Book Review: The EU and the Global Financial Crisis: New Varieties of Capitalism
The EU and the Global Financial Crisis: New Varieties of Capitalism by Christian Schweiger. Cheltenham: Edward Elgar 2014. 216 pp, £70 hardcover 978-1-78100-388-6
There is no such thing as a pan-European capitalism that is competing with Asian and US American capitalism. What still exists in Europe are the different varieties of capitalism framed by national political cultures. Slowly, these national capitalisms are being eroded and moving to a hybrid kind of neo-liberal capitalism, and adjusting to the main categories of the global economy. So far, nothing has changed: US capitalism, being the most dynamic economy of the world, still dictates the kind of capitalism that the European Union is moving to.
Christian Schweiger provides with his book a unique opportunity to think about what the main features of a European capitalism are. His point of departure is a critique of the varieties of capitalism typology which was devised by Peter Hall and David Soskice in 2001. The two main types of capitalism that both authors present are the liberal market economy (LME: for example, the United States, and the UK) and coordinated market economies (CME, e.g. Germany, and Austria). Institutional factors such as credit, education, industrial relations, and the relationship between business enterprises are regarded as crucial to understand the competitiveness of a particular economy. Schweiger clearly makes us aware of the cultural factors shaping different forms of capitalism. He argues that this has been a neglected aspect in the discussion of the varieties of capitalism literature. The recent Euro and financial crisis is used to show how different countries developed different strategies to deal with it.
The book is divided in two main parts and eight chapters . The first part discusses the EU policy framework during the crisis, and the strategies used at European level to get control over the difficult economic situation. In the first chapter, the varieties of capitalism literature is discussed thoroughly. In the past decades, the European Union has experienced a conflict over the models to be pursued at European level. National culture matters, and this is a key aspect to understand the varieties of capitalism.
The second chapter is probably the most interesting for scholars who are interested in European integration. The chapter deals with the policies at EU level constructing the internal market. Schweiger speaks of a process leading from deregulation towards ‘smart’ regulation. This clearly shows that the EU in reality is adjusting to the categories of global capitalism that is shaped predominantly by the United States.
Chapter three is certainly the most original part of his study. He focus his attention on the Eurozone and presents the thesis that the crisis of the Eurozone led to a functionalist spillover. After delineating the development of neo-functionalism, Schweiger applies this empirically to the integration efforts leading up to the economic governance package on the one hand, and the ESM on the other hand. Probably, one of the most interesting parts of his book is the mapping of EU’s multiple cores (Eurozone members, Euro+Pact, Fiscal Compact, and the outsiders the Czech Republic and the UK). It clearly shows that neo-functionalist integration is not a straightforward strait-jacket approach, but that it includes a diversity of interconnected methods, including intergovernmentalism.
The second part of the book deals with national varieties of economic and social models in the EU-27. Chapter four discusses the liberal model of the UK. Schweiger uses empirical data to show that the Thatcherite experiment created a similar system to the United States. He is particularly worried about the increasing inequality created by the liberal market economy of the UK.
Probably the best chapter on the varieties of capitalism is on Germany. It is a very thorough chapter focusing on the transformations of Modell Deutschland. This model became particularly less attractive after the reunification of Germany. In the early 2000s Germany was the sick man of Europe. The chapter deals with the structural reforms introduced by the Schröder government between 1998 and 2005. The reforms paid off only some years later, but this was also supported by a Grand coalition between the christian democrats and social democrats. This government constellation was crucial to overcoming the economic crisis in 2009. Quite interesting is the thesis of Schweiger that chancellor Angela Merkel is not attached emotionally to the European project and that Germany took the lead in managing the Eurocrisis reluctantly. Germany was and is a reluctant hegemon.
Chapter six is quite original, because it deals with the so-called GIIPS (Greece, Ireland, Italy, Portugal and Spain) countries. These countries were affected by a sovereign debt crisis and had difficulties to get funding from the markets. Schweiger makes an excellent analysis of Ireland and the other countries, and tries to find out which kind of variety of capitalism that they belong to. Ireland is a clear case of a liberal market economy, in spite of the social pacts of the 1990s, but the southern European countries can be defined as a specific variety of capitalism. But here are also differences: Ireland and Spain are victims of the housing bubble and the role that the banks played in it. Portugal, Italy and Greece are stagnating political economies, unable to get it right between productive and distributive tendencies.
Chapter seven focuses on the central and eastern European countries. After the Fall of the Berlin Wall, all of these economies had to adopt liberal market economies. This clearly had led to quite positive results, because the growth rates of some countries were very high. Nevertheless, Schweiger makes us aware that each country has quite specific problems. The investment by German enterprises in the region has certainly contributed to economic stability, but to a high level of dependency as well. If there is a crisis in Germany, this has repercussions on the whole region. The last chapter comes to some conclusions which clearly are biased towards the German and Nordic model.
There is a social democratic ideological agenda behind this book. The author desperately tries to save the European social model and tends to use the German model during the crisis as a model for Europe. However, the book does not problematise the global categories of capitalism and how they are constraining on a fragmented European capitalism. The lack of one internal market with a minimalist European model of capitalism are major obstacles for the EU in trying to change the US categories that shape global capitalism. As long as European capitalism does not speak with one voice globally, the nationally defined varieties of capitalism will shape the nature of European capitalism. While this situation prevails, the European Union as a potential economic power will remain insignificant.
A second criticism is that the author conflates German and Nordic varieties of capitalism. In reality, the Nordic variant is a hybrid model, in which similar market policies of hire and fire like in the United States exist: something that you still do not find in Germany. A chapter on the Nordic economies is missing: this is certainly a major gap in the book.
Last but not least, Vivien Schmidt’s seminal book on the ‘Futures of European Capitalism’ (Oxford University Press 2002) and the political economy studies by Liesbet Hooghe and Gary Marks were not cited.
In spite of these criticisms, this book is a fundamental study due to its richness in theoretical thinking and empirical material, and above all as a challenge to conventional interpretations of European integration.
José M. Magone is Professor of Global and Regional Governance at the Berlin School of Economics and Law.
