Jotte Mulder, Social Legitimacy in the Internal Market: A Dialogue of Mutual Responsiveness , Oxford, Hart, 2018, xvii + 263 pp, ISBN 978-1-5099-1453-1
David Campbell, Professor, Lancaster University Law School.
*This review was drafted whilst I was a Visiting Professor at the Auckland University of Technology Law School, NZ, and I am grateful to AUT for its hospitality.
This book is a revision of the thesis for which Dr Mulder was awarded his PhD by the European University Institute in 2016. His work has already attracted approving attention, and the appearance of this book now is, as Professor Joerges says in his foreword, timely and topical, for Dr Mulder could hardly have chosen a subject for his researches of more pressing importance. Brexit is, of course, but one element of a widespread questioning of the legitimacy of the EU, even amongst those who are in the end convinced of that legitimacy. Though large scale immigration is currently provoking the most acute questions, the more theoretically, and in the end politically, fundamental question is the one which Dr Mulder asks: is the internal market itself a legitimate economic institution? The immigration crisis has called into question the relationship of EU citizenship to citizenship of the national Member States, but the immigration policy did not have to be adopted. However, it is, as Dr Mulder makes very clear, of the nature of the integration project essential to the internal market that it will always call that relationship into question (if and until European citizenship actually subsumes national citizenship).
Using your reviewer's words rather than Dr Mulder's, the problem is this. The internal market is a top-down, rationalistically devised institution. The authority of the EU market can never simply accept Member States' individual positions on any question which falls within its competence or the internal market loses its whole point. But the social background which will determine whether economic policies will work, or even what they in practice mean, is the social background, or rather backgrounds, furnished by the Member States as distinct, organically developed rather than rationalistically devised, political societies. The internal market must accommodate these backgrounds or it will fail, and yet its purpose is to progressively integrate them within transnational economic due process. Dr Mulder seeks to correct what he believes is the lack of 'social legitimacy' that policies which do not adequately mediate between the (centralising) imperatives of the integration project and the (diverse, decentralising, pluralistic) imperatives of accommodation of national level social backgrounds.
In a thorough, careful and interesting examination of the case law on (economic) free movement, competition and state aid (legislation and other sources of policy are given only incidental treatment for understandable reasons of practicality, which a fortiori would rule out an attempt to trace the issues as they are manifested in the current financial problems of the EU), Dr Mulder very plausibly argues that the centralisation of 'rampaging' (to use Somek's term) economic due process has gained too much weight over diversity. Dr Mulder advocates the development of a 'dialogue of mutual responsiveness' which would improve on the balance that has been struck by reference to fundamental principles of subsidiarity and proportionality (proportionality coming in for some particularly powerful criticism). An interesting analysis of the way valuable detailed principles of substantive efficiency, margins of appreciation and good governance can be derived from the case law is put forward, but the core of Dr Mulder's argument is that the dialogue of mutual responsiveness would not only redress an incorrect balance but is essential to the integration project because that project's social legitimacy cannot inhere in formalism but absolutely requires an appreciation of diversity.
This book demands from its reader a degree of competence in the understanding of the EU and its law, as, of course, it must in order to engage with the issues at a specialist level, which, so far as your reviewer can say, it successfully does. But those like your reviewer who are not EU specialists will also find this a valuable book. Its examination of a very extensive body of EU case law seems to be as clear as the subject permits. As it also seems that mutual responsiveness is the basic strategy on which continuance with the integration project, and perhaps the survival at all of the internal market, now must be based, making that argument in a clear way is a laudable achievement.
Despite the ability with which the argument is made, your reviewer found that argument overall unconvincing for two reasons. The first is that Dr Mulder's social legitimacy is a 'normative' concept of validity distinguished, in a way your reviewer ultimately does not understand, from the 'empirical' considerations of input and output legitimacy which determine the effectiveness of legal measures. An approach based on such a concept seems not only to veer away from effectiveness but also from consideration of the public choice economics of the integration project that your reviewer believes make an indispensable contribution to understanding the power of the centralising tendency.
The second reason turns on the way that Dr Mulder's appreciation of the indispensable role of context is based on the economic history and sociology of 'embeddedness'. A 1985 paper by Mark Granovetter which insisted that understanding economic action requires an appreciation of its embeddedness in social relations has proven to be an exceptionally influential critique of the formalism of neoclassical economics. It is unfair to gloss over the specific qualities of this paper, which tried to be even-handed towards both 'under-socialised' economics and 'over-socialised' sociology. Nevertheless, your reviewer believes Dr Mulder shares some of his puzzlement at the degree of success of Granovetter's statement of a proposition which would not be contested outside of the more abstract forms of neoclassical economics, where it is largely ignored, and is a proposition which, as Dr Mulder rightly insists, had earlier been stated by many others.
Dr Mulder rests his own argument on the work of Karl Polanyi, which is enjoying a great upsurge of attention. Polanyi's The Great Transformation, one of the leading works of the economic history of laissez faire capitalism, not only shows the social embeddedness of economic action, but in a sense turns the point on its head by showing that laissez faire, by attempting to subject all of social life to the imperatives of the purportedly self-regulating market, is a paradoxical form of embeddedness which would annihilate the 'social' in order to promote the 'economic'. Such an economy is incapable of sustained reproduction because, leaving aside cultural issues, unconstrained economic imperatives generate unconstrained inequality and corollary unacceptable conditions of material life for the growing number of relatively disadvantaged. It therefore was the case that laissez faire was always a myth because social measures to constrain economic imperatives were always necessary for the market to be capable of reproduction. The history of capitalism has involved a 'double movement' in which the dominance of the economy was always, and increasingly has been, subject to the growth of the social. Your reviewer does not feel he has to spell out why Dr Mulder found it attractive to construct his argument as an application of Polanyi to the tension or contradiction between economic due process and social diversity at the heart of the internal market. He only advises that that argument should be read by all with an interest in the issues who are capable of following the argument at the level of Dr Mulder's book.
