an ideal or utalitarianism? the policies of the european union

8/6/2019 An Ideal or Utalitarianism? The policies of the European Union

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An Ideal or

Utalitarianism?A look at Nordic Europe and the European Unions policies.

Amanda Bergmann

POLS 3200


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Dr. Perreault

April 15, 2011


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The goal of this paper is to highlight how the European Union has

deviated away from its inception. Originally, the European Union was an

ideal; an institution designed to promote peace and prosperity in the

international world. However, as will be demonstrated, the EU has instead

evolved into a very utilitarian structure, driven by local politics and sovereign

interests. Yet the ideal still exists in some policy initiatives, instigating

feelings of hope that all of the European Unions policies will once more

reflect the ideal and that the European Union will become a legitimate

institution that promotes peace and prosperity.

This paper addresses two topics: one, the role of Nordic Europe within

the European Union; and two, the different incentives that drive policies

within the European Union. With this structure, readers should attempt to

pinpoint issues regarding foreign policy, economic policy, industrial policy,

and social policy within the Nordic example, as these topics will be

addressed later on.


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Nordic Europe

Nordic Europe represents an exemplary example of a region with

many homogenous and common features uniting its component states.1

Officially comprised of Denmark, Finland and Sweden neither Norway nor

Iceland are official members of the European Union Nordic Europe is

characterized by both its mature liberal democracies and its advanced

corporatist economies. However, Nordic Europes most defining

characteristic is its sense of distinctiveness from the rest of Europe.2 This

distinctiveness is based off of a common Nordic identity derived from a

heightened sense of morality, open political institutions, and extensive

welfare systems.3 Furthermore, Nordic Europes geographical isolation,

combined with its small population and peaceful coexistence, has fostered

growth of a Family of Nations- five nations all moving towards similar

goals.4

The distinctiveness of Nordic Europe is a topic that should be

elaborated. Nordic Europe is hailed as being the guardian of moral values

and promoter of social progress within the European Union. During WWII,

Nordic countries were among the most reluctant to turn over their Jewish

populations to the Nazis.5 Now, Nordic countries remain moral by actively

supporting international institutions such as the United Nations, and strongly

1 (Miles, 2010, p. 184)2 (Notes, 2011, p. March 1)3 (Miles, 2010, p. 187)4 (Miles, 2010, p. 184) (Notes, 2011, p. March 1)5 (Notes, 2011, p. March 1)


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advocating for international development and nuclear disarmament. They

value above all else neutrality and peaceful coexistence, and have

internalized a deep-seated respect for international law.6 As such, Nordic

Europe often embraces a sense of superior morality; these countries believe

that they have achieved the final goal of peace and prosperity and that their

method of achievement is the best method available. These feeling of

moral superiority are actualized in the active role that Nordic countries

have taken internationally in promoting peaceful coexistence and conflict

resolution.7 8

In addition to their moral superiority, Nordic European countries also

believe that their version of the state is the most favourable. They embody a

tradition of open and transparent government that, although not as

democratic as other European countries, is highly representative of their

populations.

9

Furthermore, their extensively developed welfare states

actively initiative their claims to superiority by applying collective action

measures towards the promotion of high standards of living for all citizens

(including those who are not economically beneficial, like the elderly).

Within Nordic Europe, welfare politics are much more important than

European integration alone, lending itself well to the old saying people over

politics.10

6 (Miles, 2010, p. 186)7 For example, their active role as a conflict resolver in the Palestinian-Israeli conflict, or theirsuccessful role in establishing relative peace in the Middle East with the 1993 Oslo Accords(until recently).8 (Notes, 2011, p. March 1)9 (Miles, 2010, p. 185)10 (Miles, 2010, p. 187)


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Nordic Europes relationship with the European Union is one of utility,

structured around the acquisition of defense and economic gain. Although

Nordic European countries do play a large role internationally, this role is

primarily one of peace-making and peace-keeping. As such, they have a

very small functional need for military might. However, their own lack of

military strength contributes to a growing fear of other nations capabilities

for hard power/military action. The European Union is thus seen as an

insurance policy; members of the European Union will not engage in military

conflict with others members, and outsiders of the European Union will have

to contend with the entirety of the European Union if they want to engage

Nordic Europe in battle.11 Additionally, the European Union offers a stable

and rich market to support the economies of Nordic Europe, and an

insurance policy in the form of bail-outs should Nordic economies get into

trouble.

Aside from this need for defense and economic support, Nordic

European countries have been very skeptical towards joining a supra-

national organization that might impinge upon [their] national sovereignty.12

Due to aforementioned feelings of distinctiveness, Nordic Europeans do not

intrinsically feel like they are a true part of Europe. Instead, they retain a

fierce and stead-fast pride in their own identity and are [] wary of any

attempts at establishing a Federal Europe that might contract or undermine

11 (Notes, 2011, p. March 1)12 (Miles, 2010, p. 186)


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Denmark

Denmark is an anomaly within Nordic Europe as it became a member

of the European Union fairly early in the game. This decision to become a

member was driven by economic rationale; Denmark viewed the European

Union as an economically advantageous initiative and therefore made sure

to integrate itself into the process early. However, this move has since

proven to be problematic: as the European Union has evolved from a purely

economic institution to a federalist vision following a European creed,

Denmark has had to constantly struggle with issues of deepening and the

question of whether continued integration is desirable. 17

However, early admission has proven advantageous in one very large

way. Due to its longstanding role within the European Union, Denmark has

the ability to be very flexible when it comes to which policies are adopted

and which are not.

18

As such, Denmark was able to address the issues of

deepening by securing four major opt-outs from the 1922 Treaty on

European Union, which effectively allowed them to avoid participation in

European citizenship, the EMU, the CFSP, and the JHA pillar.19

Yet Denmark continues to remain skeptical about new European

initiatives. Post-2000 governments have begun questioning the policies of

free movement of labour and the European defense dimension.20 These

questions will only become harder to address as time progresses; for

17 (Miles, 2010, p. 190)18 (Miles, 2010, p. 195)19 (Miles, 2010, p. 190)20 (Miles, 2010, p. 194)


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example, now that Denmark is an active member of NATO, what position will

it take on the CFSP?21

Finland

Finland is the epitome of neutrality when referencing its military role

within the European Union. In addition to economic incentives, Finland

joined the European Union in 1995 in an attempt to assert its pro-western

ideology.22 However, its close proximity to the USSR served as a strong

incentive to not join NATO (as Denmark had done).23 As such, Finland was

forced to ride a fine line of neutrality between both sides and hoped to avoid

detection from either.

With the fall of Communism in 1989, Finland was finally given the

opportunity to find its voice within the European Union without worry that it

would disturb the USSR. Since then, Finland has become a strong supporter

of Europe and a founding member of the Euro Area.24 Yet this involvement

within the European Union also has to do in part with its time of membership.

Because both Finland and Sweden applied for membership during the last

stages of EMU and the evolution of the CFSP, they were forced to fall in line

with these initiatives if they were to be seriously considered for membership.

