A Crisis of Neo-liberalism and the Future of the European Union: Socio-economic and Political Challenges to Its Legal-Constitutional Framework (and a Defence of Scharpf's Asymmetry Theory)

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A Crisis of Neo-liberalism and the Future of the European Union: Socio-economic and Political Challenges to Its Legal-Constitutional Framework (and a Defence of Scharpf's Asymmetry Theory)

This article illuminates the powerful role of law in shaping the EU's political economy. I argue that the neo-liberal architecture and, ultimately, the lack of a socio-economic equilibrium ingrained in the EU legal framework and in the case law of the ECJ are crucial with regard to their effects on the political and socio-economic spheres. Solutions to this and the restoration of socio-economic balance are limited. As Treaty change seems unrealistic, I argue that the Court should develop a new self-understanding that replaces the 'integration through law' paradigm with something that could be understood as 'integration sustained by law'.

Introduction

As the EU strives to be 'a highly competitive social market economy', I argue that the legal framework and the case law of the European Court of Justice as they present themselves today cannot be unified under anything approaching the idea of a balanced system of socio-economic rights. The reason for this lies with the EU's neo-liberal architecture and its imbalance between 'the market' and 'the social', between market-making (or -creating) and market-complementing (or -correcting) competencies enshrined in the legal framework as well as in the ECJ case law. There is, in other words, a 'constitutional asymmetry between market-making and market-correcting competences, and therefore a lack of a genuine socio-economic equilibrium within the law and political system of the EU. In that sense, the EU has ever since its foundation and up to the present day been suffering from a 'social deficit'.

In legal literature, this imbalance between 'the market' and 'the social' is widely recognised and found in the Treaties and the case law of the Court. Less attention has been given to what this imbalance implies for the liberalisation process from a legal and socio-economic perspective. This includes the limits of liberalisation, what it can realistically deliver, the necessary preconditions for it to benefit the many (rather than the few), and the pivotal role played by the legal framework and the ECJ's jurisprudence in shaping the structure of the EU's social market economy within which the internal market operates. Borrowed from Joerges, the 'integration-through-law' paradigm 'constructed a transnational legal framework which was to operate without taking the socio-economic diversity of the jurisdictions which it sought to integrate into account' (emphasis added). Part of its success is owed 'to the camouflaging of its ideological basis'-'economic rationality', or, as I shall argue, (neo-liberal) market ideology. The socio-economic imbalance enshrined in the EU Treaties and echoed in the case law of the Court is thus crucial in shaping the political economy of the EU. Both contribute to the EU's overall neo-liberal architecture, and it is this neo-liberal bias within the very structure of the EU that has, among other things, contributed to the increasing gap between the poor and the rich, and the economic malaise we are undergoing. This is echoed, for example, in the slow but continuous decline of the middle class, and, in the context of the Eurozone, arguably has created some of the challenges its Member States, but also the EU more generally, are facing today. All this not only indicates a socio-economic malaise but also helps explain the decreasing public faith in Western democracies and capitalism. The role of the law in this context is therefore pivotal, as 'the law is a function of the economy, and the economy (especially its structure) is a function of the law'.

Solving this issue may seem simple, but it is in fact anything but, as it is about restoring a genuine socio-economic equilibrium within the law that runs and governs the economic system, i.e. the EU internal market and, therefore, ultimately the EU social market economy. Borrowed from one strand of political economy literature, the EU market(s) needs to be 'embedded', as the EU today is arguably a perfect realisation of 'neoliberal economic globalism, indeed hyperglobalism: a common market embedding states rather than states embedding markets. The embeddedness of markets, a notion developed and articulated by Karl Polanyi, is based on the idea that markets are embedded in society as a whole and situated in the broader social fabric. Therefore, they cannot be separated from politics and institutions or social relations that shape and sustain them. In other words, there is no such thing as a neutral or autonomous market sphere. Rather, it is inextricably linked with the political and, therefore, remains a human artefact.

In the EU context, and starting from the premise that the EU market(s) are 'disembedded' rather than 'embedded', such embedding (basically striking a socio-economic balance) could be achieved either through Treaty change or, alternatively, through a change in the Court's adjudicative methodology. As the current political landscape does not make Treaty change a likely and realistic political option, owing to the lack of 'political will', this article will focus on what the Court could do to establish the socio-economic balance desperately needed. I shall argue that in order to sustain what EU economic integration has achieved so far, the ECJ should not do more of the same, as this would only widen the socio-economic divide. Rather, if the Court stepped in and acted otherwise, it could arguably sustain the success of the EU integration project. It might also help abate the storm of anti-EU resentment echoed in the populist movements that have gained strength over the years across the EU. This, in turn, would foster an environment that ultimately makes political integration (i.e. the transfer of further competencies) indeed feasible, provided that such integration is politically, democratically, and therefore legitimately aspired to.

In political economy and economics literature, the rise of populism has been explained by the political economy of a state. It is, therefore, a reaction by the people to the socio-economic realities they face. The role of law is crucial in this regard. Law creates a social, economic, and political reality of its own. It is central in shaping the political economy and, therefore, the socio-economic circumstances people experience. Hence, the role of the Court continues to be essential to the success of the EU. For this reason, I call for a change, from the 'integration-through-law' paradigm to a new self-understanding of the Court that could be described as 'integration sustained by law'. The former identifies the ECJ's case law as a major driving force of EU economic integration while neglecting the ideological foundations of the market logic inherent in it; by contrast, the latter uses law not to deepen liberalisation but as a stabilising force that preserves integration while preventing a deepening of the systemic socio-economic imbalance.

Against this backdrop, Section One outlines the purported ongoing crisis of neo-liberalism before examining the current political economy of the European Union as a multi-state political entity. It illustrates how the legal architecture of the European Union, with its neo-liberal bias, might have contributed to today's political developments, and shows the need to solve the socio-economic imbalance enshrined in the European Union system. Section Two details why the discrepancy between market-creating (or -making) and market-correcting (or -complementing) measures continues to be an issue, namely that of the socio-economic imbalance of the European Union legal and political system. In fact, despite recent voices contesting the validity of Scharpf's influential asymmetry theory, I take the opposite stance. In that sense, this article can-with respect to the relevant parts-be understood as a defence of the asymmetry theory. But there is more: a neo-liberal bias underpins the doctrinal approach of the European Court of Justice in interpreting the law. Section Three highlights the need for the Court to develop a new self-understanding-one that replaces the paradigm of 'European integration through law' with a new one, such as 'European integration sustained by law'. Section Four concludes.