Silent revolution/passive revolution: Europe's COVID-19 recovery plan and green deal

ABSTRACT

Do the EU Recovery Plan and Green Deal (EGD) break with disciplinary neoliberalism? Eschewing binary ‘yes or no’ answers, this article draws on Gramsci's idea of passive revolution as ‘progressive restoration’ to analyse these important developments in the European political economy. It offers a balance sheet of ‘progressive’ and ‘restorative’ elements and argues that these cohere in an integral response to geopolitical pressure and legitimation problems by the ‘Piedmont of Europe’ – Germany's power bloc. A concluding section argues that the most significant changes engendered by these initiatives may not reside in the substance in policy but rather in how policy is carried out – in the form. It seems that it is becoming increasingly difficult to depoliticize disciplinary neoliberal governance in Europe. Future research is needed on the nature and implications of this for theory and (progressive) practice.

KEYWORDS:

• European recovery plan
• European green deal
• Eurozone
• neoliberalism
• Germany

Introduction

Is ‘another Europe possible’ after all? Interpreting treaty non-lending clauses flexibly, the Asset Purchasing Programmes of the European Central Bank (ECB) had engaged quantitative easing for some time. But the March 2020 €1,350 billion Pandemic Emergency Purchase Programme (PEPP), initiated to support financially stressed member states, took this to an entirely different level. Add to this Europe's so-called Hamiltonian Moment: ‘Next Generation EU’ that forms part of the new Multiannual Financial Framework (MFF). Induced by a Franco-German initiative, proposed by the Commission, and agreed by the Council and Parliament in December 2020, this is a three-year €750 billion Recovery Plan intended to support member states’ fiscal response to the COVID-19 pandemic. Breaking previous taboos, it entails fiscal transfer-payments and deficit-financing through mutualized bonds. €672.5 billion is devoted to the so-called Recovery and Resilience Facility (RRF), of which at least 37 per cent should contribute to the European Green Deal (EGD) and the aim of making the EU ‘carbon neutral’ by 2050.

Do the Recovery Plan and the EGD, together with a turn to industrial policy (Wigger, 2019), end neoliberal austerity in the EU and usher in the Euro-Keynesian socio-ecological transformation called for by progressive intellectuals and civil society groups over many years (e.g. Bourdieu, 1999; GNDE, 2019; Lipietz, 1992; Patomäki, 2013; www.euromemo.eu)? Or do European elites, to the extent that these measures are more than temporary, merely instrumentalize COVID-19 and ecological crisis in pursuit neoliberal continuity? Eschewing binary answers, this paper suggests that Gramsci's concept of ‘passive revolution’ – through which ‘revolution-inducing strains are at once displaced and at least in part fulfilled’ (Callinicos, 2010, p. 498; Morton, 2010, p. 333) – provides the basis of a more subtle and adequate answer.

The first section defines passive revolution and neoliberalism as concepts and explains their relevance for analyzing the EU. The current passive revolution is seen as a response to the limitations of what Commission President Barroso himself called the silent revolution – a ‘shock doctrine’ (cf. Klein, 2007; also Gill, 2017, p. 636) through which the EU executive used the opportunity afforded by the Eurozone crisis to augment its authority through the so-called ‘New Economic Governance’. It thereby applied IMF's template, developed in the 1980s Third World Debt Crisis (Hesketh, 2010, p. 399), and leveraged indebtedness without resort to devaluation to deepen neoliberal reform in the EU through increasingly authoritarian methods. The Recovery Plan and EGD are major strategic initiatives responding inter alia to geopolitical pressures and legitimation crises caused by the socio-political base of Europe's power bloc becoming too narrow. They thereby flank the ‘bureaucratic Caesarism’ of the silent revolution (Keucheyan & Durand, 2015, esp. 32) with trasformismo.

Invoking Gramsci's idea of passive revolutions as ‘progressive restorations’, the second section focuses on policy substance. It assesses the extent to which progressive or restorative elements prevail and interrelate in the EGD and Recovery Plan. The overall ecological ambition is acknowledged as genuinely progressive as is the carbon adjustment border tax and the path-breaking Keynesian initiatives to debt-mutualization and fiscal federalism. But Keynesian measures as such are not necessarily incompatible with neoliberalism (e.g. Crouch, 2009). Continued reliance on finance-led mechanisms, including carbon emissions trading and ‘blended finance’, and making access to recovery funds conditional on Country Specific Recommendations (CSRs) of the European Semester indicate authoritarian neoliberal restoration. Displacement of externalities to the periphery, carbon leakage, and EGD's extractivist stance on critical raw materials, point to an outright imperialist agenda.

