It is precisely this which is the objective of the conflicts law approach, which promises to institutionalize the “united in diversity” vision, thereby offering an alternative to both Streeck’s nation-state nostalgia and Habermas’s European utopia.
The normative credentials of this alternative deserve special attention. It seems noteworthy that the conflicts law approach is by no means as idiosyncratic in substance as its terminology seems to insinuate.
Ad (1) With the first query, Habermas reproduces his famous duality of “system and lifeworld”—that is, his “two-level theory of society, which distinguishes the lifeworld reproduced through communicative action from the functional integration of the administrative and economic subsystems, narrows the capitalist economy to exchange mediated by money.” The economy is not “a polity” but a purely functional machinery! Habermas himself retracted from this position: the “distinction between law as institution and law as medium… cannot be maintained” (Habermas 1998, 562n48).
Ad (2) The second query is hardly more demanding, but, due to the technicalities of its structure, it is more difficult to restate. A very brief summary must suffice here.
More than two decades ago, Jürgen Neyer and I submitted the core ideas of the conflicts law approach (“deliberative” as opposed to “orthodox” supranationalism) in an essay on European comitology (Joerges and Neyer 1997). Our basic premise and intuition was very simple: it is a core premise of theories of democracy, most notably of Habermas’s discourse theory of law and democracy, that we, the citizens, must be able to understand ourselves as the authors of the legal provisions with which we are required by law to comply. Under conditions of Europeanization and globalization and ever more growing interdependences, this is no longer conceivable. To cite Habermas himself:
Nation-states… encumber each other with the external effects of decisions that impinge on third parties who had no say in the decision-making process. Hence, states cannot escape the need for regulation and coordination in the expanding horizon of a world society that is increasingly self-programming, even at the cultural level... (Habermas 2004, 175).
It is difficult to reject these insights. The implications are, of course, controversial. Among the three just-named alternatives—state building, downscaling of integration, and cooperation—we opt for the third. In the European case, we can build on European law’s potential to compensate for the legitimacy deficits of national rule. European law can derive its own legitimacy from this function: its mandate is to implement the commitments of the member states toward each other by two legal claims—namely, the requirement to take the interests and concerns of their neighbors into account when designing national policies, and by imposing a duty to cooperate. The very notion of cooperation indicates that this kind of rule cannot be some “command and control” exercise but must rely on the deliberative quality of cooperative interactions. Two important implications should be underlined. The first: there is no built-in guarantee that such cooperative efforts will always be successful; but such limitations need not be damaging per se; on the contrary, they may document mutual respect of essential, yet distinct, values and commitments of the other (the ordre public, in the parlance of conflict of laws and private international law). The second implication is more drastic: socioeconomic, institutional, political, and cultural diversity is particularly strong and difficult to overcome. This, however, is by no means a plea for inactivity; it is, instead, a reminder that we have to distinguish “justice within” consolidated polities, on the one hand, and “justice between” them, on the other—and that we have to work in both spheres (Joerges 2017). Last but not least, it should be underlined that the conflicts law approach seeks to defend the idea of the law-mediated legitimacy of public rule.
