Unlock eSignature Legitimacy in the European Union Tech Industry

How to eSign a document: eSignature legitimacy for Technology Industry in European Union

[MUSIC PLAYING] MARK BLYTH: Hello, my name is Mike Blyth, and I am the director of the Rhodes Center for International Economics and Finance at the Watson Institute at Brown University. On the Rhodes Center Podcast this week, I was had a great conversation with Vivien Schmidt. Vivian is a professor at Boston University, and also happens to be the person who I think knows more about the internal workings of the EU than practically anyone else on the planet, She has also just written this wonderful book, Europe's Crisis of Legitimacy, Governing by Rules and Ruling by the Numbers in the Eurozone. Although this book deals with the last eurozone crisis, that is the mishandling of the financial crisis in 2010, which morphed into the euro crisis. The whole austerity episode, et cetera, and the long 10-year recession that Europe went through, particularly in southern Europe. What it's also about is how Europe has a kind of structural problem with legitimacy amongst its own members. And how in the current moment in the COVID crisis, those same dynamics may come back to haunt us. It's a great chat, and I hope you enjoy it. Hello Vivian. VIVIEN SCHMIDT: Hi. Nice to see you, Mark. MARK BLYTH: Where are you exactly? VIVIEN SCHMIDT: I'm actually on the Italian coast, the Italian Riviera, right on the border with France, between Ventimiglia and Menton. MARK BLYTH: Now, isn't that sort of appropriate, given the fact that you're writing, or have written, this wonderful book we're about to talk about? Which is called Europe's Crisis of Legitimacy, Governing by Rules and Really by Numbers in the Eurozone. When you're talking about France and you're talking about Italy. Now we're going to get to all those wonderful dynamics of Italy past and present, legitimacy, et cetera. But let's get started. Why did you want to write a book about legitimacy? It's a particularly slippery topic for social scientists, and particularly for institutions like the EU. And here's what I mean by that. You can say that Trump is legitimate or illegitimate. There was an election. There's a guy called Trump, there's an office he holds. You like it or you don't like it. You can say that Boris Johnson is legitimate, given his handling of the COVID crisis, but he is the duly elected person. With the EU, hardly anybody knows how it works. What the bits are, what the bits do. So how do you write about the legitimacy of the organization? What is it you're trying to get at? VIVIEN SCHMIDT: Well, so first, let me answer the question about legitimacy. And I decided that legitimacy was the perfect lens through which to consider all aspects of the eurozone crisis. Most people look at either political economy, or the politics, or the governance. And I thought the only way to pull it all together was to actually ask questions about legitimacy, where all of these are connected. And in particular for the EU where in the eurozone crisis legitimacy was massively in question. So how do you think about legitimacy? There are two ways of thinking about it. One is the most basic way. Public consent in, or trust in a governing authority. But it's also public acceptance of governing activities, which reinforce or undermine governing activity. In the EU, governing authority, minimal at first, is built up in area after area over time. Policies like in the customs union, international trade, single market, the supremacy of EU law, the European Central Bank. All of these are slowly accepted at the national level by the people tacitly, by national governments explicitly. MARK BLYTH: So how do institutions such as those garner their legitimacy? You know, the British monarchy has been around long enough that it's quasi-legitimate, right? But the ECB has only been around since 1999. How does the EJC-- no one can tell you who a European jurist is. So how, prior to the crisis, did these institutions garner legitimacy? How did they go about getting legitimate? VIVIEN SCHMIDT: So this is all about governing activities. Because you're slowly building up governing authority, you do that by doing well in terms of your governing activities. And that's about policy performance that's about political rule, governing responsiveness. And that's about procedures. So this is where we get into three different types of legitimacy. What I call input, output, and throughput. If you don't like the systems concepts, that's fine. MARK BLYTH: No, stick with it. Walk us through each one. VIVIEN SCHMIDT: OK. So output is about policy effectiveness performance. Input is about political participation by citizens, their representation and governing responsiveness. And throughput, which is procedural quality, is about efficacy, competence in doing things, accountability to a forum of experts, to politicians, to the