Volume 44, Number 173,
April-June 2013
Adjustment: Origin of the European Crisis
Andrés Musacchio

This process must be analyzed in chronological order, beginning with the financial liberalization initiated in 1974 in the United States, which would continue throughout the following years in almost the entire European continent, allowing free capital circulation. Liberalization radically transformed the world stage by granting financial investors the ability to sidestep undesirable national economic policies by simply transferring funds (Huffschmid, 2002). The key aspect of liberalization is a guaranteed exit, which encourages investors to flee when they believe it necessary. It is a perverse system because by providing this exit option, nations must then implement incentives to retain investments in their territories, which decrease economic policy priority from problems such as growth and unemployment, instead focusing attention on guaranteeing short-term profitability and security for financial capital.

Liberalization has brought about a break between the location of national savings and the place where new investments are made (Aglietta, 2000: 50). By eliminating control over capital movements, it is possible to quickly transfer the savings generated in a national space abroad to finance investment projects somewhere else. As such, nation-states are bound to the logic of financial capital, which puts them into permanent competition to attract and retain resources. This competition has become one of the main drivers to deregulate markets, increase labor flexibility and decrease direct taxes, in an effort to reduce costs and increase the prospects for available revenue.

This context provides the backdrop against which to interpret the single market and the monetary union, the two key ideas behind integration starting in the 1980s. Both led to the consolidation of a regional economic space with strong conceptual influence from “supply-side theory.” Bieling and Steinhilber (2000: 110) indicate that the restructuring of integration should be understood as an effort to impose and spread a project of neoliberal hegemony, giving rise to a specific combination of permissive elements, as well as consensus and disciplinary factors, resulting in two combined logics: “competitive deregulation” – stimulated by the single market – and “competitive austerity,” especially linked to monetary unification. Said another way, reviving the integration process was not based on territorial expansion or new institutional bodies (although it did includes these facets), but rather on a drastic change in the essential features and explicit and implicit objectives, which bring us back, in the end, to changes in the power relations among social groups. The process consolidates the regional accumulation space, enshrines deregulation and State austerity as basic principles, imposes limits on fiscal deficits, defines the path to balance by promoting tax exemptions for capital and maintains the referential space of labor regulations and collective negotiation for nations. In this way different regulatory planes that facilitate and “naturalize” the precepts of supply-side theory are established. We will examine these questions in further detail below.

The European Union laid out various initiatives – all the while gathering support from lobbying groups5 – among which the following stand out: the constitution of the single market, new industrial and competition policies and the monetary union. These measures were meant to stimulate growth, but more than anything else, competition, especially against Japan and the United States. The idea that competitiveness can be strengthened solely by means of technical changes led by regional business conglomerates interacting with a network of smaller companies and scientific bodies such as universities and state organisms predominated in this restructuring.

In this framework, integration was meant to unify. By inducing transformations, it sought to consolidate harmony of norms and contribute to regulating the common market. Integration no longer tried to expand exchange as a complement of internal markets, but rather the articulation of a regional productive mechanism, with new industrial relations and new modes of regulation. Integration now sought to officiate intermediation in the contradiction between the internationalization of capital valuation on the one hand, and on the other, the limits of national markets and barriers set by States. The different spatial dimensions of economics and policy began to be “modeled” by establishing an integrated economic space and the partial transfer of state functions to regional authorities – especially those related to commerce, competition and monetary policy (Bieling, 2003; Statz, 1989). There, the European institutional level would acquire various tools to drive or promote the neoliberal model, representing a break with the project of the 1950s-60s.

The Common Market project, which sought to strengthen the competitiveness of European companies by eliminating technical and material barriers to the circulation of their goods as well as liberalizing capital flows and labor, was just the beginning. A desire to strengthen competitiveness and reduce the costs of the single market was accompanied by a call to complement liberalization with other tools that would allow for cleanup of companies in trouble and would stimulate research and development. Despite the fact that discussions regarding political and judicial aspects were becoming more relevant, it was clear that economic issues were dominant. The Single European Act centered efforts around the liberalization that had allowed the Community to advance on the road to its first logic of discipline: competitive deregulation. Efforts to unify the economic space led by multinational companies were imposed during the path to the single market, as barriers fell allowing States to decree a certain level of protection for their labor markets or small and medium-sized enterprises. This discipline was also determined by the lack of harmony among national policies and standards in some specific fields. In some sense, this method tacitly recognized the policies while putting them in competition with each other. The pressure to retain activities forced countries in the region to adopt more flexible and regressive mechanisms; otherwise they would lose productive density.

5 Especially the European Round Table, an informal organization of large companies acting “on personal interest,” whose initiatives can be clearly recognized in eu policies (cf., for example, Van Apeldoorn, 2002; Musacchio, 2010, and their documents at www.ert.be).

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PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 195 October-December 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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