Geoffrey Garrett

Introduction: The International Diffusion of Liberalism

Political scientists, sociologists, and economists have all sought to ana- lyze the spread of economic and political liberalism across countries in recent decades+ This article documents this diffusion of liberal policies and politics and proposes four distinct theories to explain how the prior choices of some countries and inter- national actors affect the subsequent behavior of others: coercion, competition, learn- ing, and emulation+ These theories are explored empirically in the symposium articles that follow+ The goal of the symposium is to bring quite different and often isolated schools of thought into contact and communication with one another, and to define common metrics by which we can judge the utility of the contending approaches to diffusion across different policy domains+

Globalization, government spending and taxation in the OECD

This article assesses the impact of globalization on welfare state effort in the OECD countries. Globalization is defined in terms of total trade, imports from low wage economies, foreign direct investment, and financial market integration. Welfare effort is analyzed in terms both of public spending (and separately on social service provision and income transfer programs) and taxation (effective rates of capital taxation and the ratio of capital to labor and consumption taxes). Year-to-year increases in total trade and international financial openness in the past three decades have been associated with less government spending. In contrast, integration into global markets has not been associated either with reductions in capital tax rates, or with shifts in the burden of taxation from capital to consumption and labor income. Moreover, countries with greater inflows and outflows of foreigndirect investment tend to tax capital more heavily.

Global Markets and National Politics: Collision Course or Virtuous Circle?

Increasing exposure to trade, foreign direct investment, and liquid capital mobility have not prompted a pervasive policy race to the neoliberal bottom among the OECD countries. One reason is that there are strong political incentives for governments to cushion the dislocations and risk generated by openness. Moreover, countries with large and expanding public economies (when balanced with increased revenues, even from capital taxes) have not suffered from capital flight or higher interest rates. This is because the modern welfare state, comprising income transfer programs and publicly provided social services, generates economically important collective goods that are undersupplied by markets and that actors are interested in productivity value. These range from the accumulation of human and physical capital to social stability under conditions of high market uncertainty to popular support for the market economy itself. As a result, arguments about the demise of national autonomy in the global economy are considerably overdrawn.

Capital mobility, trade, and the domestic politics of economic policy

The conventional wisdom about the domestic political effects of economic internationalization in recent decades is overdrawn and too simple. Increasing exposure to trade and capital mobility has not led all countries to pursue the same types of economic policies. The political power of the left and the strength of organized labor still have a marked bearing on macroeconomic policy. Rather than being constrained by internationalization, the relationship between left-labor power and fiscal expansions has increased with greater trade and capital mobility. However, the political left and organized labor have had to pay a price for these expansions. With greater exposure to world market forces, left-labor power has been increasingly associated with lower levels of corporate taxation and with higher interest rates. Nonetheless, common assertions about the demise of partisan politics must be reconsidered.

International cooperation and institutional choice: the European Community's internal market

The decision of the European Community (EC) members to complete their “internal market†by the end of 1992, as embodied in the 1987 Single European Act (SEA), may represent the most ambitious instance of multilateral cooperation since the construction of the post-World War II international order. The economic objective of internal market completion is the removal of a wide array of nontariff barriers to trade that elsewhere have proved politically intractable, including border controls, national standards, preferential procurement policies, and industrial subsidies. The institutional structures underpinning the internal market are more constraining on the behavior of sovereign states than has been the case for other international regimes. The SEA replaced unanimity voting (national vetoes) in the primary decision-making body of the EC, the Council of Ministers, with a system of majority voting over matters pertaining to the internal market. In addition, the internal market is buttressed by an elaborate and powerful legal system. EC law is considered to have supremacy over national laws and to have “direct effect†in domestic jurisdictions, regardless of whether it is explicitly incorporated through legislation.

Legislative Politics in the European Union

This paper compares legislative dynamics under all procedures in which the Council of Ministers votes by qualified majority (QMV). We make five major points. First, the EU governments have sought to reduce the democratic deficit by increasing the powers of the European Parliament since 1987, whereas they have lessened the legislative influence of the Commission. Under the Amsterdam treatys version of the codecision procedure, the Parliament is a coequal legislator with the Council, whereas the Commissions influence is likely to be more informal than formal. Second, as long as the Parliament acts as a pro-integration entrepreneur, policy outcomes under consultation, cooperation and the new codecision will be more integrationist than the QMV-pivot in the Council prefers. Third, the pace of European integration may slow down if MEPs become more responsive to the demands of their constituents. Fourth, the EU is evolving into a bicameral legislature with a heavy status quo bias. Not only does the Council use QMV but absolute majority voting requirements and high levels of absenteeism create a de facto supermajority threshold for Parliamentary decisions. Finally, if the differences between the Council and the Parliament concern regulation issues on a traditional left-right axis, the Commission is more likely to be the ally of the Council than the Parliament.

