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Part I
The European crisis in a global perspective
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1 The crisis of European integration and economic reason
Orthodoxy versus heterodoxy1
Magnus Ryner
This chapter has two objectives. Firstly, it offers an explanation why orthodox European integration scholarship failed to identify, let alone predict, the factors that generated the crisis in Europe.2 Secondly, it identifies the ontological foundation of a heterodox recasting of the production of knowledge about the EU that faces the full implication of the anomaly that the financial crisis represents for integration scholarship, which with variations forms the basis of subsequent chapters in this book.
Concerning the first aim, I cut through variations in the complex ecosystem of integration theory to identify their common code that is ‘prior to any theoretical rule’ (Kuhn 1962: 24, 66–67), and which owes its success primarily to instrumental reasons. Instrumentality is not in and of itself a problem, and the capacity of European integration scholarship to address certain particular questions is not in doubt. Anxious to shroud itself in the aura of science, however, European integration scholarship conflates the particularity of its instrumentalism with general knowledge about the EU. It thereby constitutes itself as an orthodoxy that is unduly intolerant towards forms of research on the EU that do not conform. Hence, there are important questions and issues pertaining to the EU that fall outside the borders of admissibility as defined by the code of European integration orthodoxy, and which it cannot address. These could be called ‘blind-spots’. It is the argument of this article that the emergent properties of the financial crisis are located exactly at such a blind-spot of European integration orthodoxy. To invoke Puchala’s (1971) oft-cited metaphor about the blind and elephants, one could say that the financial crisis points to a central part of the proverbial beast – perhaps the trunk – that European integration orthodoxy does not touch at all.
Concerning second aim of the article, I suggest that a more productive heterodoxy can be discerned from Post-Keynesian and Critical Political Economy. These approaches have the distinct advantage over the European integration orthodoxy in that they conceive production, power and hence a significant element of arbitrariness as co-constitutive of ‘integration’ itself. Hence, they are better placed to discern the arbitrary elements that generated the financial crisis, with attendant implications for Europe.
Orthodoxy, heterodoxy and European integration
The terms orthodoxy and heterodoxy are derived from the concept of doxa. Doxa refers to unconscious, taken-for-granted, and habitual assumptions of the world that define the universe of possible discourse in a social meaning system. Related to the concept of habitus, doxa determines what resonates and what is recognizable or ‘sensible’. Orthodoxy arises when these assumptions are questioned by heterodox challenges to this universality and taken-for-grantedness (heterodoxy is defined simply by way of these terms of negation). In such situations, orthodoxy defends doxa by postulating the taken-for-granted assumptions as ‘reified abstractions’, which deem heterodox challenges as inadmissible and nonsensical. As such, doxa and orthodoxy are intimately wound up in the tendency of social orders to naturalize their own arbitrariness (Bourdieu 1977: 164).
Thomas Kuhn can be invoked to defend the proposition that orthodoxy does not only exist in traditional societies or in religious world views, but also – as Bourdieu insisted – in the social scientific field (Kuhn 1962). Whilst, according to the scientific method, all hypothetical proposition should in principle be subject to falsification, as Kuhn’s work on paradigms suggests this is not the case. It is not even possible to describe the world scientifically without resort to certain concepts. As a result, the structure of scientific reasoning remains trapped in certain foundational a priori assumptions – or reified abstractions – that mediate between empirical research and causal claims in a complex reality (for more on this, see van Apeldoorn, Bruff and Ryner 2010).
Whilst it might be one step too far to suggest that EU scholarship constitutes a Kuhnian scientific paradigm, it is justified to suggest that EU scholarship has orthodox codes. As Rosamond’s sociology of knowledge of the field suggests, social scientific knowledge production on the EU has not developed simply as a natural-rational response to external events. Whilst not denying that European integration scholarship constitutes a progressive research programme that has developed in response to such events, Rosamond (2007) shows that the particularity of these responses is due to a ‘disciplinary politics’ internal to European integration scholarship itself. This disciplinary politics is power-laden and determines what counts as legitimate research and how it should be conducted. Taking this cue from Rosamond, and relating Kuhn to Bourdieu, it can be argued that the orthodox codes of this disciplinary politics shape the habitus of the scientific field and set the terms for what is considered to be serious debate. As such, they prescribe the rules of performance in institutions through which one may project symbolic power of scientific knowledge (Bourdieu 1991: 8). Crucially, Kuhn (1962: 23) suggests that these central codes become successful because they answer questions that are considered ‘acute’. Acute for whom, one might ask.
