The EU Social Market Economy and the Law

Theoretical Perspectives and Practical Challenges for the EU

Delia Ferri, Fulvio Cortese

• Publisher: Routledge
• Year: 2018
• Print ISBN: 9781138478480
• eBook ISBN: 9781351068505
• Edition: 1
• Topic: Law
• Subtopic: Law Theory & Practice
• Index: Law

Investigating the extent to which the European Union can be defined as a "highly competitive social market economy", this edited collection illustrates and tests the constitutional reverberations of Art. 3(3) of the Treaty on the European Union, and discusses its actual and potential transformative effect. In the aftermath of Brexit, and in the 60th anniversary of the Treaty of Rome, the book is particularly timely and topical, offering new and deeper insights on the complex and constantly evolving social dimension of the EU, ultimately reflecting on how the objective of (re)constituting the EU as a "highly competitive social market economy" might best be achieved.

Part I
The EU social market economy

Theoretical perspectives

1
The EU between market state ideals and social market economy objectives

Placing the social market economy within the Union’s constitutional history

Charles Edward O’Sullivan

1 Introduction

Following the end of World War II, European States engaged in a period of unprecedented economic redistribution and intervention within their national economies. Market failures of almost any kind were viewed as sufficient grounds for greater State control of the economy.¹ This fit within a wider conceptual framework, according to which ‘ the political machinery of the nation could be used to improve the lot of mankind and helped give post-war national politicians the justificatory ideology they needed ’.² The State’s responsibility towards its citizens morphed into one based on ‘the comprehensive responsibility for the subsistence and development of society in cultural, economic and social terms’.³ Social market economies were therefore those that blended capitalism with social objectives,⁴ and acted as a compromise between classical socialist and liberal economic models. These varied nation by nation, with each utilising a differing form of interventionist capitalism.⁵ However, the overarching intent was that ‘never again will doles and subsistence levels be tolerated’ among the poor and working poor’.⁶

With the entry into force of the Lisbon Treaty, the European Union (EU) has now similarly committed itself to transforming the internal market into a fully formed ‘social market economy’ by way of Article 3(3) TEU. However, the normative potential of this provision remains to be seen, and this book attempts, as detailed in the introduction,⁷ to shed a light on its ability to reshape the foundations on which the EU is built.

The EU and its institutions have never explicitly endorsed a particular economic model for the internal market.⁸ Rather, the Union has instead engaged primarily in ‘market building’ activities,⁹ through which it has sought to eliminate barriers to trade and open up its Member States’ economies so that the internal market may one day be completed. With this in mind, this contribution will explore whether and to what extent the reformulated Article 3 TEU is capable of reshaping the internal market into a ‘social market economy’ similar to those operated by its Member States. In order to do so, it will adopt a theoretical framework, which measures the extent to which the EU’s structures elevate the market over social objectives, and whether or not the Union should therefore be considered a ‘Market’ rather than a ‘Social’ State, the latter of which would be reflective of a ‘social market economy’.

The EU cannot be considered a State in the strictest sense. In reality, it exists as an entity with its own entirely ‘unique legal order’, and can be conceived of as ‘sui generis organisation’.¹⁰ It is however capable of satisfying Almond’s definition of a political community¹¹ as it: regulates behaviour; extracts capital; possesses a (limited) redistributive element; recalibrates its own structures to new challenges through Treaty amendments and ordinary laws; as well as enshrining values. Consequently the Union can be classed as ‘State-like’, allowing for its constitutional competences, as well as legal and institutional structures to be assessed in this light. This contribution embraces the latter view and argues that Article 3(3) TEU on the EU acting as a ‘highly competitive social market economy’ is a further example of ‘State-like’ behaviour.

The contribution will adopt the following structure. Section 2 will explore the concept of the ‘social market economy’ from a historical perspective and discuss how this concept balances two seemingly anachronistic values: the social and the market. The third section will be divided into two separate subsections. The first will examine how this concept of the ‘social market economy’ and ‘Social State’ are context dependent, and that based on a historical view of the Union’s constitutional development, it has remained a primarily economic entity with additional competences being subsumed into this to reinforce and support the completion of the internal market. The latter will then look at the specific constitutional provisions which reinforce this trend, and the ways in which EU constitutional law has continually impacted on the social policies of its Member States despite having very few express competences in the social fields. A fourth section will argue that because of this trend towards economic integration and the impact of EU law in social fields the Union is more closely aligned with that of a ‘Market State’, wherein economic rights and deregulation are of primary importance, and that the potential of Article 3(3) TEU cannot be fully realised without the EU’s constitutional legal order being consciously reframed to negate this overall trend. The contribution will finally provide some concluding remarks, underlining these points.

