Economic Patriotism, the Clash of Capitalisms, and State Aid in the European Union

Abstract

Abstract:This article analyses the political economy of state aid in the European Union (EU) using the concepts of economic patriotism and models of capitalism. State aid is analysed as a form of economic patriotism, which is conceived here as economic interventions which seek, by a number of means, to advance the perceived economic self-interest of particular groups and actors (firms, workforces, or sectors) defined according to their territorial status. The article argues that the paradox of neo-liberal democracy generated by liberal international markets, overlapping economic governance regimes (such as the EU and the World Trade Organisation), and nationally delimited political mandates presents new problems for policy-makers attempting economic interventions like state aid. Forms of economic patriotism are partly shaped by national institutional and social configurations and state traditions. Within EU economic governance, this generates a 'clash of capitalisms' whereby liberal EU anti-trust and competition policy norms proscribe certain state aid and industrial policy measures favoured by some European states. As traditional industrial policy becomes decreasingly viable, new modes of economic patriotic interventionism are enacted within contemporary processes of market-making, and the re-regulatory activity framing European markets. The paper focuses on French state aid responses to the global economic crisis, noting how the retreat of neo-liberal ebullience within the EU provides a conducive environment for resurgent French dirigiste approaches to state aid, indicating that the politics of economic patriotism and state aid will continue to be important features of the European political economic landscape in the years ahead. the EU provides a conducive environment for resurgent French dirigiste approaches to state aid, indicating that the politics of economic patriotism and state aid will continue to be important features of the European political economic landscape in the years ahead. JEL Classification: B10; D20; D72; F50; G28; G34; H81; L52; P16.

The politics of State aid in the European Union: explaining variation in aid allocation among Member States

“…Factors like globalisation and Europeanisation pushed interventionist policies like tariffs out of fashion, and deprived national governments of direct control over some economic policies, such as monetary policy in the Euro area. This restricts the room of manoeuvre national governments have at their disposal and forces them to be "creative" to continue supporting national industries (Clift 2013). To borrow from Hall (1986), "governing the economy" has become increasingly difficult for national governments.…”

“…The last claim is that the Europeanisation of domestic policymaking has decreased the room of manoeuvre of national governments (Ladrech 1994;Schmidt 2002;Featherstone and Radaelli 2003). Governments steered from direct public intervention to the use of incentives as a tool for regulatory policies, thus making subsidies the most important remaining form of State intervention (Clift 2013; see also Lavdas and Mendrinou 1999, 122). Hence, the degree to which governments are able to attain certain policy goals such as market failure correction would be conditional upon international commitments.…”

Kicking away the financial ladder? German development banking under economic globalisation

“…These corresponded to areas to which KfW was already lending at the time, and by implication, those areas Germany was supporting as part of its industrial policy, including renewable energies, SMEs, regional development, and technology and innovation promotion, and infrastructure, allowing KfW to continue providing support in those areas. While the European Commission has a degree of control over the design of State Aid law, it is often unable to issue and enforce these laws over strong member state opposition (Blauberger 2009;Clift 2012) Given Germany's strong position in the EU, although negotiation documents are not public, it is reasonable to assume that Germany played some role in negotiating exemptions in its favour.…”

Questioning the ‘common sense’: Was Scottish independence really an alternative to UK neoliberalisation?

“…Members are obliged under the Treaty to show that state aid is not distorting the single market (Lisbon Treaty 2007: Article 107 [1]). Members use the ambiguity of the Treaty's language on state aid to frame subsidies as promoting competitiveness (Clift 2013). Whilst the EC European Competitiveness Report (2012) asserted the need to identify and remove government subsidies and protection via benchmarking and the monitoring of member states' economic policies, the EC has declared an 2014 objective to address any ambiguity (EC 2014).…”