What the hell is an economic government?

So, somebody has a brilliant idea to solve all Europe’s problems. What is it? It’s to set up a European economic government for the EU. It’s not exactly new – several people in the Jospin government thought so, including Dominique Strauss-Kahn. It might have something going for it.

But what is it? The EU already has – already is – an economic government, in that it handles trade negotiations, operates a single set of product standards, interworking arrangements between big networked systems, some social and environmental regulations, and even operates some fiscal rules. If you include the European Central Bank, and why not, it conducts monetary policy.

In some areas of the economy it has a positively dominating influence – agriculture, fisheries, and forestry being three, and a whole range of things through the enlargement process. It is quite heavily involved in big infrastructure projects, and in managing CO2 emissions controls. So in what way isn’t it an economic government already?

Two ways spring to mind. The federal budget is tiny, and a lot is still lashed to the CAP. Another one would be greater control over member state budgeting. But it’s hard to imagine that the French government would be over keen on a new Brussels competence area that dealt with the cost of their nuclear missiles, say, or that a Commission budget bureau would be particularly effective. So what is this thing?

One suggestion is that it would be intergovernmental rather than supranational, coming under Council of Ministers control rather than Commission control. That sounds a lot like a drive for greater member state control, rather than anything else. Alternatively, such a thing could be responsible to the European Parliament for the budget. That sounds like an improvement, but how it would shift the economy all on its own is a mystery. As Terry Eagleton’s priest said to the man who came to him with a sex problem, “It’s all a mystery! It’s all a mystery!”

What the hell is an economic government?

3 thoughts on “What the hell is an economic government?

  1. I think I can respond to that.

    First, there’s a confusion that arises in using the term “economy” or “economic” to refer to industrial systems. European nations are widely believed–perhaps rightly–to have risen to industrial strength on industrial policies that were managed in large measure by an exceptionally proficient civil service. Because European enterprise was largely a bourgeois affair (as opposed to the quasi-military style of industrial management in US & some German enterprises), individual European firms tended to have small technical cadres for implementing technical plans, but almost nothing for direct financial management of production. This was, however, an integral part of US-based firms.

    This function of financial supervision of production (to optimize efficiency) was either weak or else carried out by a combination of agents outside of the European enterprise, such as lenders or the government. There was a deeply ingrained conservativism in European industrial management, whereas US industrial management tended to aggressive, confident, and pro-active. This can be good and bad; I suspect most readers will be quite familiar with the negative results. I merely mention this in order to explain why US enterprise developed its now-familiar outline.

    Anyway, European enterprise tended to respond to major trade crises by transferring managerial control away from the old bourgeois families to an American-style quasi-military managerial bureaucracy. This was done to solve certain problems but it has very unfortunate side-effects–such as the growth of an US-style political establishment.

    There is a need, therefore, for a pan-European industrial management that could, for example, enable Stiftungen to be far more successful at competing and propagating.

  2. To follow-up: my impressions of European vs. US-styles of industrial management come from several papers at the ECGI, plus Alfred D. Chandler’s Scale and Scope: The Dynamics of Industrial Capitalism. As we all know, institutions like a country’s peculiar style of business management evolve to serve unique needs of that society. In the case of Europe, the bourgeois was numerous enough to provide talented, competitive management for a large number of firms for centuries. In the USA, the bourgeois was not at all numberous and the business of enterprise management was taken on by a middle-class bureaucracy using capital borrowed from European financial institutions. As a result, talented and effective managers from the USA had opportunities lacking to their European cousins. OTOH, US political institutions were “deprived” of a cadre of talented or inspired managers, and still are.

    After the Franco-Prussian War, free trade nostrums actually declined in influence and national governments tended to throw their energies into the creation of industrial cartels capable of “defeating” those of other nations. After 1987 or so, neo-liberal ideology has tended to deprive European states of their first-best system of “enhanced-bourgeois” management, and left all the political initiative in the hands of monolithic, professionally-managed firms. So European politics has taken on some of the unfortunate aspects familiar to US voters.

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