Ad (3) As long as there is diversity in the European Union, the law will have to cope with differences. Conflicts law is simply the name of the discipline doing this. In the foreseeable future, Europe cannot live without it. In this trivial sense, European law is conflicts law. There is no way out. European law should hence consider how to design its principles and methodology appropriately. The normative options that the conflicts law approach seeks to institutionalize are beyond the doctrinal wisdom of mainstream European studies. We submit that they are nevertheless valid—and there is some growing awareness of the validity of this insight. Among the approaches with obvious affinities is Daniel Innerarity’s (2018) concept of “inter-democracy.” Two of his considerations are particularly important for the argument submitted here. The first concerns Europe’s heterogeneity, which excludes all “one-size-fits-all” recipes. “If the EU is going to be more democratic, it will be so in the style of complex democracies. And that complexity is not only related to the diversity of its citizens but to the variety of issues about which it needs to decide, some of which may require proximity, but others that demand a certain distance” (Innerarity 2018, 7). “Inter-democracy” is his key concept: the democratization of interdependencies must replace state-like or federal hierarchical models. It deserves to be cited at some length:
The states are increasingly more incapable of democratic action because they cannot include everyone affected by their decisions in the electoral process and, on the flip side, citizens cannot influence the behaviour of those who are making decisions in their name. This is the principal democratic deficit that the European Union should rectify. Extraterritorial effects and the burdens that one state imposes on others cannot be justified by recourse to domestic democratic procedures and require another type of legitimacy. That is why we can affirm that the fact that national actors keep outside interests in mind may improve the representation of true domestic interests, since they are no longer circumscribed by the state arena either. In this sense, we might think that the EU helps strengthen the democratic authority of the member states, to the extent to which it can serve as a measure to manage externalities in an efficient fashion. (Innerarity 2018, 73)
A second one is Damian Chalmers’s (2016, p. 11–16) essay on the “Democratic Authority of EU Law.” This quest for a resettlement is groundbreaking and well elaborated:
EU law allows [Chalmers departs from Article 2 TEU] … for another approach in which the European Union’s mission become resettled around the promotion of democratic authority within Europe. The central question would be whether a measure has sufficient democratic credentials to warrant obedience over its alternatives, with EU law only justified where it would promote the quality of democracy within a Member State. EU law would, thereby, become an instrument for the cultivation of politics and the values of political community rather than something which suppresses these to secure a policy.(Chalmers 2016, 1)
The third is the suggestion to reorient the jurisprudence of the CJEU from its promotion of the primacy of the economic liberties over the democratic Rechtsstaat (“economic constitutionalism,” in our parlance) toward a principle of restraint—namely, to respect the limits of European competences, which requires that “the law of the Union does not limit welfare state options at the national level too severely” (Rödl 2018, 2).
A fourth one is Steven Klein’s recently submitted rereading of “the political” in Polanyi’s economic sociology of law, to which we resort in our epilogue.
5. Epilogue: Synthesizing Polanyian Economic Sociology and Conflicts Law Constitutionalism
Our methodological approach is inspired by Friedrich Kratochwil’s understanding of the challenges of interdisciplinary studies. Kratochwil distinguishes between three modes of practicing interdisciplinarity: (a) the “Chinese menu approach,” where studies from different disciplines are pursued side by side, without taking much notice from each; (b) the “colonization” strategy, where disciplines oﬀers their approach or method as a universal tool for generating knowledge—economics is the main culprit; (c) “efforts to ‘translate’ the insights of the other field into one’s own.” The last-named variety is what we try to do; but “this requires an ability to examine critically the blind spot of each discipline by looking at them from the perspective(s) of the other(s)” (Kratochwil 2010, 122).
Conflicts law constitutionalism and the approaches just cited share an understanding of the ordering of the economy (of Wirtschaftsrecht) as a political problem that requires a legal framework within which such political conflicts can be constructively resolved. Our conceptual message is hence that the coordination of the freedom of autonomous yet interdependent polities to organize their social and economic orders at will is conceivable only under conflicts law as constitutional form. Steven Klein (2019) has, in his recent work on the tensions between democracy and capitalism, addressed this problématique in Polanyian terms. It is too simplistic, he argues, to summarize the Polanyian messages on the tensions between marketization strategies and protective counter-moves with the much-cited theorem of the always socially embedded economy (see Klein, forthcoming). This reductive reading, he submits, fails to realize that the coexistence of markets, the economy of a society, and democracy will require the establishments of “non-market institutions” committed to delivering integrated political solutions. This we have shown with our Weberian approach to cultural political economy. Polanyi’s most important pertinent contribution has identified four “distinct modes of economic integration”—namely, reciprocity, redistribution, exchange, and householding (see Klein, forthcoming) with this potential (Polanyi 1957). Among these modes of economic integration, redistribution/redistributive solidarity is of utmost importance in a heterogeneous union (Klein 2019). We submit that the survival of the European Union as union depends upon the establishment of such solidarity between Europe’s still segmented yet interdependent societies. This vision will have to depart from the commitment to ever more uniformity—and will have to search for a constructive cooperation among unequal polities. “United in Diversity” is an anticentralist and confederal, rather than federal, vision, a defense of political autonomy against imposed convergence, combined, however, with duties of cooperative problem-solving.
