This post is part of a symposium highlighting the second issue of the Journal of Law and Political Economy. All of our posts highlighting releases of JLPE issue releases are here.
In a recently published article in the Journal of Law and Political Economy, I attempt to trace the relevance of the Law and Political Economy (LPE) movement for Europe.
The motivation for intensifying an already ongoing transnational conversation is not just to explore the different implications of neoliberal hegemony on each side of the Atlantic. It is also to explore the potential this transnationalization presents for the movement as a whole. A more transnational LPE would be more fluently comparativist and more clearly focused on global regimes and how they circumscribe state-bound prescriptions of social transformation.
However, the relevance of LPE for Europe might not be instantly obvious. LPE in the U.S. gets part of its conceptual thrust from its opposition to the dominance of Law and Economics, a framework that never achieved the same kind of intellectual hegemony in Europe. But there is a European parallel that could ground critique: the guiding role that ordoliberalism has played in the structuring of the supranational economy. Critical legal approaches to European ordoliberalism can be divided in three strands: negative universalism, instrumentalism, and counter-hegemony. I use a critical analysis of each as the backdrop for an emerging LPE in Europe agenda.
The Ordoliberal Economic Constitution
What is ordoliberalism? Ordoliberalism sprang from the Freiburg School following the fall of the Weimar Republic. Its key differentiation from its liberal predecessors was stressing that a liberal economic regime cannot result from a spontaneous natural order of laissez-faire. Market freedoms, undistorted competition, and monetary stability were seen as key to economic prosperity and, eventually, social welfare. Such conditions had to be guaranteed through an “Economic Constitution”, which would fulfill the purpose of inoculating the economy from political contestation.
European supranational integration reflected the premises of ordoliberal thought in its structural orientation to guarantee “economic freedoms” and “undistorted competition”, and sideline social policies, like employment or welfare-related policies, which remained under the political autonomy of Member States. While the European Economic Community was not initially designed to reverse European welfare states per se, the decoupling of economic integration and social protection laid the groundwork for the emergence of a fundamental constitutional asymmetry. As European law acquired supremacy over national law (Van Gend En Loos, 26/62, 1963, Costa v. ENEL, 6/64, 1964), economic policies benefited from a superior status than that of welfare-state policies. The building of a European legal order through judicial law-making meant that law was used “as a mask for politics”, neutralizing political objections and immunizing reforms from the possibility of reversal. The depoliticizing function of constitutional legal architecture in Europe allows to draw parallels with the ideological work law and economics has done in the United States.
This insulation of the supranational economy from political contestation has assumed a different form in economic governance after the 2007 financial crisis. Contrary to the original ordoliberal approach of employing hard rules to insulate market freedoms, undistorted competition, and monetary stability, the post-crisis focus on budgetary balance is characterized by profound elasticity in the understanding of the rule of law, as is for example the case in the broad executive discretion for identifying and addressing macroeconomic imbalances. Indeed, as sound budgetary policy and the survival of the euro came to constitute a telos of the constitutional structure of the treaties (Case C-370/12, Pringle v. Government of Ireland; Case C-62/14, Gauweiler and Others v Deutscher Bundestag), fundamental commitments of democratic constitutionalism, including representative democracy and the principle of legality, can now be circumvented in order to maintain economic liberal commitments to price stability, competition, and property rights.
The shift from hard rules to elasticity indicates that the ultimate purpose of the Economic Constitution is not formalist legality but rather the safeguard of a substantive vision of the internal market. In that sense, ordoliberalism is fundamentally a normative economic and political —and only secondarily a jurisprudential— project. As such, it is alternative normative projects that can challenge its foundations. Before outlining how the emergence of an LPE agenda in Europe can fulfill such a function, I turn to existing normative agendas and their vision for the role of law in the economy in European scholarship.
One response prompted by the ‘democratic deficit’ of the EU and perceived subsumption of the rule of law under economic rationalities is to retain the imagery of constitutionalization while attempting to empty it of substantive value commitments. Such negative universalism is wary of how ‘positive’ visions of constitutionalization will inevitably entail some form of value imperialism. Its defense of a ‘culture of formalism’ stresses how the universality and indeterminacy of the legal form can serve an integrating purpose by enabling particular identities and causes to make their claims in universal terms beyond their separate value-systems. As the meaning of the law becomes the common space that different sides resort to, the legal form guarantees that politics do not degenerate into a clash of incommensurate value-systems.
This approach fails to grapple with the power structures that the ordoliberal legal form has created and which arguably preclude certain interpretative possibilities. As such, the jurisprudential defense of the legal form as a vessel for possibly radical claims does not appear as a sufficient challenge to a pragmatic project of depoliticizing the economy. Rather, it obscures the political stakes in the content of the law that structures the economy.