The third section sees parallels between the geopolitics of Gramsci's original analysis of passive revolution in the Italian Risorgimento and the EU. Both can be seen as instances of socially dense inter-state systems with emergent trends towards common polity-formation. In this context, Gramsci assigns central importance to the ‘Function of Piedmont’ (1971, 286–289): the role played by a leading state in a passive revolution. As indicated by its pivotal importance in removing blockages to fiscal transfers and debt mutualization, Germany plays this role in the EU. This section explains how the Recovery Plan and EGD emerged from a reconsideration of the German strategy, its causes, and multileveled channels of implementation. It is argued that the Recovery Plan and EGD address risks associated with bets the Silent Revolution in its original form made on emerging markets, especially China, and its discounting of the European home market. The need to keep the Italian social formation integrated into the broader European power bloc is especially notable. This assessment is made with reference to Germany's oligopolistic corporatist political economy and limitations encountered in securing aggregate demand for its production.

The ‘molecular changes’ caused by a passive revolution iteratively transform the socio-political terrain. The concluding section argues that ‘progressive restoration’ of policy substance aside, the transformative implications for procedural context – or form – of the EGD and the Recovery Plan are profound and must be better understood. Though definite conclusions about these are beyond the limits of this paper, preliminary reflections suggest that what mainstream integration theory calls ‘spillover-effects’ (Haas, 1968, pp. 47–50, 283–286, 299–301) threaten to breach the neoliberal essence of what Hayek once called ‘inter-state federalism’ by compromising the depoliticized representation of market discipline as natural. Instead, arbitrariness in EU bureaucracy is exposed. Social forces working for socio-ecological transformation should contest efforts to contain these breaches and seek to politicize them further. The article ends with some preliminary reflections on difficulties entailed in this when EU governance tends to, in Erne’s (2015) words, ‘nationalize social conflict’.

Passive revolution and neoliberalism in the EU

Passive revolution

Gramsci developed concepts in the concrete analysis of particular historical situations. The transposition of these to other situations, including passive revolution, raises methodological questions of ‘concept stretching’ (Callinicos, 2010, pp. 492–500). In what way can a concept developed for analysing of Italy's ‘southern question’ and unification in the nineteenth century be relevant to the European Union in the 21st? The answer is that using it, and indeed ‘revolution’ itself (Holmes, 1996), is justified because in an important sense we still populate the same essential context. In the Communist Manifesto, Marx and Engels (1848/1998], pp. 242–245) referred to commodification as the essential impulse revolutionizing the forces and relations of production and the bourgeoisie as the major revolutionary class. Neoliberal globalization essentially continues this dynamic (Gamble, 1999, pp. 134–136). Barroso's silent revolution as Kleinian ‘Shock Doctrine’ is in this context a typical strategy through which crises generated by neoliberal globalization are used to extend and deepen commodification yet further. That is, to break open Marx and Engels’ metaphorical ‘Chinese walls’ hindering the operation of capital. The concept passive revolution facilitates analysis of nuance and political complexity entailed in the process, relating to uneven and combined development, geopolitical rivalry, and problems of forging requisite ruling class unity and mass consent. Morton (2010, p. 332) convinces therefore when arguing for a more general applicability of the concept in ‘incorporated comparisons’, ‘focusing on interrelated instances of state transition within world-historical processes, where particulars of state formation are realized within the general features of capitalist modernity as a self-forming whole’. This accords with Cox’s (1983, pp. 162–163) contention that the power of a Gramscian historicist concept is that it is ‘loose and elastic and attains precision only when brought into contact with a particular situation which it helps to explain – a contact that also develops the meaning of the concept’.

In ‘Notes on Italian History’, Gramsci contrasts passive revolution with hegemony. The Jacobins compelled the French bourgeoisie to lead a revolutionary coalition of subaltern social groups against the ancien régime, fused together through a liberal social myth. By contrast, would-be Italian Jacobins in Mazzini's Action Party failed to similarly activate ‘the nuclei’ of the Italian bourgeoisie. Instead, Italian unification and industrial capitalism was instituted ‘from above’ under the leadership of the Piedmont, which served as substitute to a ‘ruling class’ (Gramsci, 1971, p. 286). Responding to geopolitical pressures, it organized a composite coalition of big southern landowners and northern industrialists, while neutralizing oppositional groups (also Morton, 2010, p. 317). The Risorgimento combined revolutionary and restorative elements as did many post-Napoleonic European societies in the transformation to capitalism. These were more liable to crises as the ‘integral’ relations between state and civil society were more fraught than in hegemonic formations.

