Bohle, D. :

NEOLIBERAL HEGEMONY, TRANSNATIONAL CAPITAL AND THE TERMS OF EU'S EASTWARDS EXPANSION

Informed by a neo-Gramscian framework of analysis, the paper investigates the nature of neoliberal hegemony in the EU, and its consequences for the terms of enlargement. It is argued that a historical bloc that seeks to establish the hegemony of transnational capital promotes both deepening and enlargement. In western Europe, social democratic political forces, organised labour and political forces of the peripheral countries have been incorporated in the historical bloc, albeit in a subordinated position. As a result, a precarious hegemonic constellation of ‘embedded neoliberalism’ has emerged. In contrast, the EU has exported a more market radical variant of neoliberalism to its new member states. This serves best the interest of transnational capital, and helps to preserve the order of ‘embedded neoliberalism’ within the old EU. East European societies have not been in a position to question the unequal terms of enlargement. This can be explained by their specific legacies, which have led to their incorporation into the transnational historical bloc through passive revolution.

Introduction[1]

As of May 2004, ten new countries have entered the European Union (EU), eight of them from eastern Europe.[2] After more than a decade, a period of hesitation, insecurities and drawbacks so characteristic for the relations between the EU and its eastern neighbours thus drew to a close. However, even with enlargement, the signals towards the new members remain mixed. Most importantly, it has become clear that the EU is not prepared to grant them equal social and economic rights in the near future. The transition period concerning free movement of labour denies the nationals of the new member states a crucial aspect of EU-citizenship. The financial arrangements leave them with significantly fewer resources per capita than the old members.

These concrete terms of enlargement invite a more general assessment of the relation between the EU and the central-east European countries (CEECs). How to explain the unequal treatment of the new members? Is it likely to be transitory or are we witnessing the emergence of a durable second class membership? Why have the new member states accepted the conditions of enlargement? These are the questions informing my essay.

Mainstream approaches to eastern enlargement are not well equipped to answer these questions. This article seeks to advance a critical understanding of the new European constellation, which is based on neo-Gramscian perspectives of European integration. My main proposition is that the concrete form and problematic outcome of the EU's eastward expansion can be explained by the composition of a new – transnational - historical bloc, which has emerged in the EU since the mid 1980s and has spread towards the CEECs shortly after. In what follows, I will first briefly introduce mainstream understanding of eastern enlargement of the EU. Second, I will spell out the building blocks of a neo-Gramscian theory of international hegemony, and third present recent insights on the new, neoliberal path of European integration provided by neo-Gramscian approaches. It will be argued that the relaunch of European integration could develop into a precarious hegemonic constellation. In contrast to ‘embedded neo-liberalism’ (van Appeldoorn 2002) shaping the deepening of the EU, the mode of incorporating eastern Europe up to now has resulted in the export of a much more ‘market-radical’ variant of neoliberalism. The fourth part will expand the neo-Gramscian analysis to the pattern of the EU's eastward expansion and explain the reasons for CEE’s selective integration. The last part of the paper asks why CEE actors have been rushing for inclusion despite the unequal terms.

Enlarging the European Union eastwards: mainstream debates

Studies of the EU’s eastwards enlargement are not well prepared to address the unequal pattern in which social and economic rights are distributed in a united Europe. The theoretical discussion has mostly focussed on the question whether EU enlargement policies and decisions can better be explained by rationalist or constructivist approaches. The question that has dominated the debate is why the EU decided to open enlargement negotiations. Constructivists argue that this decision does not confirm rationalist expectations: For a number of member states, the costs of enlargement are assumed to be higher than the benefits, and enlargement seems a suboptimal solution to alternative strategies like association agreements (e.g. Schimmelfennig 2001). The decision to enlarge therefore points to the significance of norms and collective identities that allow the EU to accommodate the preferences of the CEECs (Sedelmeier 2001, Schimmelfennig 2001, Sjursen 2002). Constructivist research on meso-level policies and the major policy decisions taken in the second half of the 1990s in the context of enlargement has largely confirmed that despite clear material interests expressed by EU member states or interest groups, norms, identities, or principles have been equally important in explaining the policy outcome, and have generally led to a stronger accommodation of CEEC’s interests than a purely rationalist account would predict (Sedelmeier 2002). Given that the general direction of this research focuses on the accommodation of CEE’s interests rather than their violation, the question of unequal treatment of the new member states has not been at centre stage of the inquiry.

Rationalist approaches on the other hand argue that both the enlargement decision as well as the result of the entry negotiations can be explained by national interests, and the differences in state power (Moravcsik/Vachudova 2003). According to these authors, EU members promote the current accession – just like the previous ones - because they perceive it as being in their long-term geopolitical and economic interest. The applicant countries accept the unfavourable conditions of enlargement because of the tremendous advantages of membership. Their disproportionate concessions can be explained on the basis of bargaining theory: Those countries that gain most through international co-operation have the most intense preference for agreement, and therefore are willing to compromise the most (Moravcsik/Vachudova 2003: 44). Moravcsik/Vachudova explicitly acknowledge the costs of enlargement for the applicant countries, which stem from the huge task of transposing the acquis communautaire, the humiliation of having to go through evaluation procedures, the EU interference and double standards in core policy areas and the fact that resources are oriented away from social policy to economic goals. They argue however that these costs will be more than outweighed by the long-term benefits of membership – such as access to major markets and to foreign direct investment (FDI), stabilisation of the new democracies, and the strengthening of their administrative capacities.