In this vein, Alan Milward and Viebeke Sørensen (1993; see also van der Pijl 1996: 263–90) trace the origins of the success of European integration orthodoxy to its appeal to American Atlanticist grand strategy after the Second World War. It was concerned with consolidating the transatlantic alliance by rendering it organic and enduring through the reconstruction of Europe in the image of America’s particular variant of modernization. This Atlanticist concept permeated the European Commission, where it has remained ideologically central in no little measure because of the importance assigned to this bureaucracy in the process. Foundational works such as those of Karl Deutsch (1957) and Ernst Haas (1968) on the politics of integration and Jacob Viner (1950) and Bela Balassa (1962) on the economics of integration, themselves based respectively on pluralist systems-theory (Parsons 1951; Easton 1953) and the neoclassical synthesis (Hicks 1937), addressed acute questions for this grand strategy and lent it intellectual credibility.
Two closely interrelated attributes of the basic and enduring code of European integration orthodoxy can be discerned from the foundational works. The first may be referred to as the disciplinary split, which, in contrast to IR in general, has made European integration scholarship reticent towards political economy. Classical political economy, which enjoyed a century-long golden age following the publication of Adam Smith’s The Wealth of Nations, had rested on a unified conception of social science where production and power were seen as co-constitutive in and by social relations. Classical liberal, mercantilist and Marxist political economists had in different ways adopted such a unified conception to explore the foundations of production and distribution of surplus required to make civilization materially possible. However, with the disciplinary split in the late nineteenth century into sociology and economics, the social sciences fragmented. Neoclassical economics severed the link between production and power by summarily abandoning conundrums of value theory and their attendant concerns with classes and surplus. Identifying its concern rather with opportunity costs of ‘individuals’ and the allocation of scarce resources, economics restricted its view to exchange relations between ‘households’ and ‘firms’ abstracted from social structure. Sociology, by contrast, abstracted social relations from both production and power. It came to refer to something that existed in the interaction between individuals whose social existence as such was taken for granted, in contradistinction to economic and political relations. The density of these interactions determined the degree of orderliness, that is ‘integration’, of society and the potential for ‘social concensus’. Political science was defined in narrow terms as ‘power in government’ – an abstraction that displaced social and economic relations to ‘the environment’ without asking how the ‘environment’ constrains ‘government’ (Wolf 1997: 8–10).
Continuing to hold on to this disciplinary split, European integration orthodoxy is based on a division of labour between the ‘economics’ of integration and the ‘political sociology’ of integration. Drawing in particular on international trade theory, the first postulates a priori that free-market price formation results in Pareto-optimal integration (equilibrium) between supply and demand. Taking this at face value, political sociology reduces the question of integration to one of the density of interaction required to ensure the prevalence of administrative-managerial rationality, as required to ensure social and political equilibrium.
This was a central thread of thought to Robert Cox (1976: 177–81), who in his critique of neo-functionalism came very close to the mark indeed in specifying the second attribute of the orthodox code, which may be called the integration telos. It is the product of an amalgam of what he calls the ‘natural-rational’ approach of liberal idealism and the ‘positivist evolutionary’ approach of functionalist systems theory. This amalgam conceives a reified-abstract telos, where it is assumed a priori that ‘economic integration’ (the realm of economics) and ‘social and political integration’ (the realm of political sociology) are expressions of the ‘rational’ and ‘general’ potentials that inhere in human nature. These can be distinguished from the arbitrary irrational special interests, and the realm of power politics that were associated with the old European (inter-) state system, and which poses the external constraint to the realisation of this potential. The central question shared by all theories of the European integration orthodoxy becomes one of whether it is warranted to be ‘optimistic’ or ‘pessimistic’ about the prospects of the integration process transcending such old-European (inter-) state politics. Hence, Stanley Hoffman’s emblematic ‘realist’ and ‘pessimistic’ critique of neo-functionalism did not challenge the terms of the question as he gloomily observed the resurgence of nationalism in Gaullist guise after the Empty Chair Crisis (1966: 862–63, 872–73, 889–901). It is not difficult to see how subsequent debates between ‘supranationalists’ (Sandholtz