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The origins of a flawed monetary paradigm in Europe: recurring patterns, regressive repercussions and the role of law
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Date
2020-09-22
Authors
Ball, Michael
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Publisher
University College Cork
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Abstract
The financial and Eurozone crises represented the culmination of approximately forty years of neoliberal economic policies. The financialised economic environment facilitated an unprecedented flow of capital and an unparalleled accumulation of private debt that would ultimately and, predictably, prove unsustainable. At the heart of that economic paradigm was the flawed understanding of the nature and operation of money and its interaction with markets and governments. This thesis is concerned with the manner in which the law facilitated that monetary conception. The legal historical analysis undertaken identifies the key components and theoretical foundations traditionally associated with the doctrine of monetary sovereignty and notes the cycle of monetary abuse associated with the production of currency that leads inevitably to economic instability. Moreover, the reconfiguration of public finances in Britain, in the seventeenth century, paved the way for the development of financial markets during a period of intense legal activism. The establishment of a political norm was established that would prioritise the property rights of government creditors, based on a legal conception of the naturalisation of markets, placing the interests of financial elites beyond the reach of the state insulating them from democratic challenge. Despite the brief abandonment of this form laissez-faire capitalism after 1945, it re-emerged in a more extreme form within the neoliberal paradigm. Those re-emergent values were incorporated into European Economic and Monetary Union (EMU). The legal architecture of the single currency, based on a flawed legal conception of money, severed the link, traditionally found at the national level, between the authority to raise revenue through fiscal authority and the issuance of currency by monetary authorities. Nonetheless, the architects of EMU displayed an unshakeable belief in the efficiency of markets and were convinced that the emphasis on budgetary restraint and price stability would ensure success. In their deference to the prevailing economic orthodoxy, political and institutional actors did not pay sufficient attention to the growing imbalances between Member States and the accumulation of unsustainable levels of private debt. With the onset of the Eurozone crisis, the cause was misleadingly attributed to the fiscal profligacy of peripheral Member States. That narrative provided the justification for the introduction of legal measures that would ensure fiscal consolidation. Those measures merely upheld a set of contestable political and economic interests which represented the abandonment of the normative disciplinary function that the law should have in balancing the interests of the market and the society in which it functions. In turn, the CJEU acquiesced to the political decisions taken by the executive in order to maintain the existing order rather than challenge the validity of those decisions. In that deference, the Court employed a considerable degree of interpretative latitude in which the teleological was prioritised over the literal that weakened the constraints on policymakers and provided the justification for the discretionary allocation of losses that were borne by EU citizens.
Much of the analysis of the Eurozone crisis has understandably been dominated by scholars of political economy and/or pure economics. Legal analysis has tended to focus on the constitutional transformation resulting from the legal responses to the crisis. This thesis represents a departure from those approaches. The use of an historical methodology provides a different perspective when compared to the current literature which tends to be ahistorical in nature. The longitudinal view that it provides, regarding the development of the law in monetary matters, shows that the Eurozone crisis was not an atypical event but a continuation of a cycle that occurs when policy makers revert to a form of laissez-faire capitalism designed to constrain the state with the disciplinarian nature of liberalised financial markets.
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Keywords
Legal history , EU law , Public finance , Monetary sovereignty
Citation
Ball, M. 2020. The origins of a flawed monetary paradigm in Europe: recurring patterns, regressive repercussions and the role of law. PhD Thesis, University College Cork.