Seminar 8: The Internal Market (9 March)

This seminar looks at the European Union and its efforts to create an internal market.  Fligstein & Mara Drita provide a way of thinking about the internal market process, Scharpf provides one of the mianstream critiques of this project.

Reading

Fligstein and Mara-Drita ‘How to Make a Market: Reflections on the Attempt to Create a Single Market in the European Union (1996) 102(1) American Journal of Sociology 1

(http://sociology.berkeley.edu/sites/default/files/faculty/fligstein/How%20to%20make%20a%20market.pdf)

Fritz W. Scharpf,  ‘The Double Asymmetry of European Integration Or: Why the EU Cannot Be a Social Market Economy’  MPIfG Working Paper 09/12

https://www.econstor.eu/dspace/bitstream/10419/41661/1/633741485.pdf

 

Further Reading

Nicolas Jabko Playing The market: A Political Strategy for Uniting Europe, 1985-2005 (Ithaca: Cornell University Press, 2006)

 

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4 comments on “Seminar 8: The Internal Market (9 March)

  1. stavros says:

    The article authored by Fligstein and Mara-Drita attempts to shed light on an important institution-building moment within the EU edifice, namely the Single Market Project (SMP). As the authors observe, institution-building moments occur when a social, economic, or political crisis undermines the current institutional arrangements (p. 3) and this was precisely the case for the European Communities in the 1980s. Their analysis moves beyond, and in fact complements, rational choice theories regarding institution-building.

    The real merit of their argument lies in that they endeavour to explain and conceptualize the SMP by applying a ‘cultural frame’ institutionalist argument. Pursuant to the latter, preexisting institutions and organizations will constrain and enable actors to engage in cooperative behavior and cultural practices, rather than consciously calculated interests, dictate agreements (p. 5). Cultural frame theories also argue that actors’ interests are not fixed and that in fluid social situations, it is possible for a new conception of interests to emerge. The EU had to find a way to specify the content of the SMP in such a way as to mobilize states and organized capitalist groups in a social-movement fashion (p. 6).

    In this respect, the European Commission constituted the driving force for the formulation of alternative institutional projects. The European Commission, acting as a collective institutional entrepreneur, managed to align the relevant actors with these projects, as businessmen favoured the idea of removing trade barriers while states retained, for the most part, their enforcement powers. Delors, the then President of the European Commission, linked strategically the idea of institutional reform to the SMP and moreover, he used the cultural frame of the SMP to convince leaders of the states that the institutional projects of the SMP, the Single European Act and the Treaty on the European Union followed logically (p. 13).

    An argument that is propounded by the authors and is also supported by the analysis regarding the directives that were passed during and in support of the institution-building episode of the SMP is that the latter was mainly addressing rules of exchanges, rather than property rights or governance structures. This was mainly due to the fact that the SMP was about facilitating trade and in this regard did not implicate sovereignty claims by states. In other words, as long as the SMP concerned the minimization of cost transactions, it could be easily ‘sold’ to the national constituencies. Another important consequence of placing the focus primarily on rules of exchange was that the SMP favoured large exporting firms. Finally, it is quite remarkable that the regulation of rules of exchange within the SMP proceeded mostly through harmonization, namely through setting collective standards for health, safety, or common technical standards for all nations (p. 19). However, it is equally important that the enforcement powers for the said directives remained for the greatest part within states’ domain.
    It should be, though, highlighted that the analysis undertaken in the article under consideration is subject to an important caveat, which is justly noted by the authors. The directives, whether they concern property rights, governance structures or rules of exchanges, are treated as equal in importance, notwithstanding the fact that some of them will have a much greater impact than others, and therefore the weighting of the cases is arbitrary (p. 21). It goes without saying that the preceding proposition raises important methodological concerns regarding the article’s analysis, since the hypotheses of the authors are merely tested against the plain wording of the directives, rather than against their substantial impact in the economy.

    Nevertheless, the sociological approach to markets, which was adopted by the Fligstein and Mara-Drita in the present article, provides an interesting conceptualization of the SMP. All things considered, the European Commission managed to gather support for the SMP from states and large (exporting) corporate actors by producing elite social movements. This was achieved through focusing on rules of exchange by means of harmonization standards, while at the same time leaving intact the enforcement powers of states. This intricate, albeit strategic, venture succeeded in the EU’s overcoming of the multifaceted political crisis that the European project was experiencing in the 1980s.

  2. Fabrizio says:

    While Fligstein and Mara-Drita offer a descriptive analysis, Scharpf’s paper is normative. Scharpf, however, builds on a “heroic semplification” of the phenomena which is so heroic that it is hard for me to understand what are the features of the competing models. This makes the whole discussion difficult to follow.

    Apart from that, the Author blames integration through case law, but uses a label “integration through law” which is misleading. What he argue is that at the political level the social market economy is doomed to fail. His proposal is based on a revisited extension of the integration through case law approach at the political level. What he ultimately proposes is some sort of “defeasible political integratition”.

