Paradigm Shift or Paradigm Lost? Economic Constitutionalism at the Turn of the Century

Paradigm Shift or Paradigm Lost? Economic Constitutionalism at the Turn of the Century Summary: 1. Introduction. – 2. The regulatory State and the transformation of the relationship between law and economics: from economic management to independent authority regulation. - 3. The notion of ‘Ordoliberal’ economic constitution: the interdependence between legal and economic ‘Order’ (Ordo). - 4. Interdependence and circularity between legal systems, political, economic and social developments: some of the systemic approach to the phenomenon of independent authority regulation. - 5. The ‘alleged’ neutrality of the Constitution with respect to the choice of economic model: framing independent authority regulation as institutional evolution in the Italian legal system. The debate on public economic law at the end of the “short 20th Century” was undoubtedly marked by the presence of two “paradigms” - the Regulatory State and the economic constitution - by which we have tried to give an account of a broad movement of renewal in the discipline of economic matters, as well as in administrative organization, forcing them into a single verbal expression, in a single phrase (both descriptive and normative). The interdependence of the market and the state can never have been as obvious as in the years since the financial crisis of 2008. The previous 30 years had been the years of deregulation, of reliance on the dispersed wisdom of unfettered markets, and of the ‘rolling back’ of the state. Yet when markets proved unable to provide not merely social justice but also economic stability and solvency, it was the state that was called to the rescue. This was followed by the sovereign debt and banking crises in the eurozone, emphasizing fiscal constraints on government and the need for cooperation between states to prevent financial collapse. In this paper we propose to use the term “paradigm” in both of the meanings in which it was used in the famous work by Thomas Kuhn on Structure of Scientific Revolutions. In particular, the notion of economic constitution seems largely similar to what Kuhn defines as “disciplinary matrix”, that is “what some members of the scientific community have in common, that is the set of techniques, models and the values to which members of the community more or less consciously adhere.” As suggested by a close reading of the work of the great epistemologist, however, the paradigm could also be understood in a second sense, that is as “a single element of this set, that acting as a common example, replaces the explicit rules and allows definition of a particular and consistent tradition of research”. In this second meaning, the term seems to adhere more to the concept of “regulatory State”, which came into common use of legal doctrine during the new millennium. Both the notion of the regulatory State and the notion of economic constitution seem, however, to refer to an element of discontinuity in the scientific tradition of public economic law, a gap that could be due to the widespread awareness in the Italian doctrine, at least from the early 1990s, of facing a quid novi - compared to the traditional reading of constitutional statements on economic matters - represented by the European economic constitution. The relationship with European Community law, with its opening of markets and the transformation resulting from the broader phenomenon of globalization of law, have marked the definitive loss of the connection between the law of the state and territory. This discontinuity is not to be understood as trivial, linear or as a diachronic succession of one paradigm to another, such as might suggest the idea of a transition from the interventionist State to regulator State and, again, as a result of past events related to the international financial crisis, to a “savior State”. Moreover, the quality and quantity of public intervention in the economic field seem to depend more on long term cyclical dynamics than on an evolutionary or non-linear path, according to recurring historical events. As stated by Tony Prosser: “any idea that the state could withdraw from the economy had already been proved illusory. This was apparent, for example, in the growth of the concept of regulation as both an academic discipline and a concern of practical politics. Regulation was necessary not just to limit the operation of markets, to protect human rights, and to guarantee the provision of basic services, but also to make markets work”, as was evident from the vastly increasing importance of competition law and policy and of the regulation of financial services. Yet this concern with regulation tended to underestimate the extent to which markets and the core state were interwined; regulation was classically portrayed as the work of independent agencies at ‘arm’s length’ from government, setting out a framework within which market transactions could freely operate. The events of recent years have shown that governments have been called on to intervene in ways which are far deeper, and far more costly, than merely setting a framework of regulation. Nor is it useful to approach the notion of economic constitution from a perspective of conceptual dichotomy between political and economic constitution, in the sense that the latter would be ascribed a “priority” over the first (instead of the typical constitutionalism of the 20th Century); nor can the mere diachronic contrast between “old” and “new” economic constitutions be considered satisfactory. What the use of the term “paradigm”, in reference to the regulatory State and the economic constitution, expresses is rather the idea that a single item (or a coherent set of elements) of the new discipline of facts and economic relations becomes “a common example, which replaces the explicit rules and allows us to define a particular and consistent tradition of research”. As is obvious, to better understand the meaning of the two “paradigms”, we should start from what is unanimously considered as the starting point for any reflection on the new public economic law, the real historical, doctrinal, legal and positive watershed: the Maastricht Treaty. Until the approval of the Maastricht Treaty, the doctrine (at least in Italian) was still deeply marked by the problem of compatibility between constitutional discipline in economic matters and the so-called European economic constitution. It is not difficult to go back to the then prevailing reading of the domestic economic constitution, thus effectively summarized: “the fact that, until the seventies, in many countries, the policies of deficit spending, associated with the construction of the welfare state, acquired in Italy a special significance from the legal and constitutional points of view. In some countries building the welfare state was equivalent to implementing a constitution (though not in the UK). Of these, only Italy, immediately after the war, created a constitution for itself which directly recognized social rights in its text (unlike France and Germany). [...] In political-constitutional debates and in the constituent assemblies the idea prevailed that social rights were inherent elements of public performance. This assumption won out over the theory of pluralist social rights, which saw the integration of individual rights into groups or into the social groups to which they belong, according to a richer, less compact notion of citizenship rather than one based on public performance: apart from any other consideration, such theses were more appropriate for an era of widespread prosperity”. It is not by chance that the Maastricht treaty marks a moment of “sudden” awareness. In fact, until that moment we can say that there had been a successful relationship between the design of the European Communities as a functional “communities of law” (Zweckverbaende funktionaler Integration) for market integration and an internal constitutional order in which the implementation of the constitutional provisions on social rights was conceived mainly in terms of public interventions in support of the most diverse social purposes, or even through a traditional idea of economic planning, a sort of “division of labor”. In this “division of labor”, however, according to the original intent of the fathers of the Treaties establishing the European Communities, the growth and spread of wealth procured by open markets and competition in the (then sole) European common market had to some extent to serve as their own “guarantee” for the self-management of national welfare on the part of member countries. In any case, this phase ended with the Treaty of 1992 – which also made clear what was already clear at least in the Single European Act – either because the Treaty sets clearly political objectives or because the illusion that the opening up of national markets in which Welfare had grown, with the predetermination of budget constraints and very stringent macroeconomic compatibility, could not fail to destabilize and affect social balance, so far defined by state measures, and necessarily had to vanish.