In 2015, upon learning of the election of Syriza in Greece, Jean Claude Juncker, President of the European Commission, infamously stated that ‘[t]here can be no democratic choice against the European treaties’.1 Since those treaties mandated austerity, Syriza would not be allowed to implement its anti-austerity programme.
In this Juncker signals a particularly insidious aspect of austerity, namely, its tendency to remove economic policy from popular control. Such removal is usually justified by arguing that austerity is not a political choice but rather an economic and technocratic necessity. In this way, the violence documented in this book – the suicides, the evictions, the deaths from illness – is normalised in capitalist societies.
What is telling about Juncker’s statement is that he does not directly appeal to economic necessity. Instead, he invokes law. This chapter demonstrates that the role of law in austerity goes beyond legitimation. It argues that modern-day austerity has been accompanied by an intensification of legal intervention into politics. The aim of these legal interventions has been to minimise popular control over the economy and oblige governments to implement austerity measures. This ‘law-sterity’ has occurred at the international, regional and domestic levels.
The genius of law-sterity is that pro-austerity governments are able to appeal it in order to legitimise their policies and minimise resistance against them. At the same time, the law compels governments not otherwise inclined to austerity to implement it. These austerity rules have been made effective through the use of violence. Law’s violence has taken different forms at different levels. Internationally and regionally, it is by the imposition of sanctions for breaching austerity rules and – ultimately – by cutting off of vital funds, should austerity targets not be met. The loss of such funds inflicts further violence upon populations. In the UK, similar mechanisms are also in play, but they are backed by the direct coercive violence of the state. This chapter will develop an understanding of those dynamics before concluding that the aim of law’s violence is to make it rational for even left-wing governments to implement ‘progressive austerity’.
International financial institutions have been at the forefront of developing programmes of austerity. Although austerity is associated with economic policy in Europe following the 2008 crash, it has a longer and more geographically varied history. In particular, many of the techniques of austerity were first deployed in the 1970s, 1980s and 1990s in Latin America, Asia and Africa.
Since the 1980s, the IMF’s legal mandate has been to exercise surveillance over all policies which can affect ‘exchange rate stability’, which potentially includes all economic policies. This is nominally limited by the fact that the IMF has a duty to ‘respect the domestic social and political policies of members’. The IMF has avoided this by arguing that its legal duty can only be fulfilled through structural adjustments to the economy, involving privatising state industries, ‘liberalising’ labour law and reducing bureaucracy. This, the IMF argued, was not an interference in ‘domestic social or economic policy’ but rather a technocratic adjustment to achieve exchange rate stability.
The legal techniques pioneered by the IMF were perfected by the EU. When the precursors to the EU first came into being, European member states had all adopted Keynesian policies. In the 1970s, as the Keynesian consensus fell apart, the governments of member states looked to European institutions. Insofar as neoliberalism could be transformed into a binding legal obligation, opposition to it could be quietened.2
This was achieved during the 1970s and 1980s through a series of treaties which moved towards the creation of a single European market and buttressed by an activist European judiciary that extended the power of European law over domestic law and simultaneously read economic competition as the overriding objective of the treaties.3 All members of the EU were thus bound by a European law which embedded the values of neoliberalism.
In 1992 the Maastricht Treaty on European Union was concluded. Article 104c of that treaty committed member states to avoiding ‘excessive government deficits’, empowering the European Commission to ‘monitor’ their economies. Should the Commission decide that a member state had made a ‘gross error’, it was to make a recommendation to the Council of Ministers that could then impose sanctions. This was supplemented by a Protocol ‘On the Excessive Deficit Procedure’ which set out a mathematical equation for what counted as ‘excessive’. Austerity and the avoidance of the budget deficits were directly incorporated into the legal framework of the EU.4 This is not simply an incidental part of the EU framework, but is accorded a supreme constitutional status.
The EU has also very much adopted the IMF’s model of structural adjustment lending. When Greece (and thus the German banks) was threatened with default in May 2010, the EU agreed on a bailout package composed of 80 billion euros pooled from the EU and 30 billion from the IMF. In order to receive the money, Greece had to sign a ‘Memorandum of Understanding’ imposing strict conditions.5 The programme’s short-term objective was ‘fiscal consolidation’, involving ‘measures that generate savings in public sector expenditure’,6 with the medium-term objectives lifted straight from the IMF’s playbook, calling for:
Reforms … to modernize the public sector, to render product and labour markets more efficient and flexible, and create a more open and accessible business environment for domestic and foreign investors, including a reduction of the state’s direct participation in domestic industries.7
This was coupled with a detailed timetable for the implementation of said ‘reforms’ and a series of quantitative targets. All of this was to be monitored by the European Commission. Such agreements have become the primary mechanism through which European institutions have dealt with the consequences of the crisis, and have been formalised in a number of ‘lending facilities’.8
When, in 2015, this framework was challenged by the Syriza government, the creditor institutions refused to release further money to Greece unless it signed a new Memorandum embedding more austerity targets. This caused a crisis inside Syriza, with its radicals calling for a default and its moderates arguing the consequences would be worse than austerity. The radicals split, and the remaining moderates implemented a programme of austerity under protest.
