Europeans at the gates

The Economy of Ireland - Economic Growth in Europe since 1945 - The Stateless Market - Managing The Economy In The 1960s - The Politics of European Integration - Integrating Southern Europe - European Integration and Disintegration
October 25, 1996

All but one of these books deal with the Europeanisation of what was once national political economy. The way in which individual countries have adapted to an increasingly integrated European economy, the role of the political institutions of the EU, and the prospects of expansion further eastwards are recurrent themes.

The one exception is Sir Alec Cairncross's superb Managing the British Economy in the 1960s: A Treasury Perspective. This is a book for the economic policy connoisseur in which Cairncross draws extensively on his wide experience as a participant in Treasury policy formulation. His analysis, admirably self-contained in 300 words, is supplemented by excellent statistical tables, a useful calendar of main events and a dramatis personae listing up to 80 key individuals. Cairncross's verdict on the 1960s is sober and balanced. He has - for a policy insider - surprisingly few axes to grind. He rightly argues that, by and large, the international economic climate was conducive to expanding trade and full employment, and that the period was one of rising living standards with economic growth "a good deal faster than in the 1950s and much faster than in the 1970s". The countdown to, and consequences of, the 1967 devaluation are comprehensively described, throwing fresh light, incidentally, on the 1990s' fashionable folly of decrying a competitive exchange rate in favour of ERM discipline leading ultimately to a single European currency. Indeed, partly as a consequence of devaluation, the healthy balance of payments surplus of 1970 contrasted with the considerable deficit of 1960. It is all the more remarkable, therefore, that within four years the British economy had suffered the severe meltdown of the disastrous Heath administration. 1970-74 is outside the scope of Cairncross's book but - as far as the great debate on Britain's economic decline is concerned - he makes a powerful case for the exculpation of the 1960s governments. If Cairncross is right, the British economy, while underperforming in internationally comparative terms, was not on the road to a currency-debauched stagflation when Harold Wilson lost office in June 1970.

The fortune of the British economy is never too far from the fortune of the Irish economy, as The Economy of Ireland edited by J. W. O'Hagan makes clear. But since 1973 a more important dimension has been the link to the EU by which, as Jonathan Haughton argues, "Ireland has become a district of Western Europe, perhaps with little more autonomy than a typical state of the United States". But the 15 contributors, far from bemoaning this fact, either accept it as unavoidable, or positively revel in it. Covering virtually every aspect of the Irish economy in commendable depth, each chapter bar one contains a thorough analysis which will delight the generations of students who will plunder The Economy of Ireland as an essential text. Only Mary O'Sullivan's weak and disappointing chapter on manufacturing and global competition fails to maintain the high academic standard. By contrast, among the most impressive contributions are Alan Matthews's assessment of agricultural competitiveness and rural development, Dermot McAleese's consideration of inflation and the balance of payments, and O'Hagan's comprehensive coverage of unemployment. The particular strength of O'Hagan's analysis is its cross-reference to different types of unemployment in Organisation of Economic Cooperation and Development countries. Moreover, he wisely focuses on the nature and type of employment, including the impact of technological change, the extent of skills mismatch, and the consequences of employment protection legislation. In the 1990s, he concludes, the problem is that a "large proportion of the Irish unemployed are long-term and that solutions must reach out to political and social factors which lie beyond conventional economic analysis".

While the contributors collectively make a good case for defending Ireland's "district" status within the EU, perhaps more could have been made of alternative developmental models. Has the massive EU subsidisation of the Irish economy inhibited the creation of competitiveness and entrepreneurial dynamism? Has the Common Agricultural Policy prolonged the dependence on agriculture to the disadvantage of other sectors? Is high unemployment a price worth paying for eventual monetary union? Have investment, trade and tourism links with the United States been retarded by adherence to EU external trade protectionism? Would Ireland have prospered more if, like other small countries - Switzerland, Iceland and Norway - it had retained more of its economic sovereignty? Has Ireland liberated itself from Britain's hegemony only to become an agricultural appendage to a German economic Reich? These questions require more convincing and imaginative answers than those which O'Hagan has assembled.

