Why Brussels Needs To Read Karl Polanyi

Kurt Huebner, Karl Polanyi

Kurt Huebner

The project of European integration is going to run into walls. In political terms, it has become evident that its active as well as its passive support is decreasing. To some degree this loss in faith is tied to the social implications of years of austerity policies that were imposed to many nation-states in the EU. Persistently high rates of unemployment and a reduction of real household incomes are no reasons to be supportive of a project that is widely seen as elite-driven as well as mainly in the interest of export-sectors.

Electorates in relatively better-off member states, on tbe other side, are no longer willing to act as guarantors of crisis-ridden neighbors. Moreover, and at least as relevant, is the rise of political parties and movements across Europe that see the return to the nation state as a recipe for all kinds of problems, also for the ones that are not in any way tied to the EU. In economic terms, the project of European Integration is facing a long-run period of stagnation or at least of very low economic growth. Neither Brussels nor the member states seem to be prepared to work against such a path or to be prepared for dealing with the underlying forces of shifty towards a low growth path. The investment initiative of the Juncker Commission can, at best, be a drop in an empty bucket. In terms of legitimacy, European Integration has lost a lot of its appeal, and this is not only reflected in decreasing participation rates in European elections but more so in the emerging new form of economic governance that contradicts basic rules of democratic self-control by potentially taking away significant political sovereignty in the budget process.

Dealing with all those issues is a Herculean task. One of the necessary but insufficient conditions to move the project of European Integration onto a forward-looking, socially inclusive and economically balanced path is a change in the dominating political-economic discourse, and consequently in the policy course. Over the last ten to fifteen years or so, the European Commission and its key directorates has been filled with commissioners as well as an administrative strata who use the Brussels playing field for a rather simplistic version of market orthodoxy. One of the caves of unfettered liberalism is DG Trade where in the last few years Karel De Gucht followed an already well-established liberalisation project that forgot all about the many potentially damaging interplays between financial markets and social inclusion on the one side and openness for goods and services on the other. DG Trade set the pace for a political discourse in which more openness and more market access is seen as the most critical motor for efficiency gains and growth.

The new Juncker Commission (© European Union, 2014)

The new Juncker Commission (© European Union, 2014)

This discourse willingly forgets everything about the historical and not so historical lessons that well-functioning markets need deep embeddedness as has been famously shown by Karl Polanyi in his Great Transformation. Not too long ago a US-American pair of Europeanists argued that the EU would have entered a phase of re-embedding markets, mainly due to the actions of the European Court of Justice. Nothing could be more wrong. The financial crisis of 2008 and then the crises of Eurozone economies actually revived the liberalisation orthodoxy in the Commission, and in particular DG Trade accelerated its policy offensive. To be clear: even though all empirical simulations of currently negotiated trade and investment agreements only hint to overall small direct GDP gains it still can pay off to come up with international agreements like TTIP or CETA and the like. Those bilateral agreements provide the opportunity to structure and re-organise global trade and investment flows in a first-best manner.

Truly European-inspired trade and investment agreements need Polanyian embedding that does much more then only asking for the non-violation of basic ILO standards as well as the acceptance of similarly general environmental rules. Bringing Polanyi back into town needs a substantive vision of a global economy that needs institutional safeguards in order to avoid crisis and unequal distribution of benefits and costs. Such agreements need to be designed in order to become trendsetters in organising and moderating global flows of goods and services as well as various forms of capital and also labour in a way that satisfies all criteria for a socially, economically as well as environmentally sustainable growth path.

Let’s be realistic. The new Commission is on a different path that only pays lip service to embedding, if at all. Bringing back Polanyi to Brussels is an uphill battle but it is worth it.

This column is part of our Social Europe 2019 project.

Have something to add to this story? Share it in the comments below.

