Europe Inc. in crisis - the EU’s alliance with big business is a dead-end

It is now 15 years since four friends in Amsterdam set up Corporate Europe Observatory (CEO) and published the report Europe, Inc.: Dangerous Liaisons between EU Institutions and Industry.[fn]The text of the 72-page report is available online. In 2000, Corporate Europe Observatory published a 256-page book titled Europe, Inc. – Regional & Global Restructuring and the Rise of Corporate Power (Pluto Press). Three key chapters from this book are available on our website.[/fn] Launched at the civil society “Summit from Below” which happened alongside the EU Summit in Amsterdam in June 1997, the report exposed the influence of industry lobbying on the new EU treaty being signed at the summit. This first CEO report uncovered the powerful role of lobby groups such as the European Roundtable of Industrialists (ERT), in promoting and shaping an EU-wide free trade area (the single market), a single currency (the euro), and numerous other major EU projects and policies at the time. The report warned that the far-reaching influence of corporate lobbies over EU decision-making came at the expense of democracy and of social and environmental concerns.

Fifteen years later, those very same problems have not gone away. In fact, the situation is worse than ever before. The corporate capture of EU policies has played a central role in sparking the deepest economic crisis for generations and contributed to the EU's flawed response to the crisis, based on harsh austerity policies that are currently causing social havoc across Europe.

Financial crisis caused by lobbying power of financial corporations

The financial crisis that erupted in 2008, triggering the deep economic crisis we’re in, was the result of an unsustainable bubble economy caused by the deregulation of financial markets. This deregulation process started first in the US in the 1980s, but was implemented just as boldly in Europe in a drive to create a single market for financial services. New EU-wide rules were developed that were extremely beneficial for big banks and investment funds, but which failed to safeguard our societies against reckless profit-driven speculation. As research by ALTER-EU has shown, the financial industry itself was heavily involved in shaping these inadequate EU rules.1 This happened for instance via dozens of European Commission advisory groups that played a central role in drafting the new financial regulations. These so-called expert groups were often heavily dominated by industry lobbyists. The corporate capture of these powerful advisory groups continued after the crisis broke. Commissioner Michel Barnier, who took office in 2010, has repeatedly expressed unease with the influence of banking lobbyists, but it remains to be seen if this will translate into real change. The financial industry was virtually allowed to draw up its own rules with its lobbyists given the role of co-legislators. This seems absurd but fits into a wider pattern.

EU decision-making - a lobbyists’ paradise

Today corporate lobbyists have EU decision-making in an ever-tightening grip. As a result, a large proportion of EU laws and policies are heavily influenced by lobbying. The number of lobbyists based in Brussels grew from 650 in the mid-80s to an estimated 15,000-30,000 today, with most representing industry.2 On virtually every issue (from energy policy to food labelling to banking), industry lobbyists outnumber and outspend public interest NGOs. The annual turnover of corporate lobbying in Brussels has long passed the one billion euro mark.

The European Parliament, with its increased powers, has become an important target for industry lobbyists. Last year’s battle around food labelling rules was a telling example of how a massive investment in industry lobbying can pay off, with MEPs opting for a labelling scheme that had been developed and promoted by industry, instead of the more consumer-friendly ‘traffic-light’ option.3 Numerous financial market regulations have also been watered down in the Parliament, with votes sometimes including more amendments drafted by banking lobbyists than by MEPs themselves. Industry also launches coordinated lobby campaigns to influence member state governments to block or weaken proposed legislation. This is what happened this spring when the financial industry’s scaremongering lobbying persuaded key governments withdraw support for the financial transaction tax, effectively torpedoing the proposals.4

But the most important focus for industry lobbyists is still the European Commission, which has a monopoly on initiating new EU legislation. And the Commission is not only open to industry lobbyists, it has an active policy of providing privileged access to big business lobby groups. The Commission advisory groups on financial regulation dominated by financial industry lobbyists mentioned above is far from an isolated example. Other Commission departments, including those in charge of taxation, consumer protection and agriculture, have allowed expert groups to be captured by commercial interests.5 And the allocation of the EU’s multi-billion euro research funding budgets is heavily influenced by ‘technology platforms’ controlled by industry representatives.6

What’s good for big business...