public. Transparency with access to information, inclusiveness, and openness, meaning open to all concerned citizens and interests. And these are the ways in which one needs to think about legitimacy. And this is the way the EU itself thought about its own legitimacy primarily. MARK BLYTH: So if I'm not being too crude, because the book is more nuanced than this, but allow me a bit of vulgarity. What you essentially see is that it was really output first, then it was input, and nobody really worried about throughput. And then the crisis hit. And then that kind of went haywire. And they had to rearrange their prioritization of different forms of legitimacy. Would you say that's fair? VIVIEN SCHMIDT: Well, what I would say is that initially, in the response, EU institutional actors-- and we're talking about member state leaders as much as the Commission and everyone else-- thought, all we have to do is reinforce the rules, rigidify the numbers, and everything will be fine. We'll end up with good performance, and therefore it doesn't matter that the people haven't been involved. And, of course, as we've seen, there were bad results. And that's because they also misframed the crisis as one of private debt, as opposed to the reality of public debt. You've written a lot about this, in fact. And I even quote you in the book on this. They not only misframed the crisis as public debt, they misdiagnosed it as a problem of behavior, as opposed to the structure of the euro. The result was they ended up with the wrong remedies, austerity and structural reform, and no solutions. No European Monetary Fund, eurobonds, they finally got a banking union, but there's still no individual deposit insurance. No unemployment insurance in effect. No fiscal federalism, which is what you need to make this kind of monetary union work. MARK BLYTH: But let's try and stress the value of all the difference that you're inserting into the conversation here. Because what you just described there was they got it wrong in the diagnosis, and then they did wrong stuff. But the book actually is much more sophisticated than that. And it basically says, look, here's how this rather fragile, hierarchical Rube Goldberg thing did stuff. There was a variety of inputs. You had things like the Parliament, it was kind of OK. And then you had outputs. And so long as everything was going great, as it was between 2000 and 2007, outputs. Lovely, right? And nobody really thinks of the throughput. Now, as you say, they doubled down on the rules. So that's I mean you can frame something and then ignore the rules. Why did they double down on the rules? That's the important point of entry, I think, that you're making. VIVIEN SCHMIDT: So they first double down on rules because, they assume, as EU bureaucrats would, this is, after all, what they're supposed to do is they follow the rules. But by doubling down on the rules, it all went wrong. And so the response then was, oh, wait a minute, this is a problem. We assume that all you have to do is good procedures, and you get good performance, and you don't pay attention to the people. Mm, no longer working. Rise of populism, decline, deteriorating economics. And what you begin to see is they begin reinterpreting the rules by stealth. So for the Commission, I call them at the beginning ayatollahs of austerity. Because they're the champions of austerity. Let's move forward into austerity and structural reform. But by 2012, they realize, uh-oh, this isn't working. And they became ministers of moderation. MARK BLYTH: Hmm. VIVIEN SCHMIDT: As they began reinterpreting the rules by stealth. MARK BLYTH: Right. VIVIEN SCHMIDT: Also because they couldn't admit to it. And so what you've got is actually a problem with legitimacy yet again. Because they're getting better performance, but they're not telling the truth-- MARK BLYTH: Right. VIVIEN SCHMIDT: --about their increasing discretion. MARK BLYTH: Now that's a really interesting insight to me on this one. Because imagine a standard polity. Let's take France, let's take Italy, even though there's a very fragmented party system. If you have legitimacy on the front end, that is to say, direct voter support, and you have bad performance on the back end. If you're doubling down on rules, a, you will get called out on it. And b, there's a political cost to be paid for change in your mind. But you can change your mind. You could be seen to change your mind. Why is it that within the EU system, they couldn't be seen to change their mind? VIVIEN SCHMIDT: OK. Well, you can change your mind at the national level. And if you don't change your mind, someone else will be elected. MARK BLYTH: Right, exactly. VIVIEN SCHMIDT: And change it for you. At the EU level, that's not possible. It's dependent upon all these different member states. It's dependent on various institutional actors with diverging preferences having to deal with pretty rigid rules. The legality