Abstract
This contribution discusses the regulatory approaches of German-speaking countries to the design of European and international economic law since World War II. The US initiatives for the 1944 Bretton Woods Agreements and the 1947 General Agreement on Tariffs and Trade were driven by neoliberal, multilateral approaches prioritizing rule-based liberalization of market access barriers, deregulation, privatization, and “financialization” of markets as spontaneous information, coordination, and sanctioning mechanisms enabling private economic actors to pursue their economic self-interests. By contrast, the postwar German and European ordo-liberalism and the “Virginia School” of “law and economics” perceived markets as legal constructs, which cannot maximize general consumer welfare without legal limitations of “market failures,” “governance failures,” and “constitutional failures.” The federalism and constitutional protection of common market freedoms inside Austria, Germany, and Switzerland contributed to their promotion of ordo-liberal, constitutional approaches also in their external economic policies aimed at creating and progressively developing Europe’s microeconomic “common market constitution” not only inside the European Union but also in the broader “European Economic Area,” the European Free Trade Area, and the EU’s common commercial policies. The worldwide WTO legal and dispute settlement system was influenced both by neoliberal US initiatives as well as by ordo-liberal European proposals (e.g., for the design of the WTO dispute settlement system). The current US assault on the WTO Appellate Body system is driven by neoliberal interest group politics and hegemonic mercantilism by the US Trump administration.
Emeritus Professor of International and European Law and former head of the Law Department of the European University Institute at Florence (Italy).
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
On the ordo-liberal Freiburg School of law and economics as a predecessor of ‘constitutional economics’, and on the contrast between neo-liberal ‘free market economics’ and ordo-liberal ‘constitutional economics’, see: V.J. Vanberg, The Constitution of Markets. Essays in Political Economy (London: Routledge, 2001).
- 2.
Cf. R. Baldwin, The Great Convergence. Information Technology and the New Globalization (Cambridge Mass: Harvard UP 2016).
- 3.
For this state-centered conception of IEL see, e.g., G. Schwarzenberger, The Principles and Standards of International Economic Law, 117 Recueil des Cours (The Hague: Nijhoff 1966), 1-98; I. Seidl-Hohenveldern, International Economic Law, 198 Receuil des Cours (The Hague: Nijhoff 1986), 3-264.
- 4.
An example for a private law-centered conception of IEL is: B. Schöbener/J. Herbst/M. Perkams, Internationales Wirtschaftsrecht (Heidelberg: Müller 2010). Also the Internationales Wirtschaftsrecht edited by C. Tietje (Berlin: De Gruyter, 2009) and M. Herdegen’s Principles of International Economic Law (Oxford: OUP 2013) include chapters on ‘international business law’ and transnational private law.
- 5.
See, e.g. R. Stewart and R.M. Ratton Sanchez Badin, ‘The WTO and Global Administrative Law’ in: C. Joerges/E.U. Petersmann (eds), Constitutionalism, Multilevel Trade Governance and International Economic Law (Oxford: Hart 2011), chapter 16.
- 6.
For detailed explanations of these five competing conceptions of IEL see: E. U. Petersmann, International Economic Law in the 21st Century. Constitutional Pluralism and Multilevel Governance of Transnational Public Goods (Oxford: Hart 2012), ch. 1.
- 7.
Cf. E. U. Petersmann, Multilevel Constitutionalism for Multilevel Governance of Public Goods - Methodology Problems in International Law (Oxford: Bloomsbury 2017); A. Somek, The Cosmopolitan Constitution (Oxford: OUP 2014).
- 8.
Cf F. Ehm, Das völkerrechtliche Demokratiegebot. Eine Untersuchung zur schwindenden Wertneutralität des Völkerrechts gegenüber den staatlichen Binnenstrukturen (Tübingen: Mohr 2013).
- 9.
Cf A. Verdross, Die Verfassung der Völkerrechtsgemeinschaft (Springer 1926); H. Lauterpacht, The Function of Law in the International Community (Clarendon Press 1933); H. Mosler, The International Society as a Legal Community 140 Recueil des Cours (1974) 1; B. Simma, From Bilateralism to Community Interest in International Law 250 Recueil des Cours (1994) 217; B. Fassbender, The UN Charter as Constitution of the International Community (The Hague: M. Nijhoff 2009); A. von Bogdandy, Constitutionalism in International Law: A Proposal from Germany, in: 47 Harvard International Law Journal (2006) 223.
