Ilja Srubar
SYSTEM CHANGE
AND EUROPEAN INTEGRATION
ABSTRACT
The author states that 'the EU will have to adapt to the demands of
deregulation caused by globalization which is seen as a return to the
domination of a pure economic logic. The crisis of welfare state and the
emerging of conflicts over distribution could endanger the legitimacy of
EU. The system change in the center and at the periphery of the EU may
lead to a political mobilization from below and - consenquently - to a
stronger need for legitimization of its institutions and decision-making
bodies by elections .
Key words: globalization, deregulation, transition, system change,
legitimacy, modernization
When addressing the topic of system changes as a frame in which European integra-
tion in the sense of EU enlargement is taking place, we have to differentiate between
three levels :
First, there is the „transition from the authoritarian rule", to use the terminology of
O'Donnell and Schmitter (1986), which initially transpired in Southern Europe and
subsequently in Eastern Europe. On the second level, the Western (and Northern) EU
countries, which include the core countries of the Union - Germany, France and Italy -
are also undergoing a system change as a result of the requirement to bring their welfare-
oriented social order in line with the neoliberal demands of the globalized economy . The
term „globalization" already gives us the name of the third comprehensive process of
system change in which the former two developments are embedded .
When we look at the structural „imperatives" of-the processes described by the term
,,globalization" in the perspective of the long run (longue durée) in the sense of Braudel
(1962), they appear as the advancement of a liberal period in the ever changing cycle of
etatist and liberal models of order in the course of modernization of industrial societies
(Sombart 1934, Bornschier 1988, Srubar 1996) . The measures which are urgently rec-
ommended today as reforms for deregulating the economy, trimming down public ad-
ministration, privatizing state-run enterprises and services, as well as for re-privatizing
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SYSTEM CHANGE AND EUROPEAN INTEGRATION
employment and healt related risks in order to raise achievement motivation are well-
known. We encounter these kinds of reforms in the „old liberal" models of „industrial
society" or the „civil society" as presented for example in the works of Herbert Spencer
(1889), John Stuart Mill (1859,1861) or William G . Sumner (1906). The structural dernand
of global accumulation of capital for human labor, which has to be always available but
does not have to be paid permanently, which results today in so-called ,outsourcing" or
,,downsizing," did Karl Marx already analyzed in depth for early industrialization (1962,
640 ff.), although under different living conditions .
The attempts to cope with class conflicts resulting from this constellation, as de-
scribed by Marx, which marked the development of European societies during the 19th
and the greater part of the first half of the 20 11 century, yielded different solutions, which
I would briefly like to call to mind here : Only a minority of European societies was able to
resolve the transformation of their social structures brought on by industrialization, in
the sense of sociological modernization theories, that is, by integrating the population
into a stable democratic order (Great Britain, partly France, Czechoslovakia, Switzerland
and the Scandinavian and Benelux countries) . The majority of the societies in Southern,
Eastern and Central Europe reacted to the pull of modernization with authoritarian regimes
of rightist . As a rule, these regimes followed a short phase of liberalization and
democratization, during which the traditional elite, ruling in more or less constitutional
monarchies, were superseded or temporarily replaced . In such "liberal" phases, the
emerging left-wing movements concerned with class struggle were opposed by radical
right-wing or conservative authoritarian forces, that then came to form the backbone of
the authoritarian regime . The opposite outcome of the Russian Revolution can be seen
as the left-wing orientated inversion of this configuration .
Within this rough pattern, it is certainly necessary to make further differentiations .
For our purposes, we must differentiate between three kinds of authoritarian regimes .
One which establishes itself as the consequence of immense social changes resulting
from a quick and intensive industrialization, and another which develops as a reaction
by the - for the most part - traditional upper class and its allies to the social results of the
begining modernization of society. Characteristically we encounter the first type of
authoritarian regime described in Italy and Germany, whose fascist or national socialist
supporters react to the already developed class conflict in these societies with attempts
to economic regulation and with welfare measures, as well as with a corresponding
rhetoric . The second type mentioned above can be found at the Southern and Eastern
periphery of Europe, i .e . in Greece, Portugal, Spain, as well as in Hungary, Romania,
Bulgaria, Yugoslavia and partly in Poland etc . The attempt to radically overcome class
conflict by means of expropriation and by establishing a centralistic state - as was the
case during the Bolshevik regime in Russia - signifies a third type of such regime . Each
of these three types of authoritarian adaptation to the socio-structural results of mod-
ernization can therefore be regarded as an etatist reaction to the consequences of the
liberal world economic system .