Therefore, Finlands newly integrated role within the Union can be said to be

a by-product of the temporal sphere, which made it impossible for Finland to

21 (Notes, 2011, p. March 1)22 (Notes, 2011, p. March 1)23 (Miles, 2010, p. 194) (Notes, 2011, p. March 1)24 (Miles, 2010, p. 191)


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secure any form of differentiated integration even if it had tried.25

Sweden

Sweden and Finland are very similar cases. Due to their shared

ascension to membership in 1995, Sweden too was unable to secure any

form of differentiated integration. Sweden (along with most of Nordic

Europe) therefore chose to work within the structure and now embodies the

ideas of crises management and non-alignment.26 Not wanting to be

dragged into war, Sweden rejects the idea of military alliances (such as

NATO) and initiatives in favour of more pacifist and humanitarian actions

(such as peacekeepers and diplomatic discussions).27 By utilizing the fringes

of EU law, Sweden is able to successfully practice non-alignment techniques

but still be involved in the CDSD/ESDP structure.28

Swedens main incentive for European Union membership was

economic; it wanted to join the EFTA in order to have the same benefits as

Germany and Holland. However, membership within the Union has been

contested as Swedes are afraid of losing the social advances that they have

made. Both the Laval case and the Viking case have shown that there are

ways around the European Unions safeguards against the Visegrad models

25 (Miles, 2010, p. 195)26 (Miles, 2010, p. 192)27 (Notes, 2011, p. March 1)28 Able to do so by arguing that the CDSD/ESDP are not formal alliances, and therefore itdoes not have to actively be a part of the alliance in order to have an opinion. (Miles, 2010,p. 196)


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social race-to-the-bottom.29 For the Swedes, the problem of a varied Social

Europe exposes them to battles they had won 50 years previously by

reintroducing them to debate under the guidelines of the ECJ and not the

Swedish government.30 Therefore, European integration poses a significant

threat to the welfare system both within Sweden and the rest of Nordic

Europe.

Iceland & Norway

Neither Iceland nor Norway are officially members of the European

Union, yet both constitute as members of Nordic Europe due to their strong

political, economic and social ties to the region.31 Both nations are however

members of NATO; Norway encompasses the Nordic tradition of

peacemaking and peacekeeping, whereas Iceland allows the Americans to

dictate its policies.32

Iceland was originally skeptical of joining the European Union because

the common fishing rules would undermine their main industry: fishing. Fish

were essential to the Icelandic economy, and unless Iceland could secure an

opt-out of the common fishing rules, the European Union would take its

29 Both the Laval and Viking cases ruled in favour of foreign workers being brought into thecountry for lower wages and benefits than was considered socially acceptable in Sweden.

This is an example of the Visegrad economic model of race to the bottom, where wagesand social benefits are cut in an attempt to become the most competitive. (Notes, 2011, p.March 3)30 (Miles, 2010, p. 192)31 (Miles, 2010, p. 196)32 (Notes, 2011, p. March 1)


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previously protected and regulated fish and damage its economy.33

However, the 2008/09 economic collapse effectively ensured that Iceland

would have to join the European Union if it did not want to go bankrupt.34

Although Norwegian governments strove in the past for European

Union membership, public rejections of European integration by Norwegians

on several accounts have left Norway out of the club. Yet instead of

remaining the only outsider within Nordic Europe, Norway has become an

adaptive non-member, forming both formal and informal relationships with

the European Union.35 Norway was therefore permitted to join the Schengen

Area in order to maximize Norwegian access to and participation in many

aspects of the Single European Market.36 Furthermore, it regularly

contributes to core policies such as environmental, structural funds, and

research and development; and it has acquired equal-partner status in some

regional flagship policies such as the European Union Northern Dimension.

Basically, Norway has become more fully integrated into EU policy than

some full but reluctant EU members.37 However, Norway is currently slowly

moving towards membership for two reasons: economic problems resulting

from the 2008/09 economic crisis, and changing conditions in the Nordic

region brought on by alterations in Swedish and Finish perspectives [].38

33 (Notes, 2011, p. March 1)34 (Miles, 2010, p. 192)35 (Miles, 2010, p. 193)36 (Miles, 2010, p. 193)37 (Miles, 2010, p. 193)38 (Miles, 2010, p. 195)


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However, this means very little as the same fierce debates regarding

European integration continue.

As depicted, in most individual cases integration into the European Union has

been done so reluctantly.39 With the exception of Denmark, Nordic

countries, convinced of their own moral and institutional superiority, have

elected to join the European Union only when economic hardship or security

worries have forced them to do so. However, it is also important to note

than Nordic Europe integration has brought with it the rise of a more socially-

oriented Europe as Nordic countries assert their own morally superior values

into the existing system.40

39 (Miles, 2010, p. 189)40 (Notes, 2011, p. March 1)


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The Eurozone

The Eurozone is a macro-economic governance structure comprised

of all European Union member states that have adopted the Euro. The

Euro, a multi-national currency currently shared by seventeen member

states, was designed to promote exchange rate stability and convertibility

between members of the Eurozone. Theoretically, the Euro is an effective

way to tie together and stabilize member states markets in order to create a

strong European Market. It does this by breaking down the barriers of

currency conversion between Eurozone states and lowering the risks

associated with exchange rates.41

The Eurozone emerged in the wake of the Bretton-Woods Failure. After

WWII, the world economy was structured on the Bretton-Woods system.

Within the Bretton-Woods system, every nations currency was pegged to

the United Stated Dollar (USD) at a fixed exchange rate and devaluation42

of

any nations currency was only permitted if the International Monetary Fund

(IMF) agreed. In order to ensure the stability of the world economy, the USD

was pegged to the gold standard; $1 USD could be directly correlated into a

certain amount of gold. This meant that any wealth that existed in the

intangible financial sector could be directly converted into wealth in the

tangible world in the form of gold. Since there is a fixed amount of gold in

41 (Notes, 2011, p. March 8)42 A traditional tool used by sovereign states in times of economic hardship to promoteexport sales and therefore boost the economy.


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the tangible world, the value of the USD could not wildly fluctuate and

therefore could not destabilize the world market.43

The problem occurred in 1971 when President Regan delinked the USD

from the gold standard. This delinking effectively meant that the intangible

wealth of the financial markets no longer corresponded into tangible wealth

in the real world. When currencies are not tied to tangible goods, they are

said to be floating. Floating currencies are dangerous because the financial

sector, not the presence of tangible goods, effective controls the value of the

currency. This opens up the possibility for financial sectors to rapidly change

the value of a currency within a short span of time. Thus, when the USD was

delinked from the gold standard, its value dropped 35% in just a few days.

This effectively lowered the purchasing power of the United States.44

The drop in value of the USD was dangerous for two reasons. One,

since every other nations exchange rates were tied to the value of the USD,

the value of their currencies dropped as well. This meant that they too lost

their purchasing power and faced the possibility of inflation. Two, within the

European context, the United States was the biggest market for European

goods. Thus, when the United States currency devalued, Europe lost its

largest customer. This threatened the stability of European markets for they

now had a high supply and a low demand. The same can be said for many

43 (Notes, 2011, p. March 8)44 (Notes, 2011, p. March 8)


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other regions of the world. Inflation and overproduction thus threatened the

stability of the entire world market.45

Due to the threat of world market instability, a new system that

regulated the value of floating currencies was required. By establishing a set

limit - based off of an average of the seven strongest economies (G7) - in

which currency values could fluctuate, the world economy was able to

stabilize exchange rates between nations. This effectively meant that

nations currencies could not devalue past a certain point within a short span

of time. As such, nations would not lose their purchasing power (for imports)

or customers (for exports) without some previous warning.46

As previously mentioned, the Euro is a step past that. By establishing

a single currency for all members within the Eurozone, the threat of varying

exchange rates between Eurozone countries was eliminated. This eased

market exchanges between Eurozone member states, for each members

currency was the same and therefore trustworthy. The Euro was also

strengthened by each Eurozone states economy, creating a strong currency

that allowed the European Union to control the market. The strength of the

Euro has allowed the European Union to begin a transition from a low-

currency exporter (as it has been historically) to a high currency importer

with a strong domestic market and financial sector. However, it must be

45 (Notes, 2011, p. March 8)46 (Notes, 2011, p. March 8)


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noted that this transition is not complete and that the Europeans still rely on

the American economy.47

The creation of the Euro was therefore seen as an all-encompassing

answer. As demonstrated, it could theoretically solve the issue of the

unprecedented growth in financial markets caused by the failure of the

Bretton-Woods system. Dyson also argues that the Euro promoted

cooperation between Eurozone countries: The density of interactions

amongst officials increased both at the EU and global levels, along with their

sense of being a professional club dedicated to economic and financial

stability.48 He states that the introduction of the Euro brought with is a

socio-cultural change that reinforced the autonomy and sense of shared

identity at the core EU level. However, one must also take into consideration

that these countries, having coexisted since their culmination, were most

likely already aware of their interdependence. Additionally, it can be argued

that socio-cultural change began in the 1940s when the process of the

European Union began.