- 10.
Cf. E. U. Petersmann, Constitutional Functions and Constitutional Problems in International Economic Law (Fribourg University/Boulder Press 1991); idem, State Sovereignty, Popular Sovereignty and Individual Sovereignty: From Constitutional Nationalism to Multilevel Constitutionalism in International Economic Law? in: W. Shan/P. Simons/D. Singh (eds), Redefining Sovereignty in International Economic Law (Oxford: OUP 2008), 27-60; T. Cottier/M. Hertig, The Prospects of 21st Century Constitutionalism’ in: A. von Bogdandy/R. Wolfrum (eds), Max Planck Yearbook of United Nations Law 7 (Brill/Nijhoff 2004) 261–328; M. Herdegen, Principles of International Economic Law (Oxford: OUP 2nd ed. 2016).
- 11.
Cf. Petersmann (notes 7 and 10) and A. Peters, Compensatory Constitutionalism: The Function and Potential of Fundamental International Norms and Structures, in: 19 Leiden Journal of International Law (2006) 579.
- 12.
On the foundational role of human rights for designing ‘constitutionalism’ see: E. J. Schwöbel, Global Constitutionalism in International Legal Perspective (Brill 2011); E. U. Petersmann, ‘Constitutional Constructivism’ for a Common Law of Humanity? Multilevel Constitutionalism as a ‘Gentle Civilizer of Nations’ in: Max Planck Institute MPIL Research Paper Series No. 2017-24.
- 13.
Cf Petersmann (note 7); R. Forst, Contexts of Justice: Political Philosophy beyond Liberalism and Communitarianism (University of California Press 2002).
- 14.
The failures of liberalism, democracy and of economic planning during the inter-war period, and the resulting financial, economic and democratic crises impeding the enforceability of the social rights guarantees in the Weimar Constitution, were described in F. A. Hayek, The Road to Serfdom (Routledge 1944). See also E. Kennedy, Constitutional Failures. Carl Schmitt in Weimar (Durham: Duke University Press 2004).
- 15.
For an overview of academic views and the jurisprudence of the Constitutional Court see: J. Drexl, Competition Law as Part of the European Constitution, and A. Hatje, The Economic Constitution, in: A von Bogdandy/J. Bast (eds), Principles of European Constitutional Law (Oxford: Hart 2006), 587ff, 633ff.
- 16.
Cf. A. Hinarejos, The Euro-Area Crisis in Constitutional Perspective (OUP 2015); M. Adams/ F. Fabbrini/P. Larouche (eds), The Constitutionalization of European Budgetary Constraints (Hart 2014).
- 17.
Cf J. Rawls, Political Liberalism (Columbia University Press 1993) xvi-xvii.
- 18.
This does not include the very substantial financial sector assistance granted to Spain under the European Stability Mechanism (ESM) and the European Central Bank (ECB)’s indirect financial assistance measures.
- 19.
D. Gros, The Italian Banking Saga: Symptom of a deeper underlying problem? In: CEPS Thinking ahead for Europe, 7 July 2017 (http://www.ceps.eu/publications).
- 20.
For analyses of the relevant case-law see: T. Beukers/B. De Witte/C. Kilpatrick (eds) Constitutional Change Through Euro-Crisis Law (CUP 2017). In Pringle, the CJEU construed the bail-out prohibition in Article 125 TFEU as ‘not intended to prohibit either the Union or the Member States from granting any form of financial assistance whatever to another Member State’ (Case C-370/12, EU:C:2012:756, para.130). In the Dano judgment of 11 November 2014, the CJEU allowed EU member states to exclude economically inactive EU citizens from certain national social benefits if freedom of movement was used only in order to obtain another member state’s social assistance (C-333/13, EU:C:2014:2358), thereby allaying fears of ‘welfare tourism’.
- 21.
Cf. V. Hatzopoulos, From Economic Crisis to Identity Crisis: The Spoliation of EU and National Citizenships, College of Europe Research Paper in Law 01/2017.
