CEPN-LADYSS, 10 septembre 2015

Mysterious EuropeSome brief remarks on Rober Boyer’s Seven lessons from the euro crisis

Cédric DurandCEPN (CNRS/Paris13)

Learning from the EU crisis with Boyer

A great intellectual opportunity for political economy “Le réel, c’est quand on se cogne” (Lacan)

The limits of usual interpretations Excessive public deficits

crowding out effect on private activity because of Ricardian equivalence

Mismanagement of interest rate too low => bubbles, in fact pb with one size fits all monetary policy

The Eurozone not an OCA, thus doomed to failIs it so irrelevant ? Points to the necessity of a fiscal federalism and thus democracy.

A different approachMonetary and financial instability should be related to the real economyNational heterogeneities has to be taken into accountA complex web of “cognitive, economic and political factors”

OK but is it controversial ?

General assessment

Does Robert Boyer bites off more than he can chew ?• The (correct) refusal of mono-causality lead to a multiplicity of lines of

arguments that are difficult to put together: are they consistent ? How are they articulated ?

• A mismatch between rich and audacious developments and not so trenchant conclusions

• Normatively, the text reveals a persistent Europeist candour. A personal hypothesis: is the lack of trenchant a way to soften a too deceptive reality ?

We need a spicier version of Boyer’s arguments• A class perspective is inspiring: integration is not class neutral.

“it is possible for particular social groups to alter advantage by altering state boundaries” (Wallerstein, 1979, p. 292).

• Boyer’s decisive insight about the changing hierarchy of structural forms in the course of integration must be explored further

• Dynamics of class restructuring are at the origin of the euro crisis

Seven lessons1. It was dangerous to trust real Business Cycles models to assess the

epochal change brought by the euro2. An open debate among different economic approaches would have

anticipated the imbalances3. In the weakest economies, policy makers have not perceived the radical

institutional changes required by the euro4. Polarisation of specialisation has not been alleviated by innovation and

industrial policy and this is the underlying origin of the crisis5. Monetary stability may be associated to financial instability and a major

crisis: specific financial regulation were required to sustain the euro6. The euro, along with capital full mobility, has exacerbated the productive

imbalances across member states that leads to the present crisis7. The ECB has become the leader of the rescue of the Euro but no other

actor has the legitimacy and tools to develop an offensive industrial policy at the continental level

Boyer’s 7 lessons on the origin of the crisis reduced

Bad policies in the periphery (i.e. lack of structural reforms)I generally disagree. The non-cooperative player has been Germany. In Keynes view the adjusment of trade imbalances must rely also on the surplus country

Lack of EU innovation and industrial policiesI agree with the statement considerable loss of room of manoeuvre at the national level But, could it be mitigated by EU innovation and industrial policies ? Isn’t it wishful thinking without fiscal federalism ? And in this case, what is the problem with productive divergence ? If we have a genuine unification, there is no pb with transfers

Free capital flowsThis is clearly a central element, but it is not a cause among other, it is the most important feature of contemporary financial hegemony. The “raison d’être” of the Euro. A single currency without free capital flow within is not a single currency (ex: currently Greek Euro are not really usual Euro are there uses are restricted) Crises are an unintended consequences of financial capital political successes

UNEVEN CLASS RESTRUCTURING AT THE ROOTS OF IMBALANCES

complementary thesis 1

THE cause of imbalances: diverging ULC because of the retreat of German Labour

http://yanisvaroufakis.eu

Growth regimes, working class restructuring and imbalances(Stockhammer, Durand and List, 2015)

FINANCIAL HEGEMONY IS THE RESULT OF (IMPERFECT BUT SUCCESSFUL) STRATEGIC POLICY MAKING BY BIG BUSINESSES

Complementary thesis 2

What was the motive of the Euro ?

Against a (naïve) functionalist view • the will to reduce exchange rate instability• An harmonicist illusion, mask uneven distribution of economic

advantages

A class-strategic perspective• the quest by Financial institution and TNC (via the European

Roundtable of industrialist) to the advantages of a domestic World Money

Costas Lapavistas (2012)

• The implementation of a mechanism allowing to circumvent past social compromises and force labour restructuration

Without european transfers and exchange rate adjustment, wages and public spendings are the sole adjustment variables“The European social model has already gone” (Draghi, WSJ, 2012)

Banking on World Money (Net FDI stock, Lane and Mileni database)

The Changing hierarchy of structural forms in the course of EU integrationBoyer (2000, 2013) ; (Durand and Keucheyan, 2015)

The productive capital momentBecause of the national and global rise of labour and rapid industrial development, the regulation of capital accumulation was mainly subordinated to the economic and political management of the workforce

The transnational capital momentThe European roundtable at the command in the re-launch of the EU integration in the 1980sDomination of trade and competition issues(Van Apeldoorn, 2002 and 2013 ; Ross, 1995)

The financial capital momentEuro helped to complete the financial integration of the European economy and to deepen financial markets, which, throughout the continent, fostered the rise of financialised forms of corporate governanceThe Euro crisis resulting from huge regional imbalances => financial stability as the expression of the dominance of finance over the other structural forms

Changing hierarchy of structural forms and EU integration(Durand and Keucheyan, 2015)

Uneven distribution of selectivities across European statehood

Exclusive competencies of the EU commercial policy, competition policy, monetary policy (and, finally, the common fisheries policy)

Since 2008, densification of European institutions to support financial hegemony (in sharp contrast with the lack of any social initiative).

Compromises between member states and business and financial organizations are made for the central purpose of reproducing financialisationECB buying of national bonds only on secondary marketsBanking UnionECB QE

A negative path of social integration

Limitations to the very possibility of a European social policy under the current treaties.

• First, social policy is a subordinated policy. It has to negotiate "the diverse forms of national practices, in particular in the field of contractual relations, and the need to maintain the competitiveness of the Union economy.” (Art 151).

• Secondly, key dimensions of this policy are excluded, as the areas in which the Union shall support and complement the activities of the member states do not cover “pay, the right of association, the right to strike or the right to impose lock-outs” (Art 153) and must not interfere with “the right of Member States to define the fundamental principles of their social security systems”.

• Finally, the Fundamental Rights Charter is mostly non-binding, as it only applies to EU member states in relation to their implementation of EU law (Art 52 of the Charter). Worse, the minimal social Community acquis is currently undermined by the Commission’s determination to revise some older directives and the more liberal orientation the jurisprudence has taken within the ECJ (Dufresne & Pernot, 2013).

The highly dynamic process of negative integration (Scharpf, 2010 )• memoranda, the fiscal compact and, possibly, the “reform contracts” proposed by Germany

follow such a negative integration path; all include very stringent constraints on key dimensions of welfare (pension reforms, unemployment benefits, health benefits) and on labour market regulations (Jolivet et al., 2013).

• Social issues are not addressed for their own sake, but, rather, operate as adjustment variables under the heading of financial stability, macro-supervision of fiscal policy and competitiveness