Polanyian Means to Hayekian Ends (or Ordoliberalism on Steroids): The Economic Philosophy of EU Governance

This paper asks what sort of political-economic system the European Union has grown into since the mid-1980s. The governing principles of the single market and the Eurozone feature a unique combination of Hayekian and Polanyian principles that are often seen as polar opposites. The core normative vision is much like Hayek’s ideal federation: a multi-level polity in which central government fosters openness across subunits to deliver wide-ranging competition and fiscal conservatism. But Hayekians generally detest today’s EU because it has pursued these goals with far more central authority than they endorse. Indeed, the EU’s core political strategy implies a Polanyian analysis—markets are unnatural political constructs that depend on strong assertion of central authority—though Polanyians detest much of its Hayekian normative vision. In recent years, this combination has often been described as close to German ordoliberalism, which preached strong state action to deliver Hayekian-style goals. This makes some sense, but not very much, since the few remaining ordoliberals also generally dislike today’s EU for having taken on too much active economic authority. Moreover, it is hard to argue historically that ordoliberals played a strong direct role in building the EU. We argue that today’s EU is closest to a ramped-up form of ordoliberalism—“ordoliberalism on steroids”—that resulted from an unintended political intersection of Hayekian and Polanyian agendas.