An institutional critique of intergovernmentalism

Most intergovernmentalist analyses of European integration focus on treaty bargaining among European Union member governments. Recent articles also have examined everyday decision making through power index analysis, an approach that asserts that a governments ability to influence policy is a function of all possible coalitions in the Council of Ministers to which it is pivotal. This approach suffers from two major weaknesses. First, it fails to take into account the policy preferences of governments; it overestimates the influence of governments holding extreme preferences and underestimates that of more centrist governments. Second, power index analysis fails to consider the important roles of the Commission of the European Communities and the European Parliament in legislative processes. Todays procedures affect the mix of agenda-setting and veto power, and this has systematic effects on policy outcomes. If intergovernmentalism is to explain choices made during treaty rounds, it must take into account these legislative dynamics.

GOVERNMENT PARTISANSHIP, LABOR ORGANIZATION, AND MACROECONOMIC PERFORMANCE

Governments of the Left and Right have distinct partisan economic policies and objectives that they would prefer to pursue. Their propensity to do so, however, is constrained by their desire for reelection. We argue that the ability of governments to further their partisan interests and preside over reelectable macroeconomic outcomes simultaneously is dependent on the organization of the domestic economy, particularly the labor movement. We hypothesize that there are two different paths to desirable macroeconomic performance. In countries with densely and centrally organized labor movements, leftist governments can promote economic growth and reduce inflation and unemployment. Conversely, in countries with weak labor movements, rightist governments can pursue their partisan-preferred macroeconomic strategies and achieve similarly beneficial macroeconomic outcomes. Performance will be poorer in other cases. These hypotheses are supported by analysis of pooled annual time series data for 16 advanced industrial democracies between 1967 and 1984.

The Institutional Foundations of Intergovernmentalism and Supranationalism in the European Union

We present a unified model of the politics of the European Union (EU). We focus on the effects of the EUs changing treaty base (from the Rome to Amsterdam Treaties) on the relations among its three supranational institutions—the Commission of the European Communities, the European Court of Justice, and the European Parliament—and between these actors and the intergovernmental Council of Ministers. We analyze these institutional interactions in terms of the interrelationships among the three core functions of the modern state: to legislate and formulate policy (legislative branch), to administer and implement policy (executive branch), and to interpret policy and adjudicate disputes (judicial branch). Our analysis demonstrates that the evolution of the EUs political system has not always been linear. For example, we explain why the Courts influence was greatest before the passage of the Single European Act and declined in the following decade, and why we expect it to increase again in the aftermath of the Amsterdam Treaty. We also explain why the Commission became a powerful legislative agenda setter after the Single European Act and why its power today stems more from administrative discretion than from influence over legislation.

The European Court of Justice, National Governments, and Legal Integration in the European Union

We develop a game theoretic model of the conditions under which the European Court of Justice can be expected to take “adverse judgments” against European Union member governments and when the governments are likely to abide by these decisions. The model generates three hypotheses. First, the greater the clarity of EU case law precedent, the lesser the likelihood that the Court will tailor its decisions to the anticipated reactions of member governments. Second, the greater the domestic costs of an ECJ ruling to a litigant government, the lesser the likelihood that the litigant government will abide by it (and hence the lesser the likelihood that the Court will make such a ruling). Third, the greater the activism of the ECJ and the larger the number of member governments adversely affected by it, the greater the likelihood that responses by litigant governments will move from individual noncompliance to coordinated retaliation through new legislation or treaty revisions. These hypotheses are tested against three broad lines of case law central to ECJ jurisprudence: bans on agricultural imports, application of principles of equal treatment of the sexes to occupational pensions, and state liability for violation of EU law. The empirical analysis supports our view that though influenced by legal precedent, the ECJ also takes into account the anticipated reactions of member governments.