Hayek v. Polanyi in the European Union

by Henry Farrell on July 16, 2012

A somewhat different take on matters Hayekian – Martin Höpner and Armin Schäfer’s “article on Hayek and the EU”:http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=8638234&fulltextType=RA&fileId=S002081831200015X has just come out in _International Organization._ It’s been in gestation for a while (an earlier working paper version can be found “here”:http://www.mpifg.de/pu/mpifg_dp/dp10-8.pdf), but the argument is pretty straightforward – if you look at it right, the European Union looks rather more Hayekian than Polanyian-social-democratic.

bq. Instead of re-embedding markets, the EU is beginning to resemble Hayek’s blueprint of “interstate federalism,” where individual (economic and social) rights are located at the central level while the capacity for taxation and interpersonal redistribution remains entirely decentralized. What appears to be the nucleus of supranational social policy might turn out to be a recipe for less social protection and redistribution at the national level. … by granting non-nationals access to social transfers while being unable to oblige them to contribute financially puts pressure on the generosity given to all entitled persons. As economic liberals have aptly observed, divorcing rights from obligations limits the capacity for redistribution. … political initiatives to re-embed markets have become extremely difficult as EU members have grown ever more economically diverse. At the same time, integration through law (as opposed to political integration) continues apace and limits national governments’ ability to correct markets.

This article stems from a broader left-skepticism about the EU associated with people like Fritz Scharpf and Wolfgang Streeck (uncoincidentally the former director and director of the Max-Planck Institut where Höpner and Schäfer are based). Its argument is open to challenge but is also, at the least, highly plausible. Nonetheless, it’s the kind of argument that gets very little attention in the US, where, broadly speaking, leftists are in favor of the EU, and rightists (especially Hayekians and libertarians) against it. Much of this surely has to do with the tribalism that John Q. was talking about last week – a lot of US intellectual politics is based on affect. But it also suggests that the EU is a different kind of experiment than most Americans believe. If the EU manages to weather the tempest that still threatens to swamp it, and comes out the other end with a currency union, a banking union, and some kind of bond system, it will still look, as Höpner and Schäfer suggest, very Hayekian. Will it be politically sustainable over the longer term? I suspect not – increasing misery at the national level as a result of increased exposure to international exposure, combined with a withering of social protections will create the kind of political upheavals that Polanyi described (whether with happy, or unhappy consequences). Polanyi’s ideas suggest that Hayekian federal constitutionalism is almost necessarily self-undermining. But of course, Polanyi could be wrong …


by Kieran Healy on July 16, 2012

Or, Greedo shot first