Seen as a ‘flexible’ concept, Morton (2010, pp. 317–318) suggests that in its most abstract sense passive revolutions ‘involve elite engineered social and political reform that draws on foreign capital and associated ideas while lacking a national-popular base’. But it also involves a second dimension that responds to the ‘sporadic and incoherent rebelliousness of the popular masses’ by partly accommodating their demands. Passive revolutions, therefore, can draw on two, not mutually exclusive, methods: trasformismo and ‘Caesarism’. The latter is one of ‘arbitration’ by executive agency between an ‘equilibrium of forces heading for a catastrophe’ (Gramsci, 1971, p. 463). This agency can be a charismatic leader – a Caesar, Napoleon, or Cromwell. But notably, Gramsci also saw the British national unity government of the uncharismatic Ramsay Macdonald as exemplary of Caesarism. Gramsci held non-charismatic, non-personalised, bureaucracies to be the most frequent form of Caesarist agency in the modern world (Keucheyan & Durand, 2015, p. 32). Trasformismo, by contrast, involves the pre-emptive co-optation of oppositional elements. Gramsci stresses that this co-optation is ‘molecular’, in contrast to the social osmosis entailed in hegemonic formation (Gramsci, 1971, p. 275). Whatever combination of methods deployed, passive revolutions rarely remain confined within their original parameters.

Neoliberalism in the EU

There always is an authoritarian element to neoliberalism as its overarching aim and vision of socializing subjects in accordance with the commodity logic is based on ‘insulating certain policies and institutional practices from social and political dissent’ (Bruff, 2014, p. 115). This is certainly the case in continental Europe, where successful Thatcherite or Reaganite neoliberal Jacobins (cf. Hall 1988, pp. 40–43) are notably absent. European integration has been crucial in that regard as EU competition policy and the monetary regime have served transnational European capital (van Apeldoorn, 2002) through Caesarist ‘executive arbitration’, anchored in what Gill (1991, p. 290, 302) has called new constitutionalism based on lock-in mechanisms, where ‘Ulysses is tied to the mast’ (Giavazzi & Pagano, 1988). States have thereby been prevented from pursuing expansionary economic policies and ambitious public investments for social and environmental purposes in a mode of ‘asymmetric regulation’ (Holman, 2004, pp. 716–726), according to Hayek’s (1948) vision of inter-state federalism. Supranational competence has been reserved for market-making entities with a remit to secure economic competition and price stability, whereas fiscal, social, and environmental policy remain at the national and sub-national levels. Even where those units agree that concerted measures to regulate markets would be desirable, ‘joint-decision trap’ collective action problems emerge as different state traditions and interests make it difficult to reach agreement on the particularities of such measures (Scharpf, 1988).

Originally, the European Monetary System (EMS) of fixed exchange rates between national currencies and capital mobility lent a degree of market-automaticity to new constitutionalism, through the balance of payment constraints. Disciplinary-neoliberal lock-in mechanisms thereby operated in a highly depoliticized form. Anchored by Bundesbank anti-inflationary policy, any expansionary policy-impulse outside the norm would be counteracted by currency outflows requiring interest-rate increases that neutralized the original stimulus (Gill, 1992, pp. 164–172). When the introduction of the Euro eliminated this power of ‘exit’, new constitutionalism was instead ensured through the non-lending clauses of the Maastricht Treaty and the Growth and Stability Pact (GSP). This was the origin of what Menéndez (2021) calls ‘governance through numbers’, where good citizenship depends on satisfying quantitatively defined benchmarks, and where failure to meet these benchmarks puts member states in a state of exception and subject to externally imposed conditionality managed by executive authority. Since the quantitative indicators are fallaciously based on the assumption of incontrovertible economic fact, the apparent objectivity of the benchmarks masks arbitrariness in this authority.

It is important though to stress that the EMS, EMU, and EU competition policy accorded with conservative democratic constitutional order based and rule of law (Bonefeld, 2012, p. 56). Developments since the global financial crisis have, however, led to a qualitative change corroding the latter. Invoking language that Franz Neumann deployed to understand the degeneration of the Weimar Republic, regulations based on ‘spurious generality’ have increasingly replaced ones based on ‘determinate generality’, opening the scope for the exercise of arbitrary executive power (Ryner, 2019, pp. 92–93).

The original GSP contained its share of arbitrariness. What is so special about a 3 per cent/GDP deficit or 60 per cent/GDP debt target? But at least the numbers were not particularly tendentious or refer to areas outside supranational competence. ‘Structural’ policy, concerning public ownership, industrial relations, or social policy, was only subject to the voluntarist process of the Open Method of Coordination. This changed with the silent revolution and the New Economic Governance, which was a quid pro quo to unconventional monetary policy and the creation of the European Stability Mechanism (ESM). Henceforth, arbitrary executive power proliferated and was radically extended. ‘Structural reforms’ – a euphemism for neoliberal welfare state retrenchment and the opening of new spheres for commodification – was now included in what states under the state of exception had to undertake to redeem themselves with the Troika of the ECB, Commission, and the IMF and through the CSRs and ‘contracts for competitiveness’ of the European Semester. The benchmarks themselves became increasingly tendentious and subject to arbitrary interpretation while member state authority to veto was circumscribed through the introduction of Reverse Majority Voting (Oberndorfer, 2015, pp. 193–201). For example, in the Macroeconomic Imbalance Procedure, imbalance is exclusively interpreted in terms of lack of competitiveness, which in turn is understood to be redressed by numerical wage flexibility and privatization. The idea of ‘structural deficit’ relies on ‘potential GDP’, which is notoriously difficult to measure, and the Commission Directorate-General for Economic and Financial Affairs has exclusive authority to interpret it.