was also a problem. And that's why they essentially reinterpreted the rules by stealth. But the problem is you got incremental improvement, but you still had these sub-optimal rules and perceptions of illegitimacy. And my way of thinking about this is that, even as the Commission in particular increased its flexibility, it engaged in a discourse of denial that led southern Europeans to feel oppressed even when they were accommodated, and northern Europeans to feel deceived regardless. MARK BLYTH: But just let me go back to one thing you said there. EU bureaucrats don't have someone sniping at their heels who wants to take their job in the way that you would in a political system. So doesn't that give them more freedom to actually go, look, we thought the world worked this way. Turns out it doesn't. What sensible thing should we do? We should change our minds. Doesn't that give them a bit more freedom? But they seem to lack the ability to take it? VIVIEN SCHMIDT: So it depends upon which institutional actor we're talking about. The Commission is essentially accountable to the member state leaders in the Council and to the European Parliament. It actually has administrative discretion, but relatively little room for maneuver. And it, and actually, to be fair to it, it took as much as it could as it was reinterpreting the rules. What's interesting is the European Central Bank, of course, has a tremendous amount of independence and autonomy, and actually could have done a lot more at the beginning. So when we ask questions about the legitimacy of the European Central Bank, it's, again, a Janus-faced question. Here is was the European Central Bank the hero of the crisis? Or was it the ogre? As a hero, you could say, well, it actually also reinterpreted the rules. In this case, in plain view. As it started with a very narrow mandate with Trichet, where it claimed credibility was all we're not a lender of last resort, as you yourself wrote about. And then slowly but surely, by 2012, Mario Draghi says, actually, it's not so much about credibility as stability. And he reinterprets the mandate to allow for open monetary transactions in 2012. The I'll do everything to save the euro quote, which stops market attacks in their tracks. And then by 2015, you get quantitative easing. Now, this makes Mario Draghi in particular, but the ECB, the hero of the crisis. However, you can read it completely the opposite way and say actually it was the ogre. Because, in exchange for doing anything, he kept saying, we want to push the member states to austerity, to structural reform. Push the program countries, countries in trouble, into deep, deep austerity, harsh austerity, and really punishing structural reform programs. And at the same time you could say, look how slowly it acted. It delayed its response. OMT only in 2012. QE only in 2015. Whereas the American Fed, and the Bank of England, they were doing quantitative easing in massive amounts right from the beginning. So was it the hero of the crisis or was it the ogre? MARK BLYTH: And that Janus-faced quality, again, to bring it back to legitimacy, you still see this playing out now with the German Constitutional Court. Because, in a sense, what they are doing is they're saying, oh, no, no, no. Legitimacy of this organization still come from adherence to the rules. And you guys are going beyond the rules by reinterpreting the rules. And we're calling you on it. So is this conflict over what is legitimate action and what is not built into the architecture of the EU on a deep level? VIVIEN SCHMIDT: Well I'll take the German Constitutional Court and add it to the position of Germany. Because this is all about German power in the end. Because it's only the German Constitutional Court saying we have to consider German democracy. No one else can do this. And here for the council, the Janus-faced behavior is, is the council a dictatorship led by Germany? It's all about German economic interests and political interests, as well as legal with the Constitutional Court. Or on the other hand, was this a mutually accountable deliberative body? From 2010 to 2012, it certainly looks like a dictatorship. But thereafter, you get an acceptance, the Italians push for growth. And then Merkel says OK, OK, growth and stability. And then the Italians, again, this is next. Renzi comes in in 2014 and says, no, we need flexibility as well. And she said, OK, OK, stability with flexibility. MARK BLYTH: Have cake and eat it, right. VIVIEN SCHMIDT: Exactly. But what you see is there is movement. MARK BLYTH: Right. VIVIEN SCHMIDT: So it can't just be a dictatorship. But is it a mutually accountable body? There's also a question there. Because when you have a gun at your head, and you're Portugal, you agree. But if you're a program country, this is probably deliberative authoritarianism. Or, in the case of Greece, harsh authoritarianism, harsh dictatorship with no deliberation