2002 European Community Studies Association-Canada 5th Biennial Conference Toronto, Canada May 31-June 1, 2002 Can Neo-Corporatism Survive the European Union? (And Can the EU Survive Neo-Corporatism?) Paul S. Adams University of Massachusetts-Amherst Introduction While Philippe Schmitter dubbed the 20th Century the “Century of Corporatism”, the future of corporatism in the 21st Century is certainly threatened. One of the strongest threats to corporatism in practice may be emerging from the once remarkably stable neo-corporatist regimes of Western Europe as they economically and politically integrate within the European Union (EU). As the EU takes on more and more bureaucratic, regulatory, economic and political functions, the individual national governments may have far less ability to regulate their own economies, much less support and implement neo-corporatist institutions and processes. As more economic and social policy is decided in Brussels versus Berlin, Vienna and Stockholm, the supranational challenges to neo-corporatism appear to be significant. European integration seeks to adjust individual national economic and political structures to a more uniform Europe-wide economic system. As traditionally neo-corporatist states become more deeply conformed, committed and integrated within the EU, it is clear that the pressure to abandon or significantly scale back neo-corporatist institutions and processes will increase. This paper shall focus upon two distinct elements of the future of neo-corporatism. First, the paper shall assess the effects of European integration upon neo-corporatism in both theory and practice. Despite distinctions amongst neo-corporatist regimes, it will be argued that European integration has had a significant impact upon all neo-corporatist states and their respective institutions and processes. Along with concurrent pressures of globalization and structural economic change, the future of many long-standing and stable neo-corporatist structures remains in doubt. Second, the paper will explore the potential for neo-corporatism to persist in an integrated Europe outside of the traditional auspices of state sovereignty and policy-making. Though neo-corporatism at the state level is being quickly eroded by EU-level (and global) challenges, the outcomes are not as pessimistic for neo-corporatism as one might suggest. Neo-corporatism at the EU level is one potential path for the future. Many of the structures currently utilized exhibit strong neo-corporatist qualities that may be products of both the influence of neo-corporatist states within the EU, as well as political and economic pragmatism of other EU states seeking solutions to Europe-wide issues. Further the EU experiment with subsidiarity and federalism may allow for potential forms of subnational neo-corporatism worthy of study and debate. In conclusion, the future of neo-corporatism vis-à-vis the European Union may not only be a one-way street of integration overcoming national neo-corporatist economic structures. Recent political debate and anti-EU sentiment in nations such as Austria, France, Netherlands, and Sweden suggests that neo-corporatist and statist policy-making may also be part of the greatest challenge facing the continued widening and deepening of European integration. The ability of the EU to subsume national structures of economic regulation is not necessarily permanent or complete and may provide political limitations upon further widening and deepening of European integration efforts. Corporatism & Neo-Corporatism: Assumptions Sovereignty and Interventionism There are three assumptions shared by virtually all theories and definitions of corporatism (including neo-corporatism) that are critical to this research; the corporatist state possesses relatively absolute internal sovereignty, the state is decidedly interventionist in society, and the state has identifiable external sovereignty. For the state to organize, recognize, subsidize and incorporate interest or social groups, the basic foundation is that the state must be the ultimate domestic political authority, what as Alan Cawson defines as “the highest level of collective social organization”, and that it must possess the capability, authority and legitimacy to enact and enforce economic, social and public policy. A. Cawson, Corporatism and Political Theory (Oxford: Basil Blackwell, 1986) pp. 66. Corporatism, unlike pluralism, also requires the existence and maintenance of a powerful and dirigiste state role in state-society relations. It is not only internally sovereign, it is interventionist in regularly using that internal sovereignty to shape, coerce and manage domestic social, economic and interest groups’ behavior. Theories of corporatism are replete with acknowledgments of not only the assumption of internal sovereignty but also with the regularity in which the state utilizes its monopolistic power to regulate and manage the social, economic and political interests of the society. As Wiarda has stated regarding the relationship of state and society: Each of these groups (corporatist units), in order to function legitimately and to bargain politically in the system, had to have ‘juridical personality’ or right to existence recognized by the state; each existed in a contractually defined relationship to the state H. Wiarda, Corporatism and Comparative Politics: The Other Great “Ism” (Armonk, NY: M.E. Sharp, 1997) pp. 59. Schmitter’s well-known and criticized definition of corporatism also displays the inherent assumption of internal state sovereignty since its takes for granted that the state grants a “deliberate representative monopoly” to corporate units in exchange for “certain controls”. David Collier and Ruth Berins Collier argued that the majority of early corporatist analyses essentially treat corporatism as a form of state-sponsored organization of state-society relations through “structuring, subsidy and control”. D. Collier and R. Berins Collier, “Who Does What, to Whom, and How: Toward a Comparative Analysis of Latin American Corporatism” in J. Malloy, ed., Authoritarianism and Corporatism in Latin America (Pittsburgh: University of Pittsburgh Press, 1977) pp. 493. Historically, corporatist regimes institute such structures, subsidies and controls through formal and legal relationships between the state and incorporated units. It should be noted that many corporatist and neo-corporatist regimes often heavily rely upon informal and customary relationships as well the formal institutional ties between state and societal interests. The formal and legal relationships may take innumerable forms but all share the necessity of a large, directorial and interventionist state role in the economy and