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Abstract
In the past, economic integration in Europe was largely compatible with the preservation of different national varieties of capitalism. While product market integration intensified competition, member states could build on and foster their respective comparative advantage. Today, this no longer unequivocally holds true. This article contends that a new, ‘post-Ricardian’ phase of European integration has emerged in which the Commission's and the European Court of Justice's (ECJ's) attempts to promote economic integration systematically challenge the institutions of organised capitalism. It demonstrates this by discussing recent disputes over the Services Directive, the Takeover Directive, and company law. In the current phase of European integration, the Commission's and the ECJ's liberalisation attempts either transform the institutional foundations on which some of the member states' economic systems rely or they create political resistance to an extent that challenges the viability of the European project.
Acknowledgements
We would like to thank Helen Callaghan, Liesbet Hooghe, Nicolas Jabko, Fritz W. Scharpf, Susanne K. Schmidt, Tobias Schulze-Cleven, Christa van Wijnbergen and two anonymous reviewers for extremely helpful comments.
Notes
1. Financial Times, 18 October 2004, p. 6.
2. See, for example, Financial Times, 20 April 2005, p. 6; Financial Times, 30 May 2005, p. 6; and Maatsch (Citation2007) for a comprehensive analysis.
3. For more details, see European Commission (Citation2005).
4. Of course, it might be oversimplified to talk about just two types of capitalism. V. Schmidt (Citation2002), in contrast, distinguishes three variants, Amable (Citation2003) even five. In an extended discussion, one could analyse the effect of European integration on these various national models. Yet, we still maintain that the VoC approach offers a valuable analytical starting point to show how the impact of European integration on the member states differs (1) over time and (2) across varieties of capitalism.
5. See the debate on institutional complementarity in issue 2, 2005 of Socio-Economic Review.
6. Cf. Balassa (Citation1961) for a theoretical account of different stages of economic integration.
7. David Ricardo (1772–1832) initially developed the theory of comparative advantages, which maintains that free trade creates wealth for all parties involved if they focus on goods with a relative cost advantage. The VoC literature discusses how different sets of institutions of national economies (in spheres such as industrial relations, corporate governance and skill formation) create comparative advantages. Note that the economic literature to date often speaks of ‘competitive advantages’ (Porter Citation1990).
8. Hence, our argument differs from accounts that posit a general neoliberal bias of European integration, either due to structural reasons (Scharpf Citation1996) or due to pressure from influential interest groups such as the European Roundtable of Industrialists (van Apeldoorn Citation2000). While European integration has been promoting increased competition for decades, the extent of its interference has grown so substantially in the post-Ricardian phase that it endangers the viability of different models of capitalism.
9. We define institutions as a legitimised and enforceable set of rules which enable societies to govern its members' (in our case, economic) actions. Hence, we deviate from a rational choice understanding of institutions as strategic equilibriums. We are concerned with the capability of the member states to regulate economic activities on their own territory.
10. In this article, all cited paragraphs of the Treaty of the European Communities refer to the numbering introduced after the Amsterdam Treaty of 1997.
11. In fact, the ECJ had already begun to apply the country-of-origin principle to services before the Services Directive was negotiated. In the Finalarte case, the ECJ reasoned that ‘the application of the host Member State's national rules to providers of services is liable to prohibit, impede or render less attractive the provision of services to the extent that it involves expense and additional administrative and economic burdens’ (C-49/98, 25 October 2001, §30).
12. Tageszeitung, 4 March 2005, p. 2.
13. Schmidt uses the term ‘divide and conquer’ to describe the Commission's strategic use of infringement procedures in order to change member states' preferences on liberalisation measures. In both cases, the Commission tries to play opposing member states off against each other by manipulating their pre-strategic interests. We thank Susanne Schmidt for her suggestion that in both cases, in principle, the Commission's strategy would be unsuccessful if the member states opposing liberalisation committed themselves to ‘solidaristic’ behaviour.
14. Neue Zürcher Zeitung, 9 November 2002, p. 83 (our translation).
15. Multiple voting rights imply, for example, that the shares of certain shareholders are weighted twice as high as those of others.
16. Financial Times Deutschland, 4 October 2002, p. 29 (our translation).
17. Gesetz zur Kontrolle und Transparenz im Unternehmensbereich (KonTraG).
18. Protest against the asymmetric proposal also occurred inside the Commission; see Financial Times Deutschland, 25 September 2002, p. 14.
19. See Börsen-Zeitung, 22 June 2002, p. 6.
20. Börsen-Zeitung, 14 October 2003, p.7 (our translation).
21. The first cases were C-483/99 (Commission/France, 4 June 2002), C-503/99 (Commission/Belgium, 4 June 2002) and C-98/01 (Commission/United Kingdom, 13 May 2003).
22. Compare Zumbansen and Saam (Citation2007) regarding the broader implications of the Volkswagen decision.
23. In all of these cases, the ECJ decided that national regulations constituted undue restrictions on free movement although they were not discriminating against foreigners – in line with the ECJ's general move from non-discrimination against foreigners to non-restriction of economic action.
24. Note that the potential effects are much more serious than the well-known US-style Delaware effect: Unlike the US, Europe consists of quite different varieties of capitalism. In the US, the Delaware effect enables firms to avoid, for example, minimum capitalisation standards. In Europe, however, the Centros, Überseering, and Inspire Art decisions offer an exit out of codetermination, which – in our view – is one of the main pillars of a historical class compromise.
25. See Börsen-Zeitung, 15 September 2004, p. 2.
26. However, the number of German companies with more than 500 employees whose legal form is based on foreign company law grew from 17 at the end of 2006 to 29 at the end of 2008. See data provided by the Hans Böckler Foundation: http://www.boeckler.de/pdf/mbf_2008_06_19_sick.pdf.
27. Cf. note 11.