Barroso's silent revolution can be interpreted, then, as a Caesarist strategy to deepen neoliberal reform in Europe (Keucheyan & Durand, 2015), which drew on and radicalized more long-standing new constitutionalist norms. Whether consciously conceived as such or not, the EGD and Recovery Plan together form a response to attendant legitimation problems, by flanking such Caesarism with trasformismo. Critical observers have noted that austerity, stagnation, and lack on ‘interactive embeddedness’ between neoliberalism and Europe's welfare capitalist settlements have been corrosive of legitimacy for some time (Cafruny & Ryner, 2007, pp. 43–104). The legitimation crisis became acute, however, in the wake of the Eurozone crisis especially in southern Europe, with major turbulence and ‘rebelliousness’ in the party system and consensus structures albeit on the whole of the ‘sporadic’ and ‘incoherent’ type (Cozzolino, 2019; Ferragina et al., 2020; Moreira Ramalho, 2020). When added to the geopolitical pressures of emergent US-Chinese rivalry and the climate crisis, the need for a flanking strategy to the ‘silent revolution’ became apparent.

The European green deal and recovery plan

The EU Recovery Plan responds to historically severe and uneven economic stress caused by the COVID-19 pandemic. The Commission estimated that EU GDP would shrink by a historic 7.4 per cent in 2020 (in reality 6.5 per cent) and in the worst-hit case of Spain, by 12.4 per cent (in reality 10.8 per cent), following a period of anaemic and highly uneven growth after the Eurozone crisis. Crucially, the Recovery Plan is configured to boost the longer-term response to the global climate crisis and other ecological problems through the EGD (von der Leyen, 2019), whereby the EU reduces carbon emission to 55 per cent of the 1990 levels by 2030, rather than the 40 per cent of the Paris Agreement, chiefly through:

• extending the EU Emissions Trading System to more sectors, including maritime and air transport, and adopting a tariff-like Carbon Border Adjustment Mechanism;

• a ‘circular economy action plan’ to reduce material throughput, increase reusing and recycling, and a ‘sustainable products policy’ promoting resource-efficient design through financial incentives and regulations;

• a sustainable and smart mobility strategy to reduce 90 per cent of transport emissions by 2050;

• a ‘farm to fork’ strategy for sustainable food production, decreasing chemical pesticides and fertilizers usage, and a biodiversity strategy promoting forest preservation and afforestation;

• a ‘zero pollution’ action plan for air, water, and soil;

• the raising of the EGD financing needs equalling approximately 1.5 per cent of EU GDP until 2030 (currently €260 billion per year). The cornerstone would be a €1 trillion Sustainable Europe Investment Plan (SEIP), including a €140 billion Just Transition Mechanism targeting regions and sectors most affected by the transition. 25 per cent of EU funds are to be devoted to climate and related finance. This is in addition to €114 billion member states co-financing. Furthermore, InvestEU and European Investment Bank (EIB) guaranteed loans should leverage €300 billion of private and member state funds (European Commission, 2020a). It is to this fiscal mechanism that the Recovery Plan would make a significant additional contribution.

When viewed as ‘progressive restoration’, the aims of the EGD must be seen as considerable progress. Though the SEIP in its original form only amounted to €7.5 billion in new money and was exceedingly optimistic about raising private investments (Euromemorandum, 2020, pp. 7–8), the amounts and pathbreaking norms of deficit funding and debt mutualization in the Recovery Plan are considerable. The overall additional value of the RRF grants to which countries are eligible until the end of 2026 amounts to over 12 per cent of 2020 GDP for Croatia, 10.5 per cent for Greece and Bulgaria, about 7 per cent for Portugal, Slovakia, Latvia, Romania and Spain, as well as about 4 per cent for Italy (Nguyern & Redeker, 2022, Figure 2).

Nevertheless, albeit these numbers are impressive, at least for Eurozone members the Recovery Plan is still likely to provide only a quarter of the peripheral member states’ financial needs. Contrary to the planned expansion of the EU budget from 1 to 2 per cent of EU GDI, long-standing arguments, tracible to the McDougall Report (European Commission, 1977), remain that the Eurozone requires a common budget of at least 5 per cent of GDI (Euromemorandum, 2021, p. 12). In other words, the essence of macroeconomic regime remains disciplinary neoliberal and the reforms restorative.