    To this regard, I think that Scharpf does not consider the role of a change in the cultural frame, potentially supported by EU institutions. He seems only to consider a rational bargaining mode (especially, p. 30).

  3. Elias says:

    Both articles by Fligstein/Mara-Drita and by Scharpf attempt to analyse the creation of a trans-European market on the basis of an institutionalist analysis.

    In order to explain the creation of the Single Market as institution during the late 1980s and early 1990s Fligstein/Mara-Drita rely on a sociological institutionalist approach which tries to complement the rational-choice institutionalism In this context, they underline the importance of crises as windows of opportunities for institution building as well as the role of institutional entrepreneurs in creating a new “cultural frame”. This “cultural frame” shapes the interests and preferences of the different actors and sets-up the playing-field within which the bargaining takes place. Interestingly, the authors identify tree type of rules necessary for the creation of a “market institution”: 1) property rights, 2) rules on competition and cooperation and 3) transaction rules (p.17). According to the authors, the Commission as institutional entrepreneur succeeded in convincing the different players to agree on the importance of the accomplishment of the Internal Market by creating a “cultural frame” which provided considerable advantages for exporting industries and at the same time preserved the Member States competences in regulating property rights and market governance. This was possible thanks to the reliance on the “principle of mutual recognition” with regard to property rights and economic governance on the one hand, and the “new form of harmonization” in the field of harmonization of rules of exchange on the other.

    Scharpf’s article considerably differs from Fligstein/Mara-Drita’s approach. Instead of being based on a sociological cultural-frame institutionalism, Scharpf rather relies on a rational-choice institutionalism. He argues that the creation of the Internal Market is characterised by a double-asymmetry favouring, firstly, judicial law-making over political law making and, secondly, negative integration over positive integration.

    With regard to the first asymmetry, Scharpf draws on the findings of “legal integration” literature and identifies the Court and to a lesser extent the Commission as key institutional players within the context of market building in Europe. He argues that the Court played a pivotal role in order to overcome the problem of “joint decision trap” and to bypass the unanimity rule during the 1980s which allowed during the first 20 years of European integration the Member States to preserve a certain form of “embedded liberalism” by protecting the key institutions of their national social and economic systems. Thus, “integration through law” by the judicial activism of the Court constituted the key driver of the creation of a European Market institution and shaped or even restricted the framework in which political bargaining in the field of market creation and regulation took place.
    Secondly, Scharpf uses his concept of positive and negative integration in order to demonstrate the second asymmetry of EU market building. He argues that the mode of market creation and integration through law by the ECJ and also by the Commission relies primarily on negative integration striking down national market rules and institutions, without re-regulating the market by positive integration at the European level. According to Scharpf, the process of EU integration as creation of an European market institution is due to these two asymmetries unavoidably biased in favour of a Liberal Market Economy and increasingly restraints the regulatory leeway of Social Market Economies.

    Unfortunately, Scharpf does not really differentiate his categories of positive and negative integration and applies them rather as black boxes in order to describe the impact of the ECJ case law and EU law in general on national economic and social institutions. However, he does not really analyse to what extent the jurisprudence of the Court simultaneously reflects some features of positive and negative integration. Nevertheless, there are numerous judgments in which the Court stroke down national regulations, but at the same time provided guidance – often within the framework of the proportionality analysis – how Member States or even the EU legislator could re-regulate the underlying issue in compliance with EU law. Moreover, his analysis suggests that the market creation at EU level almost exclusively relies on negative integration and underestimates the importance and content of re-regulation (positive integration) at EU level. In this regard, Fligstein/Mara-Drita’s analysis which differentiates between different types of rules which have been re-regulated at EU level or left within the competence of the Member States draws a more accurate picture of certain aspects of EU market building. Moreover, Scharpf does not provide any empirical evidence for his thesis of the convergence of all national economic and social systems towards the model of a Liberal Market Economy.

  4. Christopher Johnson says:

    Both papers this week provided a compelling explanation for the process of European integration. Because I am relatively unfamiliar with both the subject matter and the style of scholarship, I cannot see any obvious deficiencies in the reasoning of either author. Therefore, I will focus instead on the area I enjoyed the most, the discussion of the role of the Court of Justice in European integration.

    The Scharpf article suggests that the Court of Justice has adopted a pro-integration stance in response to the integrational impasse resulting from the requirement of unanimous political agreement. He appears to suggest that this occurs through two mechanisms: the first is straightforward, through interpreting the Treaties in a manner that furthers the integrationist cause. The second mechanism, however, is more interesting. He suggests that the phenomenon of negative discrimination resulting from the Cassis De Dijon and Dassonville judgments resulted in a transformation of bargaining incentives for Member States leading to harmonizing legislation being passed. This is the most compelling idea from his thesis as it has offered me a new perspective on negative discrimination, a phenomenon normally seen in a negative light by purely legal academics.

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