One of Dysons main arguments reverts back to the fuzziness of the

Eurozone. His given reason for this fuzziness is that European macro-

economic governance has not evolved in a linear way.49 This is due to

contradictory EU Treaty and legal provisions which mark the Eurozone as

special; differences in mutual gains from integration; the presence of free-

47 (Notes, 2011, p. March 10)48 (Dyson, 2010, p. 221)49 (Dyson, 2010, p. 217)


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riders; differences in beliefs about the framework of the Eurozone; and finally

differences in interests between large and small states, and success and

problem states.50 Furthermore, the existence of the IMF, G 7/8, European

Commission, and other institutions and players play an integral role with

regards to the European market.51 It can hardly be said, with all of these

conflicting characteristics and external players, that a consolidated Eurozone

has been formed. However, despite the lack of cohesion within the

Eurozone, the institutional framework of the Euro based off of regulation

and supervision, fiscal policies, structural policies, and economic policy

coordination is somewhat stable and perpetual given its unitary nature.52

As previously mentioned, the strength of the Euro is derived from the

strength of the Eurozone members markets. By sharing the Euro, Eurozone

members are combining the strength of their markets and, in doing so,

creating a common fate.

53

If the Eurozone succeeds in producing a strong

and profitable economic market, all Eurozone member states will benefit.

Conversely, the failure of one Eurozone members market will destabilize the

Euro; this destabilization will then negatively affect the other members

markets and lead to a Eurozone-wide failure.54 The risks of Eurozone

membership are therefore high.

50 (Dyson, 2010, p. 217)51 (Dyson, 2010, p. 226)52 (Dyson, 2010, p. 222)53 (Dyson, 2010, p. 232)54 (Notes, 2011, p. March 10)


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However, joining the Eurozone is still considered a good insurance

policy. By joining the Eurozone and integrating their markets into the

common fate, nations place themselves in a position where, if their

economies fail, they will be bailed out by the stronger members so as not to

compromise the entire Eurozones stability. Such was the case for Greece

and Ireland, who both received hefty bailout packages when their economies

threatened to destabilize the entire Eurozone. Furthermore, membership

within the Eurozone offers insurance gains or insulation from foreign-

exchange market volatility and crises, access to large euro financial markets,

and the trade and investment gains from the removal of currency risk and

reduced transaction costs.55

As such, weak nations have more incentive to join the Eurozone than

strong ones, leading to an overall weakening of the Eurozone.56 Strong

economies such as Germany (the strongest economy in the European Union)

are forced to accept weak nations membership in order to strengthen their

own economies. By strengthening the economies of weaker nations,

Germany and other strong nations are hoping to stabilize their own

economies.57 Furthermore, now that these weak nations are part of the

Eurozone, strong countries are committed to supporting them in order to

avoid a negative common fate. Thus far the failure of weak nations has not

55 (Dyson, 2010, p. 217)56 Since, as mentioned, the strength of the Eurozone is determined the strength of Eurozonecountries.57 By creating trading partners, and improving the neighbouring countrys standards in orderto limit economic and social dumping. A similar theory is used as legitimization for the ENPwhich, as mentioned before, stabilizes buffer countries in order to promote border controland the development of prosperous trading partners.


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culminated into a negative common fate; however, if too many weak nations

begin to fail, strong nations such as Germany may be threatened due to their

ties via the Eurozone.58

The phenomenon of strong countries bailing out weaker countries has

led to the politicization of Euro management. Initially, the Euro was

legitimized by its de-political nature. It was managed efficiently by long-

sighted professionals and not by short-sighted politicians, who manipulate

monetary policies in order to win elections.59 However, due to the issue of

common fate, there exists astounding political pressure to help failing

members. If a Eurozone member was allowed to destabilize the Euro, the

entire Eurozone would be affected. This destabilization would result in

increasing inflation as the purchasing power of these nations plummeted

(due to a devalued Euro). Rapid inflation would then result in social unrest

(due to high costs for goods and the inability of the state to provide social

programs) and a lack of competitiveness on the international market, both of

which are not good for electoral support.60 Therefore, Eurozone

governments feel compelled to intervene in Euro management and help

failing members; otherwise, they risk being voted out of office.

Nevertheless, government intervention is hurting the credibility of the

58 (Notes, 2011, p. March 10)59 (Notes, 2011, p. March 15)60 It is for this same reason that the Euro cannot be devalued despite the fact that the highvalue of the Euro is actually hurting Eurozone countries.


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European financial system as people lose confidence that the Euro is being

managed efficiently, effectively and apolitically.61

While the European Union is made up of twenty-seven members, only

seventeen belong to the Eurozone. The ten nations who have elected not to

join the Eurozone have done so in order to retain sovereignty over their

currency. Domestic adjustment processes to economic imbalances in the

Euro Area prove long-term and protracted and take the form of politically

painful cuts in wages and non-wage costs. The result is a disincentive to

euro entry for politicians, whose time horizons are defined by short term

electoral cycles and who are inclined to favour sharp, temporary shocks.62

The reasons why current Eurozone member governments intervene in Euro

policies are therefore very similar to why outsider countries have yet to join

the Eurozone. Due to vested interests, such as the ability to retain the

flexibility even if restricted to use domestic interest-rate policy and the

nominal exchange rate to speed and ease adjustment to asymmetric

shocks63, a semi-permanent group of insiders and outsiders has been

created. On the inside lie countries such as Germany, France, Belgium and

Italy; on the outside, countries like the United Kingdom, Denmark and

Sweden.

In reality, those who have not adopted the Euro have come to regret it.

Due to the interdependent nature of international markets, outsider

61 (Notes, 2011, p. March 10)62 (Dyson, 2010, p. 217)63 (Dyson, 2010, p. 217)


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countries (especially those who are close to the European Union) are finding

that their currencies are inevitably pegged to the Euro regardless of whether

or not they are members of the Eurozone. However, since they are not

official members, outsider countries have no say or control over the

management of the Euro. They are therefore basically left with a pseudo-

Euro over which they have no control. Additionally, if the Euro fails, these

economies (in addition to insider economies) will be negatively affected.

However, if the Euro succeeds, outsider countries will not receive the

benefits that insider countries will. It is essentially proving to be a lose-lose

situation.64

Since its introduction into the Eurozone, the Euro has had several

consequences. Firstly, as has previously mentioned, the Eurozone has

effectively built a policy of continent-wide success or failure. While the Euro

has been effective in removing internal vulnerability between nations

65

, it

has contributed to international vulnerability. Dyson states that [all] will be

hurt on an international level during crises since [the Euro] has not

accelerated growth.66 The Euro is therefore a short-term answer for building

strong domestic markets. However, it will not help the Eurozone countries to

move forward on the international market. Additionally, because outsider

64 (Notes, 2011, p. March 10)65 One currency = perfect currency conversion = trustworthy currency between Eurozonenations = trustworthy trade. Essentially, trading partners want to ensure that their tradingpartners currency is stable and not prone to change. This is because if a deal is made andone partners currency devalues, the other partner receives a smaller amount of real wealth(since the purchasing power of the devalued currency has dropped).66 (Dyson, 2010, p. 232)


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countries are still indirectly attached to the Euro, they too are put at risk

during international crises.67

Secondly, the institutional framework of the Euro has given primacy

[] to price stability and central bank independence.68 The 1989 Delors

Report concluded that monetary policy competence could not be shared

between central banks and a new European central bank without

endangering stability.69 Thus, control of the Eurozone has been given

primarily to the European Central Bank (ECB). This is because, as previously

touched upon, Europeans do not trust elected European politicians with the

economy.70 The ECB backed by provisions found in the Maastricht Treaty

therefore controls the behaviour of Eurozone governments by dictating what

is necessary in order to succeed. This central role of the ECB leads to a

democratic deficit within the structure (as ECB members are not elected),

and a loss of sovereignty and social protection.