- 22.
On differences among these two schools see: J. Lange/von Kulessa/A. Renner, Die Soziale Marktwirtschaft Alfred Müller Armacks und der Ordoliberalismus der Freiburger Schule – Zur Unvereinbarkeit zweier Staatsauffassungen, in: ORDO 49 (Stuttgart 1998), 79-104. See also P. Commun, Erhards Bekehrung zum Ordoliberalismus, Freiburg Discussion Papers on Constitutional Economics 04/4 (Freiburg i.B. 2004). For Hayek’s criticism of governmental ‘social justice policies’ as an alternative to income distribution based on market principles see: F. A. Hayek, The Fatal Conceit. The Errors of Socialism (University of Chicago Press 1991).
- 23.
Cf A. Müller-Armack, Wirtschaftsordnung und Wirtschaftspolitik. Studien und Konzepte zur Sozialen Marktwirtschaft und Europäischen Integration (Freiburg i.B. 1966).
- 24.
As a much higher percentage of the average families in France, Italy or Spain live in their privately owned homes than in Austria and Germany (e.g. due also to destruction of cities during World Wars I and II and the post-war influx of millions of German-speaking refugees from Eastern Europe), and Germany continues to pay the largest national contribution to EU budgets, German resistance against calls for new EU ‘social programs’ (like an EU unemployment guarantee, transformation of national debts into EU debts) is likely to continue on grounds of ‘subsidiarity’ and rule of law (e.g. defending the EU budget and debt disciplines against rent-seeking pressures).
- 25.
Cf. E. U. Petersmann, The EU’s Cosmopolitan Foreign Policy Constitution and its Disregard in Transatlantic Free Trade Agreements, in: European Foreign Affairs Review 2016, 449-469.
- 26.
The first ICSID dispute based on an investor-state contract was Holliday Inns v Morocco, ICSID Case No. ARB/72/1.
- 27.
The first ICSID dispute based on national legislation was SPP v Egypt, ICSID Case No. ARB/84/3.
- 28.
The first ICSID dispute based on a BIT clause was AAPL v Sri Lanka, ICSID Report IV, at 250.
- 29.
Cf. V. Kube/E. U. Petersmann, Human Rights Law in International Investment Arbitration, in: Fontanelli/Gattini/Tanzi (eds), General Principles of Law and International Investment Arbitration (The Hague: Brill 2018).
- 30.
Cf L. Azoulai, The Court of Justice and the Social Market Economy: The Emergence of an Ideal and the Conditions for its Realization, in: CMLRev 45 (2008), 1335-1356.
- 31.
Cf. E. U. Petersmann, EU Citizenship as a Constitutional Restraint on the EU’s Multilevel Governance of Public Goods, European Law Review 43 (2018), 89-105.
- 32.
Arguably, none of the more than 500 GATT/WTO dispute settlement rulings since 1948 has violated human rights. Yet, ‘American neo-liberals’, ‘European ordo-liberals’ and ‘Chinese state-capitalists’ often interpret WTO rules from different legal perspectives; cf S. Joseph/D. Kinley/J. Waincymer (eds), The WTO and Human Rights (Cheltenham: Elgar 2009); E.U. Petersmann, International Economic Law without Human and Constitutional Rights? Legal Methodology Questions for my Chinese Critics, in: JIEL 21 (2018), 213-231; idem, How to Reconcile Human Rights, Trade Law, Intellectual Property, Investment and Health Law? WTO Dispute Settlement Panel Upholds Australia’s Plain Packaging Regulations of Tobacco Products, in: The Global Community Yearbook of International Law and Jurisprudence 2018, 69-102.
- 33.
Case C-284/16 The Slovak Republic v. Achmea BV [2018] ECLI:EU:C:2018:158.
- 34.