Another stark case is the Commission’s close alliance with big business lobbies in shaping the EU’s international trade and investment policies. Fifteen years ago, then EU Trade Commissioner Leon Brittan actively built up industry lobbying structures to inform the Commission’s position in international trade negotiations. This resulted in the creation of the Transatlantic Business Dialogue (TABD) and the European Services Forum (ESF), both of which are still active.7

These undemocratic habits continue today. When the Commission initiates new international trade talks it consults closely with big business lobby groups as a matter of course, particularly BusinessEurope and the ESF.8 It routinely supports the creation of business fora that can help lobby governments to remove obstacles to trade and investment. The EU-India Business Forum and the EU-Africa Business Forum are just two examples of many.9 This industry-led approach benefits EU-based multinationals wanting to expand their operations overseas, often at the expense of pro-poor development and safeguards for the environment.

Despite heavy doses of feel-good language in its public messages, the Commission sees civil society groups as a risk it needs to manage, while big business lobby groups are its allies. Civil society groups have for over a decade campaigned to liberate EU trade policy from the grip of corporate lobby groups, but the European Commission firmly resists any step in this direction.

Underlying this approach is the flawed assumption that what is good for big business is good for Europe - and the rest of the world. The Commission has over the last three decades been a consistent promoter of neoliberal reforms to expand the role of markets, not just in the context of international trade policy, but also within the European Union. This includes a continuous push to ‘complete the single market’ by subjecting all sectors of economy to market forces, from public transport and energy, to health, education and water. In some cases, like the attempt to bring water into the single market, public opposition was too strong, but the Commission stubbornly continues to pursue deregulation and privatisation, an agenda that naturally favours corporate interests.

Leaving the environment to markets?

The combination of this ideological persuasion for market-based approaches and the heavy lobbying power of industry has also been bad news for environmental policies in Europe. Take the example of climate change. European public opinion has consistently supported ambitious measures to curb greenhouse gas emissions, but the actual policies coming out of Brussels are far from ambitious. Overall reduction targets have remained disappointingly low, not least because of cynical lobbying by BusinessEurope and other industry groups.10 The very basis of EU climate policy is a market which allows corporations to trade emissions rights, an approach that has not only been deeply ineffective, but which has also perversely created multi-billion euro windfall profits for large energy users.11 Instead of insisting on cuts of emissions at source, the Commission has time after time embraced flawed ‘solutions’ promoted by industry, such as agrofuels (grown under unsustainable conditions, often increasing emissions) and the controversial, costly carbon-capture and storage projects.

Ahead of the UN summit on sustainable development (Rio+20) in June the EU is promoting a market-based approach to “protect” biodiversity and other natural resources, regardless of the apparent failure of carbon trading.12 The Commission is working closely with business lobbies to design and promote this market-based approach at a global level, as part of what is misleadingly referred to as the ‘Green Economy’. The underlying agenda is that ‘biodiversity trading’ will result in EU-based corporations and investors gaining access to resources and new markets in the South.

Limited transparency gains

Over the last 7-8 years, there’s been an often lively debate about the role of lobbying in EU decision-making. This has led to some progress in transparency around lobbying, although the EU’s lobby transparency register, upgraded in 2011, remains voluntary and full of loopholes.13 After a number of revolving door scandals involving ex-Commissioners who went into corporate lobbying jobs, the ethics rules for Commissioners were tightened a little last year. A growing number of Members of the European Parliament (MEPs) have expressed concern about the influence of lobbyists over EU decision-making and have called for measures to prevent corporate capture.14 The ALTER-EU coalition, bringing together around 200 civil society groups from across Europe, has been instrumental in developing strong pressure for change.15

But the Commission’s ambitions for greater transparency, better practice and greater accountability seem limited. The Commissioner currently in charge of these issues, Maros Sefcovic, appears more interested in polishing the Commission’s image than in solving the problems that exist (industry-dominated advisory groups, Commission officials going through the revolving door into lobby jobs, etc.).