  • Shayn McCallum

    I am delighted and excited by this article! I have been pushing Polanyi’s ideas stubbornly inside the PES, various organisations and pretty much everywhere I can get an audience for years and nothing gives me greater pleasure than witnessing the start of a growing interest in the insights of this often overlooked genius.
    I can only respond with a heartfelt “amen” to the sentiments expressed here by Kurt Huebner. Here’s hoping some of this will be taken up before it’s too late.

  • Prof.Dr.Magdolna Csath

    I am afraid the problem is even more serious. In some of the former socialist countries which joined the EU together the gap between the super rich and the poor has increased very considerably. One reason is the membership itself. If one is fair and objective then he has to confess that the new member states are cheap production locations of the companies coming from the developed and rich Eu countries. (In Hungary they are mostly German companies). These companies pay shameful salaries for workers working very often like modern slaves. At the same time they enjoy generous tax holidays and government support coming out from the budget, which has to be balanced at below 3 percent. So the governments raise taxes and reduce social support to make up for the lost revenue. All these practices are OK with the EU leaders, as the rich countries are the beneficiaries. These practices also limit the opportunities for developing the local economy, helping local SMEs and supporting social enterprises or co-ops which could contribute to solving social problems. On the top of everything these poor countries are praised when GDP grows, while everybody knows that a large proportion of this GDP is the profit of the foreign companies which is repatriated, so it does not help to develop the local community. So putting it simple: more honest diagnosis would be necessary including the future of the new “Eastern periphery” and a therapy would be needed to achieve real economic and social development, as well, in the poorer member countries, including the former socialist countries. A key part of the therapy should be a strategy for encouraging local innovation, the creation of quality jobs where young people are motivated to work and stay at home and by doing so strengthen the social texture and the human capital of the country. At the end of the day, this would be very useful for the future of the EU, as a knowledge-based, learning region, as well. Prof.Dr.Magdolna Csath

  • Anthony Sperryn

    The language in this article in places is a little difficult to understand, but the message is there.

    I believe it is time that someone stated unequivocally that the concept of a free trade zone is nonsense without equalisation of taxation, social security and employment conditions. Those are pre-requisites for the level playing field people talk about.

    I would take the view, furthermore, that the job of the European Union is to protect the people, ie the individual human beings (all of them, not just the rich ones), living within the Union and to stimulate the economy within the Union in order to enhance the living standards of the people there.

    The job of the European Union is not to open the Union to outside influences so as to lower the well-being of the people living within it. There is never going to be a level playing field between the European Union and the rest of the world, because the social and environmental standards are so different. One end-result of neglecting this point, already appearing, is that predatory capital has been running amok within the European Union. Solidarity between peoples is fast disappearing.

    It is time that the European Commission learnt that “trickle-down” doesn’t actually happen in real life. That economic theory has been proved to be bogus. The European Union’s policies need to be re-oriented towards people, not businesses, not “growth”, not “competitiveness”, not overseas aid, not making an impact on the world (also known as self-aggrandisement), not fighting wars or other such matters, though it would be foolish to ignore those matters in their entirety.

    In this context, TTIP is an irrelevance. It is a Trojan Horse to lower environmental and social standards, to promote job loss within the European Union (on the pretext of some lower consumer prices) and to increase the power of multinational corporations over elected national governments.

    I would add that I am highly suspicious of the efforts of MEPs and others to try and soften people up into accepting TTIP, by explaining what the situation is (quoting the word “transparency”), so misleading people into thinking that a “partnership” with the US is inevitable.

    As has been shown by the obscene levels of fines imposed by the US authorities on foreign banks, the US is as nationalistic as they come and it will never respect the interests of other parties whose military fire-power is less than its own.

  • kathleen mcmullen

    Doesn’t Social Europe have editors?

    ‘Neither Brussels nor the member states seem to be prepared to work against such a path or to be prepared for dealing with the underlying forces of shifty towards a low growth path.’
    Translation: Brussels and the member states are down right lethargic in dealing with the underlying forces of this stagnation and the shift towards low growth.