and Zysman 1989; Burley and Mattli 1993; Mattli and Slaughter 1995; Jabko 1999; Fliegstein and Stone Sweet 2002) and ‘intergovernmentalists’ (Moravcsik 1998; 1999; Garrett 1995) on the causes and consequences of the Single Market plot onto the register of this debate, framed as they are by the regime theory of ‘complex interdependence’, which itself sought a middle position (Keohane and Nye 1977; Keohane 1984). ‘Political science’ theories of ‘multilevel governance’ that are supposed to break the mould of IR are strikingly caught up in the same terms of debate, based as they are on the aforementioned conventional systems theory and as such only bring the idea of a ‘middle position’ between the ‘pessimists’ and ‘optimists’ to its ultimate conclusion (Marks, Hooghe and Blank 1996; Hix 1999; Alesina, Angeloni and Schuknecht 2005). Similarly, contrary to what one might suppose, most constructivist scholarship does not challenge this basic code either, as questions of subjectivity tend to be reduced to more or less dense socialisation phenomena that were present in Haas’ original work. These are engrenages that pertains to the cementing of transnational elite consensus and politicization that pertains to the transfer of mass loyalty and legitimate representative politics to the EU level (Risse-Kappen 1996; Risse et al. 1999: 147–87; 2005; Marcussen 1999; Haas 2001; Haas and Haas 2002; Checkel 2003; Zürn and Checkel 2005).
Money and finance in European integration orthodoxy
It is with reference to this code, then, that the European integration orthodoxy has made sense of money and finance in Europe, such as the formation and implication of the Economic and Monetary Union (EMU) and the creation of a single market in financial services. Consequently, this orthodoxy has departed from a priori assumptions that made it unable to see the signs of the developing of the crisis at the outset.
Following the intellectual division of labour of the disciplinary split and the neoclassical synthesis, the economics of integration has made excessive a priori assumptions about the stability of monetary and financial integration, departing as it does from equilibrium models. As such, the economics of integration offers in large measure highly specialized elaborations on one aspect or the other of the two key neoclassical theories of money and finance, namely the efficient market hypothesis and the theory of sound money. Both of these see integration of financial and money markets as no different from, and as a logical extension of, the Pareto-optimal case for free trade.
This line of reasoning is clear in the Cecchini, Padoa-Schioppa and Sapir Expert Reports, which the European Commission established to provide the intellectual point of reference for, respectively, the ‘Europe 1992’ Single Market, monetary integration based on ‘sound money’ (ultimately leading to the Maastricht design of the EMU), and the Financial Services Action Plan (FSAP) of the Lisbon Agenda (European Commission 1988; Padoa-Shioppa 1987; Sapir et al. 2004).
These depart from the analytical model initially developed by Bela Balassa to justify the elimination of tariff and non-tariff barriers (based on the principle of ‘mutual recognition’) to create an integrated European market. According to these, the economies promised by the Single Market – to be realized inter alia through optimal allocation of factors of production, economies of scale, technological development, competition and learning – would be facilitated by the sturdy macroeconomic framework of a monetary union. The common currency would reduce exchange rate uncertainties and transaction costs. A macroeconomic framework based on maintaining price stability and fiscal balance – as institutionalized by an independent European Central Bank (ECB) and the Growth and Stability Pact (GSP) – would increase credibility in free and therefore efficient financial markets. Such markets would minimize costs of capital and allocate resources according to their optimal utilization, especially clearing up lock-in effects in existing industries and providing resources for high-tech investments (Hartmann, Maddaloni and Manganelli 2003: 7). Lower rates of interest and transaction costs, in a context of increased competition, would provide higher rates of welfare-generating investments and innovation. These would be further induced by the liberalization of labour markets, welfare systems and taxation regimes that in part would be the result of the discipline exerted by the strict macroeconomic regime and in part induced by Lisbon Process Best Practice (the Open Method of Coordination). The outcome, as stated in the Lisbon Agenda, would be a more flexible and mobile labour force, which can be better deployed with the new investments. The overall result would be faster growth, better profitability, more employment and in time higher wages. The USA is explicitly seen as the role model with its flexible labour markets and highly capitalized and sophisticated ‘deep’ and liquid financial markets, which are seen as explaining the growing ‘productivity-gap’ between the USA and Europe.
Of course, the economics of integration currently insists that it is possible and desirable to accommodate the financial crisis in a m...