in the third bailout. MARK BLYTH: So let's think about where we are now with all of this. We still have these different crises, or different channels, of legitimacy. And we now have the COVID lockdown. So basically, Europe loses a decade, particularly the South. They still have double digit unemployment going into the crisis in many of these countries in the South. And coming out of it, there's been the whole discussion of Italy's need if not for a bailout, then for relief. There was the abortive cry for eurobonds, which then became coronabonds. Which now become basically the Dutch saying we can give you more loans, which nobody actually needs, because the problem is they have too much debt and they can't pay it back. VIVIEN SCHMIDT: Exactly. MARK BLYTH: So are we doomed to repeat this? Are we just heading for yet another crisis along exactly the same metrics? That is to say, the politics has irrevocably changed. You've got populists on the ground. You got fragmented party systems. Input's gone. Output, right? Yeah, it was just about getting better, and now it's gotten a lot worse. Throughput, you've basically still got the same rules on the books. So how do they how do they navigate this? How did they make this work for the EU going forward? VIVIEN SCHMIDT: So what's interesting about this is that I was very pessimistic in the very early days. The EU is very slow to start. It was completely inefficient on the procedural grounds. This was the eurozone crisis deja vu all over again. The Council was unaccountable, it failed to act. Member states pursued their own policies. But the silver lining in this is that they were completely ant-austerity policies. MARK BLYTH: Yeah, that's true. VIVIEN SCHMIDT: This was about spending, spending, spending at the national level to make it possible for people to quarantine, to isolate, et cetera. But member states act, Council doesn't. The ECB claims it's not in its mandate to deal with the spreads between Germany and Italian bonds. MARK BLYTH: Which begs the question exactly what your mandate it then, but never mind. VIVIEN SCHMIDT: Exactly, exactly. The European Parliament has no role and the Commission is nowhere. And it looks like the migration crisis again. With national level borders going up, each dealing with its own issues, export bans of key equipment. But, I think the important piece is that, after a couple weeks, things changed dramatically. The member states, as I've said, throw out euro crisis budgetary austerity, even if the rules are still on the books, which is a danger. The ECB, after its misstep, becomes the hero yet again without the overlying demands for austerity and structural reform for the countries needing help. The Council is no longer a dictatorship by Germany. On the contrary, it looks like a deliberative, neutrally accountable body pushed by Germany and France together. And the Commission are immediately ministers of moderation, suspending budgetary criteria to allow unlimited government spending. Suspending state aid rules, recommending a multi-annual financial framework that's masses beyond where it was before, recommending unemployment insurance fund, some form of coronavirus bonds. And actually they come up with more than the French and Germans had asked for with a fund of 750 billion euro fund, where 2/3 of it would go to grants and only one third debt. So what I'm hopeful is that we will have enough push for a new kind of investment. Let's call them not just coronavirus bonds, but green bonds, and a sort of a reset of the European economy. Because that's what the EU needs is a reset. Just like, actually, all economies after 30, 40 years of neoliberalism need a reset. Need to confront climate change, need to confront future pandemics in a way that makes sense. Which is throwing out the old neoliberalism, the old rules, and recognizing that debt's not the enemy. Lack of growth is the enemy. MARK BLYTH: But they still have those rules on the books, and that would worry me. And then the second one is the politics on the ground have changed at a national level. So what you're describing, which I think sounds like a great idea, is still a kind of technocratic top-down. We're going to do this, and it's Europe, and we speak with one voice. And the reality on the ground is they don't speak with one voice. They're increasingly discordant and dissonant. Not just North-South, but also East-West. And not just parliamentarians versus populists, but fragmented party systems across the place. Latest opinion polls in France that I saw has the family business that is the French nationalists back up there with Macron. The biggest surprise in the recent elections were the greens, again. So again, let's talk about legitimacy. That may be a series of good ideas. But do these institutions have the legitimacy to carry it off, given that the domestic foundations of support which they took for granted have become rather