society. In many states, the incorporated groups are subsidized by the state. Business or industrial interests may receive tax credits, direct product subsidies, market protection, and other forms of state-sponsored monetary and trade benefits. Unions and labor interests receive direct subsidies, directed social welfare benefits, state-guaranteed pensions, and access to other social services. Farm interests may earn crop subsidies, protection from foreign products and price guarantees. Interests are also often guaranteed representation in bureaucratic, legislative, economic, social, and executive policymaking institutions. In Austria, for example, the peak labor organization (ÖGB) is legally guaranteed representation on the Joint Commission for Wages and Prices, a formal and permanent bureaucratic institution. E. Tálos, “Corporatism – The Austrian Model” in V. Lauber (ed.) Contemporary Austrian Politics (Boulder, CO: Westview Press, 1996) pp. 110-112. In Switzerland, peak associations representing labor, industry and agriculture are constitutionally provided with representation on consultative and legislative committees through which all salient legislation must pass. However, corporatism is not merely about protecting and providing services or guaranteeing representative monopolies to the incorporated groups. In return for the state subsidies, recognition, representation and protection, the groups are explicitly engaged in assisting the state to carry out its policies and programs. Often the incorporated groups are the institutional methods by which the state can guarantee conformity, loyalty and adherence to state policies and laws, as well as a general social stability and national consensus regarding economic or social policy. Within the innumerable examples of how the corporatist state controls, subsidizes and structures incorporated units is the assumption that the state is capable and willing to actively manage wages, prices, imports, exports, taxes, monetary and fiscal policies, social welfare systems, agricultural trade, subsidies, pensions and other elements of social and economic planning. Corporatism requires a highly interventionist state that is able to tax, spend, subsidize, protect, provide, sustain a significant welfare state and achieve the goals of pursuing a national economic, social and political interest. Unlike pluralist or neoliberal regimes, corporatist systems require the state to be an active and interested manager, director and final arbiter. Where pluralist states may merely “referee” the struggles amongst societal and interest groups and neo-liberal states leave much of the economic planning to the vagaries of the market, corporatist regimes are expected to have the state deeply enmeshed in both economic and social policy. The state is a powerful and regulatory participant in the struggle to make policy, not merely an administrator of policies debated and decided by others. As Noel O’Sullivan has stated “…the role of government is highly active and not merely passive or reactive…the division between state and society is systematically contravened”. N. O’Sullivan, “The Political Theory of Neo-Corporatism”, in A. Cox and N. O’Sullivan, eds, The Corporate State: Corporatism and the State Tradition in Western Europe (Cambridge: University 1988) pp. 7 The legitimacy of the corporatist regimes also rests squarely upon the assumption that interests are incorporated under the auspices of the state in order to achieve economic and social benefits that will be enjoyed by or benefit the entire state. Under these conditions, corporatism clearly requires that states maintain some semblance of external sovereignty to be able to identify what policies and acts enhance or protect national interests. As Peter J. Katzenstein has suggested, states (especially small Western European states) facing a world market in which they are handicapped by their market size and competitive disadvantage have used neo-corporatism to produce a national consensus regarding economic and social policy that provides internal stability as well as external profitability. To accomplish this task, it is already assumed that the state is committed to the idea of a national economy and a national interest and the incorporated units therefore expect and require the state to be able to identify and manage both. Corporatism therefore rests upon a very nationalistic sense of identity for the incorporated units that pledge loyalty and allegiance to both the state and the national interest vis-à-vis corporatist institutions. The assumptions regarding internal and external sovereignty are not exclusive to theories of the corporatist state; most state-level theories of governance share similar foundations. Pluralism, authoritarianism and even Marxism regularly assume that states possess both forms of sovereignty and act as the ultimate political and economic authority within a given territory and society. While Marx saw state sovereignty as merely a vessel by which the vanguard of Communists would be able to transform the bourgeois industrial state into a proletarian utopia from which the state would wither away, it still assumed that state sovereignty would be a critical feature. However, from the perspective of traditional corporatism, external and internal sovereignty are fundamental assumptions of the state. Corporatism differs from neo-liberalism and pluralism in that it requires a far more interventionist state in regulating and organizing social and economic interests of society. The ability to subsidize, control or structure such interests is costly in both resources and efforts, but is assumed to serve a greater national interest. Combined, corporatism rests upon some rather well known and traditional conceptions and assumptions regarding the nature of states; internal sovereignty, external sovereignty and interventionism. However, the combination of these three specific characteristics of the corporatist state suggests that under conditions that threaten internal sovereignty, interventionism and external sovereignty, such regimes may be inherently susceptible to significant pressure and instability. Globalization and regional economic integration may present just such problems due to their systematic challenges to internal sovereignty, external sovereignty, and state-sponsored economic and social intervention. The processes of globalization and regional integration have seriously undermined and eroded the three core assumptions underlying the corporatist (and neo-corporatist) state, putting the future of state-level corporatism in peril. Disaggregating Corporatism & Neo-Corporatism At this point it may be necessary to distinguish between the two primary variants of corporatism. During