Although rationalist research on eastern enlargement is better prepared than its constructivist counterpart to address the divergence of socio-economic rights in the united Europe, it relies on a number of problematic assumptions and concepts. My first major objection relates to the basic assumption that the expected costs and benefits determine the applicant's and member state's enlargement preferences. Underlying this assumption is the understanding that costs and benefits, as well as national interests, can be determined in a quasi-scientific, objective manner. It is however by no means self-evident why and by whom certain consequences of enlargement are perceived as costs or benefits. Perceptions of costs and benefits are linked to the position of actors in the social, economic and political fields, and a common understanding of ‘national interests’ on the state level is the outcome of political struggles and choices. Thus, rather than taking for granted that ‘[t]he applicants are forced into concessions precisely because the basic benefit offered to them – membership – is of such great value’ (Moravcsik/Vachudova 2003: 49), critical inquiry would have to address the question how this preference for membership came about in the first place.

A second problem of this approach is that it considers states as the most relevant actors in international relations, and thus neglects the role of trans- and supranational actors in shaping the enlargement process. Recent research on European integration and enlargement has however shown that these actors play an important role (van Apeldoorn 2002, Sedelmeier/Wallace 2000). Thirdly, this approach concentrates uniquely on the form of international relations and ignores the social content or purpose of enlargement (van Apeldoorn 2002: 11-13). This allows the authors to stress the similarities between the current enlargement negotiations and the earlier ones: both have been characterized by asymmetrical interdependence, and consequently by concessions of the applicant countries. Important differences between earlier and the current round of enlargement that are linked to the changes in the social purpose of European integration are however ignored.

All in all, mainstream analyses of eastern enlargement either tend to neglect the consequences of enlargement for the new member states, or provide an apologetic, panglossian account according to which everybody will be better off at the end, and the best off are those, who initially lost the most. This article seeks to advance an alternative understanding of eastern enlargement by addressing the questions of how the EU's and CEEC’s preferences came about, which role transnational actors have played in this, and by linking the unequal pattern of the new Europe to a shift in the social purpose of European integration. Ultimately, the aim is to advance a critical understanding of the new European constellation, which is based on a neo-Gramscian framework of analysis.

Neo-Gramscian analysis of international hegemony[3]

A critical account of the new European constellation that draws on the work of the Italian communist philosopher Antonio Gramsci (1971) and its interpretation through Robert Cox (1981, 1983) takes as its main problematique the changing nature of global hegemony. In contrast to conventional analysis of hegemony, which equals it with dominance based on military and economic capabilities, neo-Gramscian analysis puts forward a broader concept. According to Cox,

International hegemony is not merely an order among states. It is an order within a world economy with a dominant mode of production which penetrates into all countries and links into other subordinate modes of productions. It is also a complex of international social relationships which connect the social classes of the different countries. World hegemony is describable as a social structure, an economic structure, and a political structure. And it cannot be simply one of the things but must be all three. World hegemony, furthermore, is expressed in universal norms, institutions and mechanisms which lay down general rules of behaviour for states and for those forces of civil society that act across national boundaries – rules which support the dominant mode of production (Cox 1983: 172).

International hegemony thus has to be analysed on several interlinked levels. The first fundamental level is that of the material sphere of production. Production is understood in an encompassing sense as including production of physical goods as well as knowledge and social relations (Cox 1989: 39). Different modes of production engender various forms of social relations by giving rise to different constellations of social forces. The latter are of crucial importance for neo-Gramscian analysis of hegemony, as they constitute the power base within and across states. States form an institutionalised arena of class struggles and compromises (Cox 1987: 19). Crucial for the relative stability of a certain configuration of class rule that underlies state power is the creation of a historical bloc. A historical bloc refers to the way in which a leading class builds 'organic' alliances with subordinated classes within a specific national context. Class rule exercised through a historical bloc will not appear as particularistic. Its institutions and ideologies will extend to subordinate groups, without however undermining the vital interests of the hegemonic class (Cox 1983: 169). Although the concept is linked to specific national contexts, it can be internationalised: an international historical bloc refers to the relative stable alliances of ruling classes that support the existing international order (Jacobitz 1991: 11).

Crucial for international hegemony are furthermore values, norms and ideas, that are shared by ruling and subordinated classes. Similar to constructivist approaches neo-Gramscian analysis stresses the role of ideas for shaping institutions and actions. In a Gramscian understanding ideas and material conditions are however always bound together. In order for ideas to become meaningful, they must be articulated within a hegemonic project, i.e. a project that stems from the economic sphere, but which is broad enough to incorporate diverse and even partly antagonistic ideas. In the formulation of such hegemonic projects, intellectuals linked to the ruling classes play a major role (Cox 1983: 168).