But the restorative aspects of the reforms are at least as much about institutional design as quantitative proportions. Access to the RRF is conditional on addressing all ‘or a significant subset’ of European Semester CSRs, demonstrated by reaching defined milestones and targets in National Recovery and Resilience Plans (NRRPs). It is with reference to these that the Commission may or may not release the payments member states can request twice a year. Analysts of the European Semester expect the compulsion to adhere to it, which had waned (Efstathiou & Wolff, 2018), to increase significantly with the RRF and disproportionally so for the large recipients (Bokhorst, 2022, pp. 113–114; Nguyern & Redeker, 2022). Furthermore, an EGD based on the emissions trading system and ‘blended finance’, where ‘governments take on the risks, while private investors earn the profits’ (Euromemorandum, 2020, p. 8) suggests that the European Commission has learnt little from the global financial crisis. Building the EGD on finance-led capitalism is particularly problematic because of the asymmetrical power relations unrestricted capital flows impose on debtors in the periphery. These are likely to reproduce conditions of unequal exchange, and uneven distribution of environmental externalities (Jäger & Schmidt, 2020).

The sharpest critique can be reserved against von der Leyen's vision of a ‘geopolitical Commission committed to sustainable policies’. These include the commitment to a ‘deep and comprehensive’ free trade agenda, a 30 per cent increase in the EU budget for military ‘external actions’, and tighter external border controls under the heading ‘protecting the European way of life’, all of which contradict EGD's stated aims. Trade, military, and security policies have contributed to biodiversity depletion, increasing the impact of climate change, and weakening resilience against it (Euromemorandum, 2020, p. 13). Trade and investment agreements form legal obstacles against policies required for socio-ecological transformation (Euromemorandum, 2020, pp. 25–28). Concrete initiatives to promote international solidarity and cooperation are largely absent from the EGD. This raises serious questions about carbon and other environmental leakages to other parts of the world, and the commitment to ‘differential responsibilities’ in combating climate change as per the Paris Agreement. Policy rather seems symptomatic of tendencies to displace externalities to weaker actors in the international system (cf. Lessenich, 2020).

Euromemorandum (2021) elaborates on these concerns with reference to the Commission's own Action Plan for Critical Raw Materials (European Commission, 2020b), which estimates that the EU will need 18 times more Lithium by 2030 and 60 times more by 2050. This is likely to exacerbate stress on water resources for instance in the arid Andes region, and contribute to historic relations of dependency and social conflicts between the extractive mining and indigenous farmers (e.g. Furtado, 1976, pp. 19–22). Lithium is only one example of similar needs for other critical raw materials, which will generate lateral pressure and resource conflicts with China, especially in Africa, which EU High Representative Josep Borrell has called a ‘field of geopolitical competition’ (Fox, 2020). The geopolitics of the EGD clearly elucidates its limitations, and how the ‘European way of life’ is synonymous with the ‘imperial mode of living’: ‘[R]esource – and energy-intensive everyday practices … based on an unlimited appropriation of resources and labour power and a disproportionate claim to global sinks’ (Brand & Wissen, 2012, p. 547; also Brand, 2021; Paterson, 2000).

‘Piedmont’ of Europe: silent/passive revolution and the political economy of Germany

Analysing The Risorgimento as passive revolution, Gramsci (1971, p. 105) considered the function of arbiter and leader that Piedmont assumed to be ‘of greatest importance’, in many respects performing the role of a Jacobin hegemonic party understood as ‘the leading personnel of a social group … with the additional feature that it was in fact a State, with an army, diplomatic service etc.’. He viewed Serbia as an unsuccessful ‘“Piedmont” of the Balkans’ and France as the early nineteenth century ‘“Piedmont” of Europe’. In this vein, Germany can be seen as today's ‘“Piedmont” of Europe’. And indeed, the ‘balance sheet’ of ‘progressive’ and ‘restorative’ aspects outlined in the previous section come together as a coherent preference-set of a partially reconstituted German power bloc. Consequently, whether the EGD and Recovery Plan endure in the above form or not – the announcement of increased German military expenditure in response to the Ukraine War point of ominous militarization – they are symptomatic of a more organic new tendency.