the 1970’s and early 1980’s and the emergence of the first major wave of corporatist scholarship, Philippe C. Schmitter provided a useful analytical distinction between state and societal forms of corporatism in his groundbreaking article “Still the Century of Corporatism?” P. Schmitter, “Still the Century of Corporatism”, in P. Schmitter and G. Lehmbruch, editors, Trends Towards Corporatist Intermediation (London: Sage Publications, 1979) State corporatism generally referred to regimes and institutions that exhibited top-down or authoritarian organization primarily linked with states of Southern Europe and Latin America. Wiarda has suggested that due to their particularistic cultural histories, these regimes typify a form of “organic-statist” corporatism where the state plays a dominant role in organizing and controlling the component parts of “the state” (which is meant to represent all social and economic groups). Primarily based upon their Catholic, Iberian and neo-feudal tradition, numerous Latin American states clearly fell into the corporatist category. The regimes of Trujillo in the Dominican Republic, Arias in Panama, and Stroessner in Paraguay typified corporatist organization based primarily on the three traditional Latin American corporate units; the church, the military and the oligarchy. More progressive or populist regimes such as the Vargas regime in Brazil, Perónist Argentina, and the PRI in Mexico also incorporated a wider range of interests that sometimes included labor unions, peasants, indigenous peoples, women’s organizations and other societal groups. The other typology, societal corporatism, represented a more democratic, bottom-up form of corporatism primarily practiced in Western Europe. In these corporatist states, the incorporated units typically play a larger role and the state is less dominant under a more democratic system. Though even in neo-corporatism the “most important institution…is the state”. M. Georges, Euro-Corporatism? Interest Intermediation in the European Community (Lanham, MD: University Press of America, 1996) pp. 6. In Scandinavia, Switzerland, Austria, the Netherlands and other Western European states the most notable corporatist developments were a series of early and mid 20th century legal reforms that shifted the conflict between labor and capital from outside to inside state auspices. The process, while not nearly as comprehensive as in the Southern European cases of fascist Italy, Spain and Portugal, was decidedly corporatist in forming a formal bureaucratic relationship between labor, capital and the state. These corporatist reforms were intended to alleviate the growing costs and disruptions of labor-capital disputes (such as general strikes) that debilitated national economies. The adoption of corporatist structures of representation promoted consensual consultation and bargaining between labor, capital and the state on issues such as wages, pensions, working conditions and social policy. This pattern would mature in the postwar era and would become central to many Scandinavian and Continental European states’ management of labor-capital-state relations, now regularly labeled as neo-corporatism. By the late 1980’s, corporatism and neo-corporatism in both practice and theory were well-established regimes and analytical tools for describing a particular type of state-society relationships that were clearly not pluralist in nature. However, that decade also signaled the beginning of a number of significant transformations in domestic, regional and international systems that have fundamentally challenged the bases of corporatism and neo-corporatism in both practice and theory. Neo-Corporatism and Change: Incorporating Interests Change that occurs within corporatist and neo-corporatist states, or to the international context of the state in the international order are potential sources of challenge and contestation to the traditional or preexisting institutions of governance. In any regime of governance (corporatist, pluralist, authoritarian or otherwise), domestic changes in population demographics, economic organization, modes of production, political culture, religion, or public opinion, may permanently alter political institutions and practices. Further, the state’s relative position vis-à-vis other states and the international economic and political system may also instigate changes at the domestic level. This illuminates a significant element of corporatist theory relating to the concept of change. Specifically, corporatism is concerned with several critical questions primarily revolving around how new groups become incorporated and how corporatist arrangements evolve over time. Unlike pluralism, which allows unencumbered competition amongst societal, economic and political interests, corporatism and neo-corporatism regulate, moderate and control the competitive process by integrating interests under the auspices of state political institutions. While pluralism allows a fluidity of interest articulation and intermediation, corporatism and neo-corporatism limit or monopolize state-society relations. Theories of pluralism generally conceptualize change as tautological with the nature of pluralist competition which is imbedded in the assumption that as new interests emerge and evolve they will enter and compete in an interest market with little or no state intervention. Pluralist systems are engineered to rather easily and gradually absorb and integrate changes in economies, societies and polities with relatively minimal disruption. In the United States for example, the decline of labor unions as dominant interests has taken place over a thirty-year span. However, corporatism may not normally evolve in such a fluidic fashion since interests do not freely compete and new interests are not guaranteed the equality of opportunity to participate until earning state recognition. Therefore change in corporatist and neo-corporatist systems may fundamentally differ in both speed and procedure than in pluralism. The positional relationship of the state within the international political and economic system is also one that affects the evolution of corporatism. States utilize corporatism and neo-corporatism as explicit tools of promoting national stability and national political and economic interests. The emergence of corporatist and neo-corporatist regimes, while argued by many corporatist scholars to be based on socio-cultural tradition, nonetheless has been synchronous with changes in the international order. Hence, changes in the international political and economic order may also affect the process of change in corporatist and neo-corporatist systems. Corporatism and neo-corporatism were often adopted as