Values, norms and ideas are crucial for integrating subordinated social classes into hegemonic projects as well as spreading the interests of hegemonic forces to those societies, in which a dominant class has not been able to establish hegemony in the encompassing Gramscian sense. In these societies, new hegemonic projects spread in the form of 'passive revolution', i.e. a revolution where

The impetus to change does not arise out of a “vast local economic development ... but is instead the reflection of international developments which transmit their ideological currents to the periphery”. The group which is the bearer of the new ideas, in such circumstances, is not an indigenous social group which is actively engaged in building a new economic base with a new structure of social relations. It is an intellectual stratum which picks up ideas originating from a prior foreign economic and social revolution (Cox 1983: 170, see also Gramsci 1971: 116).

The ultimate aim of a neo-Gramscian analysis of international hegemony is to unearth the contradictions of existing power relations, and look for ways of overcoming them. As a critical theory, it does not seek to provide for an alternative description of the existing hegemonic order, but rather asks how this order came about, whose interests are served, which are its major contradictions and thus to contribute to the development of counter-hegemonial projects (Cox 1981: 129-30).

Cox developed his analytical framework in order to contribute to a critical understanding of the processes of international changes related to the erosion of the post-World War II order and the emergence of globalisation. More recently, a number of authors have applied and further developed Cox' approach to analyse European integration in the context of global structural changes (van Apeldoorn 2002, Bieling/Steinhilber 2000b, Bieler 2000, Bieler/Morton 2001, Cafruny/Ryner 2003, Gill 1992, Röttger 1997). Despite slightly diverse theoretical perspectives on European integration, these approaches have demonstrated that a qualitatively new, transnational neoliberal constellation has emerged over the last 20 years. In the following section, I will summarise the findings of neo-Gramscian analysis of European integration.

The emergence of neoliberal hegemony in the EU

As argued above, international hegemony has to be analysed on several interlinked levels: that of the dominant mode of production, of social, and politico-ideological relations. Major transformations on all three levels have over the last decades shifted hegemony in the EU towards a specific neoliberal form.

Basic characteristics of neoliberal hegemony

The mode of production has been characterised by the dissolution of the Fordism. On its place, a new mode is emerging, centred on knowledge-based information and communication technologies. The emergence of the new mode of production is largely dependent on US capital, technologies, and companies, and has not penetrated Europe as deeply as the US. European production is still to a much larger extent characterised by traditional industrial sectors than the US (Beck et. al 2002: 25-75, Lüthje et al 2002: 25-102). European integration since the mid 1980s has aimed at reducing its dependence and backwardness, and at restoring Europe's global competitiveness. ‘Negative’ integration, i.e. the elimination of national constraints on trade and competition, transnationalisation of production, and cross-border centralisation and concentration of economic power has led to an increasingly transnationally integrated European economic space (Ziltener 2004: 962-4).

On the level of social relations, this process has engendered a truly transnational historical bloc, which seeks to create the conditions for the hegemony of transnational capital.[4] A major forum of the bloc's leading class is the European Roundtable of Industrialists (ERT) (van Apeldoorn 2002: 183-190). It was founded in 1983 upon the initiative of Pehr Gyllenhammar, the chief executive of Volvo, with the support of Etienne Davignon, a then European Commissioner. Today the ERT consists of 45 CEOs and chairmen of Europe’s most transnational and biggest corporations. Through intense lobbying activity at national and supranational levels, regular official meetings with highest representatives of the EU, and strategic reports on burning issues of European integration the ERT has developed privileged influence on European policy-making (van Apeldoorn 2002, Holman/van der Pijl 2003).

Whereas nationally based export-oriented capital has frequently allied with transnational capital, the influence of domestic oriented and import-competing capital in the new European constellation has largely diminished. Forces of labour have also been pushed into the defensive. Trade unions are integrated in a subordinate position in the neoliberal bloc. Through the institutions of 'competitive corporatism' (Rhodes 1998) trade unions participate in neoliberal restructuring by accepting wage restraint, reforms of the welfare states and increasing flexibilisation of labour markets (Bieling 2001: 107-8). Bieler (2005) argues that even if labour as a whole is in a defensive situation compared to the post-war constellation, it can however not be conceptualised as a homogenous force. Rather, labour in export-oriented and transnational sectors is more likely to develop supranational activities and support some of the policy initiatives on the European level. In contrast, labour in sheltered sectors is more likely to take a defensive stance towards neoliberalism and European integration.

The shift in the mode of production and the emergence of a new, transnational historical bloc has led to the institutionalisation of a new form of relations between European and national institutions. Since the 1980s, the European mode of integration aims at enhancing competitiveness on all levels of the European societies. Partly through directly taking over and ‘Europeanising’ certain state functions (e.g. monetary policy), and partly through reshaping significantly the framework in which nation states operate, the EU develops into the interface that enhances regime competition between different national systems of governance. The bulk of the adaptation process to this new competitive environment rests upon the nation state and national institutions (Ziltener 2000: 88-96). States have transformed from Keynesian welfare states into 'national competition states' (Hirsch 1995, see also Jessop 2002), whose main function is to mobilise society in the aim of competitiveness.

On the level of economic ideas a major shift from Keynesianism to neoliberalism has taken place. Neoliberalism has to be understood as both an economic and a political program. As an economic program, it aims at reducing state intervention in the economy, and ‘freeing’ the ‘market forces’. As a political program, neoliberalism is most clearly defined by its opposition to state-socialism and the Keynesian welfare state (von Hayek 1990, 1991). In terms of its ‘positive’ political program, neoliberalism may be combined either with authoritarian, right wing political forces, or with centrist ones, be they conservative, liberal or the new social democracy. Think Tanks and networks of experts popularised actively the main ideas legitimising neoliberalism (Plehwe/Walpen 1999, Cockett 1995).