71

The European Central Bank and the Euro are both based on the

German Deutschmark model. This is problematic because during its peak,

the Deutschmark was so strong that is was doomed to fail. The same

instance is now happening with the Euro. Because the European Union has

yet to successfully transition from a low-currency export market to a high-

currency financial market, the strength of the Euro is undermining the low-

67 (Notes, 2011, p. March 10)68 (Dyson, 2010, p. 215)69 (Dyson, 2010, p. 216)70 (Dyson, 2010, p. 223)71 (Notes, 2011, p. March 15)


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currency export market. Prices for European goods are skyrocketing, which

means that customers of European goods can no longer afford to buy them.

This is putting the Union in a position of high supply and increasingly weak

demand (as was seen in 1971 during the Bretton-Woods Crisis). The obvious

answer to this case would be to devalue the currency in order to increase the

customer base. However, the Euro cannot be deflated. As previously

touched upon, Euro deflation will lead to inflation (otherwise the currency is

hurt forever), which will lower purchasing power. A low purchasing power

means that European citizens can no longer afford to buy goods and that

European governments can no longer afford to provide services; both of

these consequences lead to social unrest.72 Therefore, the only way to save

the Euro (deflation) is undesirable. Additionally, due to the strength of the

Chinese market, it can be argued that dropping the Euro will still have no

significant effect on Eurozone markets ability to compete.73

Thirdly, the creation of the Eurozone has lead to the reinforcement of

liberal capitalist biases and a normalization of behaviour. The focus of the

Eurozone is global scale, GDP-based measures of economic performance

and sovereign risk that yield comparative international league tables and

competitiveness indexes.74 This promotes a certain model of development

(in order to remain competitive with both the USA and Asia) and inherently

72 The Italian Recipe, which calls for an unstable and illegitimate government that no onetrusts, will also lead to deflation as international trading partners will be reluctant to trade.

This model also avoids flooding the market and hurting assets. However, the Italian Recipecannot work within the context of the EU because EU governance needs to remain crediblein order for the entire EU structure to remain legitimate. (Notes, 2011, p. March 10)73 (Notes, 2011, p. March 10)74 (Dyson, 2010, p. 219)


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rejects all other forms. Such rejection has ultimately led to the normalization

of behaviour between Eurozone markets. For example, the Mediterranean

has begun emulating the Germanic stability culture (and failed).75 France too

has moved away from its lackadaisical lifestyle towards a more competitive

market at the expense of social and welfare costs. Whilst Eurozone

integration stops governments from being fiscally irresponsible, it also limits

diversity within the Eurozone and contributes to the common fate.76

Eurozone countries seem to have forgotten that approaches other than

liberal capitalism can also be highly successful (as demonstrated by Austria

and Swedens consociational models). They have moved away from

alternative models such as discretionary fiscal fine tuning77 in order to

provide certainty and stability to investors. This normalization effectively

freezes innovation and limits the potential for the Eurozone to grow. 78

The Eurozones competitive and apolitical nature has also contributed

to increasing resistance towards globalization initiatives. In order to remain

internationally competitive, Eurozone members have had to give a lot up.

Many Europeans have therefore begun questioning the credibility,

75

(Dyson, 2010, p. 231)76 If all Eurozone countries follow the same model and one fails, the others will ultimately failas well due to the lack of diversity available to cushion the failure of the first.77 Discretionary fiscal fine tuning is a process of political intervention with the intent tochange an economy. It normally takes the form of tax breaks and incentives, and can bevery effective in creating jobs in the short-term. However, due to a fundamental shift inideology, the markets have now been reified as self-governing and policies such asdiscretionary fiscal fine tuning are shunned. (Dyson, 2010, p. 227) (Notes, 2011, p. March15)78 (Notes, 2011, p. March 15)


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sustainability and logic of globalization initiatives, and are instead opting for

increased standards of living over globalization initiatives.79

Finally, the Euro has contributed to the divide between large and small

countries. Large Eurozone member states feel entitled due to their strong

economic status and believe that they can push their will on the weaker

members.80 They have forgotten that they too have broken the Eurozone

rules.

So where does the Eurozone leave us? Instead of being the most

dynamic and competitive knowledge-based economy in the world, capable of

sustainable economic growth with more and better jobs and greater social

cohesion, the Eurozone has become an institution that lacks cohesion and

an insufficient amount of structural reform, and whose members are

unwilling to engage in firm commitments.81 It has been surpassed by other

international institutions (IMF, World Bank, G 7/8, G20, etc) and has proven

incapable of managing the international economy on its own.82 The

European Union has not been deepened by the process; instead, members

have been divided between insiders and outsiders, and strong and weak

economies. It therefore appears that, aside from the assurance of a bailout

for weak members, the Eurozone has become more evil than good.

79 (Dyson, 2010, p. 230) (Notes, 2011, p. March 15)80 As France, Germany and Italy demonstrated by pushing the Stability and Growth Pact andthen withdrawing when they felt that the economic and political costs of compliance weretoo high. (Dyson, 2010, p. 228)81 (Dyson, 2010, p. 229)82 As demonstrated by the Dot.Com bubble burst and Europes subsequent need to bail outthe American economy in order to not destroy their own. (Dyson, 2010, p. March 10)


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Industrial Policy

The European Unions industrial policy is officially geared towards

proposing specific solutions to improve the competitiveness of European

industry and prevent deindustrialization, notably in the light of increasingly

strong competition from China and Asia.83 Essentially the three main goals

of any industrial policy, the European Unions included, are to create jobs

and wealth, promote competitiveness, and increase citizens standards of

living. This can be accomplished both directly and indirectly through the

effective use of industrial policy.84

The European Union has developed seven initiatives in order to help

increase its level of competitiveness.85 The first requires nations to increase

their energy efficiency and to consider the environment. This will allow

Union member states to emerge as winners in the international market.

Japan is a prime example of how energy efficiency can be competitive: by

focusing on alternative forms of energy to oil (re: nuclear energy, oops),

Japan was able to buffer itself when oil prices soared. This meant that they

did not have to adjust to the high oil prices and subsequently had more to

spend on other goods. Denmark is another example, though with regards to

environmental consciousness. Denmark successfully identified that their

most valuable resource was their environment; as such, Denmark introduced

83 (Howarth, 2010, p. 233)84 A direct policy example would be supplying sectors with financial aid and subsidies. Anindirect policy example would be increasing health standards and education in order tomake the population healthier, more education and therefore more competitive. (Notes,2011, p. March 17)85 (Howarth, 2010, p. 233)


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industrial policies designed to protect it. This has had the effect of forcing

Denmarks industries to develop greener and more sustainable methods of

production which, due to the new-green age, has them a competitive

advantage over other industries who are now attempting to become more

sustainable.86

The second initiative is concerned with intellectual property rights.

Intellectual property rights are important because they promote the

development of innovative new ideas. By developing these ideas at home,

Union member states are able to not only sell these ideas abroad, but also

develop them within their own economies without having to pay for their

rights. In offering property rights, it assures innovative thinkers that their

ideas will not be stolen from them. This gives them an incentive not only to

think up new ideas, but also to stay where they are and not move to other

states such as the USA.

87

The third initiative concerns better and more efficient regulation.

Lightening the bureaucratic burden by compiling different necessities

together, lightening certain regulations, and/or completely eliminating

certain hurdles, makes it easier for companies to conduct business. The

easier it is to conduct business, the more business will be conducted.

Therefore, lightening the bureaucratic burden indirectly promotes economic

growth.88

86 (Notes, 2011, p. March 17)87 (Notes, 2011, p. March 17)88 (Notes, 2011, p. March 17)


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The fourth initiative concerns industrial research, development and

innovation. As briefly touched upon, if countries have the ability to develop

their own technology, they remain extremely competitive: they can sell

these technologies to outside buyers at a high cost; develop these ideas into

products (preferably high-value-added products89); and stay ahead of the

curve by producing original ideas and products which will then allow them to

corner the market (on that good). Furthermore, due to the high value of the

Euro, Union member states are able to buy foreign technology very cheaply.

