Western German Model

Delors would in other moments express his admiration for the key planks of a West German style “social market economy,” for instance in a speech to the economics policy board of that country’s Christian-Democratic Union. In the vision Delors set out there, the prospective EU should look to this Sozial Marktwirtschaft as a model, because of the economic successes permitted by its founding principles, derived both from Freiburg School thinkers such as Walter Eucken and Alfred Müller-Armack and from the influence of other West German political cultures that participated in that same “social compromise.”

The principles associated with the ordoliberal “strain” can be found first of all in a “market that functions” based on a high degree of competitiveness — not a spontaneous product of business activity, but something ensured by state authorities who pursue a well-tailored competition policy aimed at preventing distortions and concentrations.

Secondly, these principles lie in an “active economic policy” that has “monetary stability” as its main goal, to be pursued through the “preventive application of monetary and financial measures” by a “totally independent central bank.” In contrast, the role played by other (socialist, Christian-social, labor movement, etc.) political cultures can be identified in the principle of “social balance,” to be achieved both through redistributive and welfarist policies and through consultation among social partners.

Delors himself claimed that these three pillars of West Germany’s social market economy shaped his own project for revitalizing European integration, guiding its various stages. If the four freedoms of movement (goods, capital, services, and people) implemented across the European single market by the 1985 White Paper corresponded to the principle of a properly functioning competitive market, for Delors a social balance would come through social dialogue and by the rebalancing work to be fulfilled by Europe’s so-called Structural Funds and accompanying policies.

Finally, the third and last of the pillars of the social market economy, namely an “active cyclical policy” aimed at “indispensable monetary stability” and the “regulation” of the market, would be realized via the coordination of macroeconomic policies and the establishment of an independent monetary authority: the two key elements of the 1989 Report on Economic and Monetary Union.

The independence of the central bank from political decision-making was one of the ordoliberal-inspired constitutional arrangements to which Delors adhered most wholeheartedly. He strenuously defended this approach, in October 1989 bluntly telling the European Parliament that it was indispensable to any minimally “acceptable” European monetary union.

Faced with the doubtful or fearful, Delors downplayed the risks of a drift toward ever greater technocratic power, insisting that “independence” ought not be confused with “irresponsibility.” Indeed, even within such a framework of economic governance, “the last word [would] always be political,” since even an independent central bank would still have to “justify itself before public opinion” and “take into account what the political authorities say.”

Yet for this reason, the “absolute independence” of the central bank could not be the subject of debate or compromise, as it was already “a done deal”: the countries that had been able to test “the advantages” of this configuration of monetary authority (i.e., West Germany) would “not agree to go back,” he told the European Parliament. For this reason, the profile and competences of a European central bank would have to take as their model “the current status of the Bundesbank,” i.e., West Germany’s own.

Against Individualism

Clearly, we do not mean to suggest a total identity between Delors’s socioeconomic vision and ordoliberal theoretical precepts. Indeed, on several occasions Delors expressed his autonomy from them. Consider, for example, the question of the budget deficit and its proper level. Despite his opposition to member states resorting to “financing of budget deficits through monetary creation,” as he told the Comité d’action pour l’Europe on November 23, 1989, his position was not the same as the (rather stricter) West German claims.

He believed that it would be wrong to establish “overly strong budget constraints.” For Delors, the level of deficits remained “a matter to be assessed nationally,” which could not be judged mechanically and abstracted from the specific context. In this sense, he hypothesized a Golden Rule that would authorize deficit spending if it was aimed at financing investment. More broadly, Delors declared his opposition to collapsing overall economic policy into “monetary and budgetary aspects alone,” for other considerations also had to be made.

The fact remains that Delors’s clear aversion to the social model and even the anthropology expressed by Reaganism, Thatcherism, and the neoliberal-monetarist culture hegemonic in the English-speaking world reflected a substantial affinity with some of the most characteristic elements of the Freiburg School–inspired German liberal tradition.

Underlying this different attitude is perhaps the anti-atomistic and communitarian inspiration that distinguished this latter, starting from the postwar journal ORDO. Indeed, rejecting the classical atomism of the liberal tradition — that which prompted Thatcher’s assertion that “there is no society, only individuals” — ordoliberalism and its “economic humanism” espoused a quasi-feudal and organicist-inspired vision of society.

In the name of free competition, ordoliberalism surely did reject the intermediate bodies between individual and state (trade unions, associations, etc.) connected to the struggle over redistribution in industrial society. Yet, it does value as a “source of social integration” those “traditional” social bodies that respect a property-based order and express what Alexander Rüstow called a spontaneous “hierarchy growing according to nature.”

