FLORENCE – The eurozone crisis is a common cause for Europeans. But the shared interests of Europe’s citizens lack adequate political representation – a failing that contributed to the current crisis. The longer the crisis is treated exclusively as a technocratic issue, the more strongly the European Union will be pushed toward disintegration.
To avoid a breakup, Europe’s leaders should look to the ideas of James Madison, one of the authors of the United States Constitution and The Federalist Papers. Currently, Madison’s co-author Alexander Hamilton is on everyone’s mind in Brussels, as watered-down versions of his concept of fiscal federalism are increasingly perceived as the solution to the eurozone’s malaise.
But Hamilton’s ideas are incomplete without Madison’s examination of how political representation should be structured in order to facilitate economic integration. Madison’s “scheme of representation” included several innovative elements, two of which apply to the eurozone’s current crisis.
First, if institutions are structured in the right way, political representatives can articulate programs and policies that, as Madison put it, “refine and enlarge public views.” Within an integrated economy, there are divergent categories of actors, such as creditors and debtors, or manufacturers and agricultural producers, the combination of which can affect the outlook of states and regions. An effective system of representation, Madison argued, would create support for political projects that would render compatible these actors’ divergent, and potentially conflicting, interests.
To accomplish this, it must be in representatives’ self-interest to reconcile their constituents’ diverse interests, rather than represent homogenous groups. Madison thus advocated creating positions at the local, state, and federal levels, and in diverse social capacities, as well as ensuring incentives and opportunities for representatives to combine and reconcile different interests at all levels of public policymaking.
Until recently, something approximating this arrangement prevailed in the European polity, redistributing integration’s gains to produce mutually beneficial outcomes for diverse European groups. But now, the costs of crisis must be reallocated. As a result, the system has not only stopped functioning, but some elements of it are actually pushing Europe towards disintegration.
This European polity lacks the second crucial element of Madison’s scheme: diversified political representation at the federal level. Individual nation-states, regions, and special-interest groups are represented within the EU. But, while common European causes arise daily, they have no Europe-wide political representation. No single political party or politician in Brussels can claim to represent European citizens’ associated interests, because none has had to compete for Europe-wide public support.
As a result, nationally elected representatives are responsible for making crucial EU-level decisions. As the eurozone crisis worsens, they are increasingly driven by domestic political pressures, and their motivation to accommodate common European interests diminishes.
To understand this polity’s absurdity, consider how American political elites would act under Europe’s current system of representation. Imagine Republicans and Democrats from New York’s state legislature voting side by side against continued subsidies for Arizona. Meanwhile, the governor of California rejects the use of federal rescue funds to keep Mississippi’s banks afloat, while the secretary of the California Department of Finance declares that Mississippi voters must decide whether or not to keep the dollar.
Eventually, New York legislators would grudgingly vote to support Arizona, on the condition that Arizona implement a strict and humiliating austerity program, and California would begin to support federal programs that aim to stabilize the “dollar zone.” These representatives know that their states are net winners of the union, ultimately benefiting from giving two dollars to some of the weaker states for every dollar that they pay in federal taxes.
But they still have to fight for re-election at home, where political parties that portray citizens of Arizona or Mississippi as lazy rent-seekers are gaining traction. As they close in on effective joint banking and fiscal policies incorporating more and more elements of Hamilton’s fiscal federalism, they are increasingly constrained by state politics – exactly as Europe’s leaders are inhibited in the current system.
It is no coincidence that Hamilton and Madison were co-authors of the constitution of the first modern economic union. While trying to imitate America’s constitution would be impossible, given that it embodies several compromises specific to its time and place, European leaders must begin to incorporate Madison’s ideas into debates about the eurozone’s future. Otherwise, it may not have one.