European Constitutionalism: The Neoliberal Drift

This post is part of our symposium on Quinn Slobodian’s Globalists: The End of Empire and the Birth of Neoliberalism. Read the rest of the symposium here. 

Alexander Somek

9780674979529We have not yet seen the full story of “law and neoliberalism”, even though a number of legal scholars have written on related subjects from slightly different angles. Duncan Kennedy, for example, has repeatedly attempted to tease out and to distinguish periods of globalized legal scholarship. Herb Hovenkamp recently presented a sweeping account of the imprint that Darwinism and marginalism left on American law. As early as in the 1970s and 1980s, proponents of the critical legal studies movement, such as Roberto Unger or Mark Kelman, pointed out that the modern legal system as such lends expression to the values of liberal individualism (again, it is Kennedy to whom we owe important contributions in this context). Inadvertently, Kelman’s penetrating critique of Chicago school style law and economics, in which he was joined by many others, turned out to be the first critique of typically neoliberal legal thinking, even though it had grown out of the attempt to expose the pathologies of “liberal legal consciousness” tout court.

What we have now seen with the publication of Slobodian’s Globalists, is how, and in which respect, economic neoliberalism has fed into the emergence and growth of global and regional transnational legal institutions. As Slobodian artfully demonstrates, this connection is by no means accidental, it is, indeed, a consequence of the belief in the existence of a world economy. If the economy is in fact an entity of global expanse, the old liberal demand that the state not unnecessarily interfere with society has to be extended to external relations. States must not pursue protectionist policies nor affect adversely the interests of foreign investors. What is more, integrating the decentralised national regulators of the world economy into some international federal system promises to wipe out redistributive social policies in the long haul owing to intense economic pressures of regulatory competition.

In what follows I would like to underscore the importance of Slobodian’s contribution, for it allows us to perceive more clearly the relevant differences between the US American and the European variety of legal neoliberalism. I would also like to add an example for how the European version reinforces constitutional constraints on national democracies in practice.

What we encounter in Slobodian’s book is a variety of European neoliberal legal thought that is decidedly different from its American counterpart. American legal neoliberals straightforwardly transfer the imaginary of neoclassical economics to the analysis of legal problems. This is manifest not only in a preference for market-based solutions but also in the rise to prominence of disciplines such as law and economics and public and social choice theory.

The European legal neoliberalism that is reconstructed in Slobodian’s work is opposed to any emulation of economic analysis in a legal context. The Hayekian explanation for rejecting such a straightforward form of economic imperialism is the unfathomable nature of the economy. It is ineffable and not amenable to human design. European legal neoliberalism is manifest instead in a constitutionalism that embraces, among other things, individual rights of access to national markets and protections against monopolies and cartels. The emphasis lies not so much on market failure qua chief rationale for government intervention, but rather on correcting “nation state failure”, which is taken to require a constitutional response.

The commitment to constitutional principles gives rise to a remarkable dynamic, at the end of which the taming of the nation state amounts to its gradual diminution. The fundamental freedoms guaranteed by European Union law provide an interesting example.

First, in the eyes of the European Court of Justice the task of removing national legal constraints to transnational economic activity is largely given into the hands of individuals. The “fundamental freedoms” that guarantee the transnational movement of goods, services, businesses and, most importantly, of capital can be invoked against any Member State by individuals in a national court of law. The economic actors who, according to Hayek, have access to fragments of economic knowledge that concerns them, are in the driver’s seat. If their challenges to conflicting national law prove to be successful—and the European Court of Justice in cooperation with national courts has been largely receptive to their claims—this law has to be “set aside”. It will no longer be applied to their situation. The economic agents are thus in a position to punch smaller or larger holes in the protective shield of national sovereignty.

Second, this hole-punching exercise unfolds a particular constitutional dynamic. On its face, the original constitution of the European transnational market is about preventing the unfair abuse of nation state power. Arguably, any discrimination on the grounds of nationality would constitute such abuse, for it unduly benefits insiders at the expense of outsiders. Hence, the fundamental freedoms of EU law were initially designed to provide protection against discriminatory treatment. But this principle is not inherently stable, for it becomes clear, immediately, that the protection against discrimination, in order to be truly effective, needs to be extended to cases of disparate impact (“indirect discrimination”), too. But once this door is open there is no good reason not to extend the protection against discrimination also to cases of systemic discrimination. The focus then shifts from acts that confer advantages on nationals at the expense of non-nationals to the unequal burdens that arise as a result of the incidental co-existence of nation states. Higher regulatory standards in one country make it more difficult to sell goods produced in another country with lower standards. The foreign producers have to engage in an extra effort to make the sale of their goods possible. They suffer from the systemic adverse effect inherent in the coexistence of nation states, for such coexistence permits differences in regulatory standards. The foreign producers are systemically discriminated against “on the grounds of nationality” because they are confronted with obstacles to their economic activity that do not arise from discriminatory conduct but from the existence of different nations as such. But this is not the end of the story. It seems consistent with the logic of protection from systemic discrimination to extend the approach to comprise also economic substantive due process. Why only protect the outsiders against obstacles to economic mobility? Is it not more consistent with equality to protect the insiders against their own comparatively more restrictive regulations, too? Abstaining from affording them the same protection that is available to outsiders would merely replicate the evil of discrimination. The economic rights that emerge from this line of reasoning perceive the economically active as prima facie entitled to the least onerous regime that participates in the transnational system.

Handing over constitutional protection of the transnational economy to individuals has indeed served as an engine of market integration in the European Union. Hayek would have been pleased. But one should not underestimate the constitutional significance of this dynamic. In the upshot, the powers of the Member States to regulate the economy become ever more narrowly circumscribed. From their perspective, European Union law must be respected as “higher law”. What is more, even though the judicial exposition of individual rights is in principle subject to revision by the Union legislature, such revisions rarely ever happen. In most cases, the legislature subsequently merely codifies the case law of the European Court of Justice. This legislation, again, plays the role of “higher law” vis-à-vis the Member States.

One should not be surprised to hear voices lamenting the “overconstitutionalization” of economic law on the basis of Union law. But this is the neoliberal ordo in practice: An ever diminishing room for manoeuvre on the part of the national democratic policy owing to an “order” that, in spite of notoriously meagre democratic credentials, claims to embody sound liberal principles. Slobidian has formulated this principle beautifully in his summary of the “essence” of the Geneva School: “Democracy is a potential threat to the functioning of the market order. Therefore, safeguards against the disruptive capacity of democracy are necessary.” (272).

Alexander Somek is Professor of Legal Philosophy, University of Vienna Faculty of Law and Global Affiliated Professor of Law, University of Iowa College of Law.