2 The social market economy: a historical perspective

As highlighted in the introduction to this volume,¹² the term ‘social market economy’ was coined by Röpke, Rüstow, Böhm, Oppenheimer and, overall, Müller-Armack as ‘market freedoms that are capable of achieving social objectives’. The most common social objectives are to limit social inequality and to correct or address market failures. These concepts are subsequently often embedded within national constitutions as prescriptive principles of social policy. These prescriptive principles are often referred to as ‘Social States’, after the German Sozialstaat, outlined within Article 20 of the Basic Law as a guarantee that ‘[t]he Federal Republic of Germany is a democratic and social federal [S]tate’.¹³ Establishing a concise definition for what the ‘Social State’ means in reality has long proved difficult, however Brezovar has argued that the concept came about when ‘The State began to provide its people with certain public services – the State’s part is not only to command but also to perform certain duties, to provide assistance’.¹⁴ As a result, this provision creates a quasi-constitutional imperative to provide for the well-being of the German people, and seeks to ameliorate if not solve the ‘ basic conflict between social rights and market values’,¹⁵ and therefore acts as the constitutional basis for the German ‘social market economy’. The judiciary has predominantly sought to temper this obligation by underlining that whilst there is an emphasis on the executive and legislative branches ‘to ensure the balancing of social differences … it leaves the legislature broad latitude for doing so’, it is also the case that the State ‘must merely create the minimum conditions for its citizens to live in human dignity’, with the underlying principle of the ‘Social State’ in Article 20 establishing nothing in terms of how ‘the task is to be accomplished in individual cases’.¹⁶ As Dani notes elsewhere in this volume,¹⁷ the German Constitutional Court wanted to ensure that ‘the constitution establishes an open institutional framework amenable to competing political aspirations and, notably, also to alternative renderings of the ‘Social State’.

Other constitutional traditions and political regimes have, over time, attempted to enshrine their own ‘Social State’ provisions within both law and practice, echoing this ideal. As outlined in the introduction to this chapter, there was arguably a common European commitment in the post-WWII era aimed at greater levels of State intervention in the economy, and a more pragmatic concern was that by limiting some of the most notable excesses of market forces, the State could ensure that socialism would not replace the existing capitalistic status quo.¹⁸ This political drive for greater State intervention was often spearheaded by some of socialism’s most ardent critics.¹⁹

O’Gorman²⁰ views the ‘German experience’, that of the Sozialstaat in Article 20 of the Basic Law, as instructive in interpreting and applying Article 3(3) TEU, as it arguably represents the constitutional basis for its national ‘social market economy’ in the same way that Article 3(3) now does. In his estimation, this does not mean that the EU will adopt the Sozialstaat model in a wholesale manner. Rather, the German experience could provide a clear example of how the Court of Justice (CJEU) might reconcile this clause within its own legal framework.²¹ However, this to some extent assumes that the way in which economies are regulated or controlled by the State is apolitical, as well as the ‘Social State’ clause being sufficiently clear and precise that it may be followed by the State in taking action to negate the potential for further interpretation.²² As alluded to previously, the German Constitutional Court has been quite clear that Article 20 is essentially apolitical, and does not require any specific measures to be carried out or tools to be used. On this basis, it is not possible to assume that the German experience can or should be taken as instructive as it is constantly subject to the political realities of those that interpret it, like any broad prescriptive principle.²³ It acts a site of constant political contestation, continually subject to the particular political, economic and social factors at play within the German State at any given time. Socialist scholars in particular have emphasised that this temporal effect may over time add additional layers of complexity in terms of the application of new measures and removal of others, masking the original intention if one can be said to exist, at least insofar as the first government(s) following its adoption viewed it.

3 A specifically European context

Having briefly outlined the link between the concept of the ‘social market economy’ and the ‘Social State’, as well as the potential difficulties in abiding by a prescriptive social policy clause, the following subsections will explore the ways in which the EU will, based on its own constitutional development, find it difficult to comply with Article 3(3) TEU. This is not only because of the economic foundations upon which the Union is based, but due to the previous attempts it has made in adopting more socially orientated provisions in previous Treaties and their muted impact.

3.1 The development of an economic constitution for the EU

If, as the argument surrounding the development of the German ‘Social State’ and its underlying social market economy attempts to posit, the translation of this proscriptive principle into practice is highly dependent on the specific context in which it is interpreted and applied, it is necessary to look at the way in which the EU has developed and how the recent inclusion of Arti...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Contributors
• Foreword
• Acknowledgements
• Introduction: the social market economy in the European Union. Theoretical perspectives and practical challenges
• PART I The EU social market economy: theoretical perspectives
• PART II The EU social market economy: practical challenges
• Conclusion: taking stock and looking ahead: the future of the ‘social market economy’ in the European Union
• Index