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lija Srubar
It would be wrong, however, to connect this growing etatism merely with authoritar-
ian regimes or with the peripheral situation of certain countries . The development of
laissez-faire capitalism in the industrial core countries made the necessity apparent of
state-financed compensation for employment risks caused by the market as a means of
political stabilization . This was also taken into account by the industrial countries of
Europe by introducing systems of social security in the period between 1880 and 1920
(Ritter 1991) . The attempt to master the economic living conditions by politic meassures
from above, meant to prevent the politic mobilization from below which were adverse
to the system. Apart from the social issue, other factors surfaced which were working
towards the submission of laissez-faire capitalism to the „primacy of the politics ." Of
substantial significance were, above all, the efforts made by the government to master
the consequences of the crises of 1929, as well as the concentration of capital which
required planned production coordination of large industrial empires . From this per-
spective, combining market economy and planning seemed quite feasible, and in view
of the existence of competing authoritarian systems which threatened parliamentary
democracy, it was even highly desirable . „Planning for freedom and democracy"
(Mannheim 1950) could be the motto for the welfare programs developing in this case
which represents the fourth type of etatism in our context .
The socio-political techniques used here, i .e . clientelization of social groups and
their linking to the redistributing all-providing state, have already been in part highly
developed in totalitarian industrial countries, that is, mainly in Germany and the Soviet
Union. Their use in the context of democratic, free-enterprise societies especially after
World War II naturally pursued different purposes : The national product was redistrib-
uted to balance the insecurities of the market and thus bind the population to the demo-
cratic political system as well as to strengthen the acceptance of the market economy,
which could now legitimately become a target of state promotion . This relief rnecha -
nism of the welfare state, oscillating from economy to society, became - as Habermas
(1973) has shown - the general method to legitimize pluralistic, late-capitalistic indus-
trial societies after World War II. The real-socialistic radical variant of the welfare state
however expanded throughout Eastern Europe under Soviet hegemony while the South
of Europe was still governed by right autoritarian regimes . The etatist period of the
European modernization process thus reached its peak during the first decades follow-
ing World War II.
It is therefore not astonishing, that the European Union, in its post-war develop-
ment, has taken on characteristic traits of the etatist construction of a redistributing and
intervening welfare state. The creation of a common market with equal conditions for
all members, maintained upright by centralistic interventions, was combined with the
creation of social and investment funds from which unbalanced economic structures
and social consequences of dysfunctional development of the same market are leveled
out. Since its beginnings in the rudimentary forrn of the European Coal and Steel Corn -
munity, the EU has pursued economic as well as welfare aims, such as full employ-
ment, higher standards of living, guaranteed minimum wage etc . and has financed
projects (until the 80s) to insure the realization of these goals (Krämer 1974, 40 ff. ;
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SYSTEM CHANGE AND EUROPEAN INTEGRATION
Weinfeld/Wessels 1991, 145 ff ., 296 ff .) . Its agrarian politics can serve as an excellent
example for the clientelization of a sector of the population in this context . The equal-
ity measures taken in order to establish the Common Market, that is, to serve
,,deregulation," brought about a complex net of economic regulations, which now have
supranational effects . 80% of national economic legislation is now influenced by the
European Union . Therefore it is not astonishing that along with the increasing crisis of
the welfare state order experienced by EU members also the European Union itself is put
under pressure and finds it difficult to be able to fulfill its redistributive functions .
This mainly takes place because the core members of the Union, who have to fight
economic stagnation and are burdened with high social contributions, seem to have
reached the limits of their ability to pay for common funds . In the individual national
economies, these difficulties are nowadays attributed to their etatist-regulating charac-
ter . The question is, however, whether the causes of these difficulties do not also apply
to the supranational set of rules of the European Union as a whole . We thus have to ask
to what extent and with which consequences the European Union will change under the
pressure of globalization not only in its individual members, but also as an institution .
