Publisher web: Polity

The Political Economy of the European Union is an impressive analysis of the varieties of national capitalist models within the European Union. Not to be taken as an introductory text to EU policies, the book aims to demonstrate the relationship between economic activity coordination in the member states versus the pursued policies at the EU level. The argument is that, at times, divergence between the liberal approach of the Commission and the economic nationalist approaches of individual member states over-shadows attempts at further Europeanisation of economic governance in the EU.

While thorough in covering governance of product, financial and labour markets, this is not an easy read for those unwilling to explore institutionalist approaches to economic integration. The core theory of institutionalism stems from public choice analysis, and at times, omits the potentially larger role of structural factors in shaping EU institutions. Systemic questions of global processes and pressures underway with financial disintegration on the one hand, and power shifts in international relations, on the other, are underplayed.

McCann elaborately covers EU policies ranging from competition, to finance, banking, social, industrial, monetary union, and in general structural and macroeconomic policy coordination at EU level. Power games and national rivalries are discussed between the member states, as well as between EU institutions and individual countries. The chapters provide an excellent overview of fifty years of developments in economic governance rules, both formal and informal. In-depth case studies are exemplary; showing everything from the principle of mutual recognition to various judgements by the European Court of Justice questioning fundamental member states’ policies.

The arguments are swift to point to the mercantilist leaning of the member states, in opposition to the more Anglo-Saxon liberal leaning of EU level institutions. The impact of the Europeanisation process on individual member states is classified and measured according to ideological preferences for economic coordination structures, such as labour relations between social partners or public regulation and the role of the financial sector in the bigger economy. This kind of analysis bodes well of a varieties of capitalism exploration of the future of EU economic policy-making.

However, the book falls short of its ambitions for two fundamental reasons. One Firstly, the discussion focuses on the old EU 15, neglecting to attempt at least briefly to cover the five years after enlargement to the new member states. These new member states are now members of the Eurogroup as well as major players in the growth of intra-EU trade and internal market developments. Their influence and, vice versa, the influence of Europeanisation on their own economic transitions should be touched upon for sake of a more balanced reflection of the political economy of the EU.

Secondly Two, the book barley considers the impact of the recent global economic crisis on both the Europeanisation process as well as on the EU in general. The current debt crisis of the peripheral countries is, for reasons of timing, not debated, as its role in re-shaping the governance structure of the Euro area and Stability and Growth Pact. Again, the new EU 10 are missing; which felt profound economic shocks as a result of the European and global economic and financial meltdown. The EU model of liberal capitalism proved inadequate in addressing the needs of poorer and less developed countries on the EU’s periphery.

These two external developments have touched upon the ideology of the liberal EU institutions regarding financial liberalisation and macro-prudential regulation in the financial sector. Coordinated EU responses to the global economic crisis, such as fiscal stimuli or ECB intervention are omitted in the analysis. Developments such as these have called into question larger issues of social and labour market policies in the Union, as well as the ideology behind the entire Euro project. The European Social Model cannot be sustained at current levels due to external financing, debt and credit developments in the global markets. Public Finance is not discussed in the McCann book, an issue at the top of the EU economic agenda.

Shifts in power and macroeconomic imbalances in international economics are not addressed with relation to EU competitiveness vis a vis emerging markets. The Lisbon Agenda is mentioned, however developments have sped-up the pressures of economic competition world-wide. With the centre of economic gravity shifting towards the East, how is the EU responding in its institutionalist structures? This sense of missed timing puts the book into a more historical perspective on varieties of capitalist development in the old EU. It is a good overview of past developments as well an interesting summary of how the old European Union came to be but is limited to such a contribution.