Political projects of European integration

In a nutshell, the above elements constitute the basic traits of the new, neoliberal Europen constellation. It is debated whether neoliberalism has become hegemonic. Gill (1995: 400, 402, 412) for instance argues that the transnational bloc has a position of supremacy rather than hegemony. While it cannot organise consent, it nevertheless rules over a fragmented opposition.

Bieling/Steinhilber (2000a, 2002) opt for a more nuanced approach to the question of neoliberal hegemony in the EU. Rather than offering a 'grande narrative', they suggest to focus on concrete political projects of European integration. This perspective stresses the different phases, concrete steps and partly contradictory strategies of neoliberal restructuring of the EU. Bieling/Steinhilber are particularly interested in the interplay of material interests and discursive interactions in the different projects. Only if those two dimensions reinforce each other, the project can be considered as hegemonic.

These authors identify three particular projects that have resulted in neoliberal hegemony in Western Europe: The European monetary system (EMS), the internal market, and the EMU.[5] The EMS proved to be the starting signal for neoliberal restructuring, as it forced the member states to impose budgetary discipline and restrictive monetary policy (Bieling/Steinhilber 2000a: 112). The project was promoted in an extremely technocratic manner, which allowed the public by and large to ignore it.

This however changed with the second project of neoliberal restructuring, the internal market. This project emerged against the background of economic stagnation and a perceived loss of European competitiveness vis-à-vis the US and Japan. A transnational coalition of actors, forged under the leadership of the European Commission and transnational capital, supported the project (Sandholtz/Zysman 1989: 114-8). Despite its economic character, it became a broadly popularised symbol of the relaunch of European integration. This was due on the one hand to a publicity campaign on the advantages of the internal market, which sought to legitimise the project through the expected economic success. On the other hand, Jacques Delors, the then President of the European Commission linked the internal market with a far-reaching vision of integration progress in the monetary, technological and social fields. This vision spoke to a number of social forces, including more defensive, internal market oriented business groups, and trade unions who became actively engaged in the construction of 'Social Europe' (Ross 1995: 43-5, 150-3, van Apeldoorn 2002: 115-58, 169-84).

The third central project, EMU, initially still profited from the 'Europhoria' triggered by the internal market. A number of actors considered the core functions of EMU - strengthening the EU in the global currency competition, reducing transaction costs and strengthening the stability culture - as a logical consequence of previous integration steps. EMU received additional legitimacy because it promised to tie the united Germany into European structures, and break the dictate of the Bundesbank (Bieling/Steinhilber 2000a: 115). The consensus over EMU did not hold however. As argued by Gill (1998), EMU much more than the internal market displays the disciplinary character of European neoliberalism. The convergence criteria of Maastricht and the stability and growth pact 'depoliticise' central policy fields and leave little room for manoeuvre for distributive options, or generous wage and social policies. At the same time, the reinforced stability culture offers no solution to Europe's burning problems of high unemployment and slow growth. As a result, European integration has got increasingly contested. It has triggered waves of social protest especially in France but also other European countries, and on the European level. Resistance is being articulated on the European Social Forums, where forces of intellectuals, trade unions, and new social movements interact (Bieling/Steinhilber 2000a: 122-8).

It remains to be explored whether these movements and coalitions give rise to counter-hegemonic projects. For the time being at least, Bieling and Steinhilber do not see major challenges for neoliberal hegemony in Europe. They argue that despite continuos and even growing socioeconomic problems and sporadic political protest, European integration is consolidating along neoliberal lines (Bieling/Steinhilber 2000a: 120). Over the 1990s, the ruling classes moreover have been flexible enough to incorporate the demands of other social forces in their projects. This is reflected in a number of policies and initiatives, above all the upgrading of structural and social funds, elements of social regulation on the European level, and the European employment policy. Thus, we may speak of a precarious hegemony of embedded neoliberalism, which has emerged in the EU. According to van Apeldoorn (2002), who coined this term, embeddedness addresses the concerns of European labour and social democracy, but ‘this incorporation is done in such a way that these concerns are, in the end, subordinated to the overriding objective of neoliberal competitiveness’ (ibid.: 181). It is against this background that eastern enlargement has to be analysed.

The political project of eastern enlargement

The neoliberal nature of the enlargement project

After EMU, the EU has not delved into a new deepening project during the 1990s. Rather, it was the issue of enlargement which became the engine for further development (Bieler 2002: 575). The first enlargement with Sweden, Finland and Austria has not constituted a major source of conflict. Eastern enlargement is different. It has been much more contested because of the large number of countries, their specific legacies, and their comparatively poor and backward economies. This is reflected in the EU policy towards its eastern neighbours. Although EU actors have repeatedly stressed their solidarity with eastern Europe and their commitment towards enlargement, the concrete terms evolved only gradually and hesitantly over the 1990s. Decision for enlargement was only taken in 1993. Even after, the EU was very reluctant to announce an accession date, and postponed crucial agricultural, structural and institutional reforms that were initially considered central for enlargement.[6] Despite the fact that the commitment towards and the framework for enlargement evolved only gradually, from the early 1990s on, the relations with the east have however been in line with the above-discussed neoliberal integration projects.