Taking their cue from Gramsci's observation that classes, broader socio-political blocs, and strategies emerge from a ‘refractory reality’ (1971, 404; Kannakulam & Georgi, 2014), a new generation of critical-theoretical analysts of German political economy are elucidating this tendency. They see geopolitical-economic pressure, generated in the aftermath of the Eurozone crisis, intensified competition from US tech-giants, and emergent Chinese interests, leading to a reorientation of big German industrial and bank capital-fractions. These are increasingly asserting this reorientation within Business Europe, the German state, and the Franco-German ‘engine’ of European integration. Already in 2017/2018, organic intellectuals representing these fractions advocated Europe-wide risk-sharing and fiscal transfers in exchange for a strengthening of constitutionalist conditionalities – in other words exactly the key elements of the Recovery Plan – to ensure the long-term survival of EMU (BdB, 2017; BDI, 2018; Business Europe, 2020 cited in Schneider, 2020, pp. 6–7). A turn to the dirigiste National Industrial Strategy 2030 has been more controversial. However, with the more-or-less explicit support from the chemical and electrical engineering sectors, where American and Chinese competition is most keenly felt, laxer cartel rules, enhanced protection from foreign oligopolies, tightened direct investment controls, and state-subsidized projects to re-shore value chains have been implemented (Germann, 2021). This change of reorientation has been asserted in state apparatuses because of the relative marginalization of the less powerful, but still important, small-and-medium-sized fractions (the Mittelstand and Familienunternehmer) whose commitment to EMU always have been more conditional. Their constituencies have been particularly important to the Christian Democrats (CDU) and the liberal Free Democrats (FDP), facing increased electoral competition from the far-right Alternative für Deutschland (AfD). The capture of the Finance Ministry by the social democrats (SPD) in the previous Grand Coalition bargain played a crucial role in this marginalization and the COVID-19 crisis was the catalyst for a definite actual change of orientation. Jörg Kukies – previously State Secretary at the Ministry of Finance under Olaf Scholz, and now holding the same position in the Chancellor's Office, and with a past at Goldman Sachs – has been the main champion of this reorientation. Peter Altmaier, former Christian Democratic Minister of Economic Affairs, played a similar role for industrial policy. Although the fiscally conservative Free Democrats seized the Finance Ministry in the new ‘Traffic Light’ coalition, resulting in a return to the balanced budget ‘debt brake’ in 2023, special funds for capital investment for climate change, digitalization, and now also military expenditure allow for deficit funding in these areas and indicate endurance in the shift of tendency (Economist, 2021; Euractiv, 2021; Marksteiner, 2022; Zgaga, 2022).

This reconfiguration of the relative positioning of fractions in the German power bloc corresponds with a changing of understanding of the European market. In the Silent Revolution, the European market was seen primarily as the site of value chains for German corporations, for which structural adjustment would help contain production costs. Its importance as a home market was discounted in favour of exports to emerging markets, especially China (Germann, 2018, pp. 599–602). The change reflects concern with the fragility of emerging markets as outlets and the risks of a Eurozone breakup. Italy's ‘system-critical’ importance for German exports was increasingly acknowledged during the COVID-19 crisis, when The Lega was becoming increasingly hostile to Italian Euro membership (Riedel, 2020). In addition, China is no longer only merely seen as an outlet for German exports. Whereas Germany's response has been less confrontational than that of the US (Starrs & Germann, 2021, pp. 1126–1131), China is increasingly viewed more ambivalently as a rival in the wake of the takeover of blue-chip companies in vanguard sectors, such as the robotics manufacturer KuKa. The EGD as a potential lever to develop strategic industries in ‘green’ technologies needs to be seen in this context.

The strategy of combining Keynesian elements and industrial policy methods with neoliberal conditionalities has enjoyed certain success. It removed the more immediate threats to a Euro exit in Italy with the formation of a ‘technocratic’ government headed by Mario Draghi, with support from the left and the right. This included Salvini's and Lega's climbdown from Eurosceptic rhetoric in response to pressures from its small business constituencies. Italian orchestrations were archetypical of a passive revolution, including a broadening of the supporting coalition (trasformismo) and centralization of authority in a technocratic executive (Caesarism) (Palombarini, 2021).

But Germany's change of direction is ultimately determined by changing conditions for securing requisite aggregate demand. Germany's export-oriented oligopolistic capital competes not primarily through sectoral market dominance and hence productive capacity. The attendant price-making power and extraction of rents have made it possible for Germany to be the guarantor of disciplinary neoliberalism in Europe while reproducing a comparative labour inclusive corporatist social accord at home (Ryner, 2003). But German capital is latently vulnerable on the demand side (Halevi, 2019a, p. 2).

The Korean War boom and Marshall Plan ensured adequate demand expansion in the immediate post-war period. Non-convertibility of currencies and European Payments Union counterpart funds were particularly as these eliminated balance of payments constraints for Germany's European partners. Balance of payments constraints returned with currency convertibility in 1958. From then on, Germany navigated between the Scylla of inflation and the Charybdis of inadequate demand expansion. In the Bretton Woods period, US deficit spending played a central role in ensuring international demand expansion. But Germany was also still modernizing its capital stock. It thereby served as a locomotive for the growth of demand in other European economies (Halevi, 2019b, pp. 11–12). This changed in 1966 when the Bundesbank increased interest rates to prevent inflation amidst an emerging current account deficit in Germany itself. Since then, the EU has suffered from stagnation in output and productivity growth.

In the neoliberal era, characterized by falling wage-shares (Bengtsson & Ryner, 2015; Stockhammer, 2004), the US remained the source of final demand of last resort, but now through expansion of debt underwritten by the increase of asset values through securitization (Dumenil & Levy, 2004, pp. 669–672). This compelled a major transformation of German oligopolies, weakening long-term linkages between banks, increased needs to embrace lean production and shareholder value (Grahl, 2001). Nevertheless, they adjusted export strategies through the re-negotiation of corporatist settlements less favourable to organized labour (Vitols, 2004), ensuring wage increases below productivity growth rates. This has increased precarity within Germany itself, not the least through the Hartz Reforms (e.g. Voigt, 2019). The EMU was central as it prevented devaluations from undermining wage competitiveness while accumulated German surpluses provided conditional support to other member states against the turbulence of Dollar unilateralism (Ryner, 2015, pp. 286–287). Hence longer-term sources to the passive revolution and changes in the German power bloc concern unresolved questions about how adequate demand expansion should be maintained after the 2008 global financial crisis, given uncertainties over American hegemony, rise of China, and Germany's own political economy and position in the world.