See, e.g., A. Steinbach/A. van Aaken, Oekonomische Analyse des Völker- und Europarechts (Tübingen: Mohr 2019). ‘Constitutional economics’ (as ‘economic analysis of constitutional law’ and of economic rights of citizens) was taught by the ordo-liberal ‘Freiburg school’ (e.g. of W. Eucken, F. Böhm, F. A. Hayek, V. Vanberg) and ‘Virginia school’ (e.g. J. Buchanan) defining economic efficiency not only in terms of ‘Pareto’- and ‘Kaldor-Hicks efficiency’ (based on utilitarian premises), but also by (hypothetical) individual and democratic consent to inclusive, reasonable rules reconciling the interests of all affected citizens (cf. G. Brennan/J. M. Buchanan, The Reason of Rules. Constitutional Political Economy (Cambridge: CUP 1985). On the influence of ordo-liberalism and ‘constitutional economics’ on the ‘Geneva school of law and economics’ see: E. U. Petersmann, International Economic Theory and International Economic Law - On the tasks of a legal theory of international economic order, in: R. S. J. Macdonald/D. M. Johnston (eds), The Structure and Process of International Law (The Hague: Nijhoff 1983) 227–261; Q. Slobodian, Globalists. The End of Empire and the Birth of Neoliberalism (Cambridge Mass.: Harvard UP 2018), who describes the WTO as ‘the paradigmatic product of Geneva School neoliberalism’ (at p. 25), and the ‘creation of the WTO (as) a crowning victory of the neoliberal project of finding an extra-economic enforcer for the world economy in the twentieth century’ (at 23). Also GATT/WTO jurisprudence (e.g. on interpreting GATT/WTO rules as protecting non-discriminatory conditions of competition) emphasized the ordo-liberal function of states and of the GATT/WTO dispute settlement systems as ‘guardians of the competitive order’.
- 35.
See also the ‘liberal paradox’ criticized by A. K. Sen, The Impossibility of a Paretian Liberal, Journal of Political Economy 78 (1970) 152 (discussing situations when constitutional rules do not allocate rights regarding the distributive effects of economic rules and actions). Sen’s criticism of utilitarian welfare economics (‘the only things of intrinsic value for ethical calculations and evaluations of state of affairs are individual utilities’) and his human ‘capability approach’ support the ordo-liberal priority given to human and constitutional rights empowering individuals; cf. A. K. Sen, On Ethics and Economics (Oxford: Blackwell 1987), 40, 46f: ‘since the claim of utility to be the only source of value rests allegedly on identifying utility with well-being, it can be criticized both (1) on the ground that well-being is not the only thing that is valuable; (2) on the ground that utility does not adequately represent well-being’, at 46.
- 36.
Cf. Petersmann (notes 7 and 10) and idem, EU Leadership for ‘Constitutional Reforms’ of International Trade and Investment Law? in: C. Corradetti/G. Sartor (eds), Global Constitutionalism without Global Democracy? in: EUI Working Papers Law 2016/21, 115-127; idem, Cosmopolitan constitutionalism: linking local engagement with international economic law and human rights, in: L. Biukovic/P. Pitman (eds), Local Engagement with International Economic Law and Human Rights (Cheltenham: Elgar 2017), 26-54.
- 37.
On the relevance of Kantian legal theory for designing IEL and multilevel governance of PGs see: Petersmann (note 6), chapter 3; this book criticizes the lack of ‘theories of justice’ in most non-European textbooks on IEL, which often rely on neo-liberal, utilitarian and power-oriented, state-centered justifications of IEL without regard to constitutional and human rights of citizens as ‘democratic principals’ of governments with limited, delegated powers.
- 38.
Cf. I. Kant, Idea for a Universal History with a Cosmopolitan Purpose, in H. Reiss (ed), Kant: Political Writings (CUP 1991), at 47: ‘The problem of establishing a perfect civil constitution is subordinate to the problem of a law-governed external relationship with other states, and cannot be solved unless the latter is also solved’.
- 39.
Cf. M. Koskenniemi, The Gentle Civilizer of Nations: The Rise and Fall of International Law 1870-1960 (CUP 2002).
- 40.
Cf. C. W. Jenks, The Common Law of Mankind (Praeger 1958).
- 41.
Cf. P. Allot, The Concept of International Law, in: idem, The Health of Nations: Society and Law Beyond the State (CUP 2002), at 289: ‘It was a tragic day in the history of humanity when the subtle and complex concept of law was crudely split into two – national law and the law between nations’.