This allows them to corner the market as they have more money to invest

into the industry.90

The fifth and sixth initiatives concern both market access and human

capital. Market access increases the capability of industries to grow by

providing them with domestic and international partners. If these industries

continue to grow, they then have the potential of expanding into economies

of scale.91 By offering increased market access, states are also able to

attract foreign direct investment (FDIs), which offer the promise of more jobs

and more customers for domestically-produced goods92. Within Eastern

Europe, many Union member states are building extensive infrastructure in

order to offer access to both domestic and international markets in an

89 High value added: the cost of the product is much higher than the cost of production. Thisallows the seller to make a large profit margin. An example of a high-value-addedcommodity would be a diamond: simple to mine, simple to polish, expensive in stores.90 (Notes, 2011, p. March 17)91 Economies of scale are preferable for high-demand products because they increaseproduction whilst decreasing production costs.92 Since they will most likely buy from local producers unless they have already established arapport with other suppliers.


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attempt to attract FDIs. In addition to market access, an increase in human

capital also makes states more efficient. The healthier, more educated and

happier a working-class population is, the more efficient and productive they

are. Therefore, by improving the human capital through social programs,

Union member states are making themselves more competitive. Both of

these initiatives work indirectly to promote market competitiveness.93

Finally, the seventh initiative concerns the management of structural

change. States must first identify key elements that are important to several

different sectors within the economy. Once identified, states can create

monopolies around these specific elements in order to effectively gain

control of all the other industries that rely on them. States can then use this

monopoly to benefit a wide range of industrial sectors by offering subsidies

or lightening regulations on the key element.94 If states are able to identify

key elements for future economies (say, a specific piece used in hydro, wind

and solar energy production), they can then promote the development of

this future economy, which will inevitably serve as a buffer when their old

economies become less profitable. This industrial policy is especially

cutthroat as it targets only the most efficient key elements. However,

socially-based industrial policies (as seen in the Scandinavian worker

retraining program) can help the losers as well by easing the transition from

old to new economies.95

93 (Notes, 2011, p. March 17)94 (Howarth, 2010, p. 233)95 (Notes, 2011, p. March 17)


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One key way that the European Union is implementing these seven

initiatives is through the establishment of small medium enterprises (SMEs)

supported by the Lisbon Agenda.96 Small medium enterprises are

advantageous because they employ more people (as they are generally not

mechanized), are easily adaptable (due to small bureaucracies and staff),

and are extremely exploitative (SME business owners and operators will

regularly work for more for less pay for the added advantage of owning and

operating their own business). Furthermore, SMEs are flexible in that they

are cheap to create and low cost to lose. If an SME goes out of business, the

entire economy is not jeopardized because many like it exist and can replace

it.97

The ultimate goal of the Unions industrial policy is to modernize the

European economy. Prior to the pursuit of initiatives designed to support

competitiveness, European companies were very inefficient.

98

However, the

strength of the Euro now requires European markets to become more

competitive lest they fail in the face of American and Asian competition.

Thus, reforms intended to produce lean and mean economies of scale,

knowledge-based economies (although the only successful endeavor thus far

has been in the pharmaceutical industry), and high-value-added industries

have been heavily pursued.99

96 (Howarth, 2010, p. 233)97 (Notes, 2011, p. March 17)98 Due to policies of protectionism, political intervention, and a low Euro. (Notes, 2011, p.March 17)99 (Notes, 2011, p. March 17)


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In order to realize this goal, the ideology behind industrial policy has

changed significantly:

In the 1950s, European economies were still hurt from the effects of

WWII. This lack of strong economies contributed to the general consensus

that European markets could not and should not self-regulate. Industrial

policy was therefore all about manipulating the market to make things

happen. The main priority for governments was to reshape markets in order

to provide full employment.100 Thus, industrial policy was heavily influenced

by politics.101

In the 1980s, European economies were rebuilt and sentiments began

to change. The market slowly began to become reified, sparking a conflict

between market-driven goals and state-driven goals. Government

intervention was tolerated in order to assist people102, but many believed

that the markets were good in themselves and that government intervention

was unnecessary.103 Furthermore, due to the strength and scope of these

growing economies, it was no longer realistic for the European Union to

intervene as the Commission was unable to control the sheer volume of

subsidies and other assistance to companies.104

100 Full employment was considered a social compromise. By providing full employment,which translated into higher standards of living, Governments could be assured that thecapitalist system would not be opposed. (Notes, 2011, p. March 22)101 (Notes, 2011, p. March 17 & 22)102 By increasing jobs and wages, regulating the market, etc103 (Notes, 2011, p. March 22)104 (Howarth, 2010, p. 234)


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Finally, in modern times the market has become completely reified.

Inspired by the liberal capitalist economic system, any and all government

intervention is considered nefarious and an impediment to economic

growth.105 Thus, the only role left for government intervention is clearing the

way for the market to work naturally; this means opening markets from

protectionism and reducing regulations and taxes. The purpose of industrial

policy now is to promote apolitical, independent and integrated markets

(such as the Eurozone). The old, sectoral industrial policy would be

replaced by a modern horizontal approach which would no longer support

individual [sectors], but competitiveness on a large scale.106

In order to promote competitiveness in the new open market, the

European Union utilized two concepts: national treatment and the horizontal

approach. National treatment dictates that foreign companies are to be

treated the same as national companies within any given state. This

includes access to the same markets, the same government-sponsored

contracts and subsidies, and equal access to research and development. It

must be noted that national treatment is not a one-size-fits-all policy; each

state is still given the autonomous power to dictate its own industrial

policies, but within that state all players (including foreign ones) are to be

treated the same.107

105 (Notes, 2011, p. March 17)106 (Howarth, 2010, p. 234)107 (Notes, 2011, p. March 17)


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The horizontal approach assumed that the free market will naturally

promote competitiveness. Through market selection, winning industries

will succeed and losing industries will fail. The idea behind this is that if all

industries are put on equal footing, the most hyper-efficient will succeed and

build the basis for a strong economy. This will then theoretically lead to full

employment as the economy becomes stronger and industries expand. The

horizontal approach is the modern rationale for NAFTA and the Eurozone; all

states and industries are given equal rights and privileges and those that

survive do so because they are the best. The main focus is therefore on

market-produced champions.108

The horizontal approach is, however, not credible. The dominant

industries and companies of the modern age are the same as when

government intervention was prevalent. This is for two reasons. One,

industries did not begin the horizontal approach on equal footing; therefore,

some industries began with higher capabilities for growth and expansion

than others.109 Secondly, the horizontal approach assumes that all Union

member states economies are equal. However, there exists massive

differentiation between Union member states and their economys

capabilities. These differences are based on ideology110, domestic political

108 (Notes, 2011, p. March 17)109 (Notes, 2011, p. March 17)110 Economic liberalism (United Kingdom) vs. Interventionist solutions (Nordic Europe).(Howarth, 2010, p. 234)


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circumstances111, economic capacity112, national economic structures, and

technical preferences.113 Additionally, all sectors are not created equal so

access to a larger market is not necessarily beneficial. Those economies

that produce high-value-added goods succeed because they generally have

a high demand, low supply and a monopoly over the market. However,

economies that produce common items are put at risk since the expansion of

markets just adds competition for customers.114

One of the main problems with the implementation of modern

industrial policy is the lack of cohesive enforcement. Often times industrial

policies are centralized and local; the more local a policy is, the more chance

it is corrupt, clientelist, and influenced by politics.115 Howarth notes that

decentralized procurement practices [ have] more problems with

compliance and more compliance costs.116 A European Union enforcement

agency for industrial policy does not exist: Union member states are

responsible for enforcing the policies of the ECJ and the Commission. This

leads to delayed implementation of initiatives based on governmental

111 For example: trade union, political and public hostility in response to the liberalization ofgas and electricity prices. (Howarth, 2010, p. 248) Another example would be the responseto water privatization and tax in the United Kingdom (Notes, 2011, p. March 22)112 Economic capacity has repeatedly been used as a justification for temporary derogationsfor poorer Member states in the implementation of EU legislation. (Howarth, 2010, p. 235)