At the international and EU levels, therefore, austerity has been implemented by subjecting governments to legally binding objectives. In the case of the EU specifically, this has assumed a constitutional status.
The UK has not generally been subject to externally imposed austerity. The UK is, however, guided by the constitutional imperatives of international law outlined above. Moreover, as Bickteron notes,9 governments frequently seek to ‘tie their own hands’ with legal targets because this means they are able to argue that political decisions are necessary, a result of technical rules and thus neutralise resistance to those plans. This has been a common feature in UK politics.
This began most visibly in 1997 with the victory of New Labour. Then Chancellor Gordon Brown set out fiscal rules to govern Labour’s economic policy. The first of these rules was ‘the golden rule’ that the government would maintain a balanced budget or a budget surplus. The second was the ‘sustainable investment rule’, requiring that government debt remain at less than 40 per cent of GDP. Both of these rules fundamentally bought into the logic of austerity.10 This was buttressed by the Finance Act 1998, which made it the duty of the Treasury to publish a code for fiscal stability, and mandated the production of a Debt Management Report.
In the wake of the 2008 crisis, the government went even further. Echoing the EU’s constitutionalisation of austerity, the Fiscal Responsibility Act 2010 imposed binding legal rules under which the Treasury had to ensure public sector borrowing decreased yearly. In effect, the Labour government attempted to use the law to create ‘external’ compulsions to austerity on itself. The Fiscal Responsibility Act was widely mocked, with George Osborne declaring it as evidence that ‘either [Brown] does not trust himself to secure sound public finances, or he knows that the public do not trust him to secure them’.11
Despite his mockery, Osborne adopted a very similar set of techniques. In March 2011, the Coalition government passed the Budget Responsibility and National Audit Act. The Act required the Treasury to publish a Charter of Budget Responsibility outlining the Treasury’s ‘policy for the management of the National Debt’12 and set out fiscal targets. Any future budgets were to conform to these targets. The Act also established the Office for Budget Responsibility, an ‘independent’ body whose duty was to ‘objectively, transparently and impartially’13 analyse the Charter. Famously, the Coalition set itself the target of ‘public sector net debt as a percentage of GDP to be falling at a fixed date of 2015–16’.14 Thus, the Coalition – building on New Labour policy – attempted to import the legal surveillance techniques of the IMF and EU into UK economic policy.
In 2015, in a direct reproduction of Brown’s behaviour, Osborne suggested that he would enact a budget surplus law to ‘legally prevent future governments from spending more than they receive in tax revenue when the economy is growing’.15 In the end, Osborne never had a chance to enact this policy. Prime Minister Theresa May repudiated the aim of a budget surplus, but the basic framework remained in place.
UK austerity has not been applied evenly. The Conservative-led Coalition, as well as its successor Conservative government, has been loath to directly attack a number of centrally run services. Accordingly, ‘a disproportionate burden’ has fallen on local government (see Vickie Cooper and David Whyte’s Introduction to this book).16 These developments have created a perfect storm of austerity. Local Authorities are faced with declining budgets and a legal obligation to balance the budget. Should they fail to balance this budget, they can be subject to the full force of the law: including fines, disqualification and even possible imprisonment. At the same time, failing to balance the budget will simply mean Tory ministers deciding council spending priorities, unleashing the potential for sanctions. Any attempt to raise funding via council tax rises will be faced with a referendum, which casts them as ‘excessive’, and loading the dice in favour of the attempt failing.
This chapter has argued that austerity has been accompanied by the extension and intensification of legal frameworks into politics. These legal frameworks circumscribe the limits of political intervention into the economy and oblige governments to implement austerity. Should governments fail to do this, they may be in breach of their legal obligations, and so suffer the legal consequences.
These consequences can be violent in two ways. Law-sterity always involves the threat of the state imposing fines upon local government officials, which can ultimately lead to prison sentences. At the regional and international levels, fines are also held like a gun to the head of officials. As the chapters in this book collectively demonstrate, the loss of public funding inflicts a series of brutally violent policies upon populations.