specific strategies to address economic and social crises of the state and its ability to defend the national interest in the international system. This is a primary argument of Katzenstein in Small States in World Markets in which Austria and Switzerland institutionally choose a neo-corporatist arrangement to better meet the challenges of the world economic order. However, if the international political, social and economic environments have fundamentally changed, the efficacy and utility of existing domestic corporatist regimes may no longer be assured. Wiarda has suggested that the evolution of corporatist arrangements are a combination of a society’s culture and history as well as of cultural and social changes that occur with modernization, economic development and industrialization. H. Wiarda, Corporatism and Comparative Politics (Armonk, NY: M.E. Sharp, 1997) pp. 94-126. This brings into stark relief that nature of corporatist change versus change in pluralist states. While pluralism assumes a fluidity of interest articulation, representation and competition, corporatism rests upon the foundation that significant social upheavals, economic crises or political discontent instigates changes in corporatist structures or from one form of corporatism to another. The development of modern neo-corporatism primarily stems from the emergence of the unionization of industrial labor in Northern European states and the economic upheaval following a number of recessions, general strikes, work stoppages and general social unrest in the early 20th Century. This system was reestablished in the 1940’s and 1950’s with the massive tasks and pressures of rebuilding national economies destroyed during World War II. In neo-corporatist regimes, change is neither fluid nor gradual. The expansion, modification or creation of the neo-corporatist franchise is usually done either during a social or economic crisis, or after a prolonged and increasingly costly socio-political struggle. Another factor in the process of change within corporatist systems is not only the expansion of incorporation but also the difficulty in the contraction of incorporated interests. Much like the dilemma facing Major League Baseball in the United States, the ability to unincorporate or disenfranchise existing units is often institutionally difficult despite the units’ unprofitability or limited utility. Once an interest is incorporated and granted its representative monopolistic “seat at the table”, it is unclear as to whether the franchise can be withdrawn even with domestic and international changes that no longer make such a representative monopoly seem reasonable. This may in itself lead to greater social and economic dissatisfaction in which new and emerging interests are precluded from participating while older, perhaps smaller, less important and shrinking interests remain over-represented. This distinction between corporatist and pluralist conceptions of change is central to understanding emerging challenges to states and their domestic political institutions. Corporatist and neo-corporatist regimes are far less responsive to gradual changes and pressures and tend to require a great crisis to evolve. Further, due to the less fluid structures, regimes and institutions, corporatist and neo-corporatist states may be far more susceptible and intensively affected by new global challenges than pluralist states, meaning that the very inflexibility of corporatist and neo-corporatist regimes leads to crisis and instability far more quickly and intensively than in pluralist regimes. Hence, in an era of significant and growing global and regional economic challenges to all states and their domestic political institutions, corporatist and neo-corporatist states will likely be amongst the most notably and intensively challenged. The Challenges of European Integration to Neo-Corporatism Political and economic developments of the late 20th and early 21st centuries have illuminated a number of trends that may significantly challenge the foundations of neo-corporatism in both practice and theory. This research primary focuses upon the challenges to neo-corporatism stemming from the process of European integration. The four main concepts and assumptions of the neo-corporatist state addressed in this research were: 1) the non-fluid and less gradual process of change affecting what units are included and excluded from incorporation, 2) the directorial role of the interventionist state, 3) internal sovereignty, and 4) external sovereignty. The challenges facing neo-corporatist regimes by European integration significantly undermine all four of these underpinnings and will fundamentally challenge neo-corporatism in both theory and practice in the 21st Century. Challenges to Incorporation European integration is challenging neo-corporatist structures, institutions and processes by fundamentally changing the roles, influence and importance of existing incorporated societal and interest groups. As existing societal groups wane in importance and representative authority, neo-corporatism’s ability to evolve and adapt is limited by the inflexible and non-gradual process of change characteristic of corporatist and neo-corporatist institutions and processes. Western European neo-corporatist arrangements are becoming less salient and incorporative of significant social cleavages than in the past. The neo-corporatist arrangements were specifically instituted to address the major social cleavages of the early and mid 20th century, namely the division between trade unionism and industrial capital. Further expansion of neo-corporatist enfranchisement typically included small businesses and farmers’ organizations. In many Western European states, these primary units (industry, small business, unions and farmers) are the pillars of neo-corporatism in practice. While the neo-corporatist arrangements and institutions were extremely effective at internalizing these disputes within state coordination, the changing nature of the Western European economy suggests that the cleavages once represented by the neo-corporatist units are no longer as significant as they once were. This has been identified in numerous trends relating to the emergence of post-industrial economics and post-material politics. The emergence of a post-industrial economy has been typified by the decline in importance of both labor unions and industrial production. As Europe transforms into a service and information dominated economy, the idea that the primary economic schism exists between unions and industry is obsolete. Consider Austria, whose union density (employed union members as % of total labor force) dropped from 62% in 1970 to 43% by 1993. C. Kunkel and