The horizontal approach assumes that all economies are equally capable. However, thereexists a vast degree of differentiation between the twenty-seven, including: member stateseconomies abilities to translate research and development into products; member stateshuman skills capabilities; and member states basic infrastructure. Thus, open marketsfavour some more than others depending on their stage of development. (Notes, 2011, p.March 22)113 (Howarth, 2010, p. 234)114 (Notes, 2011, p. March 22)115 (Notes, 2011, p. March 24)116 (Howarth, 2010, p. 247)


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discretion.117 German and French governments stuck to the minimum

requirements of the 1996 and 1998 directives to liberalize, respectively, the

electricity and gas sectors.118 Utilities sectors (water, electricity, gas, etc)

are generally the most impinged upon because, not only do they often

represent national progress and development, but governments are afraid of

the consequences.119 Privatization in these fields gives politicians a bad

reputation so implementation is often delayed. Moreover, the Commissions

reluctance to exercise its legal power in implementing initiatives further

aggravates the problem of implementation.120

This lack of a cohesive system of enforcement has led to several

methods of cheating. Often times, countries are given derogations that

allow them to delay the implementation of certain initiatives. The [p]oorer

countries of central and eastern Europe have argued that many sectors of domestic

industry were financially unable to comply with EU environmental and health and

safety regulation. Thus, for example, the 2004 accession treated permitted a delay

until the end of 2005 for the implementation of EU health and safety legislation.121

Furthermore, implementation may be further delayed by loose wording of directives

(which give room for states to maneuver) and national resistance: [N]ational

117 (Notes, 2011, p. March 24)118 (Howarth, 2010, p. 248)119

In the United Kingdom, the privatization of water led to a deteriorating water system andhigh costs (some of which associated with unnecessary/inefficient monitoring of watermeters). (Notes, 2011, p. March 24)120 For example, the Commission compromised on its mission for energy and gasliberalization. Instead of full ownership unbundled where transmission systems are sold,nations could also utilize an independent system operator (parent companies retainownership but transfer control of management to an external force) or an independenttransmitter operator (parent companies retain ownership under heavy regulation by theGroup of 8). (Howarth, 2010, p. 248)121 (Howarth, 2010, p. 242)


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governments may be committed to a directive and its implementation, but local

resistance will result in its distorted implementation.122

Secondly, many nations continue to follow traditional mechanisms of

aggressive invasive industrial policy, even though the modern free market required

them to change. SMEs are funded in order to create jobs and improve certain

sectors, both of which tie back to politics.123 Nations also work against the

competitive free market by assisting the losers of the game through state aid124,

intervention in mergers, protection of sectors from foreign ownership, and

maintenance of state ownership.125

Third, different Member States [] participate in different consortia along

functional lines.126 Instead of following policies of differentiated integration,

nations opt to follow differentiated participation. Nations regularly opt in or out

based on what products are being influenced by the policies. For example, the

Arienne Missiles are largely hosted by the French, and AIRBUS by France, germany

and Spain. By opting in on certain initiatives and out on others, nations are able to

favour certain sectors by either providing support for them or leaving them out in

the cold.127

Finally, member states can refuse to unbundle their sectors and retain

vertical integration (bundling). Vertical integration means that states or individual

industries can own the entire commodity production line. In doing so,

122 (Howarth, 2010, p. 243)123 (Notes, 2011, p. March 22)124 Germany, Sweden and Austria all donate over .6% of their GDP to state aid, making themthe largest funders of it. (Howarth, 2010, p. 245) However, all Old Europe countries seem tobe particularly bad at ingraining on Internal Market Rules (Howarth, 2010, p. 244)125 (Howarth, 2010, pp. 243-244)126 (Howarth, 2010, p. 237)127 (Notes, 2011, p. March 22)


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states/industries are able to maximize profits as a whole; by detrimentally

subsidizing production early in the commodity chain, larger profits can be made to

counterbalance the previous loss. This offers states/industries a competitive

advantage because they have effective control over the entire commodity chain

and can, in addition to offering preferential rates to their allies, squeeze out

competition. Vertical integration is in direct competition with the open market,

which promotes equal access for all competitors in order to create champions.128

Aside from member states cheating habits, the European Unions industrial

policy is in itself paradoxical. On one hand, it promotes the establishment of an

open market with no government intervention. However, invasive industrial policies

do exist, but do so behind the scenes. Big countries continually screw over small

countries by giving themselves exemptions to policies, effectively creating a two-

speed Europe. Nation states have thus remained the main actors in industrial

policy.129

As demonstrated, the European Unions industrial policy is inherently

problematic. The modern approach to industrial policy is undermined by the

prominent role that nation states play in the European economy. In addition, no

Union-wide enforcement agency exists, leaving common policies open to delayed

implementation and corruption. So, is the industrial policy even worth it? It can be

argued that the pressures of the international market (as adopted by the WTO) from

above and the pressures of ideology from below would have resulted in the same

128 (Notes, 2011, p. March 24)129 Nation states remain large players due to a history of public procurement. Governmentsare the biggest consumers in an economy and government procurement has a huge impacton competitive policy as it often disregards national treatment, promotes local business andengages in methods of cheating. (Notes, 2011, p. March 22)


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conclusion. Therefore, the European Union is just an active arm that facilitates

change; it has not played an important role in directly shaping industrial policy.130

130 (Notes, 2011, p. March 24)


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Foreign and Security Policies

Within the European Union there exists no common foreign policy.

This is due to the drastic differences between Union member states: 131

Differentiated perspectives with regards to foreign and security

policies can be explained by a multitude of variables. To begin, historical

experiences have played a major role in shaping member states opinions.

Due to its recent history of fascism and dictatorship (re: WWII), Germany is

very reluctant to promote policies of foreign intervention and instead opts for

more pacifist measures. Consequently, the recent history of colonialism in

nations such as Spain, Portugal, France, Britain and the Netherlands has

embedded within these nations a sense of duty and responsibility.

Therefore, these nations tend to me more interventionist, especially when it

comes to former European colonies.132

Differing ideologies have also played a major role in influencing foreign

and security policy initiatives. Some nations remain staunch Atlanticists and

believe that the European Union should work with America (the United

Kingdom). Others remain Europeanists and are reluctant to turn to world

powers outside of the European Union itself (France, Italy, Spain, and

Cyprus). Still others have an overwhelming urge to remain neutral (Ireland,

Austria, Finland, Sweden). These lines are typically drawn between Old and

New Europe, with Old Europe moving towards European consolidation and

131 (Notes, 2011, p. April 5)132 (Notes, 2011, p. April 5)


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New Europe looking towards the USA as it still feels beholden. Additionally,

nations sentiments towards the implementation of initiatives depends on

whether they are extroverts (ex: Norway and its call for military and

diplomatic intervention) or introverted (ex: Austria, who would rather be

hiding). 133

Differences can also drawn along the lines of capabilities. Larger

nations generally have more potent forces and are therefore able to

implement interventionist policies.134 This is demonstrated by France who,

with the largest standing army in Western Europe, is also a strong

interventionist.135

These differentiated perspectives all compile into a hodge-podge of

policies. Since European foreign and security policies are based on voluntary

participation, nation states are left to pick and choose which policies work for

them a-la-carte style.136 Many countries choose to practice a form of

constructed obstention; by not participating in foreign and security policies,

nations send the message that they do not approve of the endeavor,

effectively undermining the credibility of the effort.137

European Foreign and Security policies are often dealt with at the

intergovernmental level. However, the initiatives that are implemented are

133 (Notes, 2011, p. April 5)134 This does not mean, however, that smaller countries do not as well. As previouslymentioned, Norway particularly favours diplomatic interventionism.135 (Notes, 2011, p. April 5)136 (Notes, 2011, p. April 5)137 (Notes, 2011, p. April 7)