Among the many facets of the meaning of globalization, I would like to consider it
here as the beginning of a liberalistic phase of modernization which follows an etatist
period. It stands for the opening of the global econornic area to streams of goods and
capital which make a qualitatively new international division of labor possible because
of a fast global infrastructure for communication and transport . This infrastructure frees
producers, for the most part, from the restrictions due to singular national govern-
ments . Thus one of the important conditions characteristic to the functioning of the
welfare state is invalid : the primacy of politics over the economy . Within the world
economic system the economy is able to win back its leading position, which has al-
ready been attested by Marx when he called it the anatomy of the bourgeois society .
The national states or their organizations can only tempt and compete as favorable
industrial locations by deregulating the conditions of the economy in the sense of capi-
tal, that is by loosening the employers obligations to their employees, reducing the
government interventions in the economy, relieving the economy in regard to taxes,
etc. Employers, however, are also under pressure from rationalization in the context of
global competition, which forces them to reduce staff and to change over from labor-
intensive to knowledge-intensive production . This and the quick pace of innovation
require highly qualified employees who are willing to adapt and have a multifunctional
scope of activity, therefore the demand for these qualified employees is rising, while
the chances for just "usual" qualified workers of finding a well paid job are diminish-
ing. Even though the perpetually increasing service sector absorbs part of the unem-
ployed workers, the number of jobs in one sector does not always rise as fast as it
diminishes in other sectors at the same time .
At the moment, we can distinguish between two strategies for the labor market
which are reactions to the structural demands of globalized economy . One is the possi-
bility of making the frame conditions of employment more „flexible," meaning that
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Ilja Srubar
protection against unlawful dismissal, collective wage agreements and social obliga-
tions are loosened or diminished resulting in a high differentiation of occupations and
salaries with easily obtainable but poorly paid jobs at the lower periphery . In the sec-
ond strategy, there is no deregulation of working conditions which results in laid-off
workers ending up on state unemployment programs .
This typology, which appears in the analyses of the International Monetary Fund
(World Economic Outlook, May 1997) is certainly quite simplified . But it may prove
useful when trying to understand the system changes taking place in European societ-
ies which are important for the integration of Europe as changes in the context of glo-
balization . Let us first take a look at some of the societies which were most consequent
in carrying out deregulation, as for example the United States, Great Britain or Swe-
den. Here we can observe an extreme differentiation of salaries in all areas ; whereas the
salaries for less qualified jobs decrease and the income for highly-qualified workers
increase considerably (IMF 1997, 56) . Looking at this development from a general point
of view it means a decrease in real salaries on average . The example of ,downsizing" in
businesses in the United States at the beginning of the 1990s, however, shows us that
qualified employees can also be effected by income loss . Once released from their jobs
they had to accept jobs with salaries below their usual salary level (Johnson 1997) . This
strategy generally launches a trend which divides the labor market in two parts . As the
number of jobs could increase in the qualified sector as well as in the non-qualified
sector, this strategy supports the development of a stabilized lower class which is quite
separated from the rest of the society by status . The socio-structural results of eco-
nomic and welfare deregulation can thus be seen in the verticale stretching of the strati-
fication as well as in the fast increasing difference in income . Contrary to this, the
stratification of a classic welfare society tends to horizontal expansion and depicts the
form of a potbellied onion . This is true for the West, for example, the FRG, as well as for
the East, that is, for the realsocialistic countries (Mateju 1995, Figure 1 and 3) .
If we now were to project these two strategies and their ideal typical socio-struc-
tural results onto the societies of the European Union or its candidates for future mem-
bership, we would get a quite peculiar picture, which is oposit to the usual scheme of
the process of European modernization : It appears as if the core countries of the Euro-
pean Union - with the exception of Great Britain - because of their previous preference
of a welfare and etatist strategy of adaptation remain in a static state, while the
deregulating strategy of adaptation is more likely to be seen at the periphery of the
Union. The core countries of the Union have to cope with two-digit and continually
increasing unemployment and low economic growth . Spain, on the other hand, has
succeeded in reducing the enormous unemployment rate at least by 2% to about 23%
and in maintaining modest economic growth, which is still higher than that of the core
countries. Portugal also has succeeded in limiting its unemployment rate and keeping it
at a for German terms fantastic level of 7%, while having an economic growth of 3% .