fractured? VIVIEN SCHMIDT: So very important question. And I worry myself about this. But what's interesting is to see what's happened to the populist anti-system forces in the crisis, as well as the mainstream parties. In any number of countries where they've responded effectively, with efficacy, and transparency, and accountability to the crisis. So here we've got output and throughput. MARK BLYTH: Uh-huh. VIVIEN SCHMIDT: The input legitimacy has increased. Angela Merkel, 80% popularity and the AfD gone down. France is a more complicated question and is it just France? MARK BLYTH: Is it just Macron? VIVIEN SCHMIDT: Or actually just Macron? But they haven't been so bad in their response. Italy, what's fascinating is the 5 Star populist party, with the PD, the Partito Democratico, so the Democratic Party, the former Social Democrats, have actually been doing well. Conte, the prime minister, has good popularity, and Savini is losing. Not much, four points. MARK BLYTH: Salvini is losing, but Fratelli d'Italia is booming up. VIVIEN SCHMIDT: Is gaining, yeah, I know. MARK BLYTH: Right, very mixed picture. VIVIEN SCHMIDT: A very mixed picture. But it suggests that populists out of power are losing, to some extent. Assuming that the mainstream parties are doing a reasonable job. The issue is what about populists in power? And here you get a mixed bag. Trump in the US not doing well, because he's messed up in terms of crisis response. In Central Eastern Europe, Orban doesn't seem to be doing too badly. Yes there are problems, but in Poland, it's a question. But basically, so it's such a mixed bag, we can't make any generalizations. I think the only thing we can say is that the only thing we can hope for is that mainstream parties in power, along with the populist parties doing a decent job in the pandemic, actually address the economic issues, the health issues, in a way that everyone begins to feel better. That you no longer have people angry because they feel left behind in terms of the socioeconomics. So that you no longer have people who feel, after feeling left behind with the socioeconomics, are also worried about loss of status. MARK BLYTH: Right. VIVIEN SCHMIDT: Even if they're slightly richer. And here you've got the difference between the urban areas and the periurban and the rural. And it's also about the migration crisis. How do we fix that? MARK BLYTH: Right. VIVIEN SCHMIDT: Identity politics. But at the same time, it's also-- and this is the key to respond to your question about the EU-- it's also about the politics of take back control. The EU has to become less democratic. It has to have more bottom-up politics rather than top-down. The eurozone crisis was a recipe for disaster. Because all of a sudden the EU started dictating policies to everyone, but in particular Southern Europe, and they were the wrong ones. So what you need is more decentralization and democratization of the EU. Let the EU do what it needs to do, what all the member states need for the EU to do, to coordinate policies at the same time that the EU needs to give back to the national level responsibility over their own economics. At the same time that it provides the kind of funding necessary for economies like Italy and Spain to grow again. Because that's actually the only way you're getting out of populism. MARK BLYTH: Now this would be a tough agenda on its own, but let's put this in the new global context. So it's not out of the question that despite feeling catastrophically on many vectors, President Trump gets reelected. At which point in time, basically, the European car industry, aviation industry, what it passes for its digital sector, is going to get absolutely slaughtered by American tariffs. And then you have China. And China is doubly interesting, because not only does it want the EU to pick a side. And it's not a side that you want to be on. For all of America's problems, you can actually still somewhat rely on property rights, courts, and such things like this. What you have on the Chinese side is a divide and conquer strategy, whereby if they don't do what the smaller states, particularly the South and East want, they'll get bought off, and thereby fragment the EU. Which is a back to the Russian strategy for dealing with the EU. So for the first time in its grown-up existence, it faces real geo-strategic threats. So does this basically allow it to garner legitimacy for these types of actions that it needs to do? Or is the legitimacy, or lack thereof, the weak point in responding to these things in an adequate, scaled-up manner? How is it going to play out? VIVIEN SCHMIDT: This is the major question for the EU. Is it going to step up to the plate? MARK BLYTH: Right. VIVIEN SCHMIDT: Is it going to recognize that, actually, it's in a really bad neighborhood? It needs to be more and to do more on security and defense, and possibly have see STP merged with NATO, that they take over NATO. That