Though Dr Mulder is right to claim that the current attention being paid to Polanyi is due to his obvious relevance to contemporary issues, not only in regard to the EU but in regard to economic regulation generally, your reviewer believes he is wrong to claim that Polanyi is 'the intellectual father of the idea that markets can harm social structures by rearranging them within a self-regulating, market-enabling rationale'. This is not the place to seek to evaluate Polanyi's place in the history of this idea, though it is perhaps worth noting that he is not even mentioned as a contributor to the thesis of capitalism's 'self-destruction' in Albert Hirschman's 1982 (ie long before Polanyi's recent vogue) magisterial review of the leading literature. Your reviewer believes that, in fact, Polanyi is now found so attractive mainly because his claim that pure capitalism is incapable of sustained reproduction differs from that of surely the most important variant of that claim, that of Karl Marx.
In Marx, the labour theory of value grounds a complete rejection of commodity production; which is to say that, if its inherent logic is pursued, it entails communism. As it is no longer possible to plausibly argue for communism, Polanyi seems an attractive alternative to Marx because he formulates the criticism of commodity production without the communist implication. For although Polanyi maintains that labour (and land and money) are 'fictitious' commodities in that they cannot sustainably be subject to commodity production, he does not deny that all other economic goods can usefully be treated as commodities. He indeed criticises Marx for extending his critique to 'genuine' commodities. This entails, not communism, but a market made capable of reproduction by being always and inevitably supported by intervention. What is involved in regulating 'labour' (and, equally but differently, land and money) can, as Dr Mulder's chapter on economic free movement more than sufficiently shows, become conterminous with the entire economic sphere, and it is the case that Polanyi's distinction between fictitious and genuine commodities has rather incoherently played small part in the enthusiastic reception of his work, leaving only a general imperative of social intervention. One therefore might say that Polanyi's views form the basis of an argument for the 'social market', but doing so gives rise to a considerable difficulty.
Dr Mulder claims that his views are derived from 'the "embedded liberalism" compromise that stands at the basis of the legal infrastructure of the internal market', but this is the case only in a strained way. As Polanyi points not to communism but the social market, one could say his views are 'liberal'. But it is important to appreciate at what distance Polanyi, and Dr Mulder's use of him, stand away from very important strands of the thinking that led to the creation of the internal market which are now often gathered under what admittedly is the collective noun of embedded liberalism. In the strands of thinking your reviewer has in mind, embedded liberalism was only to very limited extent meant to rest on responsiveness or even input legitimacy at all. The economy was to be embedded in a constitution which articulated the conditions for a market economy and intendedly limited the scope for action by Member States, whatever social interventionist policies their governments, and so ultimately their electorates, may have wished to adopt. It is the 'deregulatory' encouragement of globalisation in contemporary neoliberalism that now draws particular fire, but even in its ordoliberal, social market variant (itself a conscious rejection of Marx), embedded liberalism intendedly ruled out social policies which were thought to work against the market. The 'social' dimension of the social market was intervention only in so far as this was needed to support the market, which was acknowledged not to be entirely self-supporting, by, in the most important case, the provision of a social security floor. Alfred Müller Armack, who gave the term social market economy wide currency, was very sensitive to the criticism that such an economy was 'a contradiction in terms', but nevertheless thought it was a viable alternative to 'an interventionist economic policy' which would not 'be able to resist the temptation to intervene in free consumer choice and free choice of jobs'.
Though at one level similar, Polanyi's views are fundamentally different. The market simply does not work in regard of the fictitious commodities, and social regulation does not support the market but supplants it. This relaxes whatever constraint the social market conceived as it was by Müller Armack places on social policy. Speaking broadly, enthusiasm for Polanyi is largely enthusiasm for a social market which is much more social than Müller Armack would have thought at all wise. The argument has come round, not to the embedding of liberalism, but to the embedding of intervention.
Now, and this is Dr Mulder's point, this may work against economic due process, but would it provide a balance between the economic and the social? Your reviewer's opinion is that it would not. It would merely reverse the current advantage. Something like this is, in your reviewer's opinion, certainly what has happened in all the theoretical attempts to put policy generally on a foundation derived from Polanyi. They are not communist, but they have displayed the inchoate communism of an ad hoc but unlimited challenge to market imperatives, which are accepted, when they are accepted, not for any positive reason, but because what Hegel called 'the way of the world' compels their acceptance. This is precisely what Dr Mulder does not want when he advocates a dialogue of mutual responsiveness. But, with respect, your reviewer does not see how recourse to Polanyi will prevent this from being what he gets.
It would be wrong to conclude a review of this good book on a critical note. The issues it addresses are fundamental to the internal market and, as those issues may be restated as a general contradiction between the economic and the social, to regulation as such as it has come to be understood in the era of the universal welfare state. Dr Mulder's entire approach shows he is not remotely naïve enough to think he has resolved these issues, but he certainly has valuably contributed to their discussion.