This becomes evident if the policy requirements towards the candidate countries are considered. The EU clearly uses its influence in the region in order to export the core of its deregulatory program. Ever since the Europe Agreements[7] and the Single Market White Paper (1995), the main thrust of the EU policy was to secure the liberalisation and deregulation of CEE’s political economies. Already in this early phase of accession, the EU could establish a far-reaching influence on the emerging ‘models’ of capitalism, and especially on the competition and sectoral policies and industrial standards. With the accession partnerships concluded with the candidate countries from 1997 onwards, EU requirements became central engines for domestic reforms. The accession partnerships were very encompassing. Among others, they affected macroeconomic, budgetary and monetary policies, administrative, regional, industrial and welfare reforms (Grabbe 1998: 12-8). Furthermore, in contrast to the southern enlargement, where the new member states were required to ‘liberalize domestic markets at the moment of entering the EU, in many cases with temporary exemptions, [t]he associated countries are being required to open their markets before membership, without any linkage between liberalization and membership’ (Inotai 1999: 7).

At the same time, the EU has been very reluctant to extend all those policy areas, which would make CEE’s transition and adaptation easier – like substantial financial aid, free movement of labour, or liberalisation of agricultural trade. The earliest example of this attitude is the selective protectionism incorporated in the trade agreements of the Europe Agreements, where the EU conceived of a battery of protectionist instruments, which targeted exactly those sectors in which CEE had a competitive advantage: steel, textile, apparel, chemicals and agricultural products (Gowan 1995: 25-8). Similarly, in the pre-accession strategy, which ‘is primarily concerned with liberalisation of external economic relations and creating the conditions for free movement of industrial goods, services and, to some extent capital’ (Grabbe 1998: 11), labour and also agricultural policy were excluded from liberalisation. Finally, in terms of financial aid, the EU has supported its own members much stronger than its poor eastern neighbours.

For long time, the assumption was widely held that these asymmetries would disappear with full membership. However, the negotiation agreements reached in Copenhagen in December 2002 indicate that, at least in the near future, the new members will be relegated to a second class membership. In the field of free movements of labour, transition periods have been agreed upon. Free movement of persons implies not only an economic dimension, but also constitutes an essential part of the EU citizenship rights, which is thus withhold from the nationals of the new member states (Maas 2002). In financial terms, the transfers per capita for the east European newcomers will be significantly lower than those for the old member states, despite (or because of!) the fact that these countries are comparatively poor and backward (Mayhew 2003: 16-30, Debbaut 2003).

All in all, over the 1990s, the EU has managed, through a mixture of power and conditionality and the promise of membership perspective to push the CEECs towards adopting a specific, neoliberal reform model. In its consequences, this model is more radical than the west European one. Not only are the regulatory reforms of the Internal Market in its centre. Furthermore, reform requirements have been presented which are not part of the acquis. At the same time, the EU has been very reluctant to extend all those policy areas towards CEE, which would make their transition easier, and has severely limited its financial transfers. These requirements have been presented as being self-evident. There is little debate within the EU (or CEE for that matter), whether they are appropriate for economically backward countries with huge restructuring problems.

How to explain for this result, which prescribes a more market-radical variant of neoliberalism to the CEECs? My main argument is that it is the composition of the new transnational historical bloc that can explain both, the expansion of the EU to the east, and its selective features.

Transnational capital and the project of enlargement

On a first glance, transnational capital’s preference seem to confirm the constructrivist argument that the decision to offer membership perspective that was taken in 1993 cannot easily be traced to material interests of central EU actors. The perspective of membership, once offered, had to be sustained and eventually realised however. A major shortcoming of constructivist analysis is that it does not take into account how material interests, and thus the interests in enlargement among central EU actors changed over the 1990s.

Taking the ERT’s position as an indicator for the politics of transnational capital within the EU, it is true that it stated as early as 1991 that the EU should take ‘immediate action in response to the ‘new challenge’ and ‘the window of opportunity’ offered by ‘the astonishing developments in Eastern Europe’ (ERT, cited after Holman 2001: 174). It took however several years, until the ERT concretised its position on enlargement.[8] Since 1997 it has actively lobbied for the speeding up of enlargement. In a message to the heads of the states of the EU in 1997, it invited the EU to reform its institutional structure in order to facilitate enlargement, and urged it to start closer co-operation with the applicant countries. In 1999, the ERT published its first report dealing exclusively with enlargement. It stressed that ‘enlargement offers a golden opportunity to improve the competitiveness and prosperity of the whole European economy (existing EU members and new candidates alike)’ (ERT 1999: 5). This report also reveals the significant degree to which individual members of the ERT have been engaged in CEE. In its most recent report, the ERT stresses once more that ‘of the crucial issues that have dominated the ERT’s agenda since its formation in 1983, eastwards enlargement is on a par with the creation of the single market in the 1980s, and the single currency in the 1990s’ (ERT 2001: 4).