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ultimately done so because they are beneficial for the implementing

sovereign nation. For example, EUROFOR a fast-response military support

team with permanent staff was founded in 1995 by France and reflects

Frances interventionist policies. Although EUROFOR is now encompassed

under the umbrella of the European Union, only four nations (including

France) are involved in the project.138

In order to implement common European initiatives, the European

Union has created a unit of eighteen battle groups. These groups are more

or less symbolic (only two are ready for deployment at any given time) and

symbolize will more than effectiveness. This is because their effectiveness is

hindered by their structure: controlled by the Council of Europe, battle

groups can only be deployed by unanimous consent. Considering the vast

amount of differentiation with regards to foreign and security policies, this

system will very likely never going to be utilized. Initially the United

Kingdom was very opposed to these groups as they resembled a standing

army139, though due to its relative ineffectiveness and the fact that battle

groups are still created by sovereign nations, it has become okay with the

idea.

Differentiated perspectives and a lack of a binding legal institution

have thus resulted in an underutilized structure that is both weak and

138 (Notes, 2011, p. April 7)139 The United Kingdom is afraid of a European standing army because it wants to maintainits close relationship with the USA. A standing European army could be considered a directthreat to American interests. If the Americans make a deal of it, the United Kingdom mayhave to choose whether it wants to support America or Europe.


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illegitimate140. As such, autonomous foreign policies and a two-speed Europe

characterized by voluntary opt-ins and opt-outs have formed.141 This has

contributed to contradictory policies regarding foreign intervention. For

example, the Big Six (Germany, France, UK, Spain, Italy, Portugal)

represented six very different perspectives on the war in Iraq. In order to

gain support for their own individual endeavors, these nations have begun a

war for the hearts and minds of smaller countries in order to persuade them

to their line of thinking: Germany moral and pacifist; the UK Atlanticist and

international; and France Europeanist and interventionist.142

One phenomenon that must be mentioned is the rise of soft power

within foreign and security policies. Soft power is characterized by the use of

diplomatic, economic, trade, and ideological influence as opposed to

interventionist tactics. The European Union, lead by small countries143, has

become increasingly adept at utilizing soft power initiatives in order to get its

way. This has resulted in conflict resolution without the use of force,

effectively delegitimizing the use of force.144 Diplomats are slowly but surely

becoming more powerful than aircraft carriers, and as such, small nations

are becoming more relevant on the international playing field.145

140 Due to its lack of a clear end goal and voluntary participation.141 (Sepos, 2010, pp. 310-311)142 (Sepos, 2010, pp. 314-315) (Notes, 2011, p. April 7)143 who do not have the means for interventionist tactics and instead turn to soft powertactics.144 This has left hard-power oriented nations such as France and the United Kingdom out inthe cold. (Notes, 2011, p. April 7)145 (Sepos, 2010, p. 317)


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The lack of a consolidated foreign and security policy within the

European Union has contributed to different perspectives, contradictory

initiatives, and a weak foreign policy. As of right now, the European Unions

foreign policy tends to favour interventionist means. However, as soft power

becomes more and more powerful and countries begin to move away from

interventionist means (re: Germany), the European Union is gaining the

ability to become a more peaceful institution.


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The European Neighbourhood Policy

Since its conception, the European Union has constantly expanded: the

original six members have now grown to a membership of twenty-seven

diverse nations. However, regardless of how many nations are accepted into

the Union, each new expansion creates new frontiers. This leaves the Union

constantly encountering nations that stray further and further away from

what is considered European, a problem when one of the incentives for

Union membership is the promise of security and economic stability. Yet, as

has already been witnessed, continual expansion is inherently problematic as

well and is therefore not a plausible option. Border nations can also not just

be left out in the cold, for they could then seek other alternatives (such as

Russia) which would threaten the Unions economic and security interests.

Therefore, in order to address these surmounting problems, the European

Union developed the European Neighbourhood Policy.146

Angela Merkel, the Prime Minister of Germany, stated it the true role of

the ENP best: As we cannot take on board all countries seeking

membership, we will develop the neighbourhood policy.147 The European

Neighbourhood Policy (ENP) encompasses the Mediterranean, Eastern

Europe, and Southern Caucus regions, and is a way to influence countries in

[the European Unions] interests of stability, security, [and] prosperity

without granting them membership.148 Essentially, the ENP is all about

146 (Notes, 2011, p. March 3)147 (Edwards, 2010, p. 209)148 (Edwards, 2010, p. 198)


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pushing certain values in order to create secure borders and economic

partners for European member states. It can also be regarded as a form of

imperialist external governance: European legal policies exceed Union

institutional boundaries and border countries rarely have a say in the policies

and conditions placed upon them.149 The ENP is therefore effectively

widening without deepening.

The ENP is popular with European member states because it promotes

stability, security and prosperity without actual intervention. From previous

experience150, European countries have learned that it is better to work

domestically and promote cooperation than intervene directly and risk

creating unnecessary enemies. Since these frontier countries cannot be

easily dismissed, the Union has decided that the most viable way for moving

forward is to create a friendly relationship. The ENP is a way to do this. By

promoting European values and a European vision of the world, the Union

hopes that buffer countries will become more European.151 Furthermore, in

creating this ring of friends that shares everything with the Union except

institutions (and membership), the European Union is effectively creating a

dependant system which mirrors and supports its own. The theory behind

the ENP is that if buffer countries become more economically and socially

European (re: stable), it lowers the risk of negative externalities (such as

149 (Edwards, 2010, pp. 199; 207-208)150 Example: France responded to the threat of Algerian terrorists by working with Algeria ona domestic level (offering money and aid) to stop terrorists at their source. This variesgreatly from Frances old track record of directly intervening and attempting to impose orderfrom above, which created anti-French sentiments and contributed to the problem. (Notes,2011, p. March 8)151 (Notes, 2011, p. March 8)


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migrant workers flooding into Europe) from affecting Europe and saves the

Union from having to directly intervene, spend money, and potentially create

enemies.152 Furthermore, there is the added incentive that if security isnt

achieved, conflict that could potentially harm the Union may occur.153

As previously mentioned, the ENP is designed to create a system which

both mirrors and supports the European Union. There are two ways to

accomplish this: the promotion of regional cooperation and democracy, and

the creation of liberal capitalist economic systems154. The official line of the

European Union stated that by promoting democracy and regional

cooperation, boosting national reform programmes, and improving the socio-

economic prospects of the region, [] a more positive climate for conflict

settlement [can be created].155 Liberal capitalist systems, in addition to

being the system that the European Union uses and thus complementary,

are promoted due to the belief that liberal capitalist economies are

happier.156 Therefore, by transforming these buffer nations into liberal

152 (Edwards, 2010, p. 201) (Notes, 2011, p. March 8)153 Example: Russias invasion of Georgia, which served as a security threat to memberstates. (Notes, 2011, p. March 8)154 Realistically, this has not been the case. Liberal capitalist democracies have developednot due to the ENP but by the influence of global markets. Furthermore, the ENP has notsupported the creation of legitimate democracies (as will be discussed later). (Notes, 2011,

p. March 8)155 (Edwards, 2010, p. 204)156Liberal capitalist economies are considered happier because they require working

classes. As the working class develops and becomes stronger, it will naturally become an

opponent to corruption (as corruption is uneconomical). This opposition will eventually lead

to the creation of opposition parties, which will then promote better forms of government

(because if the current government does not change for the better, it will be voted out and

replaced). There also exists the additional theory that people will become too concerned

with their individual private spheres to care about anything else. (Notes, 2011, p. March 8)


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capitalist economies and democracies, the European Union is creating

advantageous partners and initiating positive change.

