Macro-economic policy-making from European Coal and Steel Community to euro crisis

Contents

1. Introduction

2. The changing nature of ideas during the ideational life-cycle

3. Constructing the EMU: The impact of ideas from ECSC to common currency

4. The euro crisis management and the prevailing role of internalized ideas

5. Conclusion and Implications

6. References

1. Introduction

Economic integration is widely considered to be the driving force of the European project and is by today much further developed than the political integration of the EU member states. Starting with the European Coal and Steel Community (ECSC) which constituted an industrial interdependence between Germany and France, economic integration developed by deepening and widening its scope; including up to date 27 member states which share a common internal market for goods, capital, services and labor, among them 17 nations which also share the euro as a common currency (Timeline of the European Union, 2011).

This so-called euro zone entered a phase of crisis from 2010 onwards when peripheral countries, mainly in Southern Europe, had to call for the Union’s assistance for servicing their government debts. The joint response was a “muddling-through tactic” comprising of step-by-step financial assistance and cautious further economic integration, yet not proceeding with the political integration.

This paper is situated in the outlined context and is concerned with the interaction of ideas and the economic integration process up to today’s Euro crisis management. Thus the forthcoming analysis will set out to answer a two-fold research question: “To what extent did ideas construct the European Economic and Monetary Union (EMU) and how does this determine the current crisis policy patterns?”

The theoretical framework is based on the theory of the ideational life-cycle as presented by Marcussen (1998) which aims at explaining the role and transformative power of ideas among macro-economic policy elites in constructing social realities. It seems promising because European integration has been an elite-led project and policy implementation was merely top-down, especially in the field of economic integration (Christiansen et al., 1999).

The paper subsequently reconstructs and analyzes the changing nature of ideas in determining national and European level economic thinking from the ECSC to the revised Stability and Growth Pact within the EMU. Building on these insights the patterns of current policies dealing with the euro crisis are examined.

The paper argues that the German ordo-liberal economic understanding has been implemented also on the European level during the 1970s/80s period of economic downturn and uncertainty within the political elite. It then became firmly institutionalized with a more monetarist stance and continues to influence the policy decisions of today’s European elite. This explains the fixation on ‘sound’ money and finances as expressed in the crisis therapies that we can currently witness in Europe. Emphasizing this theoretical perspective helps to uncover path-dependencies which will determine future policies and the scope for changes.

2. The changing nature of ideas during the ideational life-cycle

In this paper the changing nature of the EU is examined regarding the construction process of economic integration and identity. It is assumed that the interests of the involved actors are not given exogenously, but are rather the product of a transformation process in which certain ideas dominate and become widely accepted; but still remain subject to changes in the future (Christiansen et al., 1999: 529). To investigate this process the theory of the ‘ideational life-cycle’ according to Marcussen (1998) is applied which originates from the social constructivist toolkit (Christiansen et al., 1999: 542).

Underlying the theory are the assumptions that specific ideas, defined as “prevalent, relatively uncontested, but changeable knowledge structures” (Marcussen, 1998: 2), held by policy elites who deal with macro-economic policy-making at the national and the EU level, on the one hand constitute these peoples’ way of thinking, behaviour and partly identities and on the other hand inform and legitimate the policy discourse among these elites (ibid: 1f.). Consequently, people with ‘illegitimate’ ideational discourses are effectively excluded from the power circles of macro-economic policy-making (ibid: 3).

The ideational life-cycle then conceptualizes the medium-term process which ideas undergo from their competition within an ideational vacuum to the emergence of a hegemonic set of ideas which becomes institutionalized and finally their disruption by a destabilizing shock leading to a new ideational vacuum and another life-cycle.

Following the short period of an ideational vacuum and the ideational transfer process an ideational equilibrium is established. This is the state where a certain set of ideas becomes institutionalized in the way that powerful political organizations incorporate it and the ideas slowly disseminate into social thought and action taking on a “rulelike status” (ibid: 10). Thus the ideas’ social power is magnified and in return legitimates again those actors who act in line with to these ideas (ibid: 10f.). Newly emerging polities and politics are consequently designed according to the hegemonic, legitimate ideas in any policy field (ibid: 11). But since human beings, more specifically the policy-elites, are active leaders of these processes it is furthermore reasonable to assume that the promotion of ‘their’ ideas displays a deliberate strategy of current elites to lock-in their preference and create a path-dependency which benefits from the stickiness of institutions and binds future elites and policy decisions to the existing ideational equilibrium (ibid: 11f.).

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