they step up to the plate on security, recognizing that's a problem. But they also need to have their own digital revolution. They need the Green New Deal. They need investment to shift the European countries capitalisms. They need to do all of this at the same time. At a point in which it can go either way. So if the EU doesn't step up to the plate, then it's going to become the Disney World-- Disney, Medieval and Rennaissance, travel tourism-- MARK BLYTH: Well that would work-- VIVIEN SCHMIDT: --for the world. MARK BLYTH: --if you had tourism, but post-COVID, you might not even have that, so. VIVIEN SCHMIDT: No. Exactly. So in a way, I see no alternative for the EU. I either see a situation where it moves forward rapidly in all the ways that I mentioned earlier. Or that it just-- it won't even fall apart, it will simply stagnant. MARK BLYTH: Yeah. VIVIEN SCHMIDT: And you will see rising populisms. You'll see it in Central Eastern Europe going its own way into authoritarian populism. You'll see weak democracies continue. But Brexit started the breakup. I think that if the EU moves fast, moves forward fast, that's it. Britain will come begging back after 20 years and the cold, harsh Atlantic. Or Brexit is the first of many exits. MARK BLYTH: Right. One final question, because the timescale on that something good, something bad is indeterminate. And also because, have they missed a trick? Now I'm going to ask you this one. So the focus on eurobonds and debt mutualization and lately coronabonds has always focused on the economic questions. That is to say, fiscal capacity, fiscal space, debt reduction, blah-blah-blah, all of which is true and warranted. But there's another thing. The United States runs the global economy because it has the dollar. The United States is increasingly badly run. We are basically a failed state with nukes. Now, if you stepped up to the plate and gave the world another alternative asset to buy, that as common euro-denominated debt, let's say you issued 20% of eurozone GDP, everybody would buy it. And if you did that, you would then have power and autonomy. And you would basically have something you could beat back on both China and the US. Now, if this is obvious to me and it's obvious to you, why is it that people who are in charge of this thing are so hesitant to even talk about it in public? VIVIEN SCHMIDT: This is about ideas and discourse, back to discursive institutionalism. But it really is a question of how, well, in terms of the eurozone crisis, how it was framed. Now what we see is there is a kind of recognition that they have to move forward. But they haven't gotten there yet. But this is a first step. What we do recognize is that the ECB can do more. That this could be the very beginning. Because the EU, for the first time will have its own bonds. And there's a market out there. MARK BLYTH: There's a huge market. VIVIEN SCHMIDT: A huge market, and people in the EU recognize it. But it means, this means that Merkel, who's already changed her tune, and Macron, have to convince the Frugal Four that this is no longer about debt. This is about interdependence of European economies and societies. MARK BLYTH: Yes. VIVIEN SCHMIDT: And that if they don't do something fast, and recognize that-- this is enlightened self-interest, if not common identity. Northern Europe is not going to survive if it doesn't have markets in Southern Europe. Central Eastern Europe is not going to survive unless it keeps getting the cohesion and structural funds from the Center. All of this means that you need EU-sourced funds, you need a serious EU budget, and EU's own resources. So this is a tall order for countries that have continued to think in very narrow-minded terms with blinders on about it's me, it's them. How much can we get? So this requires a massive reframing and massive persuasive exercise in convincing people that it's the future we have to think about, not the past. And we all have to do it together in Europe, otherwise we're lost. MARK BLYTH: Absolutely. VIVIEN SCHMIDT: It's a dangerous world out there between the US, China, Russia, continued turmoil in the Middle East, migratory pressure from Africa. The EU needs to pull together or it will fall apart. MARK BLYTH: Well, I hope you're right. The most dominant theory of European integration, as you well know, has been functionalism, which is basically one bloody thing makes another bloody thing happen. Let's hope that with enough bloody things on their plate, that continues to happen. Thank you very much for the conversation. VIVIEN SCHMIDT: Thank you, it was great. [MUSIC PLAYING] MARK BLYTH: This episode of the Rhodes Center Podcast was produced by Dan Richards. You can subscribe to us on iTunes, Stitcher, or your favorite podcast app. If you like us, rate us on iTunes and help others find the podcast as well. For more information, go to watson.brown.edu/rhodes. Thanks for listening. [SOUND EFFECT]