The growing interest of TNCs in enlargement can be explained by their shifting patterns of involvement in CEE. Initially, TNCs organised sub-contracting relations with east European firms rather than investing directly. Moreover, they engaged mostly in sectors which allowed for an easy exit option (apparel, furniture, textile) (Bohle 2002: 165-176). This type of foreign led activities does not need a stable institutional framework. The provisions offered in the association agreements were sufficient. However, since the mid 1990s, direct investment in more heavy industries took off.[9] Foreign investors exert increasing control over strategic sectors of the CEE economies. In most accession countries, the leading export sectors are operated almost exclusively by foreign firms. Moreover, strategic services like finance and telecommunication are dominantly in foreign hand. TNCs have increasingly used eastern European production facilities and its comparatively cheap and skilled labour as an opportunity to reorganise their production chains, and thus increase their competitiveness in the European and global markets (Faust et al.: 2004). As a consequence, a new pan-European division of labour is emerging where the east specialises in the lower-end of transnational production chains (Bohle/Greskovits: 2004). With this involvement, questions of politico-institutional stability and regulatory alignment of CEECs have become more salient. Transnational capital has come to see enlargement as guarantee for their investment projects and expects a significant reinforcement of the business opportunities after accession (ERT 2001: 10).

In addition, neoliberal restructuring within the EU has led to a change in the relation of forces by changing the dominant orientation of import-sensitive industries. Steel industry is an example. For long time, steel was one of the EU’s most import-sensitive and protectionist sectors. Neoliberal restructuring however, which started in the 1980s, changed the politics of the industry. West European steel industry as whole has not turned into an active supporter of trade liberalisation with the east, or enlargement. It took until 1996 to liberalise the steel trade between east and west (Seldelmeier 2002: 637-639, Jacobson 1997: 7). The process of neoliberal restructuring however can explain for decreasing opposition to and even partial support of enlargement among the west European steel producers. Privatisation, a significant concentration process, major reduction of employment, and growing specialisation in high-tech steel products led to the emergence of a few powerful and highly competitive actors. For these actors, east European steel production, typically specialised in basic steel, does not constitute serious competition. They rather profit from CEECs increasing demand for high quality steel and from relocation possibilities (Schabbel/Wolter 2004: 23-24). These actors actually came to support the neoliberal policy paradigm (Schabbel/Wolter 2004: 22-4, Dudley/Richardson 1999: 236-44). [10]

Thus, all in all, while we cannot attribute a causal relationship between transnational capital's preferences and the initial decision to offer membership perspective to CEECs, the fact that the EU - despite many conflicts - stayed on course after that decision reflects the priorities of transnational capital. At the same time, transnational capital has not lobbied equally strong for the extension of the more inclusionist features of the EU system. For those forces of capital that are actively engaged in CEE, exploring the differences in terms of wages, fiscal, social and environmental standards is a significant incentive for investment. Other producers that rely on trade relations with the east, like the steel industry, are more concerned with ensuring fair competition in a united Europe, and thus with a harmonisation of basic standards (EUROFER, n.y.). While these different interests may constitute a source of conflict, both fractions of the transnational bloc are however united in their missing support for a more solidaristic expansion of the EU.

The missing support for extending embedded neoliberalism eastwards

If transnational capital does not lobby for the extension of the more inclusionist features of the EU polity, what about other EU actors? The weaker actors – the elites of the peripheral EU states, social democratic forces, trade unions – have not offered the strongest support for enlargement. Thus, the southern EU states have repeatedly stressed that they are not ready to foot the bill for enlargement. Trade unions support has been at best lukewarm, and both on the EU and on the national level labour has lobbied strongly against free movement of persons, a position, which has been embraced by several social democratic governments, and has become official EU policy (Bohle/Husz 2005). Labour’s reaction to enlargement demonstrates the difficulties of transnational solidarity under the competitive environment of neoliberalism. Enlargement is seen as threatening to undermine the compromise of embedded neoliberalism in Western Europe and to weaken labours’ bargaining power. Against this threat, labour tries to defend their achieved rights. This position turns labour sometimes even into a close ally to nationalistic and xenophobic forces. The Austrian trade union confederation ÖGB for instance proposed an income criterion as a condition of free labour migration: CEE average wages were to reach 80% of Austrian average, before labour migration should be considered. Even if ÖGB has meanwhile abandoned this extremist proposal, Jörg Haider later picked it up (Bohle/Husz 2005:103).

Thus, whereas the aim of integrating Eastern Europe is shared by a limited, but rather powerful number of actors, who are mainly interested in exploring CEE’s economic potential, the idea of an equal inclusion of the CEECs and of genuine (financial) solidarity virtually enjoys no support. To the contrary, labour and political forces from the peripheral EU countries that could not prevent the neoliberal enlargement, used their power in a defensive way, by protecting their own interests against the newcomers. What are the consequences for CEECs, and why have these countries accepted the unfavourable terms of enlargement?