J. Pontusson, “Corporatism Versus Social Democracy: Divergent Fortunes of the Austrian and Swedish Labor Movements” in West European Politics April 1998, v21, n2, pp. 5. While white collar and public service unions are far more numerous in Western Europe than in North America, they are still often lumped into neo-corporatist arrangements dominated by the established and entrenched industrial trades unions that were the primary bastions of unionism in past decades. Even in Europe, white-collar employment does not enjoy the level of unionization or membership as traditional manufacturing and industrial sectors. Further, blue-collar unions, due to their relative success and the overall standards of living, are hardly representative of actual low-income and at-risk workers. Similar to the United States, industrial union wages are well above average and union members are typically middle income with primarily middle-class interests. Yet these union interests are expected to both represent and guard the interests of the social welfare, wages and benefits system. As Emmerich Tálos suggests, this structure may further reproduce and magnify other social inequalities not represented in the neo-corporatist institutions. E. Tálos. “Corporatism – The Austrian Model” in V. Lauber, ed., Contemporary Austrian Politics (Boulder, CO: Westview Press, 1996) pp. 117. The loss of representative efficacy in neo-corporatist regimes of Western Europe also stems from the emergence of new social movements and post-material politics not based upon the traditional labor/capital/small business/agriculture pillars. Issues such as the environment, women’s and children’s rights, human rights, civil liberties, and immigration were traditionally never included in any form of neo-corporatist arrangement since these issues were considered, at least in the past, less significant than the dominant social questions between labor and industry. Yet as labor and industry become far less salient to the economy and to the current issues in political contestation, there has been little attempt to extend the franchise to new interests. First, the existing incorporated units fear losing their powerful and over-representative monopolistic influence and often work against the expansion of corporatist arrangements to new groups. Unions have been especially vigilant in not letting the franchise extend to non-unionized, low-income service workers (many of whom are foreign guest workers, making exclusion even easier). Since the late 1960’s, neo-corporatist regimes have become far less representative of the major and important cleavages in the economy and society. Yet, the neo-corporatist institutions and procedures still possess strong institutional power to regulate and control economic, social and trade policymaking. The result has been a noticeable instability in many states’ political party systems and the decoupling of many traditional alliances between groups and specific parties. As political parties compete for new voters whose issues differ from those in the traditional neo-corporatist franchise, party allegiance has declined and there have been some remarkably surprising election results. In Switzerland and Austria populist, right-wing, and nationalist parties like the Swiss Peoples’ Party (SVP) and the Austrian Freedom Party (FPÖ) garnered significant support from union voters who abandoned their traditional social democratic party alliances primarily over issues of immigration, European integration and the belief that the populist/nationalist parties would be far more likely to continue to uphold their state-sponsored representative and neo-corporatist monopolies. P. Adams, “Nationalism and European Integration: The Rise of Nationalist Parties in Austria and Switzerland”, 42nd Annual International Studies Association Convention, Chicago, IL, 2001. The traditional pro-union parties lost labor support for several reasons but most notably due to their relative inability to reconcile the emergence of post-industrial and post-material interests within their coalition frameworks based on the traditional neo-corporatist relationships. The paramount goal of neo-corporatist arrangement was to promote consensus on the most troubling and demanding social schisms, yet the very lack of change within neo-corporatist structures is undermining any ability to achieve consensus on contemporary social, economic and political cleavages. The emergence of post-industrialism and post-materialism in Europe is linked to the emergence of a highly interdependent and global economy that has shifted industrial production away from certain regions to others while concurrently transforming the formerly industrial states of Europe into technological and service economies. This suggests that the existing neo-corporatist patterns of enfranchisement are under pressures to evolve or change. These pressures are more likely to cause political instability in neo-corporatist systems precisely because of their relative inflexibility and lack of fluidity in representing interests within the state. The trend in both Western Europe suggests that the regions are becoming more pluralist, and that pluralism can, perhaps, better represent the social interests, disputes and cleavages of the 21st century. The integration of neo-corporatist economies into the European Union has only exacerbated and intensified this process. The inherent goals of creating a single market are driven by the forces of neoliberalism and pluralism, simultaneously creating new pan-EU interests while undermining and marginalizing preexisting state-level neo-corporatist institutions, organizations and structures. Further the universe of post-material politics clearly includes significant elements of the integration debate regarding issues of national versus European identity, immigration and social policy, and protection of culture (as seen recently in France). While the preexisting neo-corporatist pillars in states such as Austria, Sweden, Germany, Switzerland and the Netherlands were clearly being eroded by the emergence and predominance of post-material politics and post-industrial economic, the integration of the European economies into the EU has quickened and intensified this decline. Challenges to the Interventionist State A second theoretical foundation of neo-corporatism is the assumption that the state must play a directorial and interventionist role in both the economy and state-society relations. Neo-corporatist theory rests upon the premise that the state internalizes socio-economic divisions through utilizing legal, regulatory, economic, monetary and fiscal policies to subsidize, provide social policy and direct economic policymaking. However, the global and regional economic