What is still missing in the debate is a recognition of the dangers of excessive corporate influence over EU decision-making. Transparency and ethics reforms such as those proposed by the ALTER-EU coalition, are urgently needed to block the opportunities for corporate capture.16 Improved transparency and ethics rules, however important, will not bring the change that is needed. The problem is deeper and goes back to the ’80s, when Jacques Delors was president of the Commission. Since that time, the Commission has regarded big business as a close ally in policy-making.

Delors’ alliance with big business

As CEO’s very first report back in 1997 (Europe, Inc.) highlighted, the Delors Commission (1985-1994) actively built alliances with big business lobby groups in order to push for joint priorities.17 This was a clear departure from the past when the Commission had attempted to regulate multinational corporations and held lobbies at arms’ length. Delors cooperated closely with the European Roundtable of Industrialists (ERT) to push for the creation of a Single Market, the single currency, and various other high-profile policy initiatives which essentially promoted neoliberal reforms.

For Delors, a convinced federalist, the alliance with the ERT was a way of getting European unification onto the fast-track after many years of stagnation. The large multinational companies that belonged to the ERT had the political leverage to convince member state governments.18 Delors embraced a corporate-driven European unification strategy, based on the single market and the euro, as opposed to what would have been a much slower process of political integration around progressive priorities. He may have done this in the belief that full-scale political integration and a ‘Social Europe’ would automatically follow. It didn’t. The alliance with big business resulted in a neoliberal EU project, which unleashed market forces that not only prevented the emergence of a Social Europe, but which now also threaten to dismantle the welfare state and other progressive achievements to an extent never seen before.

The strategic alliance between the Commission and big business has continued during the years of Commission Presidents Jacques Santer, Romano Prodi and Jose Manuel Barroso. Under Prodi, the ERT played a important role in the development of the Lisbon Agenda, which made it the EU’s primary goal to become the world’s most competitive bloc by 2010.19 The Lisbon Agenda text also included social and environmental objectives, but these were soon revealed to be merely token. The only real priority was to promote neoliberal reforms and boost the international competitiveness of industry. With such priorities, industry lobbying became a simple affair: any corporate demand could be presented as a necessity for international competitiveness, the EU’s prime goal. Using score-cards and other tools, the Commission put pressure on national governments to embark on neoliberal reforms, but it lacked the powers to force them. This might now have changed as a result of the new legislation passed in the wake of the eurocrisis.

Austerity Treaty: only Big Business is cheering

Immediately after the financial crisis broke in 2008, EU government leaders called for far stricter regulation of financial markets, but this proved to be an empty promise. The banking bailouts with tax payers money caused a public debt crisis that has brought several countries to the verge of bankruptcy and threatened the survival of the euro. EU government leaders have not stood up to the financial markets. Instead they have gone out of their way to satisfy their every whim. Under the pretext of restoring confidence in the financial markets, the EU countries most affected by the debt crisis have been subjected to harsh austerity conditions in return for loan packages, resulting in cuts that destroy their social fabric, as can be seen in Greece, Portugal and Ireland. The so-called Troika, made up of the International Monetary Fund, the European Central Bank and the Commission, is imposing hardline neoliberal reforms, including large-scale privatisations.20 But these EU crisis policies have not been restricted to these countries, the whole of the EU is being treated with this bitter medicine.