The Eastern candidates for membership (Poland, Czechoslovakia, Hungary, Slovenia,
and Estonia) are also showing signs of positive dynamics of adaptation : decreasing or
even low unemployment rates, renewed economic growth, and a differentiation of in-
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come along with a vertical stretching of the stratification are characteristic here . These
dynamics can clearly be seen in the changing social stratification and structures of
income of theses societies, a development which has been going on since 1989 (Mateju
1995, Figure 2) .
Here we can see how the onion-like form, which is characteristic for welfare states,
stretches, becomes more narrow, and at the same time signals a relative impoverish-
ment of the lower strata.
From a structural point of view, the tasks which the European countries have to
solve result from the same facts : they all belonged to one of the mentioned etatist types
of order, while of course we have to regard the specific differences concerning the
extent of the etatist rules within the individual types . Generally, all of these countries
have to solve the same tasks, although each to a different extent . These tasks comprise
the privatization of state-run enterprises, the regression of bureaucratic regulations in
economic matters, the deregulation of the labor market, as well as the reduction of state
redistribution, i .e . the reduction of welfare protection of employment and living secu-
rity . The inhibition to take these measures is a result of two different causes . On one
hand, it is a result of what Pareto called the „persistency of aggregates," meaning the
tendency of societies to adhere to traditionally institutionalized mechanisms of regula-
tion . On the other hand, the simple fact, that these „reforms" will cause a decrease in
the standard of living of a considerable part of the population for an indefinite period of
time, certainly plays an important role .
In view of the established difference of the dynamics of adaptation between the core
countries and those at the periphery of the Union, one could venture to state that the
willingness to take these steps and to accept the results is related to the character of the
regime, that is to be deregulated . The functions of the state welfare which are to be cut
back, are connected to the regime virtually as well as symbolically. So, removing the social
techniques of authoritarian regimes in the course of democratization is obviously easier
than cutting back the welfare state which is connected to the strengthening of democracies .
We can also assume that it is more easily possible to legitimize the socio-structural results
and the social cost of „de-etatization" in the process of transition from authoritarian rule
when these can be presented as results of the necessary overcoming of the old undesirable
regime. The entire transformational process can thus be based on the expectation of the
people who, as surveys conducted in the Eastern European countries show, take notice of
the deterioration of the present situation, but believe in the possibility that the situation will
become better in the foreseeable future (five years) (Rose/Seifert 1995) . On the other hand,
politically it is more difficult to cut out the center piece from the legitimization mechanism
of the welfare state which enabled the political class of the core countries of the Union to
remain in power for 50 years. Furthermore, there is hardly any motivation in society for
accepting the social results of system changes which present a step backwards from previous
achievements, when seen from an everyday perspective . In accordance with this, the
expectations of the population regarding their future is quite negative, as can be seen for
example in the results for FRG (former West Germany) .
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It can be said, that system change made the countries on the periphery of the Euro-
pean Union more receptive to the demands of globalization, while the core countries
only accept these demands slowly and under the pressure of growing difficulties in
financing the welfare state (IMF 1997) .
What are the consequences of these differences caused by the diferent types of
system change for the scenario of the future membership of the post-socialist countries
in the European Union, when also taking into consideration the experiences from
Southern expansion?
1 . Supposing that the nation states as economic locations are in competition with
each other, which means that the individual socio-political systems and the systems
regulating the labor market are competing as well . The greater willingness of the post-
socialist countries towards deregulation would, on the one hand, offer an advantage for
the investment of capital in this location, on the other hand, this location would be at a
disadvantage for the employees, at least for a certain period of time, who will try to
balance out this disadvantage by looking for work in countries with a higher wage
level . Whereas, however, the free mobility of capital is mostly accepted without ques-
tion, this is not the case with the mobility of employees . It is thus to be expected that a
absolutely free mobility of employees between the countries who have applied to be-
come EU members and the European Union will first be realized after a longer period
of adaptation. (This was, for example, the case with Greece, when the Union decided
during the membership negotiations to issue a period of adaptation of seven years .)