Conclusion: progressive restoration in content, transformation of form

As early as 1967, Mandel (1967) observed that capitalist development in Europe inexorably shifted socio-political contestation to the supranational level. As he well appreciated though, this development is uneven. Neoliberal rule to deepen commodification in Europe has harnessed such uneven development, creating what Hayek called inter-state federalism. Germany's leadership in European macroeconomic management has been central in forging the asymmetrical regulation entailed in inter-state federalism. Yet, anarchic tendencies in capitalist commodification require some form of socialization to ensure social stability (van der Pijl, 1989, pp. 16–20). Though vastly overstating the strength of this force, the concept of ‘spillover’ in mainstream neofunctionalizt integration theory reflects an understanding of this need. Together, these insights from Mandel, van der Pijl, and Haas provide parameters to assess the strategic terrain generated by Europe's current passive revolution.

Van der Pijl calls the agents of socialization ‘cadres’ – managers of capitalism in corporations, state apparatuses, and international organizations. With a professional concern for systems reproduction, they are aware of crisis tendencies and perform orchestrating roles in passive revolutions. The handprints of cadres are evident in von der Leyen's Commission and those of the likes of Jörg Kukies in German state apparatuses. With PEPP, The Recovery Plan, and the EGD these managers respond to systems-critical threats such as the COVID-19 pandemic, global warming, populism, and the re-emergence of global rivalries induced by the rise of China. But the responses are structurally configured to be in line with those of dominant social forces. This article has sought to elucidate how this is so. Using Gramsci's concept of passive revolution, it offered a balance sheet of these initiatives as a ‘progressive restoration’ and explained how the overall package was consistent with changes in the power bloc of Germany as the ‘Piedmont of Europe’.

The final section concluded that the passive revolution had enjoyed considerable short-term success and addressed structural imperatives in the German and European political economy. This does not mean that it is without limits and contradictions. It most certainly suffers from serious substantive problems when viewed from the perspective of socio-ecological transformation. Proposals for a global Most Favoured Nations ‘climate club’ notwithstanding (Leonard et al., 2021), it overestimates the power of markets to absorb and diffuse the potential of new technologies to radically alter infrastructure, practices of production and (especially energy) consumption (Morgan & Patomäki, 2021). These are deeply rooted in the usage of hydrocarbons and other non-renewables (Paterson, 2000). Economic history demonstrates that paradigm shifts rather require missionary investments by the state (Perez, 2003, pp. 15–21). Furthermore, overhanging risks remain that geopolitical antagonisms cannot be neutralized or even mitigated. This is the case with access to critical raw materials and rivalry with China and the problem has become over-obvious in the Ukraine War and European and German dependence on Russian gas, and which has compelled a more sinister German Keynesian turn in terms of rearmament. But furthermore, notwithstanding short-term success in Italy, there are also question marks over the capacity to counter disintegrative tendencies within the EU itself. This is because of the contradictions in form – that is the procedures through which content is transmitted – that result from the dialectic between commodification and socialization in the passive revolution, and the difficulties entailed in depoliticizing new constitutionalism.

The difficulties in question are discernible when one considers the transition from EMS to EMU, where, as argued in the first section, what appeared as market automaticity in the ERM was replaced by the ‘governance through numbers’ of the Growth and Stability Pact. Through the course development of the European Semester from the New Economic Governance to the Recovery Plan and the RRF, the ‘governance through numbers’ has become ever more elaborate and increasingly subject to arbitrary measures by the executive. As Roland Erne (2015, p. 358) has argued, it has led to a deliberation between the EU centre and Member States, akin to the ‘whipsawing techniques’ deployed by multinational corporations in disciplining its local subsidiaries. Attempts are made to represent this as a depoliticized process characterized by managerialism and expert knowledge, but it is increasingly difficult to legitimate it as such. As Erne points out, it has tended to lead to a ‘nationalization of social conflict’ in the EU. A good example of how this generates problems in the very core of the European project was the challenge to the Recovery Plan launched by an arch-neoliberal but nationalist groupings in the German Constitutional Court (Höpner, 2021). The passive revolution under consideration here faces a major pedagogical challenge to communicate the needs for its conditionalities to publics that have been encouraged to follow a competitive corporatist and therefore nationalist ethos that encourage the displacement of externalities – such as surplus production and unequal exchange – onto one another and the rest of the world (Cafruny & Ryner, 2007, pp. 20–21; Lessenich, 2020). Fragmentation and anarchic conflicts thereby continue to threaten the integrity of the EU as a neoliberal new constitutionalist project.