By far the greatest violence that the law is able to impose is the threat of a worse alternative to austerity. Thus, in the UK, attempts by Local Authorities to resist austerity at the local level can simply mean central government stepping in to impose harsher austerity. At the international and regional levels, breaching the legal obligations to impose austerity can be met with the cutting of vital funds.
It is this latter aspect that brings us to the ‘brilliance’ of law-sterity. On the one hand, it enables right-wing governments to argue that austerity is not a choice but a technocratic and legal necessity. At the same time, ostensibly anti-austerity governments are faced with a huge problem. If they contest the violence of austerity, then the law demands that even greater violence be visited upon them. The choice effectively becomes gambling on a radical break with the existing order – which could overturn the legal obligations – or implementing ‘progressive’ austerity to avoid the more violent consequences.
In this way, law-sterity makes ‘austerity-lite’ the rational choice for moderate progressive governments. While a more progressive form of austerity may be implemented under protest, it is difficult to implement such a regime for any period of time without internalising its logic. This is intensified insofar as the polarising choice between ‘progressive austerity’ and ‘radical break’ tends to split the radical and moderate components of the social democratic coalition, generally leaving the latter in power. The law’s violence is thus crucial in turning progressive governments into austere subjects who both implement austerity and – ultimately – internalise its logic.
It is in this light that we can read Conservative moves to decentralise local funding decisions. By maintaining the legal architecture of balanced budgets and central government oversight but combining it with the cutting of revenue, ‘competition’ amongst business rates and council tax referendums, the aim is to make austerity a permanent rationale for local government to act as the enforcers of a ‘progressive’ austerity.
In order to truly reckon with law-sterity we need to overturn a number of ‘common sense’ ideas about law. Rather than think of law as a set of neutral rules standing above politics, we must understand law as an expression of politics. We must reject the idea that law and violence are somehow separate. Instead, we must recognise that law’s violence is an essential part of enforcing the austerity project. We must understand that it is through the extension of law into politics that austerity has been embedded and grown. This makes law in general a fundamentally hostile terrain in our struggle against austerity. Our aim cannot be to replace ‘law-sterity’ with a new, friendly, legalised alternative but ultimately to transcend law’s violence itself.17
Websites were last accessed 31 January 2017.
1. BBC News, ‘Greece: the dangerous game’, 1 February 2015, available at: www.bbc.com/news/world-europe-31082656
2. Chris J. Bickerton, European Integration: From Nation-states to Member States, Oxford: Oxford University Press, 2012, p. 125.
3. Ibid., p. 129.
4. This has been further supplemented by the Stability and Growth Pact and the European Fiscal Compact, both of which expand the austerity trends in the treaty.
5. Directorate-General for Economic and Financial Affairs, The Economic Adjustment Programme for Greece, European Economy Occasional Papers 6, May 2010, Brussels: European Commission, available at: http://ec.europa.eu/economy_finance/publications/occasional_paper/2010/op61_en.htm
6. Ibid., p.10.
7. Ibid.
8. In particular, the European Financial Stability Facility and the European Stability Mechanism. Importantly, in order to qualify for such, member states must already be members of the European Fiscal Compact.
9. Bickerton, European Integration, p. 137.
10. Robert Chote, Carl Emmerson, David Miles and Jonathan Shaw, The IFS Green Budget: January 2009, London: Institute for Fiscal Studies, 2009, pp.82–97, available at: www.ifs.org.uk/publications/4417
11. The full text of the Act is available at: www.publications.parliament.uk/pa/cm200910/cmhansrd/cm100105/debtext/100105-0012.htm
12. According to section 1(1) of the Act.
13. According to section s.5(2) of the Act.
14. HM Treasury, Charter for Budget Responsibility: Presented to Parliament pursuant to Section 1 of the Budget Responsibility and National Audit Act 2011, London, p.7, available at: www.gov.uk/government/publications/charter-for-budget-responsibility
15. BBC News, ‘Osborne confirms budget surplus law’, 10 June 2015, available at: www.bbc.co.uk/news/business-33074500
16. Annette Hastings, Nick Bailey, Maria Gannon, Kirsten Besemer and Glen Bramley, ‘Coping with the cuts? The management of the worst financial settlement in living memory’, Local Government Studies, 41 (4), 2015, 573.
17. Robert Knox, ‘Strategy and tactics’, Finnish Yearbook of International Law, 21, 2010, 193–229.