Although Spain joined the EU more than a decade later than Ireland, many of the same problems of economic development have been encountered. Otto Holman's Integrating Southern Europe: EC expansion and the Transnationalisation of Spain is an original and fascinating account of this process. Notwithstanding Holman's predilection for impenetrable Marxist jargon - there is even a quotation from Mao Zedong - the substantive issues of post-Franco economic policy are often shrewdly assessed. Holman debunks the late Socialist government's self-image as instigators of social and economic modernity, correctly observing that a "rapid deterioration of the Spanish economy started in 1991 and came openly to the fore in the post-Maastricht year". Only generous fiscal transfers from the EU net contributor states have disguised an unbalanced under-utilised economy beset by up to 20 per cent unemployment and a near-permanent recession. The receipt of such extensive largesse through the EU's Cohesion Fund has created clientelism and a corrupt politics of appeasing regional nationalism with grants and subsidies which tackle the symptoms not the causes of chronic unemployment. This pitiful situation has become even more pronounced following the left's 1996 narrow election defeat whereby the new right-of-centre government is held hostage to regional blackmail in order to cobble together its parliamentary majority. Such political weakness is not conducive to purposeful economic policy. Holman pessimistically concludes that it remains to be seen whether Spain can meet the EMU convergence criteria in due course, and if so, only at high social costs. In fact, while inevitably generating greater social cleavages at home and in risking major confrontations with both trade unions and the less competitive sections of Spanish business, the Socialist government's pursuance of its European ambitions may nevertheless result in Spain ending up on the wrong side of a future two-tier Europe. Such an analysis runs directly counter to accepted wisdom but Holman makes a well-substantiated case which may be difficult to refute.

Just as Ireland joined in the 1970s, and Spain in the 1980s, so it was expected that the postcommunist countries of central and eastern Europe would join the EU in the 1990s. That prospect now appears more likely the other side of the millennium as is cogently argued in European Integration and Disintegration: East and West, edited by Robert Bideleux and Richard Taylor. The editors contribute no fewer than six of the 14 chapters, which cover individual countries across the full breadth of Europe, as well as the more general themes of security policy, the Comecon experiment, and the EU's eastern expansion. Setting the tone, the editors state their belief "that the principles, practice and study of European integration should be taken in the round, avoiding a narrow and self-centred concern with the development of the Kleineuropa (Little Europe) of the EU". Refreshingly they argue that "EU relations with Eastern Europe should be handled not as part of the 'external relations' of the EU but as part of the internal relations of Europe as a whole." The book's contributors live up to the editors' expectations. Several of the 14 individual chapters are excellent, especially Bideleux's introduction and Taylor's analysis of Russia, in which the political impact and appeal of Zhirinovsky is convincingly assessed. Taylor is surely right to argue that Chechenia may not benefit Zhirinovsky - or other potential leaders who profess imperial Russian ambitions - if the political cost is borne by grieving mothers and widows. Taylor sympathetically considers Russia's eternal option of looking either East or West and concludes, with much validity, that "there are powerful cultural and historical reasons why the Russians will never look to the 'real' East for their paradigms: they have always regarded themselves as bulwarks of European civilisation against Asia, as bearers of western cultural values to the East."

Other notable contributions include Bruce Haddock's critique of the crisis of legitimacy of the Italian state, Francois Duchene's unravelling of French motives for European integration, Frances Millard's penetrative perspective on Poland, and Clive Ponting's assessment of Churchill and Europe. Ponting is a lively and iconoclastic writer, who is not to the taste of the intellectually fastidious, but his chapter is tightly argued and assiduously documented from primary sources. He argues persuasively that Churchill was, in his 1946 Zurich speech, an important instigator of European integration but that he envisaged Britain as a supporter not as a participant. In his 1951 paper to cabinet colleagues, Churchill unequivocally stated that "I have never thought that Britain ... should become an integral part of a European federation". Ponting concludes that to claim Churchill as the original pro-European Conservative is a serious misunderstanding of his views. Moreover, "even to claim him as a 'Thatcherite' on Europe would misrepresent his position. He believed in an imperial Britain as a world power. On that basis Britain could never be part of a European federation". Ponting has performed a signal service in assisting the process of rescuing Churchill from those who, erroneously, claim him as a friend and ideological soulmate.