- 42.
Cf. Report on the Appellate Body of the WTO, United States Trade Representative (USTR, Washington February 2020).
- 43.
idem, at 2.
- 44.
idem, Introduction and pp. 8, 13.
- 45.
Idem, Introduction.
References
M. Adams/ F. Fabbrini/P. Larouche (eds), The Constitutionalization of European Budgetary Constraints (Oxford: Hart 2014)
P. Allot, The Health of Nations: Society and Law Beyond the State (Cambridge: CUP 2002)
L. Azoulai, The Court of Justice and the Social Market Economy: The Emergence of an Ideal and the Conditions for its Realization, in: CMLRev 45 (2008), 1335-1356
R. Baldwin, The Great Convergence. Information Technology and the New Globalization (Cambridge Mass.: Harvard UP 2016)
T. Beukers/B. De Witte/C. Kilpatrick (eds) Constitutional Change Through Euro-Crisis Law (Cambridge: CUP 2017)
A. von Bogdandy, Constitutionalism in International Law: A Proposal from Germany, in: 47 Harvard International Law Journal (2006) 223.
G. Brennan/J. M. Buchanan, The Reason of Rules. Constitutional Political Economy (Cambridge: CUP 1985)
P. Commun, Erhards Bekehrung zum Ordoliberalismus, Freiburg Discussion Papers on Constitutional Economics 04/4 (2004)
T. Cottier/M. Hertig, The Prospects of 21st Century Constitutionalism’ in: A. von Bogdandy/R. Wolfrum (eds), Max Planck Yearbook of United Nations Law (The Hague: Brill/Nijhoff 2004) 261–328
F. Ehm, Das völkerrechtliche Demokratiegebot. Eine Untersuchung zur schwindenden Wertneutralität des Völkerrechts gegenüber den staatlichen Binnenstrukturen (Tübingen: Mohr 2013).
B. Fassbender, The UN Charter as Constitution of the International Community (The Hague: M. Nijhoff 2009)
V. Hatzopoulos, From Economic Crisis to Identity Crisis: The Spoliation of EU and National Citizenships, College of Europe Research Paper in Law 01/2017
F. A. Hayek, The Road to Serfdom (London: Routledge 1944).
F. A. Hayek, The Fatal Conceit. The Errors of Socialism (University of Chicago Press 1991)
M. Herdegen, Principles of International Economic Law (Oxford: OUP 2nd ed. 2016).
A. Hinarejos, The Euro-Area Crisis in Constitutional Perspective (Oxford: OUP 2015)
C. W. Jenks, The Common Law of Mankind (New York: Praeger 1958).
C. Joerges/E. U. Petersmann (eds), Constitutionalism, Multilevel Trade Governance and International Economic Law (Oxford: Hart 2011)