A competing critical approach to the entrenchment of the ordoliberal Economic Constitution is that of using state law to advance goals of redistribution and democratic participation. Underpinned by the notion that capitalism is a product of legal ordering, such instrumentalist perspectives understand law as the central mechanism of social power and highlight the power of the agent of legal ordering for shaping the economy and steering society. As such, the goal becomes to direct centralized processes of legal ordering and orientate institutional arrangements towards goals of substantive equality and participatory parity. The means for social transformation is democratic contestation for the determination of the content of law, The exercise of popular sovereignty encapsulates a political possibility of rejecting the limits supposedly set by “the economy,” eventually also enabling the renegotiation of the broader limits placed by liberal institutions, such as property rights.
Yet, instrumentalism and its inspiration from the Welfare State is challenged, first, by the limits of the ordering capacities of law in the globalized economy and, second, by the limits of the liberal legal form itself. Globalization points to a reality in which state-centred politics does not necessarily drive legal change, while transnational economic integration and the structural power of private financial interests might insulate existing power relations beyond attempts of legal transformation through “automatic punishment mechanisms,” such as capital flight, increased interest rates, sovereign debt, or rating downgrades. This is particularly true for countries that lack the ordering capacities or the monetary sovereignty of strong global economies like the US. Furthermore, instrumentalism might be placing too much faith in the constitutive function of the law. Despite their obvious potential to significantly reshape society, top-down institutional rearrangements may not be limitless simply by virtue of popular soveirgnty and public enforcement. In other words, it is questionable whether law can indeed be framed as the sole source of social power or whether social relations of production might in themselves set material and ideological limits to grand realignment projects.
A final subset of current critiques against the predominance of ordoliberalism is defined by the focus on civil society and social movements as crucial factors in triggering social and legal transformation. Some of these counter-hegemonic approaches are theoretical endeavours invested in the project of democratizing the economy from within, drawing from a system-theoretical conceptual background. The project of democratizing the economy from within means that the economy cannot be constituted solely by the drive of profit-maximization, but must incorporate within its ambit public rationalities, such as the respect for human rights. The social cannot be disconnected from, but rather needs to permeate markets, for example through the development of a societal private law. However, the reliance on ‘self-limitation’ of the economy based on a social sphere (e.g., through social pressures, political consumerism, ethical investing etc.) that has been shaped and determined by patterns of social hierarchy and distributional inequality runs the risk of reifying unequal market power, depriving those with little market power from the capacity to co-determine normative outcomes.
Other counter-hegemonic approaches view legal reforms as inherently limited, reserving a special role for the critical practice itself and the utopian energies it might catalyze. From this perspective, critique needs to be sensitive to the notion that law is only one among multiple interrelated social frameworks in which social hierarchies might be instantiated. Policy blueprints end up reflecting a “totalizing impulse” to affix stable meanings to social practices. Instead, what is sought is a form of utopianism, traces of which may be found in social movements. Indeed, the dynamics of social struggles against austerity in Europe have often been found in “extra-institutional spaces” that attempt to envision participatory, bottom-up routes to economic equality, including, for example, the protection of the commons. However, relying on bottom-up mobilization and the normative pluralism of social movements risks underestimating the importance of legal centralism for social transformation.
Towards LPE in Europe
The mapping of these critical approaches to the ordoliberal design of the supranational economy sets the stage for an inquiry on the possible content of an emerging ‘LPE in Europe’ agenda. Following also relevant scholarship in the U.S., a core element of such an agenda could be the grounding of legal critique on normative commitments to democracy and equality. More than a simple moral condemnation of capitalist society, this could be an instance of immanent critique, based on the notion that liberal capitalism does not fulfil its own promises of freedom and equality. Furthermore, the normative framework of the LPE agenda could draw from the instrumentalist drive to translate critique into legal and institutional change, without fetishizing institutional reform and acknowledging that not all endeavours to shape collective life take a legalistic form. In that direction, LPE in Europe could emphasize an orientation towards democratic and public power-building not confined within traditional structures of government but also extending in different social spheres, such as the workplace or transnational regimes. In that regard, LPE in Europe could draw from the decentralizing and pluralistic impetus of counter-hegemony.
The discussion of the Economic Constitution highlighted the pragmatism and jurisprudential elasticity that has characterized the ordoliberal project of depoliticizing the economy. In a similar vein, the political dimension of LPE in Europe could be to couple fixed normative commitments with a mobile and contextually driven critical practice, drawing eclectically from legal centralism and politicization of the law, support of social movements, and even defense of the legal form in an attempt to flesh out alternative visions of a democratic political economy.