Where should we place law in debates about the financial crisis? To a degree, the place of law in contemporary political economy has been misconceived. Law is either blamed for creating the preconditions for the crisis, due to its absence (lack of regulation, severe de-regulation), or seen as a technical fix (better or more pervasive regulation post crisis). Law however is at its core the meeting point of politics and economics and it should be celebrated as such. Law is not simply the background to market operations but the conduit of popular will through political decision making onto economic systems and processes. One way of viewing contemporary capitalism is as an incidence of disequilibrium between the economic and political. Market-based rationality and supposedly scientific ‘technical’ solutions shape our political economy and use law as a tool to implement ‘orthodox’ solutions disregarding political imperatives. The crisis therefore can be seen as being the consequence of the dis-embedding of the political from the economic, and it is this distance that causes legal frameworks to operate in unsatisfactory ways. It is, in other words, the flawed conceptualization of regulation and not the actual implementation of technical rules that lies at the core of the problem. The sovereign debt crisis in Europe is the prototypical incidence of disequilibrium.
The European debt crisis in general and the plight of Greece in particular show
why plasticity in policy making is necessary and also reveal why current orthodox
solutions to economic calamities fail. The inflexibility of the neoclassical understanding of the state-market relationship does not allow for avenues out of crisis that are both theoretically coherent and politically welcome. Such realizations form the basis of the examination of the rules framing the Eurozone.
We should condemn the current institutional framework of the EU, and especially the EMU as inflexible and inadequate to deal with the stress being placed on Europe by the crisis. The one-size-fits-all structure of the Eurozone and the assumptions of permanence of economic and political structures is to blame for the sclerosis of Europe and its unwillingness or inability to respond to shocks. While the introduction of an EU exit clause by the Lisbon treaty inserts a degree of flexibility in the European monolith, it is too little to address the core of the problem that stems from Euro-membership. When the current economic and legal framework fails, when a political demand becomes prevalent for a change of direction, an inflexible institutional system can only serve to de-construct the European project. I am not anti-European and not anti-Euro. I am rather pragmatic in acknowledging that if the people of Europe (or Greece for that matter) wish no longer to be part of the European project, they will not be constrained by institutional arrangements. Would it not be better one wonders, if policy making had sufficient plasticity to accommodate the popular will, instead of being determined by preachers of orthodoxy?
For a full analysis of the points made above see the latest issue (2014 Vol.16.4) of the European Journal of Law Reform