been a central part of the political landscape for more than a century, ever since the Interstate Commerce Act of 1887 set up a federal commission to regulate the railroads. In due course, there followed regulative agencies in one industry after another, most created during the Progressive and New Deal eras. The result has been, in Majone’s words, that ‘as every student of the subject knows, in America regulation is a distinct type of policy-making that has spawned a distinct theoretical and empirical literature’.49 Majone’s undertaking has been to bring this body of thought back across the water, to dramatic intellectual effect.
He begins by observing that nationalization was for long the functional equivalent of regulation in America. Wherein then lay the distinction between them? The answer is to be found in the ‘significant ideological and institutional differences between the American and European approach to the political control of market processes. The long tradition of regulation in the United States expresses a widely held belief that the market works well under normal circumstances, and should be interfered with only in specific cases of “market failure” such as monopoly power, negative externalities or inadequate information. In Europe, popular acceptance of the market ideology is a more recent phenomenon’.50 It would be wrong, however, to treat the contrast as simply a matter of collective beliefs. There is an objective difference, Majone goes on, between nationalization and regulation, that makes the latter inherently superior as a solution to market failures. Public ownership was supposed to serve multiple purposes: industrial development, full employment, social equity, national security. Such goals were not only often incompatible, their very diversity detracted from the pursuit of efficiency, eventually casting the idea of nationalization itself into discredit. Regulation, by contrast, has just one ‘normative justification’—efficiency—and so avoids the redistributive tensions, and confusions, generated by nationalization. Whereas redistribution is a zero-sum game in which one group must lose what the other obtains, ‘efficiency issues, on the other hand, may be thought of as positive-sum games where everybody can gain, provided the right solution is discovered. Hence, such issues could be settled, in principle, by unanimity’.51
Since, however, ‘unanimity is practically impossible in a large polity’, the task of improving market efficiency is best entrusted to expert regulatory agencies. The key feature of these, as they gradually evolved in the United States, came to be delegation: that is, the abandonment by the state of any attempts to direct the work of the agencies it had created to regulate the market, leaving these to the discretion of those it appointed to them. This development was consummated with the reforms of the Reagan administration, which went still further by devolving most federal expenditures to third parties of various kinds in civil society. So conceived, the logic of regulation is an increasingly complete severance of expert authority from the popular will. Majone employs the idiom of a Californian school of conservative economics, property rights theory, to express this. Regulation represents a ‘partitioning of political property rights’,52 that transfers public powers from fickle legislatures, subject to partisan majorities that can change every half-decade, to independent authorities capable of making credible long-term commitments, without interference from voters.
In Europe, realization of the advantages of this arrangement was long delayed. There, the first ‘nationalizations coincided with the first worldwide depression of the capitalist economy (1873–1896) which shattered popular and elite support of the market for almost one century’.53 By the 1980s, however, this had finally changed. It was Britain that led the way with the privatizations of the Thatcher years. The growth of regulation here, as subsequently on the continent, has in effect been the complement to the advance of privatization—that is, a set of agencies whose task is to ensure that firms do not abuse monopoly power as the state once did, or generate an excess of externalities. As this pattern spreads, the balance of functions performed by the modern state alters, shifting away from the provision of welfare or stabilization of the business-cycle towards a more indirectly regulative role. There is no reason to be shocked by this change, which accords with longstanding principles of the modern Rechtsstaat. ‘Within the nonmajoritarian model of democracy—which is just another name for constitutional democracy’, Majone writes, ‘reliance upon qualities such as expertise, credibility, fairness, or independence has always been considered more important than reliance upon direct political accountability’—if only ‘for some limited purposes’.54 The main task that regulatory agencies are called upon to fulfil is to rectify market failures. Their actions may have redistributive consequences, but they must not themselves pursue any redistributive ends, which require more directly political decisions by elected legislatures. The nation-state, although the balance of its activities may have altered, continues to provide for welfare, stability and defence, as well as regulation. It remains a multi-purpose creation.
The essence of the European Union, however—this was Majone’s master-stroke—is to be just a regulative authority writ large: that is, a form of state stripped of redistributive and coercive functions, purified to maintenance tasks for the market. In practice, to be sure, ad hoc programmes of sectoral or regional redistribution—a lamentable Common Agricultural Policy and the like—have been tacked onto the EU. But these can be regarded as adventitious accretions that do not alter its overall character, which is unprecedented. It is a ‘regulatory polity’. This conclusion might seem to anticipate more or less exactly Moravcsik’s recent depictions of the EU, on which Majone’s influence—he started writing earlier, and more trenchantly—is fairly clear. But his own theory of the Union is quite distinct. The EU cannot be reduced to an inter-governmental regime, and Moravcsik’s attempt to model it as the outcome of least-common-denominator bargaining is little more than the crude application of a Ricardian theory of economic rent, incapable of explaining even episodes apparently most favourable to it, let alone more complex innovations like the Single European Act, where the role of the Commission as policy entrepreneur was critical.55
For the reason why the EU distils in a unique concentrate a more general, diffuse transformation of the modern state is that, just because it possesses no independent powers of taxation, and must make do with a tiny fraction of the revenues at the disposal of its member-states—a budget of less than 1.3 per cent of Union GDP, where public expenditures can account for up to 50 per cent of national incomes—there has been a virtually inbuilt drive within the Commission to expand its authority by the alternative route of regulation.56 The rationale for the multiplication of technical directives from Brussels is in this sense overwhelming. For the beauty of regulation is that it requires minimal funding—just the salaries of a handful of experts—since the costs of regulation are borne, not by the regulatory authority, but by the firms or individuals subject to its rulings. Thus defenders of the EU as it exists today can point out, as they regularly do—Moravcsik is indefatigable on this point—that it employs a mere 18,000 functionaries, less than a provincial city, for a population of some 400 million. But this small cadre generates an immense web of regulations, far outnumbering laws passed by national legislatures themselves. As early as 1991, directives and regulations issued by Brussels already exceeded all pieces of legislation passed in Paris. Delors’s prediction that by the end of the century 80 per cent of all economic and social legislation in the Union would be of Community origin was ‘perhaps politically imprudent’, but it ‘did not lack solid empirical support’.57 The EU is no mere façade.
But if the commanding function of the EU is regulatory, what then is its distinctive structure? Here Majone moves from an American to a European tool-box, drawing on an interest in the history of political thought and a gift of crisp conceptual clarity that are characteristically Italian, recalling something of Norberto Bobbio or Giovanni Sartori. Dilemmas of European Integration (2005) argues that the Union is not, and will not become, a federation, because it lacks a demos capable of either creating or supporting one. But nor is it a mere inter-governmental regime. Rather, in a classical, insufficiently remembered, sense of the term, the EU is a confederation, as Montesquieu once conceived it. What does this mean? That the underlying form of the Union is a ‘mixed constitution’ of the pre-modern type, formulated in antiquity by Aristotle and Polybius, and realized in mediaeval and pre-absolutist realms as a polity composed ‘not of individual citizens but of corporate bodies balanced against each other and governed by mutual agreement rather than by a political