This conclusion motivates a return to the question raised in the introduction, namely whether ‘another Europe is possible’, based on genuine socio-ecological transformation. ‘Provisional utopias’ to that effect have been outlined (Euromemorandum, 2020, pp. 8–14; GNDE, 2019; Pianta et al., 2020). Similar to the Recovery Plan, it would be based on deficit financing and debt mutualization in the form of ‘green bonds’, issued by the European Investment Bank and guaranteed by the ECB. However, finance would rely on increased corporate taxes. It would repeal the European Semester conditionalities for accessing a revised RRF that would, in turn, be based on a Europe-wide public missionary investment programme. In such a scenario, actions would target environmental protection and the limiting of climate change impact through the promotion of sustainable transport systems, energy efficiency, renewable energy, sustainable agricultural production, and demilitarization. Policies would strengthen high-quality universal public education, health care, and welfare systems, as well as support the expansion of ICT in ways that are in line with ILO's definition of ‘good work’. Such an investment programme is estimated to require a total of €5 trillion and no less than €320 billion per year (Euromemorandum, 2020). Promoting investment at the European, national, and local levels would provide the much-needed fiscal and industrial policy support to the ECB's monetary policy. But to support fiscal and industrial policy fully, the mandate of the ECB needs revision. Furthermore, as lessons from the New Deal in the 1930s show, industrial policy must be based on transparency, strong political leadership, and grassroots participation in the allocation of the funds. This was crucial in overcoming vested interests and obstacles to implementation (Lehndorff, 2019). Each member state would need a National Development Bank similar to the German Kreditanstalt für Wiederaufbau (a creature of the Marshall Plan). What is more, the EU Emissions Trading System should be replaced by a Europe-level carbon emissions tax, with governments buyback of emissions permissions as a transitory step.

This alternative integration project is not likely. This is in part because of the historically weak power resources of progressive parties, unions, and civil society actors across Europe. Nevertheless, it is important not to forget that the legitimation crisis of European new constitutionalism, and the ‘sporadic and incoherent rebelliousness of the popular masses’ that it generated, were sufficiently serious to elicit a passive revolution. This raises the question of whether attempts to depoliticize the form of European governance through technocratic practices and whipsawing that nationalize social conflicts, and actually threaten European cohesion, can somehow be countered through the cultivation of a common European counter-public? It is beyond this article to offer any definite answers to this question, but it is essential for critical European scholarship and practice to consider the question. Erne's own research has, for instance, pointed to the prospects of organized labour to find common themes and contradictions in benchmarks and national CSRs through which to mobilize transnational European campaigns. These include that the corridor for what the European Semester considers to ‘acceptable wage increases’ has generally not been fully used – including reference to the Keynesian ‘Golden Wage Rule’ in the CSR of Germany itself. It also includes possible mobilization against the ‘more uniform commodification patterns of CSRs on the provision of public services’ (Jordan et al., 2021, pp. 208–209; see also Bieler, 2021). Such ‘uniform patterns’ may well be present on key issues pertaining to socio-ecological transformation.

Opportunities such as these are based on the premise that it will be difficult to contain the politicization of European economic governance to a technocratic exercise in a situation where the Recovery Plan has made it possible to issue EU-wide debt and fiscal capacity while at the same time it has marginalized the informal Eurogroup in favour of the Economic and Financial Affairs Council. In this context, it would be essential to actively propose a radical alternative to European economic governance in the current review of the Growth and Stability Pact (Guttenberg et al., 2021). Indeed, one might, with the support of Michal Kalecki, contend that Keynesianism on a continental scale is the ultimate logical outcome of the German form of oligopolistic competition.

Acknowledgements

The drafting of this paper has benefitted greatly from correspondence and discussions with Mareike Beck, Paolo Gerbaoudo, Julian Germann, Heikki Patomäki, Inga Rademacher, Etienne Schneider, Engelbert Stockhammer, and Johan Wahlsten. I am also grateful for the excellent comments from the anonymous reviewers. All responsibility for the contents is, of course, mine. The research was generously funded by the Core Fellowship Programme of the Helsinki Collegium for Advanced Studies (HCAS).

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by the Core Fellowship Programme of the Helsinki Collegium for Advanced Studies.

Notes on contributors

J. Magnus Ryner

Magnus Ryner is Professor of International Political Economy at the Department of European and International Studies at King’s College London and a former Core-Fellow (2020–2021) at the Helsinki Collegium for Advanced Studies (HCAS). He is Vice-Chair of the Steering Committee of the Euromemorandum Group. His publications include (with Alan Cafruny) The European Union and global capitalism: Origins, development, crisis (Palgrave Macmillan, 2017) and Europe at bay: In the shadow of US hegemony (Lynne Rienner, 2007).