CEEC’s incorporation in the transnational historical bloc

The CEECs’ ‘return to Europe’ has become a much more ambiguous experience than expected. Not only do these countries face the prospect of second class membership, even if it is only transitory. In addition, integration has to date not produced the desired economic gains. Rather, the CEECs have developed characteristics of a semi-periphery: dualistic economic structures, high unemployment and precarious growth perspectives.[11] Nevertheless, until very recently, no CEEC government has challenged the strategic goal of EU membership, or the requirements it had to meet. To the contrary, EU membership has enjoyed broad support among policy makers, major social forces, and the large public. In order to understand the uncontested nature of the CEECs return to Europe, the form of their incorporation in the transnational historical bloc through passive revolution has to be analysed.[12]

Passive revolution in CEE

As argued above, passive revolution denotes a situation of radical change pushed by elites whose ideas do not stem from the domestic context but rather reflect international developments. Gramsci argues further that

The concept of “passive revolution” must be rigorously derived from the two fundamental principles of political science: 1. that no social formation disappears as long as the productive forces which have developed in it still find room for further forward movement; 2. that a society does not set itself tasks for whose solution the necessary conditions have not already been incubated…(Gramsci 1971: 106).

Gramsci’s concept of passive revolution is indeed helpful to analyse east European transformations. The breakdown of state-socialism itself was of crucial importance for making the CEE societies particularly receptive to western ideas and projects. After the crisis of Fordism in the west, the end of import-substituting industrialisation in the south, eastern state-socialism was the last attempt to organise and sustain a development project within the framework of the nation state that ultimately failed. Whereas the west underwent restructuring on a large scale and finally replaced the old Fordist model of development with a new, transnationally organised neoliberal one, eastern Europe stagnated over the 1980s, and experienced the total breakdown of its system. It is partly due to this uneven timing of crisis and restructuring that western forces could extend their ideas, rules, norms, and institutions and thus their interests on the CEECs. Economic liberalism as an ideology became very attractive for these societies, because it constituted the most radical alternative to the existent socialist system (Szacki 1995). However, neoliberalism could neither be based on established societal groups, nor around a specific national hegemonic project. The revolutions in eastern Europe, as often stated, were bourgeois without a bourgeoisie. Instead of powerful economic groups, intellectuals and elites within the state became responsible for the neoliberal reforms (Eyal et al. 1998, Bohle 2002, Shields 2003).

The weak societal embeddedness of the reform elites, and the equally weak transformation states are two of the reasons why east European reformers early on were eager to secure external assistance. Initially, the IMF and the World Bank were of crucial importance (Greskovits 1998: 19-68). EU membership, which emerged only later as an option, serves as a further external anchoring of neoliberal reforms in the region. Moreover, the EU represents exactly what the east European societies have not reached over the last decades: economic wealth, stable democracies, and a form of international integration which seems to rely on the equal participation of all member states. The ‘return to Europe’ therefore not only helped the reform elites to strengthen their project, but it was at the same time the ideology for the mobilisation of the Eastern societies, which helped enduring the hardship of transformation (Greskovits/Bohle 2001: 16-7).

Societal consequences of the neoliberal reforms

The passive revolution was the condition for the gradual incorporation of CEE actors in the transnational historical bloc. Transnational class formation in CEE started initially with the reform elites (Bohle 2002: 83-124, Shields 2003: 228-237). Later, as a result of the neoliberal reforms and the rapprochement to the EU, domestic social relations have been restructured, and have created a new social base for the Europeanisation project. One important result of the reform process in the CEECs is – at least in the case of the most ‘advanced’ countries - a very high degree of foreign penetration in important segments of the economy, which compensates for the lack of a domestic bourgeoisie. Otto Holman argues that

It is foreign capital – and the quasi-state structures and cadres at the supranational level organically related to it – which plays an essential role in the process of transnational class formation in CEE. The ownership and control of economically-relevant assets, and the income generating nature of it, are increasingly transnational phenomena, while the growing inequality in the distribution of these assets is defended – that is, presented as the “general interest” – by the “new power elites” (Holman 2001: 177).

The importance of foreign investors in the region does not manifest itself only in their control and ownership of economic assets, but also in their political influence on government positions. Foreign investors have been both bilaterally, in direct negotiations with the host governments and via their lobby organisations actively involved in the governments’ reforms of social and labour laws, tax and competition policies, and the preparation for EU accession. They have successfully watered down Slovakian labour protection, introduced a competitive race to the bottom in the CEEC’s tax regimes and lobbied for generous tax exemption schemes in these countries (AmCham Slovakia 2002, January 13, 2004, Bohle/Husz 2005: 87-96).

Simultaneously, neoliberal restructuring and the return to Europe have ‘contributed to the deterioration of the collective action capacities of its losers and opponents – mainly labor, labor unions, leftist parties....’ (Greskovits 1997: 206). Labour has tremendously weakened over the 1990s. Unionisation levels have fallen dramatically, the mobilisation capacities both on the national, and the workplace level have been seriously undermined. The newly emerging private sector is almost union-free (Crowley 2004, Bohle/Greskovits 2004). Ideologically labour has not managed to define a counter position to the dominant project of Europeanisation and neoliberal restructuring. According to David Ost, as a legacy of both communism and anti-communism ‘East European workers and unionists eschew class identities. They do not think of themselves as a separate class requiring separate organizations to defend their interests. Rather, they embrace the neoliberal project in the hope that “the market’ will ultimately serve their interests as well’ (Ost 2000: 520).