Action Plans were developed in order to implement the policies of the

ENP. The Commission has stated that the ENP is not, and has never been, a

one-size-fits-all policy. There are as many variations of the ENP as there are

partners. We [the Commission] cannot and do not wish to ignore the

difference between our partners.157 Each plan is designed to cover political

dialogue and reform with the end goal of strengthening the rule of law,

democracy and respect for human rights; promoting economic and social

cooperation; and promoting cooperation with regards to justice, home

affairs, border control, and foreign policy objectives such as counter-

terrorism. Such initiatives thus rely heavily upon the Action Plans regulatory

incentives and capacity-building instruments.158 It must also be noted that

these Action Plans are not legally binding.

Buffer countries, who are aware that they have a very low chance (if

any) of becoming members of the European Union, agree to the ENP for the

benefits. The European Union offers these nations support and aid in order

to implement programs which will make them more European.159 This is

advantageous for countries like the Ukraine who, while not viable for

European membership, could use the support to improve their standards of

157 Yet themes of democratization, economic liberalization, and conditionality are common toall. (Edwards, 2010, p. 202)158 (Edwards, 2010, p. 202) (Notes, 2011, p. March 3)159 (Notes, 2011, p. March 8)


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living.160 However, due to the fact that the ENP is not legally binding, there is

never a firm guarantee of security for these nations. The Ukraine notes that

it cannot recognize the ENP has a basis for Ukraine-EU relations, [but] can

recognize only an instrument that will acknowledge that Ukraine is an

integral part of Europe.161 Empirically, the ENP and its Action Plans have

proven insufficient to protect and promote the concerns of the

Mediterranean, Central, and Eastern Europe.162 However, the buffer

countries are forced to continue to cooperate with the ENP for fear that the

costs of non-compliance will be higher than any imposed by the ENP.163

The

end result is that, due to a lack of incentive for making positive change, the

implementations of Action Plans are often weak at best or delayed

altogether.164

As can be deducted, the ENP has inherent problems. Due to the

creation of the ENP, the possibility of continued European Union expansion

has significantly decreased. The Union is not shy in saying that it no longer

wants to evolve and grow, but instead only wants to create trading

opportunities and promote the European way of life in non-Union nations.

160 Since the fall of Communism, the Ukraines institutions and public standards havedeteriorated past the point of making them eligible for membership. Furthermore, theUkraine holds a fate similar to Belgium did in WWII; situated between the European Union

and Russia, it will remain independent as neither side is willing to risk conflict with the otherby trying to control it. (Notes, 2011, p. 203)161 (Edwards, 2010, p. 199)162 (Edwards, 2010, p. 199) (Notes, 2011, p. March 8)163 (Edwards, 2010, p. 204)164 Buffer countries must pretend to implement changes in order to receive support and aid,and to avoid the costs of non-compliance. However, if these countries succeed in becomingmore European, the support and aid will stop coming. Since EU membership is not anincentive to do better, buffer countries have little to no incentive to actually do a good job.(Notes, 2011, p. March 8)


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This is bad news for nations who are still outside of the Union but want to be

inside, for instead of being considered for membership, they will be

encapsulated under the breadth of the non-legal and often-insufficient ENP.

The ENP is also a sign that the European Union is hardening its image; it is

no longer willing to be flexible towards outsiders and is slowly developing

Germanys wish of the European way or the highway.165

Furthermore, because democracy and happiness are not the main

goals, they are often undermined. The pursuit of liberal capitalist economies

and border control over the establishment of democracy means that often

times democracies are not established at all.166 In addition, the involvement

of non-democratic governments in determining Action Plans intended to

promote democracy and respect for human rights undermines the legitimacy

of the Plans themselves.167 Moreover, the introduction of liberal capital

systems rarely results in increased happiness. Within many ex-communist

nations, unhappiness increased due to the switch from Communist regimes

to liberal capitalist regimes. Under Communism, everything was provided by

the state at a low cost (unless time is considered to be a cost). It was

therefore a rude awakening for many inhabitants of ex-communist countries

when they were thrust into poverty and expected to pay for their livelihoods

with money that they did not have.168

165 (Notes, 2011, p. March 8)166 It can be argued that liberal-capitalism created democracy within the Visegrad nations;however, in my opinion these democracies were more psuedo-democracies and it was onlydirect intervention on the part of the European Union that created true democracy.167 (Edwards, 2010, p. 208)168 Unhappiness increased due to the switch from Communist regimes to liberal capitalistregimes. Under Communism, everything was provided by the state at a low cost (unless


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These inherent problems thus bring new light to the European Unions

goal of promoting stability, security and prosperity. The original assumption

that the ENP was designed to promote stability, security and prosperity for

both the European Union and the buffer countries has been proven false;

instead, it seems that only the European Union benefits from the

arrangement. By establishing liberal capitalist systems169, the European

Union creates economically stable trading partners for its market. By

establishing readmission and Visa restrictions and requirements, the ENP

also guarantees the Union stronger border control.170

Thus, the ENP has

proven to be more about trade and border security and less about

democratization and human rights.171

The establishment of the ENP has raised questions about what the

nature of Europe truly is. The implementation of certain Action Plans and not

others has proven that the European Union stabilizes buffer countries only

for its own benefit, not for the benefit of others or just for the sake of it.172

Furthermore, it has solidified what Europe cares about; by acting as an

alternative to membership, the ENP effectively states that the European

Union is done expanding and is now ready to create an acquis with only the

time is considered to be a cost). It was therefore a rude awakening for many inhabitants ofex-communist countries when they were thrust into poverty and expected to pay for their

livelihoods with money that they did not have. (Notes, 2011, p. March 8)169 Which, as demonstrated, do not always benefit the buffer nations.170 Readmission deals dictate that transit states must accept undesirables (re: illegalimmigrants) back if they are caught within the Union; Visa restrictions are a way ofcontrolling trade and movement. Both readmission and Visa deals are regarded as vital inprotecting the EU from politically unstable neighourbood countries, and are a way for theUnion to manage undesirables and protect member states from illegal immigration(Edwards, 2010, p. 205)171 (Notes, 2011, p. March 8)172 (Notes, 2011, p. March 8)


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consideration of current member states in mind. The ENP is therefore a

consolation prize to European Union membership, and is essentially a way

for Europe to consolidate itself without having to take others into

consideration.173 The ENP is therefore a step backwards away from the

original vision of the European Union instead of promoting peace and

prosperity for all, peace and prosperity are only promoted when it becomes

advantageous to do so.

173 (Edwards, 2010, p. 211)


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Social Europe

Social Europe concerns the implementation of social programs across

Europe. Two explanations exist which explain the founding of Social Europe.

The first assumes that the structure of Social Europe was downloaded from

the European Unions founders. All six original members of the European

Community were Bismarckian nations; as such, they all had very similar

social packages. According to this theory, as the European Union grew,

these social packages broadened and evolved into the modern-day Social

Europe. However, this download has proven incomplete as Bismarckian

social traditions do not encompass the entire Union.174

The second theory dictates that Social Europe was developed as a side

product of the integrated market, implemented in order to save the liberal

capitalist system. By taking the lead on welfare reform, the European Union

was able to gain the support of trade unions, marketers and businesses.

This support legitimized the existence of the Union and the capitalist system

and perpetuated its execution even through times of struggle.175 [E]ven

Delors promotion of social Europe can be seen as a form of legitimizing

discourse for, and a spill-over effect from, economic integration and not

something pursued as an intrinsic part of European integration in its own

right.176

174 (Notes, 2011, p. March 24)175 (Notes, 2011, p. March 24)176 (Parsons & Pochet, 2010, p. 260)


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Social Europe has continued to evolve throughout the development

and expansion of the European Union. In the 1950s, Social Europe was

representative of the first theory. Because the European Community

members social packages were so similar and therefore did not hinder the

efficiency or competitiveness of the integrated European market, the

establishmen

an ideal or utalitarianism? the policies of the european union

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