Josef Hien is senior lecturer at Mid Sweden University and researcher at the Institute for Future Studies Stockholm.
Christian Joerges is co-director of the Centre of European Law and Politics at the University of Bremen and Professor Emeritus for Law and Society at the Hertie School of Governance, Berlin. Until 2007, he held the chair for European Economic Law at the European University Institute Florence. He has been a fellow at the Institutes for Advanced Study in Berlin and in Wassenaar, the Netherlands. In 2009, he was awarded an honorary doctorate from the University Freiburg i.Ue. His research focuses on Europeanization processes and in particular of economic law up to the financial crisis. His most noted book (edited with Navraj Ghaleigh), published in 2003, deals with the Darker Legacies of Law in Europe: The Shadow of National Socialism and Fascism over Europe and Its Legal Traditions.
Title IV of the Draft Constitutional Treaty of 2004; full text in the Official Journal of the EU, C310/2004, 1 of December 16, 2004, also available at http://european-convention.eu.int.
Protestantism was not the only influence on the ordoliberals. Another strong source for the ethical underpinning is Kant (the Protestant philosopher). Ordoliberals always tried to search for connections with Catholic social teaching in order to have a stronger power position in politics. Müller-Armack’s Soziale Irenik, which tries to bridge Catholicism and ordoliberalism, is a case in point but was rejected by purists on both sides (Joerges and Roedl 2004). In an interview, Ernst-Joachim Mestmäcker, student of first-generation ordoliberal Franz Böhm, acknowledged this by stating that the social Catholics could never become convinced of the normative good of competition between humans that was the ethical basis of the ordoliberal thought edifice (interview with Mestmäcker at his home in Hamburg, February 20, 2017, on the topic of the Freiburg school and its ethical roots). A series of Jesuits have in recent years taken up the issue again and have rejected ordoliberal claims of affinity toward social Catholicism in a series of articles in the Jahrbuch für Christliche Sozialwissenschaften(Kerber and W. 1990; Hengsbach 2010).
Article 20 (1): “The Federal Republic of Germany is a democratic and social federal state.” Article 79 (3): “Amendments to this Basic Law affecting the division of the Federation into Länder, their participation on principle in the legislative process, or the principles laid down in Articles 1 and 20 shall be inadmissible.”
Pertinent debates at the time focused on the nation-state. It is worth noting that Wiethölter’s positions were shared by representatives of the Left in German Social Democracy such as Wolfgang Streeck, who worked as Wiethölter’s assistant during the latter’s time as vice president of the University of Frankfurt; see Roos (2019).
The earliest encounter of which we are aware is Streeck’s (unpublished) reaction to Habermas’s plea for a European constitution in his “Hamburg Lecture” of June 26, 2001, on “Warum braucht Europa eine Verfassung?,” published in Die Zeit and available at http://www.zeit.de/2001/27/200127_verfassung.xml/seite-7. “Voluntarism” is the core objection in Streeck’s paper (“Das ‘soziale Europa’ und seine Verfassung: Fragen zu einem politischen Projekt,” on file with author).
“Es ist nicht unrealistisch anzunehmen, dass sich die, im Laufe der Nationalstaatsbildung sehr allmählich etablierte staatbürgerliche Solidarität in dem Maße über die Grenzen des Nationalstaates hinaus erweitert, wie die Bürger von supranationalen Entscheidungen nicht nur betroffen, sondern daran nach demokratischen Verfahren auch beteiligt werden” (Habermas 2015, 153).