Thus, at least for the time being, the only forces in the east which offer resistance to the current path of western integration are nationalist and xenophobic forces. In the Polish elections from September 2001, two outspoken nationalist, xenophobic and anti EU-parties, Samoobrona (self defense) and the League of Polish Families entered the Parliament (Szczerbiak 2002). Their support stems to a large degree from the losers of the transformation in agriculture, traditional heavy industry, and partly the public sector. Poland is not the only country where nationalism and xenophobia represents a challenge to the chosen path of Europeanisation. The strength of these discourses reflects the weakness of the dominant forces to offer solutions to burning social problems: high unemployment, societal polarisation, and continuous restructuring requirements which threatens to further widen the gap within the societies.

Conclusions

This contribution aimed at investigating the nature of neoliberal hegemony in western Europe and its consequences for CEE’s return to Europe. Informed by a neo-Gramscian framework of analysis, I argued that both the political projects that have advanced European integration and enlargement are promoted by a historical bloc that seeks to establish the hegemony of transnational capital. In western Europe, social democratic political forces, organised labour and political forces of the peripheral countries have been incorporated in the historical bloc, albeit in a subordinated position. As a result, a precarious hegemonic constellation of ‘embedded neoliberalism’ has emerged.

In contrast, the EU has exported a more market radical variant of neoliberalism to its new member states. This is the result of struggles and compromises within the historical bloc: Exporting the core of the EU’s deregulatory program serves the interest of transnational capital, whereas not extending the redistributive acquis and blocking labour mobility protects the bloc’s weaker forces.

East European societies have not been in a position to question the unequal terms of enlargement. This can be explained by their specific legacies, which resulted in their incorporation into the transnational historical bloc through passive revolution. In contrast to other – west, north and south European countries, their ‘return to Europe’ could not be based on established societal groups and around a specific hegemonic project on the national level. Lacking a domestic bourgeoisie, weakly embedded intellectuals and state elites became responsible for the rapprochement to the EU, the latter serving as external anchor for neoliberal reforms. The lack of a domestic bourgeoisie also explains for the very high degree of transnational penetration of CEE’s propertied classes.

If my analysis is correct, then the ties which most strongly unite east and western Europe are heavily dependent on the agenda of transnational capital. These ties are unlikely to be strong enough to sustain a stable and hegemonic constellation. The EMU project has already reduced the consensual nature of neoliberal hegemony. It has triggered social protest and relies more on discipline than earlier integration projects. Eastern enlargement opens a new line of conflict in Europe. It allows transnational capital to increase its room for manoeuvre. At the same time, the weaker forces of the western historical bloc are pitted against the east European newcomers. This constellation is unlikely to give rise to an encompassing counter-hegemonic project. Rather, it resembles a situation of neoliberal supremacy, in which the transnational bloc cannot organise consent, but nevertheless rules over a fragmented opposition.

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[1] An earlier version of this paper was presented at the workshop 4, “Enlargement and European Governance”, ECPR Joint Session Workshops, Turin, 22-27 March 2002. I am grateful to the panel chairs and participants of the workshop for their comments. Moreover, I am thankful for extensive comments from Ondrej Cisar, Gergana Dimitrova, Béla Greskovits, Dóra Húsz, Nicole Lindstrom, Dóra Piroska, Stuart Shields, and the reviewers of this journal.

[2] These are the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia.

[3] In addition to Cox (1981, 1983), this section draws especially on Bieler (2002: 579-582), Bieler/Morton (2004: 87-96), Bieling/Deppe (1996: 730-2).

[4] The emergence of a transnational historical bloc was first conceptualized by Stephen Gill (1990: 89-100).

[5] More recently, Bieling/Steinhilber have identified the creation of an integrated financial market as a new political project (Bieling/Steinhilber 2002).

[6] For an overview over enlargement policy see Sedelmeier/Wallace 2000.

[7] The Europe Agreements were special association agreements with the CEECs. The first Europe Agreements were concluded with Poland and Hungary in 1991. Other CEECs followed over the 1990s.

[8] The general secretary of the ERT between 1988-1999, Keith Richardson, acknowledged in retrospect that this delay was a mistake. 'EU enlargement was also a weak point. Reshaping Europe marshalled powerful arguments in favour of rapid integration leading to full membership just as soon as the candidate countries were ready. But the topic was not followed up and there was no specific ERT paper on enlargement until 1999. ... Perhaps we all underestimated how slowly the negotiations would move. Looking back it seems clear the the ERT could and should have done more to push and prod.' (Richardson 2000: 27).

[9] The stock of inward FDI as a percentage of GDP for the 8 new EU members was 11,6% in 1995, and 40% in 2001, compared with 10,3% and 22.5% respectively for the world (UNCTAD 2003, p. 61).

[10] Gerhard Cromme from Thyssen Krupp for instance is the current chairman of the ERT.

[11] In 2003 four of the CEEs had not yet or just barely reached the level of their GDP of 1989. Several countries experienced repeatedly economic recessions over the 1990s (EBRD 2004: 38). Real wages in 2000 were lower than in 1989 in seven out of eight countries. Unemployment increased significantly over the last decade (Bohle/Greskovits 2004: 27).

[12] The following draws on my empirical investigation of Poland’s “Europeanisation”, and its comparison to the Hungarian development path (Bohle 2002, Bohle/Neunhöffer 2005, Greskovits/Bohle 2001). Shields (2003, 2004) develops very similar arguments.

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