Neomercantilism and the Structure of the Eurozone Crisis, 1945-2012

Since 2008 the countries of the Eurozone have seen social upheaval and economic crisis on an unprecedented scale. Sociological explanations for European development and crisis have relied either on an neoinstitutionalist approach, seeing the region as a coalescing “field” of social interaction, or an approach a collection of disparate “varieties” of economy, supposing that Southern European states were profligate in their spending or wage policies compared to Germany and other Northern states. In contrast, this study uses global political economy and post-Keynesian economics to analyze the sharp inequalities between Western Europe’s economies, the unusual structure of pan-European economic governance institutions, and the way these interacted to cause the post-2008 crisis. I argue that Europe’s uneven political economy, in which a “neomercantilist” North centered on Germany has grown by extracting export surpluses from the debt-addled South, is a crucial component of any explanation for why Northern and Southern member states display such divergent models of social development and why pan-European institutions took their current form. I use Qualitative Comparative Analysis (QCA), a software-aided method of case comparison, as an initial test of competing crisis explanations, mapping the Eurozone’s Northern and Southern blocs over the 1999-2007 period. This revealed bloc structure then informs a multi-chapter historical case study of European development since 1945, putting the neomercantilist explanation in dialogue with competing sociological theories at each step. Comparative-historical methods are employed to demonstrate that pan-European institutions such as the European Central Bank (ECB) were shaped by this neomercantilist relationship between Northern and Southern countries and thus tend to exacerbate between-country inequalities. More fundamentally, I argue that the disparate social models found across Europe were also shaped by this neomercantilist relationship, rather than being a sui generis result of each country’s own particularities. Explaining who won and lost in the wake of the crisis therefore depends, at base, on this neomercantilist linkage, and the way it determined both the social models installed in each European country and the restrictive institutional framework of the Euro itself