2. Assuming that the dynamics of deregulation make up important conditions for
improving competitiveness on the world market, the following question comes up :
What will the consequences of the adoption of the complex European economic regu-
lations by the future Eastern European EU members for this dynamics be? The example
of Eastern Germany shows, that even a rigorous sell-out privatization and radical re-
duction of labor power has no starting effects for the dynamics of economy when at the
same time an etatist regulating regime is implemented - even if designed as welfare
state order . Attention must be paid that in taking on the acquis communautaire that the
already deregulated areas in the postsocialist countries do not to end up being ,,re-
regulated" anew . This could happen most of all in the case of the rural economy, but,
seen from the perspective of the transforming countries, regulations for safety provi-
sions for workers or propositions for social policy could just as well have the these
consequences if they are not sufficiently balanced out with financial assistance from
the European Union, as was possible in the case of the Southern expansion . This kind
of financial support involves at the same time the risk of structural dependency, which
might well constitute an impairment to the desired subsidiarity here .
3. The fact that the countries of Eastern Central Europe are more willing to adapt, of
course does not mean that they are already like „little tiger states ." The volume of
capital, the technological infrastructure and the productivity of the core countries of the
Union have a potential, with which the future members can only compete with in part .
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The trade balance deficit of the future EU members in Eastern Europe, which favors the
core countries of the Union, will most likely turn into a flood of imports, as was also the
case with the Southern European countries (Axt 1992) . The difficulties of further strength-
ening the country's own economic structure under the pressure of competition could -
in the case of the Southern European countries - only be reduced through financial
support from the European Union as well . Without these measures, a perrnanently
unstable trade balance could result in the devaluation of currency and consequently
leading to inflation and price increase . Conversely it could effect defensive measures
in the sense of higher interest rates putting local investors at a disadvantage . Both de-
velopments depict so-called „transformational traps" which may result in a reduction
of the acceptance of transformational dynamics and in the call for protective measures
(Altvater/Mahnkopf 1996) .
4. Although many of the essential structural problems connected with the future
membership of the Central Eastern European countries had already surfaced during the
Southern expansion, it is obvious that the position of the European Union today is quite
different from what it was at that time. We have seen that the European Union itself is
undergoing a system change, which diminishes its financial means and thus its ability
to absorb structurally weak members . This applies most of all to the core countries
(notably Germany) which have up to now payed the highest contributions to the Euro-
pean household . The core countries' ability to pay is limited by budgetary demands of
the Monetary Union, the cost of high unemployment rates and by the transfer payments
resulting from German reunification . Furthermore, it could be the case that if the core
countries realize the imperative of globalization and deregulate the economy, the labor
market and the social areas accordingly, they may want to draw on the funds of the
European Union themselves, as is already the case in Eastern Germany . Even if we can
not decide today to what extent the Monetary Union and the Eastern expansion of the
Common Market will contribute to economic growth in the future, we can be sure,
from today's point of view, that not only Southern and Eastern European countries, but
also the core countries will be competing in the distribution of the financial means of
the European Union .
5. Under these conditions, the present construction of the European Union could
become uncertain . My thesis was that - in the given historic context - the European
Union adopted essential elements of the welfare state on a supranational level during
its development . Like the welfare state, it is based on a social contract in which social
or, in this context, national participants limit their exercising of power to a certain
degree. On the one hand, this facilitates the course of the market without national hin-
drances, on the other hand, it balances the existing or arising asymmetric structures or
dysfunctions of economic development with the resulting surplus . In this sense, the
Common Market as well as the Union as a whole is a political creation with an etatist
character. On the contrary we have the globalized world market, which represents an
unplanned creation of actors taking part in it, which cannot be politically regulated,
neither on a national nor on a supra-national level . As a political construct, the Com-
mon Market is dependent on the fact that the European Union has the authority for
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Ilja Srubar
political decisions . The EU was adequate as a power of authority as long as the eco-
nomic and redistributing mechanism initiated by it were working and were able to
serve their clientele . Institutions of political representation on an EU level were actu-
ally not necessary as legitimization for the function of the Union . The European Union
was always able to rely on its status as an economic community . It allowed the Euro-
pean Commission to work as a body guided by technocratic as well as bureaucratic
rationality without any democratic legitimacy .
