Using crises: how economic ideology becomes codified into law

In our paper, we argue that the adoption of an economic ideology as a solution to a crisis in the form of legally binding obligations restricts the ability to pursue alternative courses of action and exacerbates societal tensions. The framing of events as ‘crises’, establishing them as threats to the current political and economic system, enables prevailing political actors to facilitate changes that enshrine economic doctrine into law. Alternatives to that economic doctrine are thus delegitimised as falling outside of the rule of law: there is no legal alternative.

What is a crisis? Not, we submit, an impartial and objective assessment. Structural changes are analytically observable but they are not in themselves crises, which are contextual (drawing meaning from the circumstances in which they arise) and relational (depending on the interpretive lens they are viewed through), and ultimately constructed through narratives. ‘Ideas matter’: different positions on causes of - and solutions to - structural conflicts give rise to contestations over what constitutes a crisis and how to address it. The ideas that have served as the basis for the economic reforms that have shaped the EU focus upon a market economy where the state acts not as the libertarian ‘night watchman’, but rather as a coercive entity to ensure the function of (and removal of barriers to) market activity. This is therefore not a process of state reduction, but state transformation. Here, we trace a parallel with the process of securitisation (where something is constructed as a security threat necessitating policy response), which consists of three phases: conceptualisation (identification of an event or phenomenon as constituting a crisis), communication (dissemination of a narrative calling for an immediate and exceptional response to counter, combat or recover from the crisis) and facilitation (legitimation of exceptional action).

It is possible to look at the European integration process through this lens. The collapse of Bretton Woods in the 1970s brought a floating-rate system, the costs of which were severe levels of inflation and stagflation. These structural challenges were eventually framed as a crisis of democracy and legitimacy due to alleged state-capture by actors such as trade unions. After conceptualising the discredited Keynesian model as crisis-inducing, communication came from policy-makers that a solution was needed, a narrative that facilitated significant ideational and policy change. In Europe, the restructuring along market lines began with the actions of the European Court of Justice implementing free movement of goods and services, and the removal of state barriers to trade, ‘constitutionalising’ the logic of market-based solutions and economic reasoning into the EU legal order. This approach extended into the rationale of positive integration, through market re-regulation undertaken by the European Commission and Council. The implementation of the Economic and Monetary Union (EMU) through the Maastricht Treaty represented the realisation of a new consensus that the goal of economic coordination was to achieve anti-inflationary monetary policies and the limitation of public spending deficits, discouraging state intervention in market activity, not only politically, but legally. With the Lisbon Treaty, the new Article 3(3) of the Treaty on European Union (TEU) establishes as a core objective the sustainable development of Europe through ‘balanced economic growth and price stability’, enshrining market-monetarist and monetary policies into the ground rules of the EU: should Member States wish to pursue alternate economic policies or goals, there is no legal alternative.

The Great Recession that started with the systemic spread of financial instability in the mid-2000s was indisputably conceptualised as a ‘crisis’ internationally. What is also clear is that the crisis had its origins in the practices of private sector institutions. In the EU however, the communication of governing bodies swiftly switched the focus towards public debts, budget deficits and problems of finance, thus facilitating the solution of austerity: the idea that cutting public expenditure allows for economic expansion as the private sector moves to fill the gap. This, in a nutshell, is the essence of the legislation adopted between 2011 and 2013. Economic policies grounded in an ideology of market liberalism and monetarism become codified as legally binding obligations, ensuring that while competing economic visions may contest the use of these measures it is not possible to pursue them. The state of emergency becomes the new ‘normal’ requiring budgetary surveillance and compliance to be maintained post-crisis, resulting in a permanent reconfiguration of the state.

In this context, polity and policy are so intimately intertwined that criticism of the latter becomes intolerance of the former. Mainstream Europeanism and Euroscepticism constitute in this sense two faces of the same misconception: that ‘there is no alternative’ to the way in which the integration process is pursued. The catch being that while there could very well be alternatives, there are no legal alternatives: fertile terrain for a rebirth of nationalism, of which Brexit constitutes, so far, the most extreme (and extremely clumsy) example.

This research will appear as a book chapter titled 'There is no (legal) alternative: codifying economic ideology into law', in Eva Nanopoulos & Fotis Vergis (eds.), The Euro-Crisis as a Multi-Dimensional Systemic Failure of the EU: The Crisis Behind the Crisis (Cambridge University Press, forthcoming); a draft version is available for download on SSRN.

Ben Farrand, is Associate Professor at the University of Warwick School of Law

Marco Rizzi is Senior Lecturer at the University of Western Australia School of Law