pressures to adopt neoliberal economic policies are a direct challenge to the interventionist assumption. Neoliberalism demands a smaller state role in the economic arena allowing more competition and regulation via market forces. In Europe, the ability of the state to unilaterally intervene in the economy is limited by both neoliberalism and integration within the European Union (EU) as well as through the globalization of the world economy. This has inherently shifted states away from many of the fundamental elements of dirigisme and interventionism. The shrinkage of the welfare state, privatization of formerly nationalized industries, and the reduction and elimination of state subsidies to many economic interests is taking many neo-corporatist states in Western Europe to a decidedly neoliberal future. As Schmitter and Streeck suggest, neo-corporatism seems to be in decline and heading towards a more American-style future of neoliberalism and “disjointed pluralism” P. Schmitter and W. Streeck, “From National Corporatism to Transnational Pluralism: Organized Interests in the Single European Market”, in Politics & Society, 1991, v19, pp. 133-164. These reforms, while intended to make the states more efficient and competitive in the European and world economic systems, also have the consequence of undermining some of the most elemental methods for institutionalizing neo-corporatism. The adherence to the regional trade regime limits the ability of the European neo-corporatist states to perform their traditional roles. The EU promotes adjustments and conformity amongst diverse members’ economic, social and monetary policies. As policymaking and integration continues at the EU-level in Brussels, state-level neo-corporatist subsidy, representation and protection in Vienna, Stockholm or Berlin becomes either obsolete or prohibited under EU rules. The current trends suggest that neoliberalism is quickly supplanting most other forms of state-economic relations through a process of domestic pressure to compete internationally, regional pressure to integrate into economic trading blocs, and international pressure to conform to global trade regimes such as the WTO. However, these processes are far more than just mere neoliberal reform efforts being carried out by the states. There has been a significant transference of economic, monetary and policymaking authority to the supranational governance of the EU. The EU is more than a mere advocate of neoliberalism; it is an agent of power and influence over member states and their sovereignty. Challenges to Internal Sovereignty As noted earlier, one of the most fundamental assumptions underlying neo-corporatism in both theory and practice is the existence of a rather absolute internal state sovereignty. Corporatist and neo-corporatist regimes are required to play an interventionist and directorial role in state-society and state-economy relations. The foundation for corporatism and neo-corporatism rests upon a rather simple inherent assumption that the state is the ultimate political, economic and social power over a given territory and population. As Saskia Sassen states, “rule in the modern world flows from the absolute sovereignty of the state over its national territory.” S. Sassen, Losing Control? Sovereignty in an Age of Globalization (New York: Columbia University Press, 1995) pp.3. The globalization and regional integration of the world’s economies, societies and polities is most notably and visibly a growing challenge to state sovereignty in both theory and practice. This is hardly a new idea as studies of interdependence reach back into the 19th and early 20th centuries (and even the 16th century, if one adheres to the Wallerstein world systems approach). However, the pace, intensity and scope of interdependence, globalization, regional integration and other transnational phenomena of the late 20th and early 21st centuries have clearly made the impacts and transformations far more critical and analytical interesting. Neo-corporatist regimes of Western Europe are being sapped of sovereignty by both the WTO and the even more ambitious supranationalism of the European Union. Clearly the idea that socio-economic policies can be made at the state-level rather than the EU-level has drastically changed over the last thirty years. The ability of neo-corporatist states to manage and direct their national economies may be more façade than fact. The structures of the EU are highly empowered to override domestic laws and institutions; the broad powers of the European Commission and the binding legal ability of all individuals, firms and actors to sue member states under the auspices of the European Court of Justice (ECJ) clearly undermines the conception and utility of state-centered sovereignty. The EU, however, is more than a mere tool of economic integration. It clearly has a social and political integration ethos that endeavors beyond the creation of a single market. The globalization of culture, society, norms and behavior is also fundamentally challenging neo-corporatist and corporatist institutions. The democratization and neo-liberalization processes are part of the larger process of globalization that is also attempting to construct a more global conception of culture, rights and norms. Consider the arrest and trial of Augusto Pinochet in the United Kingdom and Spain for his “crimes” committed while the president of Chile. The global human rights regime and its institutions, such as those under the Hague Convention, directly challenge the notion of absolute state sovereignty. Ultimate political and economic power over a territory may no longer be tied to state-level government structures; rather sovereignty has been ceded, bit by bit, to supranational and international regimes and institutions. While sovereignty has always been a dynamic and flexible concept, in both theory and practice, the globalist and regional integrationist trends of the late 20th and early 21st century seem to have more intensively and fundamentally challenged the core assumptions of state sovereignty in both theory and practice. However, neo-corporatist states may suffer the effects of sovereignty erosion far more than other regime types specifically due to the reliance upon such a strong state presence and role in state-society and state-economy relations. In pluralist regimes, where the state is assumed to play a far less important role in regulating social and economic competition, loss of sovereignty, while certainly occurring, has a far less immediate and tangible impact since the state already has a lower threshold of interventionist duties. Hence the evaporation of state sovereignty likely affects pluralist regimes less noticeably and in