The question now is, what will happen if the social contract, on which the European
Union has been based on until now, cannot be maintained any longer? This possibility
becomes apparent not only because the Union's redistributive functions is experienc-
ing a crisis . The Union as an institution will have to adapt to the demands of deregula-
tion caused by globalization . This may well have consequences which will limit the
governmental bureaucratic structures not only on the national but on the supranational
level as well . Nearly all globalization analysts agree in this point (Albrow 1996; Giddens
1995 ; Crook et al . 1992). This kind of deregulation - together with the reduction of
redistribution - could, to speak in terms of Habermas (1973), mean a rationality crisis
for the European Union and result in a crisis of legitimacy . Furthermore it would inter-
fere with the present prevention of politicizing the Union from below, which consisted
in cushioning economically induced social conflicts by politic action from above . If the
redistribution of means and thus the mechanism of clientelization no longer work, then
the base legitimating the European Union will have to change . What are the alterna-
tives to this?
Globalization analysts speak of the following tendencies which develop in the
postmodern „global village" as alternatives to etatist forms of regulation . The first ten-
dency consists of the growing significance of international non-governmental organi-
zations, as for example the International Monetary Fund or Amnesty International . The
authority of these organizations is based on their professional or moral competence .
Internationally divided and executed knowledge, supported by non-governmental pro-
fessional organizations, represents an already recognizable type of non-etatist global
integration, as in the perspective of Martin Albrow (1996,123) . Its legitimacy lies in
the professional competence of the organization members as well as . in the indepen-
dence of the organization itself. Another alternative tendency, as seen from a different -
German - perspective, as for example by Ulrich Beck (1996), consists in undermining the
etatist structures by democratization, that is, by politicizing and moralizing the society
from below. This might be brought about by social movements . Can we somehow con-
nect these trends with the present development of the European Union?
The German proposition of an independent European Bank as keeper of the Monetary
Union would correspond the most with the first tendency. This would mean the installa-
tion of a supranational, professional and neutral mechanism of integration which could
limit politic intervention from above as well polic mobilization from bellow in the case
that the Monetary Union should actually be established . This would continue the tech-
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SYSTEM CHANGE AND EUROPEAN INTEGRATION
nocratic style of integration without democratic legitimization presently practiced by the
European Commission .
If an increase of distributional conflicts in the European Union is to be expected, the
second alternative wins in plausibility accordingly . The legitimacy crisis of the Euro-
pean Union could become a,,motivation crisis" of its citizens . We would then expect a
politicalization of the Union from below with all the risks inherent to such a process . One
way out of this would be to legitimize EU-bodies by election . The old liberal principle of
„no taxation without representation" would replace authorization by redistribution and
clientelization .
It remains to be seen whether the creation of a technocratic, neutral integration
mechanism in the form of the Monetary Union will be able to avoid the politization of the
European Union . The system change in the center and at the periphery of the European
Union may well lead to a politic mobilization from below and - accordingly - to a stronger
need for legitimization of its institutions and bodies by elections . This kind of increasing
tendency towards a political union in no way means increased safety for the continued
existence of the European Union under today's conditions . Hand in hand with a politic
mobilozation from below, the local political cultures and culture as a social code of
orientation of actions in general would become increasingly important for European
integration . The imponderables of the multitude of European public would take the place
of the present integrative, technical-administrative set of rules of the European
Commission . It is an open question whether we think this kind of development is desirable
or not. The fact that system change in European societies implies this variant of
development as well, tells us that the relation between the European Union as a supra-
national institution and the societies that are involved in it may become reversed quite
in the sense of the alternation of etatist and liberal periods of modernization . The European
Union would so no longer be the ruler of the member societies . Together with its
institutions, it would rather be dependent on the social and cultural developments which
characterize the societies of its constituting members . This would not necessarily facilitate
the integration of Eastern European societies into the European Union . But the integration
comming could trigger it off.
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