An Ideal or Utalitarianism? The policies of the European Union
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Transcript of 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