Churchill did not live to see British membership of the (then) EEC, nor the extent to which federation is now on the political agenda. Evaluating this process is the purpose of The Politics of European Integration: a Reader edited by the Jean Monnet fellow in European integration at Nottingham Trent University, Michael O'Neill. I am sure that I will not be the only reviewer, or reader, of his book to be baffled by its bizarre structure and organisational content. The first six chapters, covering 144 pages, provide a theoretical construct to the subject of integration. The level of repetition, augmented by jargonistic overkill, makes for dull reading; the few substantive points raised could surely have been summarised into two introductory chapters at most. The remaining 200 pages are devoted to 46 different documents deemed relevant to the integrationist theme.

However, instead of being intelligently divided on the lines of historical background, economic integration, institutional supranationalism, and federalist theory, all 46 contributions are strung together without any sub-editing at all. The effect is a complete loss of intellectual precision and scholarly focus which leaves even the most avid of enthusiasts with a very long slog. Moreover, the contributions offer no variety of viewpoint - all in principle favour integration - so that the degree of repetition is just as pronounced as for the elongated six-chapter introduction. Such a structure will certainly not be user-friendly to students who find the politics of European integration already complex enough. I would recommend to Michael O'Neill the reader from my own student days, European Community: Vision and Reality, edited by James Barber and Bruce Reed (1973). Subdivided into seven sections, and buttressed with a fine bibliography, the extracts range from Churchill's Zurich speech (which does not make the O'Neill top 46) to the inter-relationship between EC law and national sovereignty.

A more thoughtful approach to the same topic is provided by Paul Kapteyn, a lecturer in sociology at the University of Amsterdam, in The Stateless Market. Sensibly divided into three sections - history, negotiations and conclusions - Kapteyn analyses not only the familiar theoretical concepts but also their practical applicability in the two specific cases of CAP fraud and the open borders policy of the Schengen Treaty. Without finding all his arguments persuasive - especially his underestimation of the forces of external trade protectionism - Kapteyn writes with authority and clarity, confronting the major issues in considerable analytical depth. Among the topics perceptively discussed are the origins of the CAP in the context of Franco-German relations, the political dimension of the Schengen Treaty negotiations, the incompatibility of Margaret Thatcher's free market ideology to continental political economy, the role of German postwar guilt in propelling a federalist agenda, and the consequences of the Uruguay Round of GATT leading to the new World Trade Organisation (WTO). Kapteyn's book was originally published in 1993 so that a number of references, not least to President Mitterrand's influence, have been superseded by events. Nonetheless undergraduate students should still find The Stateless Market useful.

Last, and by no means least, is Economic Growth in Europe since 1945, edited by Nicholas Crafts and Gianni Toniolo. This is an awesome textbook of profound and rigorous economic analysis which will prove invaluable to generations of economics students - and other informed readers besides. Crafts has already established his reputation as one of Britain's foremost economic historians and this book will enhance his reputation further. Crafts and Toniolo provide an excellent introductory chapter and a concluding chapter that reviews the preceding country studies of Denmark, Italy, West Germany, East Germany, Ireland, Spain, Portugal, Sweden, Holland, France, Belgium, and Britain. Additional to the formidable country analyses are Barry Eichengreen's shrewd assessment of the decline of the postwar consensus, Andrea Boltho's thoughtful dissection of exchange rate policy, and Mancur Olson's review of the "varieties of Eurosclerosis". The overall strength of the book lies in the wise judgement of the editors to impose a thematic uniformity on the contributors so that the "golden years" of 1950-73 can be contrasted with economic growth performance thereafter. This watershed division creates an intellectual reference point for each of the countries studied that enables the reader to draw comparative points across all 18 chapters. The lists of figures and tables, plus a comprehensively helpful bibliography, renders fully intelligible the myriad of footnotes and statistical data. The editors and contributors are to be congratulated on this work, as are Cambridge University Press for its production and indexing. If the EU's recent economic growth rate had been as impressive as this analysis of it, I suspect that the current tide of Euroscepticism would be but a meandering stream. While Europe's growth rate lags so decisively behind that in North America and Asia-Pacific, serious and well-founded doubts about the further integration of the continent are sure to grow.

Martin Holmes is lecturer in politics, University of Oxford.

The Economy of Ireland: Policy and Performance of a Small European Country

Editor - J. W. O'Hagan
ISBN - 0 333 64210 4
Publisher - Macmillan
Price - £45.00
Pages - 405

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