all likelihood less frequently. Corporatist systems require the maintenance of a directorial state, yet as sovereignty ebbs, the ability of the state to perform its numerous interventionist and monopolistic duties evaporates. Corporatist and neo-corporatist institutions, in a state with fleeting sovereignty, become both ineffective and inconsequential, often leading to domestic political disillusionment and perhaps even instability. Challenges to External Sovereignty Another feature of the integration of Europe is the fundamental erosion of the member state’s ability to identify and pursue a national interest. The raison d’etre of neo-corporatism in practice rests upon the assumption that the state not only can effectively manage the social and economic issues of the society but that it can identify what issues are of national political, social and economic interest vis-à-vis the rest of the world. Neo-corporatist regimes may, once again, be far more susceptible to erosion in external sovereignty than other regime types. Specifically, the state is assumed to have a monopoly of the loyalty of the incorporated units and elements of society upon which neo-corporatist institutions and processes are built. However, the forces of economic, cultural and political integration within the EU may significantly challenge the fundamental assumptions underlying the ideas of national identity, nationalism and national interest upon which the legitimacy of the state rests. Economic integration and interdependence have numerous impacts upon the ability of the neo-corporatist state to direct and manage a national economic interest. The growth in number and importance of multinational corporations (MNC’s) undermines the traditional notion that the state can incorporate business interests into an overarching national economic policymaking structure. As more domestic businesses become international businesses or subsidiaries of other international businesses, the ability of the state to incorporate those business interests is significantly weakened. Despite efforts by neo-corporatist states to limit some of the transnational effects of MNC’s and their domestic subsidiaries the Europeanization of capital, trade, finance and business erodes the ability of a state to incorporate business interests into any state-level economic policymaking regime. Neo-corporatism is especially susceptible to European economic integration primarily due to the integral role of domestic business and industry in the tripartite relationship between the state, labor and industry. Traditionally, neo-corporatism rested upon the belief that the three actors in the system, while sharing different parochial interests, at least share a common national interest of prosperity and stability. However, as industry and business have become Europeanized through the expansion of MNC’s, the expansion of foreign stock and property ownership, the transnational nature of investment capital and finance, and the more intense interdependence of the European trade and production network, the likelihood that businesses can espouse and share a common national interest has all but disappeared. As Robert Reich argues: There will be no national products or technologies, no national corporations, no national industries. There will no longer be national economies, at least as we have come to understand that concept. R. Reich, The Work of Nations: Preparing Ourselves for 21st Century Capitalism (New York: Vintage Books, 1991) pp. 3. There are notable examples, such as Daimler-Benz in Germany, whose interests clearly lie beyond the borders of the German state. Further, its significant merger with Chrysler undermines any notion that it has a primary interest in either American or German national economic interests; at best Daimler-Chrysler’s interests are global corporate interests serving stockholders, investors, clients and customers that span the entire globe. The process of Europeanization, while significantly affecting the industry and business components of neo-corporatist and corporatist regimes, also has a broader impact upon all elements and cleavages in society. European integration is often a primary target of labor and union organizations not only to the perceived loss of jobs and industries that may immigrate to lower-wage regions of the EU, but also because it undermines the representative effectiveness of trade unions within neo-corporatist systems. Hence the strong union turnout for the anti-EU parties in Austria, France and other European states. Labor unions, while somewhat secure and comfortable with guaranteed positions within domestic neo-corporatist arrangements, have great uncertainty about representation and interest articulation efforts at the European level. Neo-corporatist states, due to their inherent requirement of a highly developed sense of national interest and state-based identity are far more susceptible than pluralist regimes under such conditions. While pluralist regimes are also broadly affected by integration, the institutionalization of interests into neo-corporatist regimes places an even greater burden upon the state to effectively and legitimately represent and defend national economic, social and political interests. However, if national interests are no longer as definitive and secure as they were, neo-corporatism, as a method of interest organization and intermediation, will continue to loose both efficacy and legitimacy. The Next Century of Neo-Corporatism? The threats and challenges to neo-corporatism in the face of European integration seem insurmountable. The pressures to economically liberalize and regionally integrate undermine the four primary pillars of neo-corporatism in theory and practice. Neo-corporatist systems sacrifice fluidity and flexibility in interest intermediation and representation for national consensus and national interest. The European integration challenges to the states’ economies, polities and societies are transforming and reconfiguring the traditional social, economic and political interests undermining the very efficacy and representative capacity of the neo-corporatist structures and processes. The post-industrialization and post-materialism of Western Europe also pose significant dilemmas for the existing neo-corporatist relationships and institutions. The pressures to liberalize the economy and adopt a far less interventionist state model also undermine the abilities of the state to adequately manage and direct social and economic policymaking in a manner necessary to maintain the trappings and institutional controls of neo-corporatism in practice. Whether the pressures of neoliberalism stem from domestic business interests, regional trading blocs, or global trade