This “community”-inflected variant of the market economy, strongly influenced by the social doctrine of the Church and nineteenth-century Catholic corporatism, would seem to establish a particular closeness between this branch of German liberalism and the convictions of a Christian-socialist of personalist inspiration such as Delors.

He was, indeed, critical of the radically individualist ethic promoted by Anglo-American neoliberalism, accusing it of blurring the “dialectic between man and society” and eroding those institutions “charged with giving man a structured place” within the social collective. The European Commission chief’s attitude toward the fundamentals of the Freiburg School’s “rule-based liberalism” can thus be explained with reference to the obvious conceptual and even semantic similarities between (a) the ordoliberal framework of high competitiveness embedded within the shell of traditionalist communitarianism, and (b) the “competition-cooperation-solidarity” triptych that Delors set at the basis of his own “social Europe” project.

A Gamble That Didn’t Work

From what has been said so far, we see not only Delors’s proximity to the main planks of the West German “social-market economy” — albeit in the “compromise-based” form it took on in the three “glory decades” of postwar growth — but also a kind of unawareness of the side effects that they would have on the overall social model. More specifically, Delors seems not to have taken due account of the problems of compatibility between the core elements of the ordoliberal social model and the conditions that made viable his preferred social-democratic social model.

In the specific context of the postwar social-market economy, a social-democratic project could bear effect thanks to the bargaining power of the world of labor — supported by both social-democratic constitutionalism and the Bretton Woods order. But once that balance between capital and labor broke down, the international monetarist turn in the late 1970s helped rebalance the compromise crystallized in the West German model, in favor of the ordoliberal component and its insistent anti-inflationary focus.

In short, within an economic constitution with a strong mercantilist bent, mainly oriented toward price stability, a social-democratic project had extremely narrow room for maneuver. The constraining of domestic demand, which ordoliberalism theorized as a means of defending West Germany’s external competitiveness, would indeed negatively impact the bargaining power of the working class, translating the imbalance between the internal and external components of demand into an imbalance in the power relations between capital and labor. Yet, despite the political consequences of the anti-inflationary paradigm, Delors nonetheless upheld “durable price stability” as the main parameter for evaluating social models, thus making this into a sort of “constitutional totem” for Europe itself.

The transposition onto the European level of ordoliberalism’s vision of stability, combined with the stronger mobility of factors of production and the weakened regulatory and redistributive capacity of national public authorities, resulted in an environment strongly focused on market competitiveness. In all this, Delors’s much-vaunted “social” Europe could only end up structurally weakened.

In a legal context aimed at ensuring maximum compliance with the “negative” dimension of free-trade integration, but not similarly guaranteeing a positive “leveling up” of rights and standards, the measures designed to enforce a European social policy end up “looking a bit like the poor relation,” as Alessandra Bitumi puts it. Article 136 of the Treaty Establishing the European Community itself states that the implementation of social policies must not jeopardize “the competitiveness of the Community economy,” and expects that the harmonization of social systems will be the product of the “functioning of the common market.” Hence, in the framework of the EU signed at Maastricht in 1992, social rights are an accessory, logically subordinate to economic necessities.

As Delors himself stated, he was aware from the outset that the operation he attempted as Commission president from 1985 onward — i.e., reviving the integration process by means of the single market — was a challenge. It was, he claimed, a wager made moving “from a state of necessity, and in a climate in which the favorable winds were on the side of deregulation and liberalism. No doubt, like a sailor, it was necessary to take advantage of the favorable winds.” But, as Mark Mazower points out, “Delors gambled that Europe could enjoy both capital liberalization and enhanced welfare. He would turn out to be wrong.”

It would seem, then, that Delors’s thinking suffered from excessive faith in functionalism — an approach to integration based on the common European management of state functions and the dynamism that this was supposed to unleash. Failing adequately to consider the constraints inherent in the ordoliberal social model, and the fallout of the single currency-without-a-state that was built after Maastricht, “Delors’s project failed to deliver on its promises of a just Europe,” Isidoro Davide Mortellaro points out. Talk of a “social Europe” was thus reduced to an — albeit important — “motivating narrative” for the old continent.

In the 1980s, a certain measure of idealism and enthusiasm was necessary to bring the integration process out of the doldrums — and the “social” idea helped provide it. But without adequate political and constitutional bases providing the levers to implement such a policy, Delors’s moral commitment to European solidarity could not be made a reality.