Last year, a whole series of new ‘economic governance’ laws were rushed through in record time. Described as a “silent revolution” by Commission President Barroso, the so-called Six-Pack gives the Commission far-reaching new powers to enforce budget deficit and debt limits by intervening in member state budgets and welfare policies.21 Nor has the Commission wasted any time in using these new powers, with Commissioner Olli Rehn already pushing governments to make further cuts and neoliberal reforms. The new Belgian government, for instance, had to present its budget for approval and was pressured to make further budget cuts, resulting in reduced funds for public health care and development aid. The Commission’s interventions were criticised heavily by some centre-left politicians as inappropriate, ideologically-motivated interference, but this did not change the outcome. As the Commission steps up the use of its new powers, the Commission is likely to be increasingly seen not as a politically neutral enforcer of treaties but as having a deeply rooted neoliberal agenda.

To add insult to injury, a new EU Treaty was agreed earlier this year which further tightens the screws, introducing a 0.5% long-term budget deficit cap. This absurdly rigid limit on public deficits is to be written into national constitutions in order to make it irreversible.22 The new treaty, officially named the Fiscal Compact but known by critics as the Permanent Austerity Treaty, was agreed virtually without any public debate. The German Chancellor Angela Merkel described the new fiscal rules as having “eternal validity”. The treaty will cause further massive cuts in public budgets, deepening the crisis and further destroying the welfare state. It outlaws Keynesian-style policies that involve governments investing to create jobs, via loans which create (temporary) deficits. Such a restriction on government policy at a national level is deeply undemocratic.

With the Six Pack and the Austerity Treaty, industry lobby groups such as the ERT and BusinessEurope see their longstanding wishes implemented. BusinessEurope in particular has lobbied actively to influence both the Six-Pack and the Austerity Treaty and saw its main demands reflected in the final texts.23 The EU’s response to the crisis fits hand in glove with the corporate agenda of these lobby groups. The Commission’s use of its new economic governance powers will reshape societies in exactly the way that these lobby groups have demanded for many years. While BusinessEurope is cheering, the EU is alienating itself from the citizens.

Reclaiming democracy, curbing corporate power

It is almost incomprehensible that the European Parliament and national governments have agreed to a treaty that sacrifices democracy in order to appease financial markets. Europe is facing its deepest democratic crisis in decades. The treaty still needs to be ratified by national parliaments however and with a referendum promised in Ireland and possibly elsewhere, this could throw a spanner in the works. If the EU is to avoid a deep recession, safeguard the welfare state and retain any hope of democracy, it would be good news if the Austerity Treaty were rejected. The Irish referendum in late May will be the first time that citizens will have a chance to voice their opinions. Halting the ratification would provide an opportunity for governments to change course and embark instead on policies to effectively control the financial markets which caused the crisis, rather than succumbing to their powers.

The crisis has shown more clearly than ever that the EU’s current neoliberal ideology combined with the far-reaching influence of corporate lobbies is on a road to nowhere. It has led to austerity measures that are not only unfair, but which will ultimately destroy what remains of the European welfare states. It is no wonder that people in the countries most impacted by the crisis have been shocked by the policies being imposed by the EU. Such measures are a far cry from the force for social and environmental progress they expected from the EU.

There are signs that the public are not prepared to accept these impositions. New citizens movements such as the Indignados and Occupy have emerged that demand real democracy instead of de facto government by market forces, whether in the shape of big business or the financial markets. Trade unions and other citizens groups are stepping up their actions to defend the welfare state. It is from these progressive forces - and pan-European alliances between them - that the pressure for a different Europe will come.

As Corporate Europe Observatory turns 15, we can take pride in the impact of our tireless efforts to throw light on and challenge the corporate capture of EU decision-making. We have contributed to a far greater awareness of the harm done by excessive corporate influence and won many small and large victories. With ALTER-EU, which we helped build, there’s now a vibrant pan-European civil society coalition pushing for stronger transparency and ethics rules to help curb corporate influence. Across Europe, there’s a growing appetite for transparency, accountability and democratic renewal. So while the problems remain severe, the chances of breakthroughs in curbing corporate influence are greater than ever.

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