regimes, the net effect is a systematic dismantling of the powers used by the state to manage and direct neo-corporatist systems. The supranational empowerment of the EU with regulatory and judicial authority over state-level policymaking is just a part of the overwhelming challenge posed to the sovereignty of the state in both theory and practice Despite the pessimistic tone implied in the focus upon the challenges facing corporatism in both theory and practice, there still exists a sizable opportunity for neo-corporatism in both theory and practice. First, even in consideration of the Europeanization transformations taking place, neo-corporatist regimes and institutions often display an inordinate ability to persist despite changes taking place around them. In this vein, neo-corporatism, despite the tidal wave of integrationist, neoliberal, and pluralist forces, will likely continue to play a significant role within regimes in Western Europe. One critical feature of the European Union, at least for the present, is that the EU has not adopted a purely neoliberal model of economic policymaking thereby allowing some state-level (including neo-corporatist and dirigiste) policymaking to continue. However, the longevity of such allowances is uncertain considering the continuing pace and scope of economic integration efforts. Clearly, to make Europe a truly unified and free market (at least internally) there would need to be a massive retraction of interventionist state policies including subsidies, protected industries, and state-ownership/management which are the underlying foundations of neo-corporatism in practice. So for at least the short-term, it seems as though neo-corporatism shall remain. Yet the pressures of and dysfunction of state-level neo-corporatist regimes are showing signs of instability in Sweden, Austria, Switzerland, Germany and the Netherlands. The rise of populist/nationalist parties, with a clearly anti-Europe rhetoric, may be indicative of growing disenchantment not only with the breadth and scope of European integration, but also the failure of existing state-level neo-corporatist interest intermediation structures and procedures to adequately reflect the changes of European polities and economies in an integrated and globalizing world. It is also ironic that the international organizations that may be promoting neoliberalism and pluralism as a universal model may themselves operate under quasi-corporatist patterns. For a good example of this type of research see M. Gorges, Euro-Corporatism? Interest Intermediation in the European Community (Lanham, MD: University Press of America, 1996) The EU itself is still in the developmental phase of creating and structuring its own interest intermediation institutions and procedures. There is some evidence that the EU is adopting a somewhat neo-corporatist model of interest representation and articulation. Hence while state-level neo-corporatism may be in decline, the opportunity for supranational neo-corporatism may exist. In addition, while there has been a trend towards supranational organization of the European economy, there have also been commensurate moves to delegate more authority to substate governments and actors. In the EU, this trend has been called subsidiarity, and is closely linked to the emergent popularity of federalism in regime design, including the future design of the EU. As states delegate more authority to both supranational and subnational levels, there is an increased opportunity for study of neo-corporatist structures at several levels, subnational, national and supranational. While the traditional neo-corporatist approach rested firmly upon the role of states in the realm of sovereignty and monopolistic interest intermediation, newer research will likely need to continue to address the existence and operation of corporatism at multiple levels of governance. Some recent studies, while skeptical of subnational corporatism, have nonetheless begun to address this potential expansion of corporatism in theory and practice. See Omar G. Encarnacion, “Federalism and the Paradox of Corporatism” and Anton Pelinka, “The (In)Compatibility of Corporatism and Federalism: Austrian Social Partnership and the EU” both appearing in West European Politics, v22, i2, April 1999. Despite the numerous challenges to neo-corporatism in both practice and theory, neo-corporatism will continue to remain a significant element of interest representation in many Western European states. Further, there is no conclusive evidence that the current process of European integration will necessarily reach a destination of Europeanism and the creation of a single regional economy, society and polity. Hence, the threats to state-level corporatism posed by European integration, while currently appearing as indefatigable, are clearly not deterministic of the future regional order. Member states and other regional, economic and social interests in the EU may very well begin to more seriously balk at the process, pace and methods of Europeanization and neoliberalism engendering a significant backlash or reorientation of the process. The effects of Europeanization may inspire significant retrenchment of nationalism (as in France) or infinite potential outcomes other than the utopian notion of a single Europe. In other words, neo-corporatism, while currently under duress, may in fact have some future revival depending upon the direction, pace and intensity of future integration processes. Bibliography and Suggested Readings Adams, Paul S. “Corporatism and Comparative Politics: Is There a New Century of Corporatism?” in Howard J. Wiarda, (ed.), New Directions in Comparative Politics, 3rd Ed. 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Boulder, CO: Westview Press, 1985 Collier, Ruth Berins and David Collier. “Inducements Versus Constraints: Disaggregating ‘Corporatism’” The American Political Science Review, v73, i4 (December 1979): 967-986. Cox, Andrew and Noel O’Sullivan (eds.). The Corporate State: Corporatism and the State Tradition in Western Europe. Cambridge: Cambridge University Press, 1988. Crepaz, Markus “An Institutional Dinosaur: Austrian Corporatism in the Post-Industrial Age” in West European Politics, October 1995, v18, n4, p64. Eatwell, John, Elizabeth Jelin, Anthony McGraw and James Rosenau Understanding Globalization: The Nation-State, Democracy and Economic Policies in the New Epoch, Stockholm: Swedish Ministry for Foreign Affairs, 1998. Encarnacion, Omar G. “Federalism and the Paradox of Corporatism” in West European Politics, April 1999, v22, i2, p90. Gorges, Michael J. Euro-Corporatism?: Interest Intermediation in the European Community. 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