S. Joseph/D. Kinley/J. Waincymer (eds), The WTO and Human Rights (Cheltenham: Elgar 2009)
E. Kennedy, Constitutional Faillures. Carl Schmitt in Weimar (Durham: Duke University Press 2004).
M. Koskenniemi, The Gentle Civilizer of Nations: The Rise and Fall of International Law 1870-1960 (Cambridge: CUP 2002).
V. Kube/E. U. Petersmann, Human Rights Law in International Investment Arbitration, in: Fontanelli/Gattini/Tanzi (eds), General Principles of Law and International Investment Arbitration (The Hague: Brill 2018)
H. Lauterpacht, The Function of Law in the International Community (Oxford: Clarendon Press 1933)
H. Mosler, The International Society as a Legal Community, in: 140 Recueil des Cours (1974) 1
A. Müller-Armack, Wirtschaftsordnung und Wirtschaftspolitik. Studien und Konzepte zur Sozialen Marktwirtschaft und Europäischen Integration (Freiburg i.B. 1966)
E. U. Petersmann, International Economic Theory and International Economic Law - On the tasks of a legal theory of international economic order, in: R. S. J. Macdonald/D. M. Johnston (eds), The Structure and Process of International Law (The Hague: Nijhoff 1983) 227–261
E. U. Petersmann, Constitutional Functions and Constitutional Problems in International Economic Law (Fribourg University/Boulder Press 1991)
E. U. Petersmann, State Sovereignty, Popular Sovereignty and Individual Sovereignty: From Constitutional Nationalism to Multilevel Constitutionalism in International Economic Law? in: W. Shan/P. Simons/D. Singh (eds), Redefining Sovereignty in International Economic Law (Oxford: OUP 2008), 27-60
E. U. Petersmann, International Economic Law in the 21st Century. Constitutional Pluralism and Multilevel Governance of Transnational Public Goods (Oxford: Hart 2012)
E. U. Petersmann, Multilevel Constitutionalism for Multilevel Governance of Public Goods - Methodology Problems in International Law (Oxford: Bloomsbury 2017a)
E. U. Petersmann, The EU’s Cosmopolitan Foreign Policy Constitution and its Disregard in Transatlantic Free Trade Agreements, in: European Foreign Affairs Review 2016a, 449-469
E. U. Petersmann, EU Leadership for ‘Constitutional Reforms’ of International Trade and Investment Law? in: C. Corradetti/G. Sartor (eds), Global Constitutionalism without Global Democracy? in: EUI Working Papers Law 2016b/21, 115-127
E. U. Petersmann, Cosmopolitan constitutionalism: linking local engagement with international economic law and human rights, in: L. Biukovic/P. Pitman (eds), Local Engagement with International Economic Law and Human Rights (Cheltenham: Elgar 2017b), 26-54
E. U. Petersmann, EU Citizenship as a Constitutional Restraint on the EU’s Multilevel Governance of Public Goods, in: European Law Review 43 (2018a), 89-105
E. U. Petersmann, International Economic Law without Human and Constitutional Rights? Legal Methodology Questions for my Chinese Critics, in: JIEL 21 (2018b), 213-231
E. U. Petersmann, How to Reconcile Human Rights, Trade Law, Intellectual Property, Investment and Health Law? WTO Dispute Settlement Panel Upholds Australia’s Plain Packaging Regulations of Tobacco Products, in: The Global Community Yearbook of International Law and Jurisprudence 2018c, 69-102
J. Rawls, Political Liberalism (New York: Columbia University Press 1993)
H. Reiss (ed), Kant: Political Writings (Cambridge: CUP 1991)
B. Schöbener/J. Herbst/M. Perkams, Internationales Wirtschaftsrecht (Heidelberg: Müller 2010).
G. Schwarzenberger, The Principles and Standards of International Economic Law, in: 117 Recueil des Cours (The Hague: Nijhoff 1966), 1-98
I. Seidl-Hohenveldern, International Economic Law, in: 198 Receuil des Cours (Nijhoff 1986), 3-264
A. K. Sen, On Ethics and Economics (Oxford: Blackwell 1987)
B. Simma, From Bilateralism to Community Interest in International Law, in: 250 Recueil des Cours (1994) 217
Q. Slobodian, Globalists. The End of Empire and the Birth of Neoliberalism (Cambridge Mass.: Harvard UP 2018)
A. Somek, The Cosmopolitan Constitution (Oxford: OUP 2014)
R. Stewart and R. M. Ratton Sanchez Badin, ‘The WTO and Global Administrative Law’ in: C. Joerges/E. U. Petersmann (eds), Constitutionalism, Multilevel Trade Governance and International Economic Law (Oxford: Hart 2011)
C. Tietje (ed), Internationales Wirtschaftsrecht (Berlin: De Gruyter, 2009)
V. J. Vanberg, The Constitution of Markets. Essays in Political Economy (London: Routledge, 2001).
A. Verdross, Die Verfassung der Völkerrechtsgemeinschaft (Springer 1926)
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2021 The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG
About this chapter
Cite this chapter
Petersmann, EU. (2021). German and European Ordo-Liberalism and Constitutionalism in the Postwar Development of International Economic Law. In: Hilpold, P. (eds) European International Law Traditions. Springer, Cham. https://doi.org/10.1007/978-3-030-52028-1_11
Download citation
DOI: https://doi.org/10.1007/978-3-030-52028-1_11
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-52027-4
Online ISBN: 978-3-030-52028-1
eBook Packages: Law and CriminologyLaw and Criminology (R0)